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Saturday, July 20

Gapers Block

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You ever hear or read a new word, and it just sticks in your head? You find yourself, at quiet moments, just sounding it out, or maybe muttering it under your breath randomly, as if to keep from forgetting it? I have one of those now: monopsony. It's a fun word to say, and rare enough that typing it causes those little squiggly red lines to pop up. Go ahead and say it: "mon op so knee." Or you could pronounce it in the British style, "mun op sinee." I came across the word years ago in a labor economics book, and completely forgot about it until it popped up again a few weeks back in an article by anti-trust attorney Barry C. Lynn in Harper's.

Mon-op-so-knee. As in:

"Wal-Mart is a monopsony."


"Mayor Daley is a political monopsony."

A monopsony is a rare economic condition that is the enantiomer, or mirror image, of a monopoly — basically, a situation where the demand, rather than the supply, is controlled by one entity, because there is essentially only one buyer (that matters).

Wal-Mart's ability to make almost every real supplier of household consumer goods bend completely to its will indicates that it may have monopsony power over that market. Ironically, in economics the word "monopsony" most often refers to labor markets, when one employer is the sole "buyer" of labor. Wal-Mart isn't there yet. But their domination of suppliers — their ability to tell manufacturers how much to sell their products for, or face extinction in the form of a refusal to stock their goods — smells awfully like monopsony.

Despite its short-term benefits for consumers — efficiency — it is bad for an economy, because "consumers" don't exist in a vacuum — ie, before they are "consumers" they must be workers, and as such are employed by a firm that likely will be affected, in some way, by the monopsony. This is especially the case when you're talking about domination of the retail market, which, after housing, is the structural core of the American economy. When monopsony conditions exist, they will provide the illusions of advantage for the individual while in reality burdening them with indirect costs, especially in the long run.

The Mayor is likely preparing to veto the so-called Big Box Living Wage ordinance, a wildly sane bit of legislation that would force retailers of greater than 90,000 square feet and with national revenues over $1 billion to pay $10 an hour in wages and $3 an hour in benefits. Since the ordinance passed with a "veto-proof" 35-14 majority a few weeks ago, a very suspicious string of news stories have shored up the Mayor's anti-ordinance position.

First, Target made public a letter to the city announcing it was halting work on several prospective locations; then, Lowe's, the large home improvement retailer, announced it was shutting down work on a South Side location. Finally, Wal-Mart made news by announcing that nationally, its starting employees would receive an average 6 percent pay hike. This was supposed to deflate the efforts of labor unions and community organizations which, after success in Chicago, were stepping up efforts in Arizona, New Jersey and elsewhere. But, as always with Wal-Mart, it was just a façade of fairness. What they in reality had done was restructure to put in wage caps for each job description; many of its employees were already at their wage caps and in order to see any pay raises — at all — they would have to apply for new jobs within the company. This at a time when the corporation is shrinking its management force.

This supposed instantaneous reaction of retailers to the Living Wage Ordinance is exactly what its opponents predicted, and that's what makes it suspicious — as Wal-Mart struggles in its overseas markets, shutting down failing stores in Europe and Asia, it knows it has to move into urban centers (or remain static, and in so doing die.) Yet it would be willing to throw that away for ideological purposes? I don't think so. What is more likely is that Wal-Mart, Target and their big box allies are creating the public relations cover that the Mayor needs to veto the ordinance and his aldermen need to flip their votes.

Already, Ald. Shirley Coleman has said she would be willing to flip her vote, because Wal-Mart is considering a store in her ward, near Kennedy-King College. Ald. Dany Solis (25th) has also indicated his willingness to flip, if the Mayor so requested; and ditto Ted Matlak (32nd). This would put the Mayor just one vote short of unraveling the "veto-proof" majority and killing the ordinance, probably forever.

And why? For what? Why kowtow to the employers like regular Chicagoans are nothing? They're not nothing; they're the whole ballgame. The Mayor ought not forget that.

I have expressed tempered support for Daley in the past, as has my predecessor in this column. But let me say this: if Mayor Daley vetoes this legislation and flips the votes to kill it, all in the name of protecting Wal-Mart's growing monopsony, it's over. Now, does that mean it makes sense to support just anybody against him? No. But it would move him one step closer to the Revenge of the Second City Enemies List.

Like Wal-Mart, the Mayor has managed a neat trick in his flawless concentrating political demand — stakeholders have issues that need addressing, and the Mayor is the only bidder that can do anything for them. By taking himself technically out of the Democratic Party structure in Illinois and instituting non-partisan primaries that reduced the importance of the Party's slatemaking Central Committee, by engineering removal and appointment of over one third of the City Council, by fighting out his electoral battles and often handing out endorsements by proxy (e.g., HDO), the Mayor essentially forced all of the city's traditional stakeholders and special interests to have to deal with him, and him alone — he concentrated political demand in his person. Voila, political monopsony.

This sort of machine politics — which differs so vastly from the machine his father created — has its short-term advantages. Life-long Chicagoans like myself can gush about the great things Daley has done, and he has done many. Similarly we can go on and on about the great things about Chicago he's undone. But he got things done, and when Chicago needed something, whether from the state or the feds, he let no political or legislative formalities stop him. That's the advantage: short-term efficiency.

Daley has been our Mayor for 17 years. Let the arrivistes and goo-goos demonize him; most Chicagoans love the guy, and until recently a resounding percentage did. But 17 years is long-term, and now we're seeing the price we pay for political monopsony.

Because witness how easily he giveth, and he taketh away.

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may / August 16, 2006 11:33 AM

Well said and fully agreed. None are infallible. Even the ones who are great.

Larry Griffin / August 17, 2006 1:27 PM

Agree with many of the author's sentiments here--sadly, it seems like the tidal wave of retailer-organized opposition has given Daley the cover and the means to override the ordinance. It's tough to think of the Mayor as a Democrat when he throws the working class under the bus like this.

anon / August 18, 2006 5:47 PM

honestly, I think Big Box living wage will speed gentrification in the city. It's really difficult for the city to effectively use this legislation to curb labor exploitation without the support of neighboring suburbs. big boxes will move to where it's cheaper to do business and labor will move accordingly. Further, increased labor standards will mean less job opportunities for unskilled labor and higher prices for consumers. I'm assuming most of this blog's readership is willing to pay a premium on goods for better labor standards. I'm just highly dubious that this will do anything to slow down gentrification or be a marked improvement for the city's poor.


About the Author(s)

Richard F. Carnahan is a true South Side Sox fan who's played a bit part in Chicago politics more than once over the years. Contact him at

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