Why we can't shop our way to a better economy | Stacy Mitchell | TEDxDirigo

Summary

Highlights

• The Boston Tea Party's real trigger was a tax loophole favoring the British East India Company. 🎉
• Big corporations like Walmart and certain banks are monopolizing sectors, harming small businesses. 💸
• Local businesses excel in community integration, providing unique benefits like face-to-face interactions. 🌟
• Consumer habits alone won't solve the problem; we need systemic policy changes. 🚀
• Success relies on citizens acting collectively, not just as individual consumers. 🤝

Key Takeaways

• The Boston Tea Party was an act of corporate sabotage, highlighting the historical influence of corporations on politics. ☕️
• A few big companies dominate essential sectors like banking, retail, and food production, limiting consumer choice. 🏦
• Shifting buying habits alone won't fix economic disparities; policy change is necessary. ⚖️
• Local banks and businesses offer more personalized service and community connection. 🌱
• Advocating for policy reform and collective action can lead to a more balanced economy. 📢

Overview

Chapters

• 00:00 - 00:30: Introduction to the Boston Tea Party The chapter 'Introduction to the Boston Tea Party' reveals lesser-known details about the historical event, emphasizing that it was fundamentally an act of corporate sabotage. The narrative highlights that the ships involved were owned by the British East India Company, a dominant corporation closely linked with the British government. The chapter sets the stage for understanding the political and corporate dynamics of the time, especially how intertwined the company was with government actions, particularly when facing financial distress.
• 00:30 - 01:00: The Tea Act and Corporate Influence The chapter discusses the Tea Act, a law passed by the British Parliament to aid the British East India Company by exempting it from tax when selling tea in the American colonies. This allowed the company to undercut local tea merchants, leading to tensions and ultimately contributing to the Boston Tea Party. The chapter highlights that the issue was not simply taxation, but a corporate tax loophole that favored a large company.
• 01:00 - 01:30: Concentration of Economic Power This chapter discusses the increasing concentration of economic power, which is now closely intertwined with political influence. Over the past two decades, a few major companies have managed to dominate large sectors of the economy. The banking system, which was more diversified in the 1990s, is now predominantly controlled by a few big banks. Similarly, the food system has evolved into an hourglass shape, with a vast number of farmers and consumers but control wielded by few powerful entities.
• 01:30 - 02:00: Impact on Farmers and Consumers The chapter discusses the control major food companies and supermarket chains wield over the food supply chain, highlighting the impact on both farmers and consumers. It specifically notes that a single company processes over 40% of the nation's milk supply, affecting farmers' ability to secure fair prices, while consumers seemingly have a variety of choices from various brands owned by the same company. Wal-Mart is also mentioned as part of this consolidated control over the market.
• 02:00 - 02:30: Wal-Mart's Dominance and Future Trends The chapter explores Wal-Mart's remarkable growth from a minor player to a dominant force in the grocery industry, capturing 25% of U.S. spending. In several cities, Wal-Mart holds over half the market share, signifying its rapid expansion. The narrative also delves into the increasing concentration of the retail sector, with one-third of online purchases coming from a single company. The chapter raises concerns about this dominance, prompting shifts in consumer behavior regarding shopping and banking choices.
• 02:30 - 03:00: Consumer-Based Responses and Limitations The chapter titled 'Consumer-Based Responses and Limitations' discusses the challenges and limitations of relying solely on consumer-based strategies to address certain economic problems. The author argues that such an approach is insufficient as it doesn't adequately address the root causes of the issues, particularly the historical dominance of big companies. The traditional belief that bigger corporations are inherently more efficient and productive has been questioned in recent years.
