Monday, July 20, 2009

Locally-produced Marxism?

My editorial on the Portland Buy Local campaign in the Portland Daily Sun finally generated a response, although not from the intended group. A Portland resident posted a response in the newspaper, as well as online.

I disagree with most of what April Thibodeau wrote, but nitpicking at the little details makes for a dull response, so I'll boil her philosophy down to this: Purchasing from big companies sucks the wealth from the public, it also hurts our area's individual nature. The cost of these cheap goods includes the damage to Portland's character as well.

I think she did a great job of removing the masks from the two sides of the buy local debate. She correctly identifies the buy local supporters as anti-corporate consumers, and my side as pro-market and pro-economic scholarship. There's a lot of times where our arguments don't line up because she was making a more emotional appeal while I took a colder, calculated stance.

The first part of her argument went like this:

“...there is an inherent tendency for the greater wealth to be distributed unevenly so that most of the wealth goes to a few, while the majority are actually worse off. As companies get bigger and fewer, there are less and less owners, and more and more workers, thereby concentrating power at the top of these companies.”

This argument, according to Friedrich Hayek in The Road to Serfdom, “...mainly derives from the Marxist doctrine of the 'concentration of industry,' although, like so many Marxist ideas, it is now found in many circles which have received it at third or fourth hand and do not know whence it derives.”

Modern Keynesian economist Sean Masaki Flynn ridiculed this old myth in Economics for Dummies on page 319. He wrote, “...competition does not lead to each industry being dominated by a single monopoly firm. Rather, competition remains robust in most industries and consequently delivers all the benefits of Adam Smith's invisible hand.”

The reason, Flynn explains, is that there is a limited number of workers, and companies have to compete by bidding wages and benefits up to attract them.

While companies are getting bigger, this doesn't mean that workers are getting poorer. This zero-sum game argument is dead wrong. Companies are getting richer because efficient productive methods mean there is more wealth in the world. So while the rich are getting richer, the poor are also getting richer.

Without all their money tied up in dull things like food, shelter, electricity and transportation, the people of Portland have more money to splurge on fun things like locally-produced blackberry jam or handmade clocks that bigger stores don't carry. This means that Portland can still have a local merchant culture, it just has to earn that right by offering products people want at prices they can afford, instead of their current tactics of guilt and wild voodoo promises.

I stand by my submission for an economical crash-test: Does the plan attempt to increase wealth by being purposely inefficient?


  1. Adam Smith's "invisible hand" was in reference to companies having a "home bias" in their own country. Since it's constantly misrepresented as some sort of endorsement of free-market principles, it's incorrect on both accounts. He also noted: "All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind." You will also want to check your facts on consumer purchasing ability since 1970.

  2. I wholeheartedly disagree with your arguments against buying local.

    While I will admit, that the "Buy Local" movement can be incredibly obnoxious. I think the idea holds merit. I understand your critique of mercantile trade practices.

    However, you are assuming that there will not be any long term consequences for not buying local. You are right that in the short term it might be more economic and more efficient to forego buying local. But the long term effects of lack of competition are a real danger. Buying local although inefficient in the short term, serves many positive long term purposes.

    That being said, its highly probable that this "movement" is prone to strange theories and ideals; and is guilty of being elitist due to their views. But there are a great many benefits to buying local. Your thoughts?

    (I wanted to start this on your other article but was unable to respond)