Marketing and Artificial Profits are Huge Factor in US Inequality

New Orleans       When I first read an email about Washington University’s law Professor Gerrit De Geest’s book, Rents: How Marketing Causes Inequality, I thought, right on!  Soaring rents for tenants are absolutely driving inequality in city after city.  Actually, looking at the book was different, but perhaps more important.  When De Geest is talking about “rents,” he’s referring to the artificial profits that would not exist in a free, competitive market.  The term “rents” original did refer to tenants of course but as the term has aged from economist David Ricardo’s initial argument rents are now a major economic distortion.

Professor De Geest and I talked at length about his argument on Wade’s World recently. These rents or artificial profits in his calculations have grow from 20% of the US economy in 1970 to more than one-third of the economy now.  Most of those artificial profits have been collected by corporations and the rich, and they have put the mechanism to drive these fake profits in overdrive making the economy a rigged game to put it kindly.

De Geest points the finger at business schools and the dominance of their constant refrain about marketing.  It would not be too far to state that past simple communication about the existence of a certain product, everything else is designed to created artificial profits for products that are virtually the same.  Certainly, this is the heart of branding as a process of convincing consumers that identical soaps, detergents, cars and so forth worth more or less depending on the marketing.   We shared examples from both of our brief experiences working in grocery stores and food supply businesses in our youth.  Working at Luzianne Coffee Company in New Orleans in their warehouse and shipping dock, it was easy to see the exactly same blend of coffee being relabeled for the local market and plain labeled for shipment on a contract to provide coffee to our soldiers in Vietnam.  De Geest talked about a weekly “bonus special” at the store where he was a clerk.  There were no price reductions.  They just moved the items from one part of the store to another.  These are rents or artificial profits, and once you start looking through De Geest’s lens, they are obviously everywhere.

Part of De Geest’s case is that business schools promoting marketing have overwhelmed law schools undergirding regulation and economic fair play.  In leveling the playing field, he is not a fan of taxes, unions, or other potential economic actors because he believes in conditions for an ideal free market, so he’s jaundiced on rebalancing what he sees as one problem for another.  He advocates expanding the country’s anti-trust laws to put some sharper teeth in curtailing some of this, and generally stepping up the role of law and regulation in the economy.  Good luck with that with Congress and the President where they are today.

Regardless, De Geest’s arguments deserve a hearing, and, importantly, they give some names and faces to why inequality is continually expanding and making a myth of any arguments about so-called “free enterprise” being fair.

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Lake Charles’ NIC at Forty and the Art of the Bank Fair

Lake Charles Bank Fair 10-27-2018

New Orleans        Lake Charles is a middle-sized Louisiana city better known for oil refineries, chemical plants, and the fact that the city is home to the closest casinos to the Texas border.  Depending on the traffic through Baton Rouge crossing the Mississippi River and the amount of construction on the great east-west highway, Interstate 10, running from the Atlantic to the Pacific, it can take a driver about four hours to roll from New Orleans to the city.

About this time of year for a pile of years, Louisiana ACORN and now ACORN’s affiliate, A Community Voice (ACV), holds what they call a “bank fair,” which for almost as long was an ACORN staple, originally debuted in Philadelphia under the masterful direction of the inspired leaders there.  Louisiana leaders and organizers have kept the flame alive and developed a model that has consistently produced great results in Lake Charles.

The concept is straightforward.  Banks, financial service organizations, and others are recruited to offer booths and an on-the-spot application process for families trying to navigate the mysterious process of loan applications for home purchases and repairs among other things.  The organization in a time-tested system of phone, flyer, and direct outreach turns out a crowd, and, weather permitting, it’s a big one.  As the bank fair model has developed over the years, they have attracted all kinds of different organizations to participate from credit unions to social service agencies and others.   Organizational participants pay for a booth, so the organization does well at the event, too, and usually signs up a pile on new members to boot.

On the road, here and abroad, I’m usually asked about the sustainability of community organizations following the ACORN model.  Often NIC-ACORN on the largely African-American north side of Lake Charles crosses my mind.  NIC stands for Neighborhood Improvement Coalition, I think, even though it’s not a coalition, but the leaders probably liked the way, “NIC” sounded.  The local group is now celebrating its 40th anniversary this year.  Originally, supported by an organizer driving back and forth from New Orleans who recruited a local Catholic church as the meeting place then and its priest as an active volunteer for years, the group has stayed steadfast over the years.  Briefly once upon a time an organizer staffed the group, but for almost all of the forty years NIC-ACORN has been meeting, taking action, and running their annual bank fair, the leaders and members have carried the whole weight of the work with regular phone calls and visits, shipments of flyers, the ACORN News, and whatever else they needed from New Orleans.  Sometimes they had an office, most times not.  NIC is not the only forty-plus-year group.  There are others in the 9th Ward of New Orleans and in the other legacy organization in Arkansas, both in Pine Bluff and Little Rock.

The members have kept these groups alive and cooking through hurricanes, tornadoes, and the world of attacks from their opponents, but to the question of whether they are sustainable, the answer must be another question:  what could kill them?

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