Every year Americans make more and more purchases online, many of them at Amazon.com. What shoppers don’t see when browsing the selections at Amazon are the many ways the online store is transforming the economy. Our country is losing small businesses. Jobs are becoming increasingly insecure. Inequality is rising. And Amazon plays a key role in all of these trends.
Stacy Mitchell believes Amazon is creating a new type of monopoly. She says its founder and CEO, Jeff Bezos, doesn’t want Amazon to merely dominate the market; he wants it to become the market.
Amazon is already the world’s largest online retailer, drawing so much consumer Web traffic that many other retailers can compete only by becoming “Amazon third-party sellers” and doing business through their competitor. It’s a bit like the way downtown shops once had to move to the mall to survive — except in this case Amazon owns the mall, monitors the other businesses’ transactions, and controls what shoppers see.
From early in her career Mitchell has focused on retail monopolies. During the 2000s she researched the predatory practices and negative impacts of big-box stores such as Walmart. Her 2006 book, Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses, documented the threat these supersized chains pose to independent local businesses and community well-being. (stacymitchell.com)
Now Amazon is threatening to overtake Walmart as the biggest retailer in the world. Mitchell says she occasionally shops at Amazon herself, when there’s something she can’t find locally, but this hasn’t stopped her from being a vocal critic of the way the company uses its monopoly power to stifle competition. She’s among a growing number of advocates who are calling for more vigorous enforcement of antitrust laws.
Mitchell was born on a U.S. military base in Germany in 1973 and moved with her family to Maine when she was in fourth grade. Even as a child she gravitated toward environmental and social issues. In college Mitchell studied the history of social movements. After graduation she got a job as a researcher at the Minneapolis-based Institute for Local Self-Reliance and never left. She currently serves as the institute’s codirector and is based in its Portland, Maine, office. Mitchell travels extensively as a speaker, provides testimony at hearings, and advises grassroots groups, policy-makers, and citizens. In her talks and writing, she makes normally dry subjects like antitrust policy and business monopolies engaging. Her recent papers include “Amazon’s Stranglehold” and “Monopoly Power and the Decline of Small Business.”
On a warm, sunny day in May I sat down with Mitchell in a modest two-room suite in the historic Portland office building where she spends her workdays. As we talked, the sounds of a thriving local business district came through an open window.
STACY MITCHELL
Frisch: Many consumers welcome Amazon as a wonderful innovation that makes shopping more convenient, but you say the corporation has a “stranglehold” on commerce. Why?
Mitchell: Without many of us noticing, Amazon has become one of the most powerful corporations in the U.S. It is common to talk about Amazon as though it were a retailer, and it certainly sells a lot of goods — more books than any other retailer online or off, and it will soon be the top seller of clothing, toys, and electronics. One of every two dollars Americans spend online now goes to Amazon. But to think of Amazon as a retailer is to miss the true nature of this company.
Amazon wants to control the underlying infrastructure of commerce. It’s becoming the place where many online shoppers go first. Even just a couple of years ago, most of us, when we wanted to buy something online, would type the desired product into a search engine. We might search for New Balance sneakers, for example, and get multiple results: sporting-goods stores, shoe stores, and, of course, Amazon. Today more than half of shoppers are skipping Google and going directly to Amazon to search for a product. This means that other companies, if they want access to those consumers, have to become sellers on Amazon. We’re moving toward a future in which buyers and sellers no longer meet in an open public market, but rather in a private arena that Amazon controls.
From this commanding position Amazon is extending its reach in many directions. It’s building out its shipping and package-delivery infrastructure, in a bid to supplant UPS and the U.S. Postal Service. Its Web-services division powers much of the Internet and handles data storage for entities ranging from Netflix to the CIA. Amazon is producing hit television shows and movies, publishing books, and manufacturing a growing share of the goods it sells. It’s making forays into healthcare and finance. And with the purchase of Whole Foods, it’s beginning to extend its online presence into the physical world.
Frisch: We can’t talk about Amazon without mentioning its founder and CEO, Jeff Bezos, the wealthiest person in the world.
