Mackey spoke highly of capitalism, saying, “We can’t throw out capitalism and replace it with socialism—that’ll be a disaster! Socialism has been tried 42 times in the last 100 years and 42 failures. It doesn’t work.” Mackey believes that capitalism is “the greatest thing that humanity’s ever done,” crediting capitalism with increases in life expectancy, earnings, and literacy rates. Mackey recognizes that it’s entrepreneurs who have taken scientific discoveries and operationalized them to make our lives better. He points out that “businesspeople are not the villains of the story; they’re the heroes of the story. The entrepreneurs are the ones that create great progress.”

While noting that society needs rules and regulations, he says, “[Y]ou can overly regulate business so it’s hard to do business and then the whole society becomes less wealthy and less prosperous.” This is a point often made by Show-Me Institute researchers; burdensome regulations make it harder to work and make a living, which can have negative effects on economic growth.

I can’t speak to all the actions of Whole Foods or other interviews by Mackey, but it was certainly refreshing and interesting to hear the CEO of a major company supporting markets in this instance. I tend to agree with Mackey’s statements, but you can listen here and decide for yourself.

The post Whole Foods CEO Speaks on Markets appeared first on Show-Me Institute.

In just 20 years as a public company, it has experienced a thousand-fold growth in sales – going from $148 million in 1997 to $138 billion in 2016 and a projected $160 billion in the current year. Adjusted for splits, the price of the stock has gone up 200-fold – from a high of $5 a share in 1997 to $1004 a share today.

To paraphrase the bard, Amazon doth bestride the narrow world of retailing like a colossus. Others quake at its every movement. Back in June, when the company announced the acquisition of Whole Foods, the stocks of other grocery chains plummeted – with Kroger falling 26 percent in the two days following the announcement and SuperValu down 16 percent. Wal-Mart fell 5 percent. Within days, Amazon’s market cap went up nearly as much as the $13.7 billion it agreed to pay for Whole Foods.

In many years of writing about business and economics, I can think of no other enterprise that has come so far so fast. Even so, waxing biblical in your 2016 letter to shareholders, you said it is still “Day 1” (the first day of creation) in the company’s evolution. When someone asked you at a recent “all-hands meeting” what Day 2 would look like, you answered:

Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.

Your words prompt me to warn you that Day 2 may be approaching much more quickly than you think. Surely you don’t want to turn Amazon into a subsidy junkie. If that happens, Day 1 will turn into Day 2 in the blink of an eye.

Right now, cities and states across the country are competing with one another to throw big money – taxpayer money – at Amazon in the hope of being chosen as the site for Amazon’s proposed second headquarters. With one hand, you dangle the promise of up to 50,000 jobs paying an annual average of more than $100,000 per employee. With the other, you rattle a tin cup, stating in your request for proposals:

Incentives offered by the state/province and local communities to offset the initial capital outlay and ongoing operational cost will be significant factors in the decision-making process . . . . Outline the type of incentive (i.e., land, site preparation, tax credits/exemptions, relocation grants, utility incentives/grants, permitting, and fee reductions) and the amount. The initial cost and ongoing cost of doing business are critical decision drivers (emphasis added).

A few years ago, Boeing Commercial Airplanes, your cross-town neighbor in Seattle, initiated a similar nationwide bidding war for production of its latest big new wide-body – the 777X. In the end, Boeing decided to keep production at its massive facility in Everett, Washington – but only after winning nearly $9 billion in tax breaks and subsidies from the state legislature. That worked out to more than $1 million per promised job, or about $50,000 per year per job over a 20-year period (the tax breaks do run out eventually).

Maybe that sounds great to you. From your perspective, it may seem like the equivalent of having local and state governments pick up half of the anticipated HQ 2 payroll for a long time.

But think of the downside of making Amazon and its people deeply dependent upon corporate welfare. Think of the gross unfairness of huge tax carve-outs for Amazon that are denied to other smaller businesses (which have to pay for their initial costs and ongoing costs out of their own hard-earned dollars). How do you want your company and its people to succeed – by winning in the marketplace . . . or by securing a fatter portion of government largesse?

Last but not least, think of the hypocrisy of preaching a gospel of “obsessive customer focus” as the key to maintaining “Day 1 vitality,” while gouging money out of taxpayers. According to Consumer Intelligence Research Partners, there are now about 85 million Amazon Prime members – that’s 68 percent of all U.S. households! As Amazon becomes increasingly ubiquitous, most of every dollar that Amazon takes out of taxpayer pockets will be money stolen (or lifted) from its own customers.

