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697d58d1cdf2c576f6018a66edc186bbca5b9dd9There’s nothing like starting the New Year with a new controversy. My recent essay, “Finding Freedom in Your Pocket,” prompted a scathing response from one reader who derided my concerns about the rising power of the United Nations as “a little ridiculous” and who dismissed my belief in small business and localism on the grounds that such beliefs had been “completely destroy[ed]” by an episode of South Park (no, I’m not making this up!).

I’ll get to the alleged wisdom of South Park shortly. First, however, I would like to address the idea that my concerns about the power of the United Nations are “ridiculous.” Here is how my interlocutor addresses the issue:

Joseph Pearce likely makes a good point regarding undemocratic centralization when it comes to the E.U. However, his worry over the U.N leading to global tyranny is a little ridiculous in that COP21 was agreed to by a voluntary consensus of member states and the agreement itself is strictly voluntary with other nations and non-governmental actors only having the power of moral suasion to keep nations to live up to what they’ve voluntarily agreed to.

UN_EUI would argue, in response, that there is a frightening parallel between the evolution of the European Union over the past fifty years and that of the United Nations, or, at any rate, that the tyrannical rise of the former serves as a timely warning of the potential danger inherent in the rise of the latter. Let us not forget that the EU is, in theory at least, like the UN, “a voluntary consensus of member states,” even if it is, in practice, a corrupt and coercive political institution working progressively to undermine the national sovereignty and therefore freedom of its members. I recall only too well, though I was only a child at the time, that critics of the Common Market, as the EU was then called, were dismissed as being “ridiculous” for claiming that it constituted an embryonic United States of Europe. The Common Market was, we were assured, only a free trade zone and nothing more. We had nothing to worry about. Then, without any consultation with the electorate of Europe, the Common Market metamorphosed into the European Economic Community, making it a “community” and not merely a free market, and then it became simply the European Community, signifying that it was no longer only the “economic” institution that we had been told that it was; eventually it became the European Union, forcing its will and forging its union with a new single currency.

I accept, of course, that there are significant differences between the European Union and the United Nations but the fact is that the tendency of large political bodies is to seek to centralize and consolidate their power. I see no reason to believe that the UN is an exception to this rule. As the UN seeks to impose the “agreements” reached at its summits we will see that the dividing line between “moral suasion” and “political coercion” becomes very fine indeed, and, as history has shown, it is a very short leap between political coercion and political enforcement.

tweek-brosNow to the claim that the infallible authority of South Park “completely destroys” my arguments for localism and for small businesses. According to my interlocutor there is an episode of South Park in which a small local coffee shop is shown to serve some of the worst coffee in the world, much worse than the major chain with which it is competing, presumably meant to be Starbucks. This episode, says my interlocutor, “correctly pointed out that all the restaurant chains started out as local businesses that grew because people liked them because they served products that people enjoyed and that were consistently good.” This seems reasonable enough and might indeed be true, up to a point. It is, however, not the whole story.

I have witnessed at airports long lines of people lining up at McDonald’s for breakfast, while a kiosk selling breakfast items twenty yards away had no line whatsoever. Is this because McDonald’s offers better or healthier food? Of course not. It is because people are creatures of habit, and often bad habit, and have bought into the McDonald’s brand, expressing their loyalty to it by their willingness to line up patiently for ten minutes to be served. They have been brainwashed by the megabucks that McDonald’s spends on advertising, which is really a nice word for propaganda, and have been branded by the brand, much as cattle are branded by their owners. It is not the quest for good food that unites those in the line for McDonald’s but the herd instinct.

Is being the member of a herd, branded by our brand loyalty, a mark of freedom? Or do we express our freedom better by ignoring the propaganda and heading for the anonymous kiosk to take a look at its menu?

Another problem with my interlocutor’s position is his naïve belief in the freedom of the market. Big companies do not compete fairly with their smaller rivals but seek to eradicate them. Apart from the aforementioned power of propaganda, big companies use their so-called “economies of scale,” a euphemism for brute force, to exclude genuine free choice from the market. Thus, in the UK, until the law was changed to prevent them from doing so, the big brewing companies sought to exclude craft ales from the market because the big brewers owned most of the pubs and refused to sell the products that their customers wanted. Closer to home, a coffee shop in New York’s East Village was forced to close after Starbucks offered to pay higher rent for the space. In both cases, consumers were prevented from enjoying the products that they desired because big business had bullied their competitors out of the marketplace.

