Why We Can’t Shop Our Way to a Real Economy

Wresting control of the real economy from corporate banks, commodity crops, and big-box retail means reversing policies that concentrate power at the top.

| March/April 2013

  • A blindfolded straight couple carries shopping bags through a wasteland while bulls surround them.
    Many people are beginning to change where they shop and what they buy and where they do their banking, but a purely consumer-based response to this problem, on its own, is not likely to get us where we need to go.
    Illustration By Mike Byers

  • A blindfolded straight couple carries shopping bags through a wasteland while bulls surround them.

At its core, the Boston Tea Party was an act of corporate sabotage. Those ships were owned by the British East India Company, the most powerful corporation of its day. The Company was tightly connected to the British government, so much so that when it stumbled and found itself teetering on the verge of bankruptcy, Parliament quickly stepped in and passed the Tea Act. The Tea Act created a special exemption for the British East India Company so that it could sell tea in the colonies without paying any tax. The idea was that it could undercut local tea merchants and take their business. So what ignited the Boston Tea Party was not so much a tax, but a corporate tax loophole.

This story of highly concentrated economic power married with political influence is something that sounds very familiar to us today. A handful of big companies have taken over large swaths of our economy. Our banking system, diversified as recently as the 1990s, is now mostly controlled by a handful of big banks. Our food system has come to resemble an hour glass, where we have millions of farmers and millions of eaters, connected by this incredibly narrow passageway. The gatekeepers are a few big food companies and supermarket chains. One company now handles 40 percent of the nation’s milk supply. And then there’s Walmart, which was a small player in the grocery industry 15 years ago.  Today, it captures one of every four dollars Americans spend on food and already has half the market in three dozen metro areas.  The future of retail looks even more concentrated: one-third of everything sold on the web comes from a single company.

Many people are beginning to question the wisdom of this, and they’re changing where they shop and what they buy and where they do their banking, but what I want to suggest is that a purely consumer-based response to this problem, on its own, is not likely to get us where we need to go.

For a long time, the story of how big companies came to control much of our economy was that bigger is better. It’s more efficient, more productive, it outperforms. But that idea suffered a serious blow four years ago. We all remember this. It was one of history’s most dramatic reveals. Toto pulled back that curtain, and there stood Wall Street’s wizards of finance: insolvent, panic-stricken, their hands out. It turns out that big banks are not safer, and they’re not even more efficient. 

But more importantly, the bigger banks become, the more disconnected they are from our communities—and the less able they are to make nuanced judgments about risk, particularly the risk that a new business will fail. Local banks are actually really good at this, because in addition to the credit report and the market analysis, they have all this soft information to go on. They get to know the borrower face to face, and they know the local market intimately. Big banks making decisions in regional or national offices are largely flying blind. So rather than end up with a bunch of bad loans on their books, what they’ve opted to do instead is to sharply curtail small business lending.

And it’s not just banking. In sector after sector, consolidation is not serving our interests very well. We know for example that small farms produce more than twice as much food per acre as big farms with far less environmental impact. And big-box retail once seemed like a bargain, but we now know it’s costing us far more in lost income. This model has almost single-handedly eliminated large segments of the middle class. Millions of jobs in manufacturing and small businesses are gone, and all we’ve gotten in exchange is very low-wage jobs working in these stores—jobs that pay so little many rely on food stamps to get by.

5/10/2014 5:51:58 AM

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7/1/2013 5:49:46 PM

Thank you so much for this outrageous yet hopeful article. The story about the local bookstore brought tears to my eyes. I have a story of my own that taks place when I was part of a team of fitness instructors in a low-income neighborhood. We supplied 15 free outdoor classes each week for 8 weeks, the length of the funding. The program was free and reached many people who had not exercised before, who did not previously know each other or us, and who mostly did not speak English. We designed the program around their needs and abilities, and at the end of the last class of the last day of the last week, we all joined hands in a circle, said goodbye--and wept. Although I have been in corporate gym classes where we grew attached to the instructor, this was something different--the dissolution of a community who cared about each other.

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