Let’s talk about business practices for just a moment. We of the Reno News & Review are not so naïve as to believe that there are any “pure” markets in this country. Government, through laws, inducements and punishments, regulations and taxes, manipulates every single market. That is basically what our version of free enterprise is, a mutually agreed upon set of rules by which human beings can do business without having to resort to uncivil behavior. We, as a society, have decided that it’s better for everyone if the playing field is somewhat level, and laws or unfair competition designed to kill competitors is frowned upon.
The whole idea is that competition is good for citizens (citizens first, consumers second) because it brings down prices and enhances choice.
OK. So let’s say we live in a city. It’s got a nice little business area in a centralized location, maybe an arts and entertainment sort of area. The nice little business area is populated by funky, locally-owned businesses with an occasional chain store thrown in the mix to increase choice. Hey! With a small stretch of the imagination, that could be Reno’s West First Street area. Some of those small, locally owned businesses have been through a lot, from street closures to drug dealers to floods to street festivals.
Somehow, they survive. They’ve got locals who come by and appreciate that the proprietor knows their name. They’ve got passers-by who appreciate the uniqueness of their offerings. They watch their pennies, pay their bills on time, and somehow they can stay alive even in the face of direct competition from other similar businesses—for example, Dreamers Coffeehouse is within a couple hundred yards of Java Jungle, and somehow they co-exist. The money gets passed around among other local businesses, it’s kept in local banks, and local people take home paychecks. Nobody’s starving, but nobody has a Swiss bank account, either.
The best part is, we’ve got a vibrant section of town with funky Reno shops, where friends hang out and people can do business.
Now—yes, we’re getting somewhere with this—suppose a Starbucks outlet moves in midway between Dreamers and Java Jungle. Starbucks is the leading coffee retailer in the world. They should be: Their coffee is consistently good, the atmosphere is cordial, they offer a great employees’ benefit packages.
But, they only have to take two customers in five from Java Jungle and Dreamers to remove the profitability from Java Jungle and Dreamers. Twenty percent right off the top should be about enough to kill Java Jungle—the Riverside Artists Lofts’ Dreamers is, by a small stretch of the imagination, subsidized by taxes.
Starbucks, with pockets deep enough to weather any storm, can make half as much money as Java Jungle for as long as it takes because Starbucks knows that Java Jungle can only lose money for a month or six. And once Java Jungle has lost money for six months, Starbucks will get all the customers.
But when that business goes dark, doesn’t it seem less likely that another local business will want to fill the void? Does anybody remember downtown Reno circa 1978?
Since we’re not into predictions, you can call this editorial a fable because it’s got a moral at the end: By choosing when and where to regulate or subsidize, government decides which businesses survive—and whether a nice little business area remains a nice little business area.