As one of your customers told me, “I am never in favor of using my tax money to build someone else’s business so that it can sell products to me and profit off me a second time.”

The post Beware the Perils of Corporate Welfare: An Open Letter to Jeff Bezos appeared first on Show-Me Institute.

                TIF is a controversial way of subsidizing development, which we have written about many times before. According to its proponents, it can entice businesses to build in blighted areas that would otherwise remain undeveloped, or conserve historic sites that might otherwise be knocked down. Skeptics of TIF argue that the tool is too often used to subsidize—at the expense of overlapping tax districts—development that would have occurred anyway.

                Whichever view is correct, TIF is almost certainly unjustified in the case of the Koman Group’s proposal. The areas in question are not blighted in any way. I should know, as I currently live across the street from one of the locations and down the street from the other. The proposed building sites, far from being deleterious to the community, are well-maintained properties with active businesses. A new apartment building and Whole Foods is going up in the middle of the block. If these properties can be defined as blighted, any property can be. This is just another example of how a program designed to help downtrodden neighborhoods can be twisted to support luxury developments in booming areas.

                The Central West End has many new apartment buildings, a large source of local employment (BJC Healthcare), and a healthy bar and restaurant scene. It’s time to stop giving tax subsidizes to companies that decide to build there. Koman Group can knock down my nearest dry cleaner and bar if they want, but they shouldn’t get a tax break to do it.

The post City Should Reject Central West End TIFs appeared first on Show-Me Institute.

His quip aptly describes a sport popular in Missouri: The one that elected officials play when they use taxpayers’ money to support the growth of selected businesses or industries.

The attempt to single out economic winners through government planning and intervention is a dismal sport that can only end in disappointment and failure. The nutritional value of the object of the hunt may be safely described as zilch. If you eat the uneatable, you will only make yourself sick.

But you wouldn’t know that from the behavior of many of our elected officials of both parties.

Whooping and hollering, they ride to the hounds of corporate welfare—passing out hundreds of millions of dollars every year in targeted tax credits and other subsidies that go mainly to large and deep-pocketed corporations and a supporting cast of lawyers, developers, urban planners, and consultants.

In a recent report, the Mercatus Center at George Mason University identified Missouri as one of nine states that rank as “the corporate welfare kings of America.” According to Mercatus, Missouri has committed to more than $5.2 billion in subsidies to private businesses over the past couple of decades.

So how much good has being a “corporate welfare king” done for the people of Missouri? Has it made our state a magnet for growth and job creation?

Emphatically, not!

Over the last decade and a half, Missouri has lagged every other state in the nation but one in average annual economic growth.

In the 16 years from 1997 through 2013, real gross domestic product in the United States grew at an average annual rate of 2.23 percent. Meanwhile, Missouri grew at an average annual rate of just 1.08 percent—or less than half as fast as the national average. By this measure, Missouri ranked 49th out of the 50 states—just ahead of Michigan at the bottom of the barrel.

There are two things that typically can happen with taxpayer-assisted commercial developments—both bad.

The first is the support of bad ideas that would never get off the ground without the helping hand of government, such as the now-bankrupt and disbanded Mamtek artificial sweetener plant that was supposed to provide 600 jobs in Moberly. The CEO of Mamtek was recently sentenced to a seven-year prison term.

Second is wholly unnecessary pump priming at taxpayer expense. In our state, Tax Increment Financing (TIF) is commonly used to “induce” powerful companies and their allies in commercial development to do things they would do anyway, such as opening new stores or building more opulent corporate headquarters.

To cite two recent examples of the abuse of TIFs, Kansas City and the state of Missouri are prepared to pick up $1.6 billion out of the $4.3 billion cost of building a brand-new and super-deluxe corporate campus for the Cerner Corporation. If Cerner needs a corporate pleasure dome, it should pay for it on its own nickel.

Another egregious example of a private development that does not require or deserve public assistance through the grant of what amounts to a tax holiday from the property and sales taxes that apply to other businesses is the Whole Foods Market and high-rise apartment complex that is going up in Saint Louis’ trendy Central West End.

If Missouri wants to stimulate growth and job creation, the first step is to put a stop to corporate welfare, including the $400 million in targeted tax credits earmarked for commercial development that the state hands out on an annual basis. And that dictates the next step, which is to return the money to the people who earned it—through cuts in the state income tax.

Brenda Talent is the CEO at the Show-Me Institute.

