TP,
re: For example: if it is determined that more small business is preferable to fewer mega-marts, then regulations should target one and favor the other as clearly as possible, for instance by a progressive tax rate based on the size, or number of employees, or whatever explicit characteristic that is to be controlled. Indirect methods lead to elaborate loopholes.
I know a bit about this, having spent my career selling to the largest and smallest retailers in the country. I don't think it's right to tax growth, but there is another solution... I'm not sure I would propose it.
First, Bush talks about the "ownership society". I grew up in the ownership society, before WalMart, McDonald's, Home Depot, Walgreen's, etc. All that retail function was controlled by 1000's of small family owned businesses. Family owned distributors bought from the manufacturers and sold to the retailers who sold to the public. Were thing more inefficient and more expensive? Sure, but the money stayed in the community and went to people who actually provided the service.
The two benefits the big box retailers brought were price and selection. I personally witnessed several induct ires get consolidated. There used to be a family drug store on every major corner of every town in the US; no more. A town of 50K people might have 7-8 family owned hardware stores; no more.
The family retailer could compete with the selection part by offering more personal service and convenience; but they could never compete on price. The big boxes bought in huge volume, and would negotiate prices 10%-30% below what the small retailer was paying. The small guys were paying net due in 30 days, the big guys net 90, sometimes net 120 days. Because of their large orders the shipping per item was a lot less. The net effect was that the large chains could offer better prices and still have bigger gross margin than the family business. This is all legal under our trade laws; you are allowed to offer discounts based on volume as long as you charge everyone that does equal volume the same price.
The large chain were predatory, they deliberately targeted successful family businesses, setting up stores as close as they could and offering their most aggressive price levels until they drove the family business out.
One way to encourage family owned business would be to level the playing field and outlaw quantity discounts. WalMart would pay the same as Joe's Discount. Dell would pay the same for a Pentium as the corner screwdriver shop. You could give discounts to distributors, but every distributor would have to have the same discount. There is no doubt that this would help the small guy compete and grow new businesses.
On the other hand, it would certainly upset the apple cart of US commerce. It might make us less competitive overseas. It would raise the lowest end of the prices we pay. It would probably make us less efficient over time.
It's interesting, but I'm a little nervous about unexpected consequences.
John |