Mitchell: He’s worth more than $130 billion. [At press time the figure has risen to almost $160 billion. — Ed.]
Frisch: What is his vision for Amazon?
Mitchell: We tend to think of Bezos as someone who started out selling books online, and then his business grew from there: an underdog who made it big. But when you look back at the history of this company, you realize that he always had a far-reaching vision. Before he started Amazon, Bezos worked at a Wall Street hedge fund. He knew how to sell his idea to investors and how to structure Amazon financially so it would survive years of losses while gobbling up market share. It was never about being a book retailer. Books had certain properties that made them ideal for starting an online business, like being easy to ship, but from the beginning he had this plan to become the conduit for online commerce.
Look at Prime, Amazon’s membership service. You pay $119 a year and get free two-day shipping on many items, plus streaming television and other perks. Sixty-four percent of U.S. households now belong to Amazon Prime. When Bezos created the membership plan back in 2005, analysts thought he would lose money on it, because the cost of providing free two-day shipping is astronomical. In a way they were right: Amazon continues to post huge losses on shipping. But Prime was never about the immediate bottom line. It was an extremely clever strategy for locking in customers. Once you’ve paid that $119, your natural instinct is to try to maximize the return on that investment by getting as much free shipping as you can. Prime members are unlikely to comparison shop, studies show. Compared to non-Prime shoppers, they are much more likely to start their search right at Amazon.
Bezos had this very prescient vision of how the Web, which seems like a wide-open place where any entrepreneur can reach buyers, could in fact become a winner-take-all environment. Prime is a tool for making Amazon the first and only place shoppers go. That gives the company enormous power as the gatekeeper for online commerce. It can pick which products succeed by deciding what people see when they search and browse.
When you search for a product on Amazon, the results are controlled by an algorithm set by Amazon for its own benefit. Then, when you click on a particular product, there are typically multiple sellers offering the item, but the default seller is chosen by Amazon. ProPublica has found that the default seller is not necessarily the one with the lowest price. In many cases Amazon makes itself the default seller, or chooses a seller that purchases other services from Amazon.
Frisch: We hear a lot about the power of “disruptive” ideas and technologies to transform our society. Amazon seems like the epitome of a disrupter.
Mitchell: Because Amazon grew alongside the Internet, it’s easy to imagine that the innovations and conveniences of online shopping are wedded to it. They aren’t. Jeff Bezos would prefer that we believe Amazon’s dominance is the inevitable result of innovation, and that to challenge the company’s power would mean giving up the benefits of the Internet revolution. But history tells us that when monopolies are broken up, there’s often a surge of innovation in their wake.
Frisch: You don’t think e-commerce in itself is a problem?
Mitchell: No. There’s no reason why making purchases through the Internet is inherently destructive. I do think a world without local businesses would be a bad idea, because in-person, face-to-face shopping generates significant social and civic benefits for a community. But lots of independent retailers have robust e-commerce sites, including my local bookstore, hardware store, and several clothing retailers. Being online gives customers another way to buy from them. We can even imagine a situation in which many small businesses might sell their wares on a single website to create a full-service marketplace. It wouldn’t be a problem as long as the rules that govern that website are fair, the retailers are treated equally, and power isn’t abused.
Frisch: But that’s not the case with Amazon?
Mitchell: No. As search traffic migrates to Amazon, independent businesses face a Faustian bargain: Do they continue to hang their shingle on a road that is increasingly less traveled or do they become an Amazon seller? It’s no easy decision, because once you become a third-party seller, 15 percent of your revenue typically goes to Amazon — more if you use their warehouse and fulfillment services. Amazon also uses the data that it gleans from monitoring your sales to compete against you by offering the same items. And it owns the customer relationship, particularly if you use Amazon’s fulfillment services — meaning you store your goods in its warehouses and pay it to handle the shipping. In that case, you cannot communicate with your customer except through Amazon’s system, and Amazon monitors those communications. If you go out of bounds, it can suspend you as a seller.
Frisch: What’s out of bounds? Let’s say a customer wants to know which product would be better, A or B. Can a seller tell them?
