Empty Stores

As I drive to work on a daily basis, I have become accustomed to seeing empty store fronts.  There are buildings and stores open across our area, whether it is  a rich, middle class, or poor neighborhood.  Is this the new normal?  We see new shopping centers going up, in our town, two new outlet malls have opened this year.  The other outlet mall that is close by has been open for years, and they can't seem to fill all their space.  Yet the real driver of our economy is still mom and pop stores.  It is a family that dreams of owning their own business.  They dream of growing that business, expanding that business, and passing it on to the next generation.  And this is the best of wealth creation.  It is a tangible asset that spans generations.

When I was in High School, one of my classmate's dad owned a Ford dealership.  When my classmate graduated from college, he went to work for dad.  A few years ago his dad passed away, now he and his brothers and sisters run the business.  There is a furniture store here, the founder died several years ago, yet his kids now run it.  This is a great way to pass economic security, and sure it isn't for everyone, nor is it the only way.  It is one way generations of Americans have done it, and it works.

Today, we are not seeing family businesses popping up as regularly, or with as much vigor, why?  The big guys have always been a factor.  I am sure Frank Woolworth did not want to see Sam Walton succeed. Just like General Motors doesn't want a Delorean, or Tesla to succeed.  It is these businesses that change the world.  Thomas Edison's company is still around, but how much inventing is going on there?  What have they done to change the world?  Surely not as much as Edison did.  Big corporations get conservative.  They protect themselves.  They no longer see the business as the founder, and that is why small business is important.  And our system keeps it clean, if a founder of a business has a flawed goal, it will go out of business.  The reverse is true as well.  There are more than a few reasons small business is hindered in today's world.

First, and most important, in my view, is government.  As government has grown, more laws and regulation has stifled small business.  Government makes it more expensive to launch a business.  And government would rather have to work with a few very large concerns than thousands of small ones.  Why do NFL owners get their stores (stadiums) built with taxpayer money, yet John Smith gets no help building his widget store?  Why does Walmart get TIF financing, yet other businesses do not?  Why do states court large companies like AT&T or Boeing, and not Barb's Beauty Shop or Dale's Bakery?

Large companies have certain advantages of scale, making it hard for small companies to compete.  In our industry, a couple of concerns spend millions of dollars every year advertising.  A single store cannot.  The result is people are drawn by the advertising to their stores and they are successful.  Money flows out to the corporate headquarters.  Advertising sales people have less business to call on.  This meshes with a previous article on "Too Big to Fail".  Why is that true?  Resources should go to the best utilization, and that is not always the biggest company.  The biggest company, however, is easier to deal with, and more likely on first name basis with leaders.  Unions have an easier road to organization.  And people see jobs.  A win for the politician.

 The single person, with a revolutionary idea, is what drove us throughout the last century.  The Editions, Fords, Rockefellers, Woolworths, Sears, Kresskes, all made this country a better place.  Can you imagine a couple of brothers designing and manufacturing a new airplane in their garage?  The Wright Brothers did.  Do you see a new machine on the horizon, built in a basement that will help run the world?  Jobs and Wozniak did that.  We are losing that.  And that will be a loss to our nation as a whole.  We need to celebrate entrepreneurship.  We need a new generation of free thinkers, that don't say "yes sir", but rather "how can I do that."  We don't need to even the playing field, we need to get off the field and let them work.

That's not to say some interference isn't a good thing.  Some of the above companies had horrible reputations with their employees, and we as a community need to make sure there are ways to address that.  Today we don't really have that, sure there are minimum wage laws, and unions.  All sorts of Human Resource laws in fact.  But they do little good, in that they are enforced unevenly, and are generally used as tactics.

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Unions as an example love minimum wage laws, because their contract is generally tied to them.  If minimum wage goes up, so do their members wages.  So often you will see Unions lobbying for increases, not for the young couple trying to make ends meet, not to encourage fuller employment, but to get their people a raise, without working as hard for it at the negotiation table.  The result has seen a decline over the last 4 or 5 decades in teen employment.

Big companies can build factories anywhere.  Apple uses factories in China.  Most shoe companies manufacture off shore.  Even plumbing fixtures are coming in from overseas.  And that means we have less middle class factory jobs here.  Walk down the aisles of stores and look at how much is imported.  Brands that used to be made here.  Bigger is not always better.  As those jobs leave, minimum wage jobs are all that is left.  Fast food, and others are the only place more and more people can go, these businesses cannot offer a great middle class income, and skills are not as needed.  Skilled workers make more than unskilled.  How much skill is there in flipping a burger?  Or selling trinkets in a mall?  I remember people saying robots were going to take the "good" jobs, and while we use a lot of robots, I contend Big business takes more, by moving them away.  Should we not encourage those small businesses that work within their communities?

Instead we have empty stores.  Crushed dreams.  And we are the poorer for it.

Spend Wisely!

Middle Class Crash

From the very founding of our republic, a middle class developed.  It was unlike anything in Europe, where there were royals, and commoners, and rarely did the two interact.  Whether it was Ben Franklin, Henry Ford, or Bill Gates, there was hope, that with hard work, anything was possible in our country.  A poor person could, through sweat and a little equity, provide a product that people would buy.  You did not need to know the President, or anyone politically in control.  When you manufactured products, you employed your neighbors, and the community as a whole benefited.  Contrast that with a recent story from Cuba.  The Cuban Government is closing down small businesses that have popped up to provide a service or products that are not generally available.  As an example, they are importing clothing that sells for less than the government factory clothing, netting the business person profit, and saving the people money that they can spend on other things.  I guess the government does not like the competition.

