CREATING A SUPERIOR ECONOMY
Superior has two major chain retail stores closing. Both K-Mart and Target are leaving Superior.
Businesses closing in Superior are nothing new. There are empty store fronts and facilities all over town. Superior has never been a hot bed of economic vitality. But losing two long established businesses at once is unusual. Why is this happening?
One might speculate that Walmart has been successful in the big-box competition for customers. This is not hard to imagine when you look at the mostly empty parking lots of K-Mart and Target on your way to the well-stocked lot at Walmart. But all three retailers have existed side-by-side for many years in Superior. In addition Walmart, the largest, most powerful retail business in the country, has recently announced the closing of 250 stores. So it appears more is happening than simple competition.
There are probably many contributing factors to these store closings. Corporate mergers often lead to local closings. K-mart, Sears and Lands End merged. Maybe the rise of online retailers like Amazon have had an impact. Maybe the local economy is simply saturated with big box retail stores. Overbuilding is common in the boom and bust cycles of the free market.
For years Superior has been in decline with the decrease in railroad and manufacturing jobs. The general decline of working class buying power certainly is a factor. Since the 1980’s most people’s earnings adjusted for inflation have been flat or declining. It is tough to build a good economy on low wages and high debt.
Is there more going on than just the usual “creative destruction” of free enterprise capitalism? The U.S. economy has been generally struggling since the Great Recession of 2008. Wisconsin’ economy has certainly not been vibrant during these years. Has some sort of economic “tipping point” been reached? Is something fundamentally wrong with the economy?
Daron Acemoglu and James Robinson in WHY NATIONS FALL, THE ORIGINS OF POWER, PROSPERITY AND POVERTY talk about the difference between having EXTRACTIVE and INCLUSIVE economies and political institutions. They hypothesize that extractive economies, which accumulate wealth and power with a small ruling elite, ultimately fail.
Inclusive institutions, which share the wealth and power more broadly across everyone in the society, are more stable and produce a more vibrant economy. With many historical comparisons they show that man-made political and economic institutions underlie economic success or failure.
What all of the countries mentioned in this book have in common is that they have an elite who has designed economic institutions to enrich themselves and perpetuate their power at the expense of the vast majority of people in society.
The authors are not bleeding heart socialists. Rather they tout the free market capitalism of the United States and Western Europe as examples of inclusive economies. The opportunity to be innovative and entrepreneurial along with the protection of individual rights, property rights and a protective legal framework for business, made these societies more successful. Inclusive institutions such as free public education, public health, transportation and other public infrastructure are major factors in the economic success of these countries.
But historically, the actual inclusiveness of our economy and institutions has certainly been limited and imperfect. The economic and social restrictions on African Americans, women, and Native Americans are glaring examples. The struggles to create labor unions, abolish slavery, restrict child labor, and have fair prices for farmers are other examples. We have always had a wealthy ruling elite whose economic success was the result of privilege rather than ability or hard work. We have had a basically extractive economy even if it has been more inclusive than other countries.
Since the 1980’s, the extractive nature of our economy has been increasing. As we all know, income inequality has increased dramatically while corporate profits and the income of the 1% are at record highs. The political and economic power of a few billionaires is enormous. We have returned to the extractive social, political and economic system of the Gilded Age of the 1890’s.
Currently, Wisconsin and Minnesota provide an example of extractive vs. inclusive economies. Wisconsin is rapidly expanding on the conservative extractive model. The current administration has cut taxes to the upper income brackets, increased business subsidies, changed laws to help large out-of-state mining and championed factory farms, while cutting public health and safety oversight.
They have enacted many laws limiting local control and consolidating power in Madison. They have cut public services, aids to local government, funding to public schools, increased the cost of higher education and severely restricted the rights of voters. They gerrymandered political districts, limited access to public information, and restricted voting in order to control election results. These extractive policies are clearly intended to concentrate wealth and power with the ruling elite.
Minnesota has followed an inclusive strategy of increasing taxes, supporting public education, supported public services and local government. These has been none of the union busting, voter suppression, teacher bashing, blatant political manipulations or general dive-and-conquer that we have seen in Wisconsin. Minnesota is doing much better economically than Wisconsin.
In Superior the extractive model has had an impact. Obviously the reduction in state revenue sharing to school, city and county has impacted the local economy. The resulting flat wages, layoffs, and reduced local spending must have impacted the whole community. Requiring teachers and public employees to pay more for health insurance and retirement reduced their local purchasing power. Many families lost $500 to $1500 per month in take home pay. The outsourcing of UWS custodians takes money from the community and sends it to a British multinational corporation. These cuts alone did not cause the demise of K0mart and Target, but they contributed to the problem.
There needs to be a balance that comes from a more inclusive economic and political system. When even the large national retailers are failing, it is time to question what is going on. It is time to change the system. It is time to realize that everyone is BETTER OFF when EVERYONE is better off.