The post Riding to the Hounds of Corporate Welfare appeared first on Show-Me Institute.

Are you listening, Missouri lawmakers? This is the Ghost of Christmas Past. I am calling on you to mend your ways and adopt a whole new set of economic policies to replace the failed policies of the past two decades.

Yes, my friends, it is time for you to admit that what you have been doing—in spending billions of dollars of taxpayers’ money to subsidize commercial projects for the benefit of big, cash-rich companies such as Boeing, Cerner, Capri Casinos, Wal-Mart, and Whole Foods—has been a ghastly mistake.

In the 16 years from 1997 through 2013, Missouri has trailed every other state in the nation but one in average annual economic growth. Missouri ranked 49th out of the 50 states in growth of state gross domestic product—just ahead of bottom-dwelling Michigan.

And that is despite (or, I would say, because of) the fact that you have turned Missouri into one of the nine states considered the “corporate welfare kings of America.” According to the Mercatus Center at George Mason University, Missouri has committed more than $5.2 billion in state and local subsidies to private businesses over the past two decades. That is more than all but eight other states.

What else can I say to convince you of the urgent need for change? Well, perhaps some specific suggestions would help.

Here are five New Year’s resolutions for making Missouri a better place to live and work and grow a business:

• Stop putting the public sector cart in front of the private sector horse. That is to say, begin with the recognition that all the private sector really needs to create wealth and jobs is competition and freedom of choice. It doesn’t need central planning and controls, which have the opposite effect of stifling individual initiative and economic growth.
• Abolish the Missouri Department of Economic Development (DED) and return the money that the DED passes out in targeted tax credits for economic development (about $400 million a year) to everyone (not just the politically selected few) through broad-based cuts in the state income tax for individuals and businesses.
• Take advantage of a wealth of opportunities across the state to enlarge the private sector and shrink the public sector through privatization. That is what Arnold did recently in selling its publicly owned and operated sewer system to a private contractor for $13.2 million—allowing the city of 20,000 people to pay off $8 million in sewer bonds and devote another $5.2 million to other public improvement. Better yet, under private ownership, the sewer system will go on the tax rolls and help pay for schools and other public services.
• Make greatly increased use of tolls on Hwy. 70 and other major roadways and bridges. Tolls are an extremely efficient tax, and—as a result of new technology—they are readily collectible without toll booths or other inconvenience to people using the roadways. In fact, through variable tolls, the Missouri Department of Transportation could—at minimal cost—guarantee drivers congestion-free traffic flows at all hours of the day on major roadways and bridges.
• Finally, look to what neighboring states are doing in reorienting their tax structures and put Missouri in the forefront of states that are pursuing pro-growth, pro-economic freedom reforms.

In the Christmas spirit, I urge you to make all those changes—knowing that you will wake up shortly wanting to fix the problems that have kept Missouri from reaching its full potential.

Andrew B. Wilson is a resident fellow and senior writer at the Show-Me Institute.

The post New Year’s Resolutions for Missouri Lawmakers appeared first on Show-Me Institute.

Related Links

Video: Who is Hurt by Eminent Domain Abuse and TIF in Richmond Heights?
Testimony: ‘Sometimes Nothing Can Be A Real Cool Hand’ Saint Louis County TIF Policy, Punting, And Cool Hand Luke
Op-Ed: TIF Is A Bad Idea That Refuses To Die
Op-Ed: TIF Gives Cities An Unfair Advantage Over Other Governments

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The power of consumers to influence producers with their money is something we’ve discussed before on Show-Me Daily. It is not a pipe dream, either, considering that companies like McDonald’s are listening.  Entire businesses (like Whole Foods) have sprung up around the environmentally-conscious consumer.

Last semester, as a final project for my research methods class, my group conducted a survey about people’s meat-buying habits and their knowledge of farm conditions. Although I can’t mention specific results — we conducted the project for educational purposes only — we generally observed that most people claimed price to be the biggest factor when they bought meat. After we showed them pictures and information about industrial farms, a significant percentage said that knowledge of farming practices and conditions would affect their future purchasing decisions.

If these sort of things are important to you, voting with your wallet — and encouraging your friends to do the same — is the best way for the market to select for companies that most closely align with societal norms. One common misperception about free markets is that profit is the only important factor, and that the only way for a company to survive is for it to offer the lowest prices — and cut quality accordingly. But that’s merely a straw man: Product quality and any number of social considerations, including “eco-consciousness,” can have value for consumers.

