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Thursday, October 13, 2005

Protect the Free Market: Oppose Home Depot

The Home Depot is the second largest retailer in the United States, trailing only Walmart. The big box power of Home Depot is not limited to America; Home Depot is also the third largest retailer in the world. Last year, The Home Depot collected over $73 billion in revenue. In short, Home Depot is one of the two most powerful corporate retailers on the planet.

Now The Home Depot wants to open up a store in San Francisco. This plan must be opposed at all costs by anyone with a say in the matter.

I. DANGERS OF THE HOME DEPOT

a. Squashing Competition, Injuring the Free Market

The Home Depot is the prototypical big box store. By proving every kind of product relating to "Hardware and Home Repair" under one roof, and doing so on a massive scale across America, no other business could possibly hope to compete. At this point in time, it would be functionally impossible for any new business to compete with the Home Depot unless they were of a similar massive size.

Is this capitalism? Is this the free market? No. The amount of wealth required to compete with the Home Depot is impossible for any competitor to attain, so for all practical purposes, The Home Depot has a monopoly on the home repair market. The only reason any other hardware stores are ever frequented is when a trip to The Home Depot is too far. No one can compete with their prices due to the scale of The Home Depot's operation.

b. No new jobs will be created by The Home Depot and even if they are, 200 measly jobs doesn't justify the costs.

Those in favor of The Home Depot point to the 200 new jobs that will be created by the store. Those opposed point out that those 200 jobs have to come from somewhere and the net result will be 0 new jobs. The reason for this is simple Econ 1: there is no shortage of demand for hardware/home repair products, adding to the supply with a new Home Depot store means that existing suppliers will lose business, small suppliers who have lower profit margins will be forced to close their businesses and fire employees due to the lack of demand. So the argument regarding the 200 new jobs is a phony, meritless argument. Further, the jobs at The Home Depot will 1) pay less and 2) provide for less benefits than the jobs at smaller, independent hardware stores.

Mayor Gavin Newsom supports the store because of the creation of 200 new jobs. This makes me wonder: if the Al Qaeda wanted to build a terrorist training camp in San Francisco, would Newsom support it if it created 200 new jobs? Obviously not. That displays the fundamental flaw in Newsom's logic: if you create jobs, even just a couple hundred, that automatically negates any negative effect from the business. That's not true, even without going back and remembering that 200 new jobs will NOT be created because existing people will lose their jobs. The costs to the city in injuring existing competition, siphoning cash from the local economy, helping the Republican party and encouraging racism/sexism far outweigh any benefit of 200 small jobs.

c. Using the same logic, increased revenues in property taxes won't actually occur.

Another phony argument is the one that property taxes will provide San Francisco with an infusion in cash -- when smaller hardware stores are forced to close, the property tax gain to San Francisco will be minimal if at all.

d. The Home Depot will siphon cash from the San Francisco economy.

Another reason why The Home Depot will hurt San Francisco: the profits made at the new store will go to corporate executives and shareholders not in San Francisco. The profits made at smaller, independent hardware store and reinfused into our local economy because the business owners live in the Bay Area. So allowing The Home Depot to move in drains our city of cash that gets funneled through all sorts of businesses.

e. Supporting the Home Depot empowers the Republican Party.

The Home Depot gives 82% of its political donations to the Republican Party. Since their revenues are so high, this is an enormous amount of money: $367,500 in the past year alone. Their corporate executives exclusively donate to the Republican Party. Currently, SanBush got a measly 15% of the vote on his way to re-election last year. The people of San Francisco have spoken loud and clear: we do not support the policies of the Republican Party and we do not want to empower them. Allowing The Home Depot to profit off of San Francisco's residents does exactly that, however.

Francisco has no elected Republican office holders. For the past 12 Presidential elections, the Democrat candidate has won the majority of San Francisco.

f. The Home Depot is racist and sexist

Last month, The Home Depot settled a $5.5 million dollar class action lawsuit for discriminating against its employees based upon race, color and sex. In addition, the company retaliated against employees who complained.