• 03:00 - 03:30: Myths of Corporate Efficiency The chapter titled 'Myths of Corporate Efficiency' discusses a significant historical revelation likened to Toto pulling back the curtain on the supposed financial wizards of Wall Street, exposing them as insolvent and panic-stricken. It challenges the perception that large banks are inherently safer or more efficient. Economists argue that banks reach optimal efficiency at the size of small regional institutions and suggest that larger banks tend to become cumbersome due to excessive bureaucracy. Thus, today's massive banking institutions are less efficient as they grow in size.
• 03:30 - 04:00: Local vs. Big Banks The chapter titled 'Local vs. Big Banks' discusses the dominance of large banks, each holding approximately 2 trillion dollars in assets. It highlights the drawbacks of using big banks, including higher checking account fees and loan interest rates compared to local banks or credit unions. It emphasizes the disconnection of larger banks from local communities and their inability to make nuanced judgments about risk, which is crucial for banking.
• 04:00 - 04:30: Consolidation Effects Across Sectors The chapter discusses the consolidation effects across various sectors, focusing on the advantages and disadvantages local banks experience compared to big banks. Local banks excel in assessing the risk of new business ventures due to their deep connections and understanding of the local market. They use 'soft information' gained from face-to-face interactions with borrowers and a thorough knowledge of local economic conditions, making them adept at making lending decisions. In contrast, large banks, operating from regional or national offices, lack these intimate connections and insights, which makes them more cautious and prone to avoiding risky loans to prevent accumulating bad debts.
• 04:30 - 05:00: Local Businesses as an Alternative The chapter discusses the negative impact of large financial institutions on small businesses. It mentions that studies indicate regions with dominant big banks have fewer small businesses and slower job growth. The trend is not just limited to banking but is evident in other sectors too, highlighting how consolidation often doesn't benefit public interests. Additionally, it points out that small farms are more efficient and environmentally friendly than large industrial farms. Similarly, the chapter reflects on how big box retail outlets, once considered economically advantageous, may not be as beneficial as perceived.
• 05:00 - 05:30: State Policies Supporting Local Businesses This chapter discusses the economic impact of certain business models that have led to significant losses in income and a dwindling middle class. It highlights the disappearance of millions of manufacturing and small business jobs, replaced by low-wage jobs in large stores. These low-paying jobs often leave employees dependent on food stamps. The chapter also touches on the difficulty of finding locally owned pharmacies, except in places like North Dakota, implying a broader trend of local business decline.
• 05:30 - 06:00: The Role of Government Policies This chapter explores the impact of government policies on the pharmacy sector in North Dakota, which requires all pharmacies to be locally owned. As a result, there are no pharmacy chains in the state, leading to an abundance of pharmacies, particularly in rural areas, and some of the lowest prescription drug prices in the U.S. The chapter raises questions about the dominance of large pharmacy companies elsewhere and hints at parallels with historical conglomerates like the British East India Company.
• 06:00 - 06:30: Potential for Policy Reforms This chapter discusses the influence of major agricultural firms on policy and economy. It highlights how since 1995, over $275 billion has been allocated to farms via the Farm Bill, with 80% of that funding benefiting the largest 10% of farms. These funds largely support commodity crops like corn and soybeans, essential to processed foods. This imbalance in financial support makes processed foods like hamburgers cheaper than healthier options like locally grown broccoli. The chapter also touches on the influence of state and federal tax codes in perpetuating this scenario.
• 06:30 - 07:00: Calls to Action and Conclusion This chapter addresses the issue of tax loopholes that allow large corporations to avoid paying taxes that smaller businesses are required to pay. It highlights an office building in Wilmington, Delaware, which serves as a base for numerous major companies, including Wal-Mart and CVS, as a tax avoidance strategy. The chapter critiques government actions that facilitate the growth and dominance of large banks.

