The Glorious Failure of a Big Business
By Anthony Gregory • Monday July 18, 2011 1:38 PM PDT • 20 Comments
Of capitalism’s condemned features, perhaps leftists complain most of all about the profits, seemingly growing without relent, accumulated in the hands of an established corporate elite. The rich get rich and the poor get poorer. Putting aside the second part of the last sentence, the concept of the rich getting richer is especially striking. Let us assume, for the sake of argument, that this is a bad thing. It is still no small matter that those who are vastly rich today may be replaced tomorrow by those who are not so rich as of now. Indeed, this is a commonplace in capitalism, and in particular when it is unmolested by state interference.
Several years ago book stores like Borders were the subject of leftist animus. How dare they crush the smaller competition. Little book stores of all sorts were being pushed aside as these gigantic buildings that featured all sorts of titles, new and old, were being introduced into the strip-mall landscape, town by town, neighborhood by neighborhood. Surely these corporate giants, undercutting the competition from mom and pop shops, would dominate the sector forever, having consolidated their share of the market and defeated the poor small stores forever.
But today Borders is on the verge of collapse. It seems the business model is losing out, especially to online sales at Amazon.com.
At this point a note is necessary. Was Borders’ success a free market phenomenon to begin with? My guess is that the answer is yes, but not purely so. Of course customers love the novelty of being able to buy all their books in once place. There is much enjoyment to be had in perusing a location like this. I have spent many hours at these stores, but my failure to buy much might have something to do with their ultimate failure.
There were ways in which government may have initially exaggerated the success of these stores. First there are the indirect subsidies that come with government planning, eminent domain, the quasi-socialized nature of strip-mall production, and so forth. More important, such establishments seemed to thrive in the real-estate and dotcom-related booms of the late 1990s and Bush era. The underlying cause of these booms, in my opinion, was credit expansion, directed by the Federal Reserve in large part with the deliberate goal of bringing about heightened economic activity, in the second case especially in real estate.
Yet whether or not the government had a role in pumping up Borders, it was the market that began signaling to the world that the company’s days were probably numbered. It is the force of the market that is bringing the business to its knees.
This will not be addressed much by the left, except perhaps lamentably. Amazon.com doesn’t play by the same rules. It is beyond the grasp of the same sales tax burden inflicting places like Borders. So it is the new target of anti-capitalist hatred.
Although it is great that Amazon.com can avoid the state encumbrances that hurt brick and mortar places, the bigger reason for Amazon’s triumph, I believe, is its overall brilliance as a business model. You can buy most of what you’d want with a click. The prices are great. The goods are brought to your door. There are a thousand times as many products as there are in a Borders, except the shopping experience fits not in a store the size of a warehouse but on your desk.
In any event, many left-liberals have condemned Amazon for undercutting stores like Borders. The corporate artifact that ten years ago was condemned for out-competing smaller bookstores is today being eulogized for itself failing the market test.
Yet for the consumers, the downfall of Borders is glorious, much as was its climb to success. In the rearrangement of resources to serve customers we see the beautiful actions of the market economy reconfiguring the world to provide the goods and services that are most wanted and needed in the most effective way. To ignore the upside to Borders’ downfall is as fallacious as to focus only on the downside of its upswing, as did most of the anti-corporate left in the last decade. But today we see that it was not government, nor socialist agitation, that brought the axe down on this big company. It was the matrix of demand provided by customers. It was the consumer base, acting in a manner much more democratic in the good sense of the word, and much more peaceful and socially productive, than anything we see in the political process. Thank goodness there is no doctrine of “too big to fail” in the book store industries. If the government bailed out Borders as it has so many financial institutions, surely the customers would suffer.
Whereas socialists of all parties cheer on the peaceful transfer of power following the election season, they ignore the violent nature of that power and the inherent conflict in the process. With economic “power,” however, the situation is different: Borders losing out to other alternatives truly is a peaceful process, one to be celebrated for all its compatibility with a socially harmonious world.
The failure of Borders is a beautiful thing, coming as it does from the market process. If voluntary competition should one day bring Amazon.com down, in the midst of a competing commercial success today unimaginable but even more friendly to consumers than that wonderful online store, we will again have reason to celebrate.