Is this the kind of socially irresponsible company we want in liberal San Francisco?


g. If San Francisco can't stop big box stores, no other city can.

San Francisco is a liberal mecca, as most of us here appreciate. In many ways, our city represents the left boundary as to how liberal a city can be run. Other cities look to San Francisco for how far left they can go; Boston or Chicago is unlikely to do something more liberal than what we do in San Francisco.

So if San Francisco allows The Home Depot to build a massive new store, other cities will get the idea that they have no choice but to allow big box stores to build where they want. The result: more of the harm that the Home Depot generates.


h. If Home Depot comes, Walmart is next

Allowing The Home Depot to open in San Francisco means that the city would have no justification whatsoever for refusing to allow Walmart to open in San Francisco. Both businesses define "big box." Opposition to Walmart is much more intense because the scale of Walmart's corporate misdeeds are more well known and documented. Their low, low prices of Walmart easily expose it as a corporate plunderer while The Home Depot isn't considered to be as much of a threat to the free market. The numbers don't back up this perception, however, considering that Walmart and The Home Depot are #1 and #2 in the USA when it comes to big box stores.

How could the city possibly reject Walmart if The Home Depot is allowed to move in? What justification would we have? Accepting The Home Depot creates precedent by having the city, on record, refute all of my arguments against The Home Depot. Walmart would become inevitable.


II. MY STORY: THE HOME DEPOT TRIES TO TAKE OVER SAN FRANCISCO

Unlike my usual posts on this blog, this story has a bit to do with me. I was forced to move out of my last apartment in Daly City, California due to the construction of a Home Depot store across the street. Despite being an active Daly City voter who followed local politics, I received absolutely no notice of any sort of debate over The Home Depot project. In fact, construction began before residents were even notified that The Home Depot was the store moving in. Keep in mind that I lived directly across the street.

In The Home Depot's rush to make big profits this Christmas season, construction began every morning at 8am, including some Saturdays. Promptly at 8am, an enormous drilling began that shook the walls of our apartment. When you walked outside, you had to cover your ears or risk hearing damage. It was a miserable experience. When I was completely unable to study for my law school finals this May due to the noise, I moved.

Now I reside in San Francisco. San Francisco doesn't have a Home Depot store, but in addition to the new Daly City store located 1/2 mile south of the city, there is already a Home Depot in nearby Colma, which is just 15 minutes away. If you want to shop at The Home Depot, you have two easy options.

That's not enough for The Home Depot, however. Now The Home Depot wants to open up a store in San Francisco's city limits as well. They aren't in business to compete; they are in business to destroy all competition. The profits from opening up the San Francisco store won't be as high as most new Home Depots are since the new store will mostly drain the profits of the 2 existing Home Depots. The point is to make just enough profit in San Francisco to stay alive until all hardware competition is run out of business.

In July of this year, the Planning Commission voted to allow The Home Depot to build their store in San Francisco. This vote was supported by the kind of specious logic provided by Commissioner Michael J. Antonini: "I don't know that having a store in San Francisco is going to all of a sudden cause customers who are shopping at other hardware stores to now shop at Home Depot." Is he saying that every shopper at the Home Depot will be someone who doesn't shop at existing hardware stores? That somehow Home Depot's arrival will create a spike in demand for hardware and home repair products? Antonini's logic is ludicrous and quite frankly it's an abomination that someone with such limited mental capacity would be serving in any position of importance.

The Board of Supervisors in San Francisco have the final say on the project, although apparently they can only reject it based on the impact to the environment, not on any concerns about "big box" stores. Home Depot is treating this like a war, complete with a psy-ops department to launch a massive propaganda campaign. Home Depot has paid for its supporters to travel to public debates and has provided their supporters with free meals. This past weekend, the Home Depot staged a propaganda booth at a local street fair. No other booth had a corporate theme and politics were specifically omitted from the event. The planners of the event strongly implied that The Home Depot was a main reason that the festival occurred. Hogwash. The event didn't require much money at all and it's happened for the past 2 years without the support of corporate politics. The planners essentially argue that "but for" the Home Depot's participation, the event would not have happened. Considering that it turned into a propaganda rally and misled citizens, perhaps it shouldn't have happened. This argument just doesn't hold water, however, and the festival could easily have gone on without the support of The Home Depot.