Competition is the very nature of our economic system.  Competition for consumer dollars keeps our prices reasonable, and productivity high.  We have improved our standard of living immensely since the early days of our independence.  While not every new product or new technology has originated in our country, many have.  And those that did not, generally were improved by our citizens.  The assembly line, the light bulb, the phonograph,  the computer were all perfected here, if not outright invented here.  Rockets and missiles took us to space, and it was improvements to early designs that landed us on the moon.

It was the middle class that drove most of this, whether they were entrepreneurs, or just consumers of the products. A very wealthy person, generally has no more desires than a middle class person, oh they may be more ostentatious, however one person can only consume so much.  And that was the beauty of our economic system.  By "spreading the wealth" through hard work and aspiration, more consumers were born.  These people had money to buy Ford's cars or Gate's computers.  The United States developed in to the number one consumer market in all the world.  People immigrate here to be able to live their dreams, something the class system prohibits in many parts of our world.  In the 1990s, we hosted an exchange student from Russia.  He lived with us for a while.  His dream was to write software.  He studied hard, and worked his rear off to be able to write code.  After he returned to Russia, he prepared to go to University.  To enter the University, he had to take a test, to see if he was the most capable to write software, or if he should do something else.  The test did not go well.  We lost track of him at this point, we aren't sure what he ever grew up to be, but the government said no to writing software.  If he had grown up here, he could have pursued software engineering, and perhaps, because of his wants and dreams could have been successful.  Passion goes a long way to success.



Even in our country, not everyone is cut out to be a software engineer.  But if you have a passion, the market will decide if you are any good, not some aptitude test.  Some of us have seen our dreams crash, but others have lived a happier life doing what they are passionate about.  Is that true any longer?

To a degree, yes.  We are, however, less able to live our dreams than in the past.  We are losing our middle class.  You can see it in the current battle over wages at fast food restaurants.  Being a cook, or waiter, or buss boy was never considered a middle class position.  Skills is what made money.  So even truck drivers, or factory workers, if they had skills could make a good living.  Our problem today, in our opinion, is the "too big to fail" mentality.  We move money around today, instead of making things.  And many people who deserve a middle class income are shut out.  Big, multinational corporations, will produce their products where they can profit the most and not necessarily where they are needed the most.  So light bulbs, and TVs are made in other countries.  Those very skilled manufacturing jobs, are leaving, and not because of skills, or labor availability, but because of money.  Now don't get us wrong, money is an important consideration, but should not be the only consideration.  There is no way that a product can be produced in Asia, transported to North America, then distributed across the continent cheaper than the same product made here.  That is why foreign car makers when they grow to a certain size, look to open factories here.  VW, Mercedes Benz, Toyota, BMW, Hyundai, Subaru, and Nissan are examples of North American manufacturing of "imported" cars.  Fiat is a majority owner of Chrysler.  If labor rates were cheaper in Asia or the third world, would they not make the cars there and ship them to dealers here?

By assuming that GM, Chrysler, Bank of America, Wahcovia, or any other large company are too big to fail, we tie up capital that might launch the next industry.  And since these companies have no real local ties, there is no incentive for them to care about communities you find them in today.  One company close to my heart, since I grew up near them, is Anhueser Busch brewing. They were at one time the largest independent brewers in the world.  And they were American owned.  Several years ago, an European brewer bought them.  Prior to that, AB was first on hand with canned water when disaster struck.  There middle managers all had "charity" budgets to provide t-shirts or other products to local schools or charities.  Since the merger, that has changed.  They are huge now, too big to fail.  Middle class jobs are no longer here sadly.  In prior decades, that merger may have happened, but AB would have been the buyer.  See, at one time banking was local, offering the Busch Family access to capital easier, with a phone call to a friend.  They did try to fight off the takeover, they just didn't have enough time to arrange financing.  But Bank of America, who bought one of St. Louis' largest banks was not helpful, and neither was USBank, the buyer of Missouri's largest Bank.  So they are now "too big to fail".

Big is not always best for the middle class.  Sure big companies employ a lot of people.  Big companies have less local skin in the game, GE has no reason not to produce light bulbs abroad.  Especially when you consider tax ramifications of doing so.  They move money, not products.  Where the cost differential is in tax policy, why not move a call center to India?  We need to fight for our middle class, or we will become like European monarchies, or third world dictatorships, where the rich get richer by taking from the poor, there is no dynamic economy.

We need to get past "too big to fail"  if GM mismanages its business, it needs to fail.  The fallout would be hard at first, but over time others would take its place, and all the talent and skills are still there, perhaps a bigger, better company would evolve.  In the 1980s, I was working retail management, at the time the four largest companies were Sears, KMART, Woolworth and Montgomery Ward, today Sears and KMART are one company (and still are not number one), Woolworth and Montgomery Ward are gone.  That list today is Walmart, Target, Costco, and Walgreen.  Crony capitalism is taking root in our country, and the public treasury is being used to support mismanagement and greed.

We do not need to be, nor should we want to be Cuba, we are better than that.  We need to believe in our people, the people who linked the world with radio and internet, the people who lit up our lives, the people whose skills and passions have driven us for so long.  Unlike some, we do not believe it is over for America, we're just having a tough time.  We do believe that our government is not helping, but even that will not stop us.  They talk as if China may overtake us as the largest consumer market, perhaps, but only if we allow it.  We need the liberties in our system to drive our economic machine, if government gets out of the way, watch what happens!

Spend Wisely!