Price is a limiting factor for some people, and they may not be willing or able to pay a higher price in order to make purchases that satisfy whatever environmental concerns they may have — and that should be their prerogative. Many people say they want environmental concessions, but they may not be willing to pay the difference in price that those concessions would require. Government regulations can therefore harm some number people by increasing compliance costs and therefore raising the price of food. By using the market as a tool to affect change instead, people can make their own cost/environmental-consciousness trade-offs. Voting with money allows companies with successful business plans — for some, that will mean alternative production methods or types of food — to succeed. It is the most democratic of processes, because each person is able to decide where they wish to draw the line.

The post Free Market for Farmers’ Markets appeared first on Show-Me Institute.

Today I have an example. The following entries are from Whole Foods’ Twitter feed:

Recent storms flooded CA central coast berry fields. Strawberries & raspberries to be in extremely short supply for the next 10-14 days.

Alternatives during the berry shortage – frozen berries, fresh mangoes, apples, pineapples and grapes. Thanks for your understanding!

Imagine if you lived in California’s central coast, and those berries were your local food. If you confined yourself to local food, a flood would mean no more berries. You couldn’t switch to frozen berries shipped in from somewhere else, nor could you eat apples or pineapples from another region. You would have to substitute with something that was grown in the area, that was either unaffected by the flood or harvested and stored shortly beforehand. And, because all the other locavores would turn to those same alternative foods, there would be an increase in demand for them without a corresponding increase in supply — meaning more shortages.

Limiting yourself to local food is not a sustainable practice, although I doubt this economic analysis will dissuade locavores — and that’s not the point. There are many reasons besides economics for people to buy local produce now and then, or even to adopt a full-time locavore lifestyle. But the idea that taxpayers need to contribute to the development of local food for the good of our economy is unsupported by evidence.

The post Local Food Is Not the Answer to Economic Ills appeared first on Show-Me Institute.

He describes how Whole Foods has empowered its employees in their own health care decisions by sponsoring health savings accounts (HSAs) and high-deductible health insurance plans. The Show-Me Institute has produced scholarly work that demonstrates the advantages of such plans, and even offers this type of plan for its own employees.

Mackey also refutes the claim that individuals can’t make good health care decisions for themselves, and need a central authority to make the decisions for them. (This relates to our previous discussion on paternalistic policies in health care.) He says:

The assumption behind that is that people don’t care about their own health, and that somebody else has to—a nanny or somebody—has to take care of me because people are too stupid to make these decisions themselves. That’s not been our experience. We find our team members [employees], not surprisingly, seem to care a whole lot about their health.

The post John Mackey on Consumer-Driven Health Care appeared first on Show-Me Institute.

Back in June, I heard a conversation on “Bob Edwards Weekend” with the filmmakers behind Food, Inc., in which they made a point about the power that food consumers can wield by virtue of the fact that they make choices every day about where and what they will eat. Consumers tell companies what they like and dislike by the way they spend. We don’t have to look to state or federal governments to accomplish change in the food industry. If consumers let companies know that it’s important enough for them to maintain certain standards for the way their food is raised or prepared that they will favor businesses that conform to their preference, eventually even corporations as large as Walmart or McDonald’s will take notice.

Just a month or so ago, this principle was on full (and ironic) display. Many patrons of Whole Foods shop there because of the company’s commitment to high-quality natural and organic products. But when the company’s CEO published an op-ed advocating a free-market approach to health care reform and opposing President Barack Obama’s proposals, many previously loyal Whole Foods shoppers decided to take their money elsewhere to communicate their displeasure. This sort of revolt can be incredibly effective, although bringing these issues into such high profile might also inspire (as it did in the case of Whole Foods) new patronage from a group of people who had otherwise been disinterested in a company’s goods or services.

Utilizing such a “boycott” strategy, however, means that those saying “no” must be willing to give up goods and services that they would really prefer to have — at least until the market responds to their demands. And, because these consumers don’t want to give up those goods and services, they all-too-frequently utilize the coercive power of government to force providers to offer those goods and services on the consumers’ chosen terms.

Examples of this mentality leap from recent headlines. Don’t like the limitations offered by insurance companies, but you’re worried about going uninsured? Get your state government to mandate the kind of coverage you want. Wish that your favorite restaurant didn’t permit smoking, but you can’t bear to go without their signature dish? Get your city or county to pass a smoking ban. Want to build a corporate headquarters, but you can’t get the current property owners to sell at the price you want? Get your city to use eminent domain. Want an iPhone or a Blackberry Storm, but you don’t want to sign a long-term contract with AT&T or Verizon? Demand that Congress outlaw exclusive service agreements.