The biggest problem with my interlocutor’s position is his naïve assumption that small coffee shops produce bad coffee. As a self-confessed coffee snob, I can only say that the best way of refuting South Park’s silliness is simply to step into one of these locally-owned coffee shops and sample what they have to offer. In similar fashion, as a self-confessed ale-snob, I have absolutely no doubt that the many craft ales being produced by small brewing companies are so much better than Budweiser and other brands of mass-produced swill. The proof of the pudding is in the eating, and, in this case, the proof of the argument is in the drinking.

starbucks-londonMy interlocutor concludes his comments by stating that the “South Park episode was actually a rather brilliant explanation of the positive ideals and ideas of capitalism.” This, of course, begs a host of other questions, not least of which is what we mean by capitalism. If capitalism is the ruthless manipulation of the market by the biggest companies, a sort of Nietzschean survival of the fattest, so that there are relatively few capitalists owning relatively few mega-sized companies, I suppose I might concede my interlocutor’s point. If, however, capitalism is the encouragement of the entrepreneurial spirit in as many people as possible, so that the economy is ideally comprised of millions of small business owners, all working to produce quality products for their own local area, I’d say that the South Park perspective, and that of my interlocutor, is profoundly anti-capitalist. In any event, and whether we decide to call it “capitalist” or not, I will continue to spend my money on the excellent coffee and excellent ales to be found in local cafés and hostelries, and will not be joining the line outside McDonald’s or Starbucks as long as I have a choice in the matter.

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10 replies to this post
  1. You have part of a point, but so does the person you are responding to. He is right that every “Huge” business today once started out as a tiny business. Are McDonald’s, Starbucks, and all the rest to be blamed for the “Sin” of being successful?

      • Crony capitalism equals those businesses who have buddies in politics who grant them special favors that their competitors don’t get. Think the car and bank bailouts, as well as Solyndra and Tesla. In contrast, no one in government favors McDonald’s over Burger King or Target over Walmart.

  2. When I was a kid the smallish town I grew up in had a family owned drug store that had been around for decades. Sometime in the mid eighties a large chain drug store came to town and gave the family owned store the option of selling or being put out of business (the chain threatened to locate across the street and undersell for as long as it took.) The family store sold, but not happily.

    Is it accurate to say that distributism is free market capitalism practiced virtuously? It seems to me that devoid of greed and guided by subsidiarity capitalism would essentially be distributism. Maybe I’m wrong.

  3. ‘Apart from the aforementioned power of propaganda, big companies use their so-called “economies of scale,” a euphemism for brute force’

    I agree with your general point, but you greatly reduce its plausibility to people who know what these terms mean when you use them incorrectly. “Economy of scale” names a very specific phenomena in economics: that once you start making breakfast sandwiches for sale, it may be cheaper per sandwich to make 100 than to make one. (You have to pay for the knife and refrigerator and cutting board and sink etc. to make even the first sandwich.) This has nothing to do with “brute force.”

    I think, perhaps, what you really wish to complain about is “rent seeking.”

  4. Thank God Mr Pearce has a choice to buy local coffee and local ales. Mr Pearce doesn’t seem to be affording the same courtesy to others who prefer different options.

    I don’t go to McDonald’s often, but when I do, it’s because the smaller cafes are usually more expensive.

    • “Mr Pearce doesn’t seem to be affording the same courtesy to others who prefer different options.”

      Did he somewhere write that eating at McDonald’s should be illegal?! Why do you think he is denying you your “options”?

  5. I have a minor point about the Airport example: Most people would be unfamiliar with the local kiosk because they don’t frequent the airport enough. The kiosk is an “unknown.” But local establishments that are in community quickly no longer become “unknown.” They become known through word of mouth. There is a small Greek diner across from the MacDonald’s. I always go to the former for breakfast.

    Never the less, the power of suggestion that people should settle for less is powerful when applied with the advertising budget using economies of scale. This applies as much to our response to local / chain brands as it does to our response to central government regulations. Especially when the alternative is “unknown” to us.

  6. Joseph, I’m sorry you found my reply to your initial article to be ‘scathing’ I was just rebutting your points and had no idea I was creating a controversy.

    In regards to the U.N/EU, anything could happen over time, I don’t know what will happen here. Sometimes the so called ‘slippery slope’ occurs as you suggest, but other times backlashes occur and courses are reversed. Also, sometimes nothing changes and people just continue to muddle through.

    Joining the E.U for the member states is voluntary, but once joined, the member states and members who have since joined up had to agree to accept all sorts of rules and regulations that were written by non elected officials in Brussels. I’m not very knowledgeable on the history of the E.U, and was not even aware of some of what you wrote, but politicians and governments unilaterally giving up power to a more central authority for seemingly no benefit is very odd and rare, and I don’t know how it happened in the case of the E.U.

    I am aware though that your comment that the E.U morphed into this regulatory nightmare without any consultation with the public is not quite correct. First, a number of the new members of the E.U did hold referendums and, de jure, at least, any member nation can walk away from the E.U if voters in those nations elect anti E.U parties into government. I realize defacto, that it is almost impossible to quit a free trade agreement, but, then, we get back to my ‘backlash’ comment and in many member states, including the not full member of Great Britain, we are seeing backlashes with Great Britain, of course, about to hold a referendum and rising support for anti E.U parties in many other member nations. I don’t think that all of the opposition in those countries is due to the centralization of power to an unelected and unaccountable
    body based in Brussels, but I’m sure it does play a large role. I have no idea what will happen in the future, but it would not surprise me if member states get back some of the powers they’ve presently ceded to the E.U in the not too distant future.

    COP21, in contrast is completely voluntary. Prior agreements to address global warming were actually supposed to be legally binding, but they had the weakness that these agreements could not coerce the nations that signed them to simply walk away from them.
    So, now this voluntary approach is being tried.