Mitchell: You’re allowed to respond to that question, but if, in the process of responding, you violate Amazon’s rules, you can be suspended from Amazon and see your livelihood disappear. An example of this is a small company that made custom-designed urns for ashes.
Frisch: For people who’ve been cremated?
Mitchell: Yes. They sold these urns through their website and also through Amazon. A customer contacted the urn-maker through Amazon to ask about engraving. The company responded truthfully that there was no way to place an order for engraving through Amazon, but it could be done through the company’s website. Within twenty-four hours the urn maker got slapped down by Amazon. The rules for third-party sellers say you can never give a customer a URL, because Amazon does not want that customer going anywhere else — even in a case where Amazon can’t provide what the customer wants.
An independent retailer’s most valuable assets are its knowledge of products and ability to spot trends. Once you become a seller on Amazon, you forfeit your expertise to them. They use your sales figures to spot the latest trends. Researchers at Harvard Business School have found that when you start selling through Amazon, within a short time Amazon will have figured out what your most popular items are and begun selling them itself. Amazon is now producing thousands of products, from batteries to blouses, under its own brands. It’s copying what other companies are selling and then giving its own products top billing in its search results. For example, a company called Rain Design in San Francisco made a popular laptop stand and built a business selling it through Amazon. A couple of years ago Rain Design found that Amazon had introduced a nearly identical product. The only difference is that the company’s raindrop logo had been swapped for Amazon’s smiling arrow.
Frisch: Tell us what happened with the online shoe retailer Zappos.
Mitchell: This really speaks to one of the myths about the Internet. We imagine it as a place where anyone with a good idea can start a business, disrupt the existing order, and succeed. And for a while that was true. But nothing like that has happened in a long time. The dominant online companies — Amazon, Facebook, Google — each now have a huge market share. No one is challenging them because they have gained effective monopolies.
Zappos started up in 1999 and became a very popular online shoe retailer. You could order many pairs of shoes, try them all on, and then return the ones you didn’t want. Rather than face this competitor, in 2007 Amazon tried to buy them out. But Zappos wouldn’t sell. So Amazon proceeded to sell its shoes at less than it paid for them and offered free shipping. It lost about $150 million in the process, but the strategy worked: Zappos did not have the resources to lose money by matching Amazon’s prices. Eventually it had to sell to Amazon. The Zappos brand still exists, but now it’s an Amazon subsidiary.
Another example of this was Diapers.com. Having diapers delivered to your door proved popular with parents, so Amazon began selling diapers at a loss, bled Diapers.com dry, and bought it.
Antitrust laws prohibit selling goods at a loss in order to harm the competition. It’s known as predatory pricing. But the government no longer enforces our antitrust laws the way it used to.
Frisch: How did Bezos become so rich if his company is so often selling at a loss?
Mitchell: Traditionally, once the competition disappears, a company that uses predatory pricing will raise prices in order to make up for its losses. In the case of Amazon, however, something else has happened. The company has not made huge profits yet, but its stock value has grown astronomically. Wall Street values Amazon at about three times what Walmart is worth, even though Amazon generates far less profit.
Amazon’s strategy from the beginning has been to lose money in order to gain a dominant position in the market, and Wall Street has been remarkably enthusiastic about this strategy. Investors are willing to forgo profits for years because they see a future in which Amazon will monopolize markets and produce huge returns. But so far, our antitrust enforcement agencies do not recognize inflated stock value as evidence that a company is profiting from predatory pricing.
Amazon’s strategy from the beginning has been to lose money in order to gain a dominant position in the market, and Wall Street has been remarkably enthusiastic about this strategy. Investors are willing to forgo profits for years because they see a future in which Amazon will monopolize markets and produce huge returns.
Frisch: And Amazon’s board of directors and executives hold lots of its stock.
Mitchell: Correct.
Frisch: Let’s talk about another shoe company: Birkenstock.
