"How your supermarket, your travel agency, your bookstore and your furniture store became part of the financial system"

We reprint this from Las Indias in English

We also thank Tony Budak of Community Labor News

04 Sep 2012

David de Ugarte
Some time back, the business model of the big distribution chains reduced them to mere procurers of funds for financial capital. Yes, excessive scale did lower prices, but at the cost of destroying the business community, draining the productive sector of resources and making the economic fabric dependent on financial capital. Did they really improve our quality of life?

When we talk about the crisis of scales in The P2P mode of production, and about its role in the financial system, we’re describing the general problem, the cancer. But understanding cancer doesn’t mean understanding metastasis. Metastasis came long before the crisis. It was cultivated for more than three decades and became invisible to us through its very omnipresence. Paradoxically, lots of people confuse this financial metastasis with the “consequences of the market.” That’s not how it is — rather, it’s the consequence of the destruction of the market by huge masses of financial capital. Let’s take a look.

Didn’t it ever seem strange to you that, if you bought your ticket ahead of time, your travel agency obviously sold it to you below cost? Did you really think that the jet fuel to the Riviera Maya plus the all-inclusive hotel could cost 100€? And what can we say about the products at your supermarket? Why are they so much cheaper than at small stores or farmer’s markets? And what about job and education announcements? How is it that suddenly the “Financial Director” is more important than the Director, the Chief of Administration, or the product creators? Have you looked closely at your “low-cost” sofa?

All these are symptoms of the financialization of commerce. As of a certain point, the benefits were no longer fundamentally in the difference between the purchase price and the sale price. They were financial benefits. It’s a simple system: it’s based on the difference in time between the moment they charged you at the cash register and the moment your supermarket, your furniture store, or your travel agency paid their providers.

During that period, they have “floating” money available to them. Taken together, the faster the turnover at the supermarket or whatever business it is, the juicier the investment. That’s the heart of the “financial dimension of the business” they taught us about in school.
What’s interesting is that as of a certain point, the same point when it stopped being profitable for financial capital to invest in production, the main business of the distribution chains became, purely and simply, capturing funds for the financial system. At first, the engine driving the process was that the financial margins were better than the commercial ones the market was giving, but the strategists at the big distributors would soon see the opportunity to drive small competitiors out of the market, by selling at or below cost. The business could free itself of competition from small business, gain even more scale, and grow its pools of floating capital to the point where it could get into highly-paid financial markets.

That’s why, since the Eighties, big-box stores, hypermarkets, fast-food chains, furniture chains, bookstore chains, travel agencies, and more, have expanded their reach all over the world. The big distribution chains clearly seem to be more productive, and why not, if they can sell for less? But, it’s just a mirage: they’re only there to capture funds. Their growth is not the product of the market, but rather loot from its destruction.

But let’s look back and see the consequences of this race for scale born of the financialization of distribution: for years, consumers have been able to buy cheaply; however, the business community has been irreparably damaged, and the distribution businesses themselves (including some cooperatives) have become terribly dependent on a financial market that, today, simply isn’t going to cover them. More than a few have gone under. Others are having a bad time of it.
Because, let’s not forget: those funds that the financial system obtained were not reinvested in production, but rather in speculation. Excessive scale, in fact, was draining capital from the productive sector, while at the same time,complaining about “smallholdings of small industrial businesses.” And when they invested in businesses, it was only in clones of the same “fund-capturing” model.

That’s why, when the dot-com boom arrived, many people started betting on online stores, with the idea that they would only buy made-to-order things and on a large scale, meaning they would maximize the flow of money to compensate for commercial margins that were at zero or even negative. That was a losing bet in most cases. Business was slow to grow, and when your business is finance, time is money. But, with the perspective of scale, some would invest in successive rounds among the better-placed. The circus of “risk capital” had begun.

Excess scale, fed by rents and a financial system decoupled from production is the origin of the current crisis. We feed back into the system every time we buy at a big chain distributor, or pay an oligarchical provider of energy, telecommunications, or basic goods. Maybe, currently, it works out to be a little cheaper to buy from them, but have they really improved our quality of life?
Translated from the original (in Spanish) by Steve Herrick of interpreters.coop