    In regards to coffee and capitalism, my education is in history and economics, but I’m actually a pretty standard believer in liberal macro and micro economic theory (and not classical liberalism either) but I enjoy reading all different types of perspectives. So, I completely accept the reality of the problem with the concept that you are referring to known as ‘market failure.’ Despite the people who say that liberalism, socialism and communism are all the same, liberals actually support the free enterprise system. The general view of liberals is, to misquote Churchill “capitalism is the worst type of economic system, except for all the others.”

    That said, while many economic conservatives reject the idea of market failure entirely, many liberals including myself largely reject the notion that advertising by itself leads to market failures. Your claim about the power of advertising is pretty much shared only by far left liberals and by socialist and communist critics of the free market. Of course, just because more extreme people are the primary proponents of a claim doesn’t itself make the argument invalid, however, in this case, I don’t think your claim is valid.

    My basic view is that while there are some people who are effected by advertising, humans in aggregate are simply too intelligent to be constantly fooled. I don’t want to drop another quote here, but I agree with what Abraham Lincoln said on this matter. Although I don’t agree that the herd instinct is all that powerful over anything longer than the very short term, I do think there is more to the similar idea that ‘people (especially after they settle down) do get ‘set in their ways.’ So, that can explain why McDonalds succeeds when,even many people who, for instance, drink its coffee agree they can get better coffee elsewhere. That said, the constant turnover in market leaders in any segment of the economy alone shows to me the weakness in your argument, and it isn’t always the case that one big company that advertises displaced a similar big company. For instance, in the home coffee market, if advertising were all powerful, then how did the major sellers of old fashioned coffee get so displaced by these ‘brew cup’ newcomers?

    In regards to the example you cite of a coffee shop getting outbid for space by Starbucks, that is how the free market works. Why should the small coffee shop be guaranteed an obviously high traffic location when others offer to pay higher rent? If their coffee is that good, they can relocate to a lower traffic area that has lower rents and at least some of their customers should eventually be able to find them there.

    Finally (and sorry my reply is so long) I actually had no naive belief that small businesses produce bad products, as this is what I actually wrote: “Although that episode goes over the top (but it’s meant as satire) in suggesting that all local small business serve or make terrible products…”

    There are a number of theories in economics mostly based on anecdotal evidence regarding about how good the products of big businesses can be and how bad the products of small businesses can be. In the case of big businesses, bad business practices frequently occur when their is a lack of competition. In the case of small businesses, it obviously has to do with individual owner. However, at least prior to the internet and getting back to your point about small businesses not having the same ability as big businesses to advertise which I agree is valid, customers frequently had no prior knowledge other than word of mouth as to whether a small business offered good products and/or services or not and, therefore, many customers/consumers welcomed the chains for the reasons that I mentioned: (much) greater consistency in the quality of the products and services and an expectation that at least minimum quality would be realized.

    The classic example with this is in the hotel/motel sector of the 1950s (and later in some areas) where obviously there wasn’t even much word of mouth and where hotel guests often were horrified at the conditions found in the local hotel/motels. Given that, it’s not a surprise that hotel chains have virtually completely displaced the single proprietor run hotels in all of the market segments (low, medium and high cost). I’m sure I don’t need to provide the names of those chains for the author and the readers to know many of them.

  7. I just wanted to make one final point to add to my already too lengthy post. Contrary to Joseph Pearce’s assertion that my argument rested on the view that ‘all small businesses are bad’ (I forget what I wrote in my initial reply to the initial post, but I believe I said something like “there are good small companies and bad small companies and good big companies…), my argument rests on the view that many consumers simply don’t know if a small business is good or not.

    In economics, this problem was first analyzed by the giant of an economist the Keynesian George Akerloff in his seminal 1970 paper “The Market for Lemons’: Quality Uncertainty and the Market Mechanism.” For those who aren’t familiar with this paper, by ‘lemons,’ Akerloff was referring to used cars. (*Of course, he also wasn’t saying that all used cars are ‘lemons’ just that no buyer can be certain if the used car for sale is a lemon or not.)

    Further economics researchers developed this paper into what is now referred to as the ‘asymmetric information problem’ which basically means that the owners and managers of a business know more about their business than their customers do.

    This is the final paragraph on the subject from the sixth edition of the textbook “Microeconomics” by Robert Pindyck and Daniel Rubinfeld:

    “Sometimes, however, it is impossible for a business to develop a reputation. For example, because most of the customers of highway diners or motels go there only once, or infrequently, the businesses have no opportunity to develop reputations. How, then can the deal with the lemons problem. One way is standardization (italicized in the textbook.) In your hometown, you may not prefer to eat regularly at McDonald’s. But, a McDonald’s may look more attractive when you are driving along a highway and want to stop for lunch. Why? Because McDonald’s provides a standardized product: The same ingredients are used and the same food is served in every McDonald’s anywhere in the country. Who knows? Joe’s Diner might serve better food, but at least you know (also italicized) exactly what you will be buying at McDonalds.

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