Mitchell: Before I tell their story, you have to know that Amazon has aggressively recruited sellers in countries that don’t recognize U.S. trademarks. As a result its website is awash in counterfeits, including counterfeit Birkenstock sandals. For years Birkenstock complained to Amazon about all the fakes, but Amazon didn’t police the counterfeits. And because Amazon wouldn’t disclose information about these sellers, and many were based overseas, Birkenstock couldn’t pursue legal action against them. Finally Amazon told Birkenstock it would get rid of the counterfeits — if Birkenstock was willing to give Amazon access to its full line.
This is important because Birkenstock relies on specialty shoe stores to provide a lot of service and marketing for the company. The stores display the Birkenstock logo, fit customers, deal with returns, and represent the brand. And Birkenstock rewards those small retailers by allowing them to sell the company’s full line of shoes. Birkenstock also sells shoes through big-name stores, but it reserves a part of its line just for the specialty sellers. This gives those dealers something distinct to offer customers and helps them stay in business.
Now Amazon was saying it wanted the whole line, or else it wouldn’t police counterfeits on its site. Birkenstock faced a dilemma: On the one hand, the counterfeits were hurting its business. On the other hand, did it want a world in which its primary seller was Amazon and many of these independent shoe stores disappeared?
Frisch: And then Amazon could say, “We’re reducing your price by 20 percent. Take it or leave it.”
Mitchell: Yes. So Birkenstock turned down the offer and decided it wasn’t going to sell through Amazon at all anymore. Because Birkenstock has such a strong bond with its customers, it was able to get away with that. But when this kind of strong-arming goes on with companies that don’t have the same leverage, most of them give in.
Frisch: To what extent is Amazon dominant elsewhere in the world?
Mitchell: Amazon doesn’t yet have the market share in Europe that it does here, but it is rapidly gaining ground there and building European distribution centers. It’s also expanding in China and South America.
Frisch: Are governments in foreign countries putting controls on Amazon?
Mitchell: Right now Europe has a more aggressive approach to antitrust than we do. Amazon got a fairly substantial fine from the European Union for dodging taxes by shifting its profits to a subsidiary in the small country of Luxembourg. Amazon does that here, too, but it hasn’t gotten in trouble for it.
Labor unions are also much stronger in Europe, and there have been strikes at Amazon warehouses in Germany to demand better working conditions.
Frisch: You’ve characterized Amazon as a throwback to the age of the robber barons. How so?
Mitchell: The robber barons were nineteenth-century industrialists who dominated industries like oil and steel. During the Gilded Age, toward the end of the nineteenth century, these industrialists gained control of a technology that was opening up a new way of doing business: the railroad. They used their command of the rails to disadvantage their competitors. John D. Rockefeller, who ran Standard Oil, for example, conspired with the railroad magnate Cornelius Vanderbilt to charge competing oil companies huge sums to ship their product by rail. The first antitrust laws were written in response to industrialists’ attempts to control access to the market.
It’s striking how similar this history is to what Amazon has done: a new technology comes along that gives people a novel way to bring their wares to market, but a single company gains control over it and uses that power to undermine competitors and create a monopoly.
Amazon sells nearly half of all print books and has more than 80 percent of the e-book market. That’s enough to make it a gatekeeper: if Amazon suppresses a book in its search results or removes the book’s BUY button, as it has done during disputes with certain publishers, it causes that book’s sales to plummet. That is a monopoly.
Frisch: When did the Gilded Age monopolies get broken up?
Mitchell: A turning point came in the 1930s, during Franklin D. Roosevelt’s second term as president. Roosevelt concluded that corporate concentration was impeding the economy by closing off opportunity and slowing job and wage growth. So he set about dusting off the nation’s antitrust policies and using them to go after monopolies. This aggressive approach lasted for decades. Republican and Democratic presidents alike talked about the importance of fighting monopolies.
Then in the 1970s a group of legal and economic scholars, led by Robert Bork, argued that corporate consolidation should be allowed to go unchecked as long as consumer prices stayed low. The Reagan administration embraced this view. Under Reagan the antitrust laws were left intact, but how the antitrust agencies interpret and enforce the laws was radically altered. Antitrust policy was stripped of its original purpose and power. Subsequent administrations, including Democrats, followed suit.
