Restrict Government, Not Superstores

California has long been in the forefront of attempts by unions and their liberal allies to legally protect themselves against more efficient competitors, despite the inherent harm to consumers.  One illustration of their determination to persist until they get their way is SB469, the fifth attempt in the last dozen years to stymie the opening of new superstores, which now awaits Governor Jerry Brown’s signature.

It applies to stores over 90,000 square feet, with over 10% devoted to items exempt from state sales tax (i.e., food and prescription drugs), but excludes membership stores.  In other words, it targets Wal-Mart and Target (without having to single them out by name), whose superstores can offer consumers substantially lower prices than unionized competitors.

According to the Los Angeles Times, the bill would require studies to “gauge the effect that a proposed superstore would have on almost everything nearby—businesses, jobs, schools, traffic, housing, parks, playgrounds and day-care centers.”

SB469’s author, State Senator Juan Vargas (D-S.D.), says “it makes these super-boxes prove they are a good thing.”  But in fact, like multiple previous incarnations, it is actually designed to create an impossible hurdle to new superstore approvals.

It puts an unattainable burden of proof on supercenters.  SB469 would essentially require companies like Wal-Mart to prove a negative–that a supercenter would not have a harmful effect on “the community.” But as any logic student knows, it is all but impossible to prove a negative, because it requires establishing beyond doubt that in every potential scenario, something is true. No one can prove, in advance, that in every possible circumstance, a supercenter will not harm anyone, however remote the connection. Of course, the stores now in existence and eager to restrict supercenters could not have met that criterion, either, if it was applied to them.

The burden of proof is heightened by the ambiguous nature of the way the term “the community” is used.  Any individual or group threatened by competition can claim that “if I am hurt, the community that includes me cannot be better off.” That is, it provides every existing interest group a plausible sounding argument to veto a prospective competitor.

More importantly, the nature of competition makes the burden of proof impossible. Competition is simply the process of discovering who can best cooperate with (i.e., benefit) others. But whenever a customer picks one seller over another, benefitting both, the out-competed supplier is necessarily made worse off.  If damage to such a rival is sufficient reason to restrict competition, all competition, and all the progress that it causes, would be stopped.  In addition, any resulting change in shopping patterns will also necessarily increase traffic somewhere, so that objections to congestion can act as universal supplementary excuses to exclude supercenters.

As Frederic Bastiat so frequently illustrated in his writings against protectionism, applying an argument being put forward in one particular case to other circumstances can help reveal the strength of that argument.  So what if we were to apply SB469’s approach elsewhere?

If no choice could be made until after it could be conclusively proven to leave everyone involved better off in every conceivable situation or circumstance, no new choice could ever be made.  If dating was banned until it was proven in advance that both parties would feel they were better off after the fact, there would be no dating.  And just imagine if we tried to apply that same standard to questions of marriage, having children, investment decisions, career choices, or a host of other issues.  Any politician proposing to use such a standard in any of those areas would be quickly be ridiculed out of office (although sometimes I think that California might be an exception to that conclusion).

Despite SB469’s nonsensical logic when applied to almost any issue of voluntary arrangements, there is one area in which SB469’s logic might actually benefit citizens.  What would happen if we required that no political change would be allowed to take effect until it was proven beforehand that it would benefit every member of society?  If anyone objected, it would be rejected.

Under that standard, no politician would be allowed to ever take office, no bill could be passed, no new agencies could be created or administrative appointments made, etc., short of unanimous approval. Government could then do very little, because every form of robbing Peter to pay Paul, the primary “product” offered by politicians, would disappear.  Citizens would benefit greatly.  But politicians who restrict those who compete with their “friends,” with undeniable harm to consumers, would never accept the exact same restrictions as legitimate limits on their actions.

SB469 is nothing but the latest iteration of the almost uncountable ways special interests use political coercion to protect themselves against competitors.  It would keep Californians from making the mutually beneficial market relationships they would choose.  It would deny many the ability to accept the terms superstores would offer, for both jobs and goods, which they find more attractive than their alternatives.  And similar efforts are afoot in many other states, threatening to spread the consumer carnage.

Those pushing government restrictions such as California’s SB469 may not want to harm consumers (something they assert frequently), but consumer harm is the inevitable collateral damage of such efforts to protect their own bottom lines by restricting competition.  It guarantees harm to the vast majority of Californians, who politicians claim to serve, in the name of preventing harm.  But the only harm they prevent is to the special interests they really serve at our expense.

 

(Gary Galles is a professor of economics at Pepperdine University)