In every one of these examples, consumers have the power to change the market as long as they have the willpower to say “no.” Think health insurance premiums are too high? Refuse to carry insurance until a company offers a deal that you think is reasonable. Want to enjoy your meals without a smoky environment? Tell that restaurant owner that you won’t be back until his establishment has gone smoke-free. Don’t think that a property owner’s asking price is reasonable? Choose a different location or figure out a way to build around them. Prefer to stick with your favorite wireless service provider? Tell Apple or Blackberry that you won’t purchase their products until you are free to use them with a carrier of your own choosing.

The challenge here is that realizing the power of “no” in this context requires a willingness to sacrifice having something that you like in the short term so that in the long term you will be able to enjoy it under more favorable circumstances. Our nation still has a fast-food mentality when it comes to our desires, which is why it is so tempting to use the government as a shortcut to get what we want. But giving the government the authority to destroy someone else’s liberty — to the extent that they must give you what you want on the terms that you demand — is a double-edged sword. That same power can (and almost certainly will) be turned back against you.

The post The Power of Saying “No” appeared first on Show-Me Institute.

The Post-Dispatch reported that the St. Louis Tea Party Coalition, a group that also opposed Obama’s health care reform, has proposed a rather fecund idea to combat the boycott: a “buycott.” This involved coalition members going to buy a week’s worth of groceries at the Whole Foods in Town and Country. Many members of the coalition were not regular Whole Foods customers, but they were willing to show their support for Mackey’s free-market health care reform ideas — and his right to express them. Whole Foods has tried to distance itself as an organization from the personal views of its CEO through a forum on its site, but this seems to have had little effect.

Mackey exercised his right to free speech when he wrote his op-ed, and some of his company’s customers exercised theirs by boycotting. But the “buycotters” are arguably the most creative in this situation. By going out of their way to shop at Whole Foods, they are “voting with their dollars.” While it may well be difficult to replace the boycotters’ dollars, a “buycott” helps make up for some of it through positive reinforcement. And, who knows? Perhaps once the health reform hoopla has ended, Whole Foods will have a few new regular customers who might not have considered patronizing the store otherwise.

The post “Buycott” for Organic Foods appeared first on Show-Me Institute.

• Reform tort liability laws.
  Defensive medicine needlessly drives up medical costs and creates an adversarial relationship between doctors and patients.

Now, to be clear, this is the last of the seven recommendations and the least discussed within the paper, but how do they mean for it to apply? This exact issue is being discussed all over the web. It also appeared in that great op-ed from the Whole Foods CEO that I linked to yesterday.

The health care bills being discussed are, as you all know, part of a federal issue that has tremendous effects on the states. But, because it is for the most part a federal issue, I’ll stick with how tort reform might be implemented nationally. I fully support tort/malpractice reforms in federal courts. But only a very small percentage of malpractice claims are filed in federal court — usually claims against a veterans hospital, or something like that. The vast majority of malpractice cases occur in state courts, and just four years ago Missouri passed greatly needed comprehensive changes to the state’s malpractice system.

So, are supporters of tort/malpractice reform talking about just changing the malpractice system at the federal level, which would probably be a good thing but would only affect a very low percentage of total cases filed? Are they talking about encouraging states to reform their own malpractice laws, which Missouri has already done very successfully and which I fully supported at the time and still do? Or — stay with me, here — are people who generally support states’ rights arguing in this instance for changing the law so that tighter federal laws would replace and overrule state laws in malpractice cases? I realize that it is incomprehensible that someone, especially a politician, would generally support doing things one way but change that opinion in an instance where it would work against you. (Please note dripping sarcasm.) So, which of the three is it?

I have to fear it is the latter, which is also the only one of the three possibilities I don’t support. Civil tort laws have long been the province of the states (I’ll stand corrected by any lawyers in the audience). Just because a federal takeover/usurpation in this instance might fall along the lines of something I support in general (tighter malpractice laws) does not mean I am going to give up on the 10th Amendment.

Missouri succeeded in making significant improvements to how our system deals with civil justice and malpractice a few years ago. It is my hope that Illinois will also do so soon. However, this is still something for the states to determine, rather than the federal government.

The post Let’s Talk About Tort Reform! appeared first on Show-Me Institute.

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