All of the concerns that used to drive antitrust enforcement have collapsed into a single concern: low prices. But we aren’t just consumers. We’re workers who need to earn a living. We’re small businesspeople. We’re innovators and inventors. As the economy has grown more consolidated, with fewer and fewer companies dominating just about every industry, one consequence is lower wages. Economic consolidation means workers have fewer options for employment. This appears to be a big reason why wages have been stagnant now for decades. We should also remember that our antitrust laws, at their heart, are about protecting democracy. Amazon shouldn’t be allowed to decide which books succeed or fail, which companies are allowed to compete.
Frisch: What effect does Amazon have on the breadth and variety of products available? I’m thinking that less-popular items may disappear.
Mitchell: Amazon gets to pick winners and losers. A few years ago Hachette, the fourth-largest publisher in the U.S., got into a dispute with Amazon about the pricing of books. In retaliation, Amazon delayed shipping times by weeks for thousands of books from the publisher and modified its search results to direct shoppers to other books instead. Among the authors affected was Paul Ryan, the current outgoing Speaker of the U.S. House. At the time, he was a rising star within the Republican Party and had written a book. With sales of his book foundering, Ryan described Amazon’s tactic as a “power play” on national television. The company quickly restored access to his book, but Hachette’s less-famous authors had no recourse. Their books and careers were irreparably damaged because of the actions of a single company.
But there’s a broader problem that’s arguably even more harmful. Amazon’s dominance has meant that fewer books find an audience. Amazon is good if you know what you want, but it’s terrible for discovering new authors. If you’re shopping in an independent bookstore, studies show, you’re about three times more likely to discover a new book or author than if you’re shopping on Amazon. A consequence of this is that we’re reading more best sellers and well-known authors, while new authors and niche books increasingly get sidelined.
This is happening in all sectors of the economy. I’ve interviewed many small and midsize toy companies in the U.S., and one after the other has told me that the way they introduce a new toy is to get independent stores to carry it. The stores promote it to their customers and show people how to use it. Its popularity might grow from there.
As Amazon, Target, and Walmart come to dominate the industry, local toy stores are disappearing, and it isn’t clear how new products will get introduced. Many small toy makers and their inventions will disappear. Consumers won’t even know what they’re missing.
That’s bad enough in the context of toys. It’s alarming in publishing, where Amazon can essentially kill a book for any reason. We live in a democracy. How can we stand for such control over the flow of information and ideas?
Frisch: Do you see the tide turning?
Mitchell: Both Democrats and Republicans are starting to question the monopoly power of companies like Amazon, Google, and Facebook. The attorney general of Missouri, a Republican, is investigating whether Google is a monopoly. An antitrust caucus has formed in the House. I think that’s encouraging.
A lot is also happening at the grassroots level. In a statewide referendum in Oklahoma, citizens overwhelmingly voted to limit the power of corporate agribusiness. The city of Portland, Oregon, voted to take all of its investments out of corporations. A few years ago a majority of North Dakotans voted to keep their pharmacy-ownership law: the state doesn’t allow corporations to own pharmacies; only pharmacists can own them. Walmart spent a lot of money to try to overturn that law, but voters said no.
Municipalities in Colorado and Minnesota are taking control of their electricity supply so that they no longer have to deal with for-profit utilities. Hundreds of cities have built broadband networks to provide Internet access to residents, so they are not dependent on monopoly providers like Comcast and Time Warner.
People don’t necessarily recognize that all of these issues spring from the same root cause — that their problems with the cable company and farmers’ problems with big agribusiness are both about monopoly power. That’s why I’m encouraged that political leadership is beginning to emerge on this. If we can marry these issues in voters’ minds, we could begin to restore our democracy.
Frisch: How do monopolies affect civic engagement?
Mitchell: In the 1940s sociologists C. Wright Mills and Melville Ulmer compared communities dominated by a few large, absentee companies to those with many small, local businesses. They found the communities with more local ownership had much stronger social ties. People knew their neighbors, came to public meetings, and belonged to civic organizations in greater numbers. More recently sociologists have been finding, again, that communities with more local economic power have much greater citizen involvement.
