And The Medium Sized Fish Eats The Small Fish

I often get frustrated with the Michael Moore’s and Rush Limbaugh’s of the world because their ideological analyses slight endless economic, political, and cultural subtleties that require deeper thinking and more tentative conclusions.

Peter Whybrow, in his excellent book American Mania, explains Adam Smith’s work in ways few conservative free-market zealots probably understand. “Smith favored private ownership, with capital being locally rooted,” Whybrow writes. “He distrusted large institutions—be they government or corporate—as forces that foster greed, distorting and suppressing the dynamic market exchange and social intimacy that are essential to fair dealing.

As businesses merge and increase in size,” Whybrow contends, “and as manufacturing and services become geographically remote from each other, the behavioral contingencies essential to promoting social stability in a market-regulated society—close personal relationships, tightly knit communities, local capital investment, and so on—are quickly eroded.”

In other words, your less likely to exploit someone you know.

It’s in this context that I recently read Alpine Experience’s dead-tree newsletter that arrived old school in the mailbox. Alpine Experience is a local independent retailer that specializes in high quality outdoor gear of all sorts. If their website wasn’t so poorly designed I’d link to it. Here’s their slightly less bad Facebook page. I used to have an Alpine Experience t-shirt that said, “Friends don’t let friends shop at chain stores.” I shop at AE once a year when they have their annual sale. When their prices are marked down 30-40%, they almost seem normal.

I like their irreverent, personal newsletter, but I’m sure it’s probably more expensive to produce than they can afford. Inside this issue was an honest, interesting reflection on Olympia’s newish REI store’s impact on AE’s bottom line. The author, I think the store’s owner/manager, said the new REI is definitely impacting their bottom line. Admitted they’ve fallen behind projections and need to have a good winter. I really hope I’m wrong, but given REI’s economies of scale and vastly superior on-line presence, I anticipate AE going out of business.

REI is a large national chain, but its progressive business practices give it a positive, medium-sized, community-based essence. Like AE, it’s a groovy store. It has been voted one of the Top 100 businesses to work for the last 14 years in a row. Read more about its enlightened business practices here.

Recently I was cycling with an acquaintance, an independent architect who has fallen on hard times. He’s taken a job at REI to get by, working as a cashier 16 hours a week. We were discussing the AE-REI tug-of-war. He told me he needed glove liners shortly before getting the job and they were $20 bucks at AE and $7 at REI. Probably an exaggeration, but I suspect comparable products are often 30-50% more at AE. That would be a huge headwind to building a reliable customer base even in a good economy.

Back to Whybrow. REI is not a megacorporation that fosters greed, nor does it distort and suppress the dynamic market exchange and social intimacy that are essential to fair dealing. But it’s not as small nor as local as AE and it doesn’t share it’s long history.

What to make of this capitalist case study?

4 thoughts on “And The Medium Sized Fish Eats The Small Fish

  1. I don’t even mind some national chains and too often we lose sight that many big companies are not there “fostering greed”. The “buy local” concept is a great idea and one that I wish could be sustained in every case. But the “headwind” as you mention with most people is the bottom line costs between what we can produce here and what the cheap labor markets abroad allow.

    One effort we should all be making since macro economics is in play to stay is to continually push for improved wages and benefits for foreign workers. It’s hard to compete with the Indonesian worker who gets by on a dollar a day with no benefits when our standards require a livable wage with reasonable benefits. But even that seems to be escaping our grasps.

    We need to elevate the foreign labor market to our level and push back on the corporate mentality that insists we should regress to what the Indonesian worker accepts as normal.

    • Makes sense, but all countries are very reticent to give up any of their sovereignty. That’s the challenge with creating international organizations. That problem is evident when the World Court decides against the U.S. and we ignore the decision. China’s known for ignoring some World Trade Organization provisions. And of course our environmental regulations are more stringent than in many of the fast rising developing countries. But on that score, they correctly say we use 8x the resources of the rest of the world, so why should they conform to what we want? Economists say Indonesian wages will gradually rise as the country’s standard of living improves. I wonder if manufacturing will be outsourced to sub-Saharan Africa when China’s, India’s, and Indonesia’s wages improve. The one challenge there is the relative lack of public education and literacy.

  2. I have at times needed items for my kayak and I have usually found AE cheaper than REI, even before REI moved down here. It would be interesting to see if REI is engaging in a price war, but I doubt it. AE has always seemed to be fairly competitive, at least with kayak gear. I’m sure that they don’t fare as well due to volume, though.

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