Why we can't shop our way to a better economy | Stacy Mitchell | TEDxDirigo Transcription

• 00:00 - 00:30 Transcriber: Bob Prottas Reviewer: Ariana Bleau Lugo I want to begin today by telling you something about the Boston Tea Party that you might not know. At its core it 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
• 00:30 - 01:00 Parliament quickly stepped in and passed the Tea Act. And what this did was it 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. (Laughter)
• 01:00 - 01:30 This story of highly concentrated economic power married with political influence is something that sounds very familiar to us today. Over the space of just 20 years, 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 hourglass where we have millions of farmers and millions of eaters
• 01:30 - 02:00 connected by this incredibly narrow passageway. The gatekeepers are a few big food companies and supermarket chains. Do you know that over 40% of the nations milk supply is now processed by a single company? Including 70% of the milk produced here in New England? If you're a dairy farmer that means it's pretty hard to get a fair price for your milk. If you're a consumer you still have this illusion of choice because this one company markets under dozens of different brands. And then there's Wal-Mart.
• 02:00 - 02:30 Wal-Mart was a small player in the grocery industry just 15 years ago. Today it captures one out of every four dollars that Americans spend and it's growing rapidly. In dozens of cities it already has more than half the market. And the future of retail looks even more concentrated. One third of everything we buy online now 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.
• 02:30 - 03:00 But what I want to suggest to you today is that a purely consumer based response to this problem on its own is not likely to get us where we need to go. It can't get us where we need to go in part because it doesn't fully recognize how it is that we got here in the first place. For a long time the story of how big companies came to control much of our economy was that bigger is better. Right? It's more efficient, more productive, it outperforms. But that idea suffered a serious blow four years ago.
• 03:00 - 03:30 We all remember this. It was one of histories 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. According to economists, banks peak in efficiency when they reach the size of a small regional institution. Beyond that they become top heavy with bureaucracy. Today's big banks are orders of magnitude larger.
• 03:30 - 04:00 The top four each have about 2 trillion dollars in assets. And their top heaviness may explain why we actually pay more in checking account fees and higher interest rates on loans if you bank with a big bank rather than a local bank or credit union. But more important, the bigger banks become the more disconnected they become from our communities. And the less able they are to do the most important thing we need banks to do, which is to make nuance judgments about risk.
• 04:00 - 04:30 And in particular 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. So they're much better able to make that decision. Big banks making decisions in regional and national offices are largely flying blind. Rather than end up with a bunch of bad loans on their books they've instead opted to
• 04:30 - 05:00 sharply curtail small business lending. Studies show that regions where bigger banks are more dominant have fewer small businesses and slower job growth than other regions. And it's not just banking. In sector after sector if you really begin to look what you see is that 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.
• 05:00 - 05:30 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 are very low wage jobs working in these stores. Jobs that pay so little that many rely on food stamps to get by. Or consider the case of pharmacies. It's pretty hard to find a locally owned pharmacy these days. Unless you happen to live in North Dakota.
• 05:30 - 06:00 Under a unique state law, virtually every pharmacy in North Dakota is locally owned. There are no chains. And by any measure residents are better off. There are far more pharmacies in North Dakota than in other states. Particularly in remote rural areas. And prescription drug prices are among the lowest in the country. So if they aren't outperforming, and delivering better outcomes, how is it that these giant companies have become so dominant? And the answer is that much like the British East India Company
• 06:00 - 06:30 they've used their market power and their political influence to rig the game. Since 1995 we've given over $275 billion to farms through the Farm Bill. Almost 80% of those dollars went to the 10% of the largest farms. And most of the money was spent on a handful of big commodity crops. Like corn and soybeans. These are the building blocks of processed foods. So it's no wonder that a quarter pounder often costs less than a pound of locally grown broccoli. And our state tax codes and our federal tax code
• 06:30 - 07:00 are littered with loopholes that give big companies the ability to escape paying taxes that small businesses have to pay. This modest office building in Wilmington Delaware has only a handful of parking spots. But it's home to hundreds of big companies including Wal-Mart and CVS who are using this address as a way to escape paying state corporate income taxes. And I hardly need to say anything about the ways in which government has helped big banks become even bigger.
• 07:00 - 07:30 Boy! (Sighs) I don't know about you but I thought TED was supposed to be inspiring. (Laughter) (Applause) You know Stanley Kubrick once described his film "The Shining" as an optimistic movie. (Laughter) He said anything that posits the existence of life after death is a fundamentally positive story. (Laughter) I know that I'm reaching here a bit, but I think we can take some comfort in the realization that there is nothing inevitable
• 07:30 - 08:00 about the current structure of our economy. It's not the product of some kind of natural evolution. It's the logical outcome of a set of policies. And many people are beginning to have a different idea about how the economy ought to operate and to act on that idea. We've seen these remarkable shifts in just the last few years. The number of farmers' markets has more than doubled. We've added over 1,400 new locally owned neighborhood grocery stores. More than 500 new independent bookstores have opened. Long dormant factories in New York and San Francisco