It’s troubling how many places in this country have been left behind. We have relatively few winners — cities, or just parts of cities, mainly on the coasts — where people are doing extraordinarily well. Then you have the rural areas, small towns, and heartland cities like St. Louis that have lost ground, and many who live there are in despair. Corporate mergers have shuttered local plants. Small businesses have disappeared. Farmers are giving up and retiring because they can’t make money in a system controlled by big agribusiness. Banking is no longer local but is consolidated on Wall Street.
And even the major coastal cities — such as Seattle, where Amazon is headquartered — are marked by profound disparity. Some folks are doing very well, while others have been pushed out or rendered homeless by rising housing costs.
Frisch: More than two hundred cities have participated in a bidding war to become the home of Amazon’s second headquarters. Who’s participating, and will the prize be worth the giveaways for the winning city?
Mitchell: They’re down to twenty finalists, many of which are offering huge public subsidies. The largest we know about is $8.5 billion, offered by Maryland for a location just outside Washington, D.C. The state of New Jersey has put $7 billion on the table for a location in Newark. Many of the other bids are being kept secret. The taxpayers don’t even know what their elected officials are offering.
Frisch: Are they giving money or just tax breaks?
Mitchell: Both. These packages generally include handouts of various kinds, such as free land that the city owns. Some of the tax breaks are quite striking. A few places have offered to give all state and local income taxes paid by Amazon employees back to Amazon.
Even more valuable to Amazon is the public-relations benefit of all these elected officials begging Amazon to come to their town. The message to citizens is that Amazon’s growth is a good thing for them.
We’ve been playing this subsidy game for decades, even though the evidence is that the giveaways do not lead to job growth. All they do is help giant companies at the expense of local ones.
Frisch: Will Amazon create more jobs than the companies it’s putting out of business?
Mitchell: No. Amazon needs only about half as many workers to handle the same sales as a brick-and-mortar store. For every one job that Amazon creates, two jobs at existing businesses are lost.
Frisch: How does Amazon get by with so few employees?
Mitchell: Automation is part of it, of course, but I don’t think that’s the full explanation. Amazon is able to use its power to extract a great deal of labor out of people for little pay. Working in an Amazon warehouse is grueling. When I talk to workers there, I hear how exhausted they are. There’s a high rate of turnover. Most employees last only a few months and then quit or are “released,” as Amazon says when it fires someone.
Frisch: Are they monitored at work?
Mitchell: They’re heavily monitored. Because the warehouses are so automated, the workers are in service to the machines, instead of the other way around. They have devices that tell them what item to pull from the shelves and count down the seconds they have to do it. It’s difficult to take a break, injuries are common, and the pay is around twelve dollars an hour. [Amazon has since raised its minimum wage for U.S. workers to fifteen dollars an hour. — Ed.]
Frisch: President Trump has claimed that Amazon is getting a sweetheart deal from the U.S. Postal Service. Is he right?
Mitchell: I condemn his use of his presidential power to single out a company this way, but, yes, Amazon appears to get a sweetheart deal from the Postal Service. We don’t know what the deal is; it’s not public. Analysts think that Amazon pays much less than other businesses.
The Postal Service has an obligation to meet the broad needs of society. It will deliver mail to even the most remote rural areas, where private couriers will not. Shouldn’t it also have an obligation to create a fair playing field for competing businesses?
Frisch: And to set prices in such a way that the Postal Service has a future.
Mitchell: Exactly. It seems to have given Amazon large discounts. Some have suggested that the Postal Service is raising prices on other businesses to compensate. That’s another way in which Amazon is undermining competition.
One reason Amazon has developed this arrangement with the Postal Service is to learn more about how package delivery works. Amazon is now handling more of its own shipping. It’s steadily picking off the urban routes, delivering its own packages in cities while leaving the expensive rural routes to the Postal Service. Amazon’s move into shipping is also a challenge to UPS, which employs hundreds of thousands of unionized workers, whereas Amazon is relying on low-wage couriers and contract drivers who use their own vehicles.
