Breaking the Cycle

There’s an article in this month’s Retail Traffic magazine (the mind boggles) about how “credit retailers,” retailing corporations rated by Moody’s as “investment grade” bond risks, can dictate lease terms to the property owners they lease from. The terms were things like waiving requirements to be open, controlling who else is allowed to lease nearby, exactly what their rents are to be (regardless of construction costs,) things like that. Which brought to mind the thought (beyond “why the hell am I reading Retail Traffic magazine) of the tragic cycle of the whole enterprise: Normal people (they like to call them “consumers” – I guess “producers” live in China – see here,) shop for stuff based on bare minimum price. The retailers providing these prices are using enormous economies of scale that collect their outlets into enormous rectangles, pay their staff poorly, and set a floor for building cost. This floor to cost drives a very specific kind of building to be commissioned by those that commission these things, who in turn browbeat whatever is left of the architect they hire to configure it. Everybody gets their sanctified ROI and goes home happy. Thus, a few large companies that have squeezed the global supply chain down to a minimum can dictate to any city in North America and Europe exactly what they’re going to add to their city and how.

This seems to be like a classic case of both unintended consequences and externalities. The external results (horrible cities) of a cost-minimizing decision by the merchant are not borne by them (except in so far as they live in those cities,) and end up being an unintended consequence of a cost-minimizing public. Now, I’m naïve enough to think that people really don’t want to live in hideous environments, but where is the input for this registered? Planning and zoning referenda are obligatory, and rather esoteric things to explain, as well as contradicting deep-seated notions of property rights. If only it could be quantified. It is obliquely so now – the most quaint neighborhoods usually demand a premium, but if you absolutely put it to people in a vote this way: “would it be worth X per year for a city that looked like this rather that that,” what would they say? Where is the price number? Does it change among different groups? Beyond a framework for implementing something like this, who would even study the question: Economists? Political Scientists?

It’s bizarre that a subject that affects millions daily gets almost no input directly, and counter-productive input indirectly.

ADDENDUM:
For further info on the impacts of squeezing the supply chain, check out slate's debate between Barbara Ehrenreich and a pro wal-mart economist. For more wal-mart commentary, or for Ehrenreich as theater, check here. -KP