• 08:00 - 08:30 are filling up with small scale clothing makers and beer brewers. And more than 600,000 people have moved their accounts from big banks to local banks and credit unions in the last year alone. Along the way we've learned that there's a lot to recommend an economy that is rooted in community. We've learned that we're far more likely to have a conversation at the farmer's market than we are at a big box store. Seven times more likely in fact according to researchers, who confirm that communities that have a lot of locally owned businesses
• 08:30 - 09:00 do in fact have stronger social networks. And those social networks in turn give them an edge when it comes to solving problems and innovating. And we've learned that local business isn't just a smaller version of big business. It's as though it's running on an entirely different operating system. This really came home to me a few years ago when I was interviewing the president of a small bank in South Minneapolis and he said, "You know when we make a mortgage loan we're not planning to sell it. We're planning to keep it on our books for 30 years.
• 09:00 - 09:30 So our success and profitability depends on the well being of our borrowers. When they do well, we do well." He said, "You know, foreclosure is almost as much of a disaster for us as it is for our borrowers. And we've learned that there is a lot to recommend doing business with people who really know us." A few years ago my brother wanted to buy me a book for Christmas. He lives in Arizona and there was no local bookstore where he lived. So he went to the website of Longfellow books.
• 09:30 - 10:00 My local bookstore in Portland. He found the book and he placed the order. And he had it shipped to South Carolina where my father lives and where I was planning to spend the holidays. So here's this order. It's coming from Arizona. It's going to South Carolina. It doesn't have my name on it. Except my brother has asked that it be gift wrapped and that the card say "Merry Christmas, Stacy". A few minutes later his phone rings and the person says, "This is Stuart at Longfellow books. I want to thank you for your order. I just had a question about it.
• 10:00 - 10:30 Is this book for Stacy Mitchell?" And my brother surprised says, "Yeah, it is. She's my sister." And Stuart says, "Well I thought I should let you know that she's already read it." (Laughter) (Applause) Here's what worries me. (Laughter) As remarkable as these developments are,
• 10:30 - 11:00 they're unlikely to amount to anything than an interesting trend on the margins of the economy if the only way that we can figure out how to bring about the change we want to see is through our buying decisions. I'm like a lot of people. I put a lot of my "making the world a better place" energy into thinking about how I can be a better consumer. You know fair trade coffee, recycled toilet paper, I'll get the iPad instead of the Kindle so I won't be locked into buying books from Amazon. The primary and often exclusive way
• 11:00 - 11:30 we think about our agency in the world now is as consumers. But as consumers we're very weak. We're operating as lone individuals making a series of small choices. And the most we can do is pick between the options that are presented to us. And it's not that these choices don't matter, they do and that's part of why this way of thinking is so seductive. But it's not a great strategy for changing the world. You know, if you think about it, what we're hoping is that some day enough of us will have enough information about all the issues
• 11:30 - 12:00 and all the choices in the marketplace and we'll have access to all the right alternatives. And that all or most of us will be able to make the right decisions all or most of the time. And while we're trying to line up these millions of small decisions in the right direction, we are swimming upstream against a powerful down current of public policies that are taking our economy in exactly the opposite direction. What we really need to do is change the underlying structures that create the choices in the first place. And we can't do that through the sum of our individual actions in the market place.
• 12:00 - 12:30 We can only do that by acting collectively as citizens. You know, throughout our history we have been called upon at various times to arrest control of our livelihoods and our democracy from would-be monopolists. The British East India Company, the trusts of the early 20th century. This is one of those moments. It's not hard to imagine what we would campaign for. We could begin by turning the Farm Bill on its head. Instead of giving the most money to the biggest farmers
• 12:30 - 13:00 feeding the fast food pipeline, why not give the most money to local farms feeding their neighbors? We should rethink how we do planning and transportation. You know for decades we have been just pouring public resources into creating the kinds of landscapes that are perfect habitat for national chains. Meanwhile our village centers and our downtowns, we're just pulling the rug out from under them. The places where local businesses are most likely to succeed. You know it's no coincidence that Vermont,
• 13:00 - 13:30 which has some of the strongest anti-sprawl legislation in the country, also has more small businesses per capita than any other state. And it's not hard to imagine having a banking system that supported the real economy. Because we had that system in place for more than half a century. From laws that were in place from the 1930's until the 1990's prevented banks from speculating on Wall Street. And they also limited their ability to expand beyond state lines. So they had to stay focused on their home regions.
• 13:30 - 14:00 There are bills in congress right now that would begin to reinstate some of that framework. And we should close all those loopholes that give big businesses an advantage when paying their taxes. Just image if we took a small amount of the savings and redirected it to new initiatives to grow a whole new generation of local businesses. We could take a page from a great Pennsylvania program that in the last few years has seeded over 100 locally owned and cooperatively owned grocery stores in low-income neighborhoods.
• 14:00 - 14:30 And I think we also need to pull antitrust out of its 30-year hiatus. I think there is some important questions that we really need to be asking like: Is it in our best interest that one company controls more than a third of e-commerce? Does my local dairy farmer deserve to have more than one choice about where to sell her milk? So the answers are there and the public support is largely there. The question that I think we have to grapple with is how do we begin to see our trips to the farmers' market
• 14:30 - 15:00 and to the local bookstore, not as the answer but as a first step. How do we transform this remarkable consumer trend into something more? How do we make it a political movement? Thank you. (Applause) (Cheers)