Frisch: Before you took on Amazon, you helped galvanize community opposition to Walmart. Why should people be against the big-box retailer coming to their town?
Mitchell: Walmart’s pitch to communities is always that it will offer low prices and create jobs and tax revenue. Particularly for smaller communities, this seems like a great deal. But an overwhelming majority of research has found that Walmart is much more of an extractive force. Poverty actually rises in places where Walmart opens a store.
Independent businesses, on the other hand, help communities thrive, because they buy many goods and services locally. When a small business needs an accountant, it’s likely to hire someone nearby. When it needs a website, it hires a local web designer. It banks at the local bank and advertises on the local radio station. It also tends to carry more local and regional products. An independent bookstore, for example, might feature local authors prominently.
Economic relationships often involve other types of relationships, too. When you shop at a small business, you’re dealing with your neighbors. You’re buying from someone whose kids go to school with your kids. That matters for the health of communities.
When Walmart comes in, it systematically wipes out a lot of those relationships. Instead of circulating locally, most dollars spent at the Walmart store leave the community. You’re left with fewer jobs than you had to start with, and they’re low-wage positions.
Walmart has faced local opposition to many of its proposed stores. In some cases the citizens have won: Walmart has stayed out or substantially scaled down its store to have less impact.
Frisch: How do communities succeed in keeping Walmart out?
Mitchell: One factor is land-use law, which is a powerful tool of local governments. Vermont has a statewide law that requires approval from a regional board made up of all the towns in the area before a big-box store can be built. As a result, Vermont has just six Walmarts, and three of them opened in existing downtown buildings. Vermont has the highest number of small businesses per capita of any state in the country, in part because of land-use laws.
What we’ve found is that people are far more likely to vote against a Walmart store if they are thinking of themselves as citizens rather than as consumers. Walmart likes to present its store as just another shopping option and tout its low prices. It wants to keep us in a consumer mind-set. But Walmart is a threat to us as workers, entrepreneurs, citizens, and community members. When people think about this broader impact, they tend to vote against Walmart.
Frisch: You and I are in Portland, Maine, a city known for its small, independent businesses. But I’ve noticed that the city is booming with construction. Rents are rising, and there’s a fair amount of homelessness. Does a good climate for independent business cause housing prices to go up?
Mitchell: That’s a great question. In the early nineties, this section of our main thoroughfare was about 50 percent vacant, and there were many dilapidated buildings. What brought Portland back was investment by artists and local entrepreneurs who came into these spaces with a vision for a coffee shop or an event space or a bookstore. We also had a historic-preservation movement that saved buildings from being torn down. The new urbanism — the idea of living someplace where you can walk to many of the services you need — helped propel our revival.
Now, with rapidly rising commercial and residential rents, independent business owners who serve their neighborhoods are in danger of being priced out. Our downtown could become a playground for the wealthy.
Economic relationships often involve other types of relationships, too. When you shop at a small business, you’re dealing with your neighbors. You’re buying from someone whose kids go to school with your kids. That matters for the health of communities.
Frisch: Does an economic revival inevitably lead to this displacement?
Mitchell: The underlying problem is that most regions of the country have not had such a revival, so the few rejuvenated places have become sought after. There are beautiful historic towns and cities across the country that are largely vacant. This is another dimension of the monopoly problem. Consolidation has crippled the economic base of many regions and concentrated job growth and opportunity in just a few places. By breaking up these monopolies and spurring new businesses, we could trigger real investment in those neglected communities. It would take the pressure off places like Portland.
The true value of having a vibrant local economy isn’t just in the bottom line of small businesses and the specific jobs they create. It’s also the notion that place matters. A community can nurture active citizens and help people realize their dreams and potential. For a long time we have tended to ignore this. Amazon is a good example of the loss of place. Amazon is not here in Portland physically, but it’s sucking money out of this local economy just as it is everywhere else — invisibly, without enough public discussion about the consequences.
