Why It Matters Who Owns Local Businesses


May 18, 2010


Browse in Community Diseconomy

Does it matter who owns our local businesses? According to the economics texts the answer is “No.” The only question is “consumer value” which is to say, how much we get for our money. We are one-dimensional creatures; our psyches are essentially those of wall-eyed bass with better math skills.

So ownership is not relevant. Business is essentially none of our business. So long as Wal-Mart offers the cheapest prices, we should welcome it to town. Ditto Barnes and Noble, Starbucks, and Dominos Pizza. They provide the most stuff for the least price (Starbucks excluded there) so what’s our beef?

Part of the answer comes from my old neighborhood in New York City. Not long ago, when you walked south on 8th Avenue across West 23rd Street, you entered a real neighborhood called Chelsea. (Actually Chelsea spilled north over 23rd to the Fashion Institute and the Penn South Towers, but the core was in the other direction.)

It was a realm of mom-and-pop shops and restaurants, the kind of place where you knew the owners after a few visits. New York used to consist largely of urban villages such as this, that existed paradoxically within the mega-city. I do not remember a single chain in Chelsea, except perhaps the McBurnie YMCA on 23rd, and a couple of supermarkets that were local chains.

That was in the early Nineties. A couple of weeks ago I took a walk from Penn Station down through the old neighborhood. As I approached 23rd Street I encountered a CVS drug store/melangerie, and then a Gap, on a block where small shops used to be.

The Gap? In Chelsea? I thought of the actors, set designers, and kindred others who lived in my small co-op building on W. 21st, thanks to a New York law that enables tenants to buy into buildings undergoing co-op conversion at low “insider” prices. There was Richard down the hall, a City College professor and devoted dumpster diver. His interest in a Gap would not have been great.

Across 23rd it was more of the same. A Vitamin Shoppe, Starbucks, T-Mobile shop, Jamba Juice, ATT shop, and Mailboxes Inc., in that order. It could have been Vintage Oaks mall in Novato, or any of the other commercial venues that define the placeless corporate landscape of the San Francisco Bay Area where I live, and much of the rest of the country.

I felt disoriented, as though space had fractured into physical and psychological components. The neighborhood was gone in any but a geographical sense. A couple of blocks over, on Sixth Avenue, there’s now a Barnes and Noble. There’s even a Toys ‘R Us in Times Square, and a K-Mart in the vicinity of Penn Station. (Big box stores cause the sense of place to blur.) New York City itself is starting to disappear.

To which our economist friends say, “So what? Big boxes wouldn’t be there if people didn’t shop at them. The market has spoken. Are you some kind of elitist who doesn’t care about bargains?”

Leave aside the tax favors, zoning deals and the rest that turn “the market” into a kind of Charlie McCarthy doll. What such people don’t grasp is that commerce isn’t just about stuff. It serves a social function as well. The mom and pop stores in Chelsea were places where people could know and be known. They provided precious human contact in the anonymity of city life. This was especially important for older people, and others for whom shopping might constitute the only social encounters in long empty days.

There was a Greek coffee shop on 8th Avenue called The Regal— one of those places with red naugahyde booths and epic menus that used to be everywhere in the city. It was unremarkable except for the owner, a kindly Greek lady who would sit on a stool at the end of the counter by the cash register, and greet people as they came in.

This included a number of forlorn souls from a community care home in the neighborhood. They would wander in and out during the slow morning hours, and the waitress would chat them up and make sure their coffee cups were filled. As the lunch crowd came they drifted away to who knew where.

One afternoon I I was walking past the MacDonald’s a few blocks up 8th Avenue and saw one of the people who had been in the Regal that morning. He was gaunt, with a disoriented and haunted quality. Kids were tormenting him; the manager was shooing him away. That is the difference between an owner who is an actual person, and a corporate facsimile of one called McDonalds. (That a majority of the justices on the U.S. Supreme Court can’t tell the difference does not speak well of them.

The people who say that the nature of ownership doesn’t matter, and that McDonald’s should have every corner if it wants, generally are the same ones who rail against taxes and government services. Well, government wouldn’t have to do so much if communities still functioned, which they can’t if corporate profit machines dominate the commerce in them.

Safety is another issue. As Jane Jacobs pointed out in her seminal Death and Life of Great American Cities, a street with many small shops has many watchful eyes. This is especially so if the shops are run by individual owners who take a personal interest in the surroundings. The pedestrian traffic alone— the constant coming and going— provides potential witnesses and thus a deterrent to crime.

Compare that to a block with a K-Mart or Barnes and Noble. There will be long stretches with no entryways, and no watchful eyes from inside. Such blocks are especially creepy at night.

In a nation with a surfeit of stuff but mounting social deficits, there is an element of insanity in designing and assessing the economy solely in terms of financial transactions, as economists do (via the GDP, for example.) Dr. Thomas Lyson of Cornell University has compared counties with small, locally owned businesses and social institutions against those in which outside corporations dominate.

As recounted by Stacey Mitchell in her book Big Box Swindle, Lyson found that:

“[T]he big-business counties had greater income inequality, lower housing standards, more low-birth-weight babies (an indicator of overall health); more worker disability, lower educational outcomes, and higher crime rates. The small-business counties not only scored better on all of these social welfare measures, but their residents belonged to more civic organizations and voted more often.”

Those bargains don’t come cheap. And this doesn’t even get to the informal social dimension that the Regal Coffee Shop in Chelsea used to embody. (I didn’t mention that the Regal too has disappeared, replaced by a haute-cool dining establishment of a kind that has become a Manhattan cliché.)

Even the bargains aren’t really what they seem. Wal-Mart for example is infamous for loss leaders, and for pressuring suppliers to produce lower-quality items that it then can sell at lower-seeming prices. But that’s for another day. For now, let’s just be aware that there are reasons to keep an economy local, to the extent possible; and one of the main ones is to keep the social dimension of commerce intact.

If Agway owned Toby’s Feedbarn and Coffee Bar in my town, and if the Bovine Bakery was a Starbucks, and if Point Reyes Books was a Barnes and Noble, does anyone think they would be as committed to the community as those businesses—with their local owners— are now? If you knew these owners you would know the answer.

As the resident of one community in Michigan that said “No” to Wal-Mart put it to Mitchell, “They don’t sell small town quality of life on any Wal-Mart shelf, and once they take it from you, you can’t buy it back from them at any price.”