72 ways to leave monopolies

Imagine that! Two weeks ago, I wrote about monopolies and the lack of competition in many industries. Last week, President Biden signed “Executive Order on Promoting Competition in the American Economy.” Who knew Biden reads the Gettysburg Times?

The Executive Order includes 72 initiatives assigned to more than a dozen federal agencies, requiring them to address the lack of competition and its effects on the nation’s economy. It did not, however, highlight the importance of small, local businesses to their employees and consumers. If you are concerned about strengthening the quality of life and the economic vitality of Adams County, consider the positive impact when you chose to buy from independent, locally-owned businesses.

Shopping at locally-owned businesses keeps more dollars in our community than shopping on line. How? The answer is the multiplier effect (I just knew my degree in economics would come in handy one day). New money comes into our economy from tourists, benefits (e.g., Social Security), and sales of products, like apples, to people and businesses outside Adams County. If the money coming in goes right out, Adams County doesn’t benefit, which is what happens when almost all the money gained is spent on line. So to keep money circulating in the local economy, it must be spent at locally-owned, or at least Pennsylvania-based, businesses as much as possible.

As an example, follow a ten-dollar bill that comes into the local economy. Let’s say that $8 of it is spent outside the county (e.g., for an on-line purchase) and only $2 of it, or 20 percent, is spent at local businesses. That means only $2 can be spent again here. If the same 20 percent holds true, then only 40¢ of the $2 will be spent here again, and then only 8¢, etc. By the end, only a total of about $12.50 will have been taken in by local businesses.

But if $8 of it is spent here, 80 percent, that $8 can be spent again locally. If 80 percent of that $8 is again spent here, that’s $6.40 for local businesses, then $5.12, etc. By the end, about $50 will have been taken in by local businesses. That’s four times as much money as above.

Local businesses employ local residents, advertise in local newspapers, use local banks, and patronize other local businesses. You may pay a little more, but in the end, it’s they who create jobs for local residents. Remember the multiplier effect the next time you shop at Amazon and realize that most of your money goes straight to Jeff Bezos.

Biden’s Executive Order does not specifically address issues of local economies, but hopefully it will eliminate some of the problems created by the concentration of economic power in fewer and fewer large/multinational companies. For example, concerning health care, Americans pay more than two and a half times as much for the same prescription drugs as peer countries. The Executive Order directs the Food and Drug Administration to work with states to safely import prescription drugs from Canada. It also directs the Department of Health and Human Services to consider issuing rules allowing hearing aids to be sold over the counter.

The four largest commercial airlines control nearly two-thirds of the domestic market, which contributes to increasing fees like baggage and cancellation fees. The top ten airlines collected $35.2 billion in such fees in 2018, up from just $1.2 billion in 2007. The Executive Order directs the Department of Transportation to consider issuing rules requiring the refund of fees when baggage is delayed or when a service isn’t actually provided, such as when the plane’s WiFi or in-flight entertainment system is not operating. It also directs the DoT to consider issuing rules that require baggage, change, and cancellation fees be clearly disclosed to the traveler.

Regarding agriculture, farmers’ and ranchers’ share of every dollar spent on food has been declining for decades. As a result, family farmers and ranchers are getting less, consumers are paying more, and the conglomerates in the middle are taking the difference. Equipment manufacturers, such as tractor manufacturers, use proprietary repair tools, software, and diagnostics to prevent third-parties from making repairs, forcing farmers to pay dealer rates for repairs. The Executive Order encourages the Federal Trade Commission to limit equipment manufacturers from restricting people’s ability to use independent repair shops or make repairs themselves.

The Executive Order also proposes three reforms to reduce employer power in labor markets which contributes to wage stagnation and rising inequality. First, the federal government should question mergers that adversely affect labor. Second, state governments should ban non-compete agreements so that employers cannot trap employees, but instead have to compete for them by providing benefits so they them choose to stay. Third, no-poaching arrangements among establishments that belong to a single franchise company should be prohibited.

Presidents Franklin Roosevelt and Lyndon Johnson fought for workers and against the monopolists. They understood that anti-monopoly laws were not just about keeping prices down, but also about making sure that everyone gets a fair shake. President Biden is resuming that fight.

Mark Berg is a community activist in Adams County and a proud Liberal. His email address is MABerg175@Comcast.net.