Maybe it's too late to do anything. Maybe The Home Depot's construction is inevitable and big box stores can't be stopped. The ramifications of this particular store are huge and extend beyond local concerns to national and worldwide concerns. Right now, a small group of Supervisors in San Francisco hold the decision in their hands. All of them lean left; some of them are quite progressive. Craven political concerns should not factor into any of their decisions. I am hopeful that the Board of Supervisors will make the moral decision and stop the construction of a socially irresponsible big box store in San Francisco.

Comments on ""

 

Blogger Jack said ... (5:56 PM) : 

Home Depot/Lowes' low pices have spurned many people to pick up home repair & home crafts as a hobby that they probably would not have pursed. Who would go out and try a new hobby on a whim if the cost of acquiring the tools to start the hobby cost $4000? No many. Rather than $4000, a person can now pick up a decently complete set of tools at Home Depot for under $800.

 

Blogger Michael Alexander said ... (7:41 PM) : 

The Home Depot Does Not Increase Demand for Home Repair Products


You seem to be arguing that Home Depot increase demands for hardware products by providing them at a lower price.

The basic economic theory of supply and demand is this: 1) Some people value wrenches for $3 and won't pay any more for a wrench. 2) If ACE sells them for $4 and Home Depot sells them for $3, the hypothetical person will only buy the wrench from Home Depot. 3) If he can't get it for $3, he won't buy it.

There are a bunch of problems with arguing that constructing a new Home Depot will increase demand in San Francisco.

First, your numbers are exagerrated; Home Depot isn't selling products for 20% of the going rate.

Second, Home Depot is almost de facto monopoly. Prices would be even lower if there was real competition, which there isn't. The monopolist has no desire to lower prices beyond a certain point because there is no competition forcing him to do so. Lowe's is the closest thing to a competitor Home Depot has, but Lowe's is 1) half as big and 2) caters to a slightly different market (a large percentage of Lowe's sales are for large household appliances). Since we aren't dealing with a true monopoly, Home Depot still provides relatively cheap prices, but not as cheap as they would be in an actual free market.

Third, I'm not proposing banning Home Depot from America; I'm just saying that San Francisco doesn't need a store in addition to the 2 we already have in Daly City and Colma. The addition of the San Francisco store will not have the effect of raising demand as you claim because people who want to buy dirt cheap tools already have an option -- of the other two Home Depots.

Finally, The Home Depot stifles demand by underpaying their workers and taking money out of the local economy. Let's talk about Alan in Aapolis. Alan makes $20/hour with benefits at the local hardware store. The owner of the local hardware store, Andy, lives in Aapolis as well. Andy recirculates his profits into the local economy, some of which go into the hands of people eager to buy tools. Now let's turn to Bob in Bustville. Bob makes $10/hour with no benefits at The Home Depot. The owner of the Home Depot, a corporate conglomerate, takes all of their profits out of the Bustville economy and recirculates them elsewhere.

Now Alan will be much more willing to buy tools in Aapolis because he earns more money. Aapolis residents will buy more tools because their local economy is doing better. In Bustville, poor Bob can't even afford to use his Home Depot discount and local residents feel the pinch from the lost profits to Home Depot headquarters.

So for those 4 reasons, Home Depot doesn't increase demand for hardware. Further, even if it somehow did increase demand for hardware, mere demand for hardware doesn't outweigh any other concern. You still have the issues of stifled competition, the discriminatory practices of Home Depot, the precedent allowing more big box stores in San Francisco, and the issue of transforming decent paying hardware jobs into low paying jobs at The Home Depot.

The Home Depot is just plain bad for San Francisco. The only entity who will gain anything from this is The Home Depot and their mega-rich executives and shareholders.

 

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