A BRIEF TUTORIAL ON SOCIALIST ECONOMICS

Dorm life at the University of Chicago included endless reading lists, study groups and a twelve times a week food contract in the building’s cafeteria.  As one of my fellow students whose epicurean background was similar to mine put it, “They should put out a contract on whoever had the gall to call this food.”  Fortunately, we all got to enjoy a respite from this gastronomic abuse.  It was called Sunday and the cafeteria was mercifully closed.

This, of course, forced us students to fend for ourselves for sustenance.  As I was the organist for the Episcopal Church services on campus at Bond Chapel, Father Pyle and his wife had established a Sunday supper program for us poor waifs who had nowhere else to turn.  I wished that the program were a nightly event as I would greatly have preferred the fare at Brent House to that in my dorm’s cafeteria.

Hyde Park had only one establishment that could be referred to as a “supermarket”.  At the time I moved into the neighborhood it had been operating for over thirty years, having been founded during the Great Depression in 1932.  It was called the Hyde Park Cooperative Society.  But the “Co-op” as it was generally called was two miles from my dorm, far too long a journey on foot to buy a piece of fruit during the depths of winter.  So until I moved out of the dorms in my fourth year I was constrained to buy provisions from the two small mom and pop stores that were within reasonable walking distance.

My fourth year in college brought with it two major developments.  The first was that I paid for driving lessons and set to inflict myself on the general automotive community by purchasing my uncle’s two year old Dodge Monaco.   I also moved to the east side of Hyde Park and was only a few blocks from the Co-op which was the anchor tenant in Hyde Park’s largest shopping center – though by comparison to today’s mega centers it was really quite small.

Now that I was freed from the bondage of a dorm food contract, I naturally turned to the Co-op as my preferred choice for grocery shopping.  I walked into the store for the first time and wanted to find out how to become a member – it was, after all, a co-operative society.  I went downstairs to the membership department, picked up a brochure and couldn’t help but notice the photo montage that was on the walls showing the growth of the store from its original founding when four people got together and decided that they could help out people in the neighborhood if they banded together, bought food in quantity and passed along the savings to their customers.  In other words, the original founding motivation was based on a social philosophy – and the implementation of that happened to take form as a grocery store.  This philosophy continued to permeate the Co-op when I joined.

Now I must admit that I might not have been imbued with the same desire to help out the poor and downtrodden – but I was motivated to purchase a share because for ten dollars, I was going to receive a five percent return on my small investment while the banks were only offering four percent and I was promised a rebate on my annual purchases based on the store’s profitability.  Sounded like a decent deal to me.  I unfortunately made the small indiscretion as I signed up to refer to myself as a shareholder in the Co-op.  After all, I was purchasing a share so that seemed like normal terminology.  The person who accepted my ten dollars and signed me up explained that I was not a shareholder – but a member in the Co-op.  Well, shiver me timbers, apparently political correctness was floating around even back in the late ’60’s.

As I came to find out when my first year of membership had passed and the Co-op sent out its annual accounting, I apparently was not a “full member.”  My statement arrived showing my fifty cent credit on my one share investment.  In addition, I had received a 2.3% rebate on my purchases during the year.  So I was entitled to a distribution of just under three dollars.  But rather than sending a check for that amount, it had been re-invested in an additional partial share.  The explanation included in the letter indicated that until a person became a “full member,” which was to say owned ten shares of stock, that procedure would continue. And it did for many years.  I was moderately offended that the Co-op in the finest tradition of socialist organizations everywhere dictated, through it’s infinite collective wisdom, what its members should do.  Nothing could be more apparent to demonstrate that than what I will next relate.

Perhaps you will remember Cesar Chavez and his United Farm Workers’ Union.  If not, Chavez organized the farm workers to protest the poor conditions under which they labored.  He effectively called for a boycott of farm workers from picking lettuce and grapes.  The Co-op, always mindful of its social, primary mission, aggressively concurred with this policy and refused to carry either of these products during each of these boycotts.  (Those two mom and pop stores saw a significant increase in their sales while the Co-op refused to allow its patrons and members to purchase lettuce and grapes).  Apparently their customers didn’t completely subscribe to the collective wisdom.

As years went by, Chicago saw a significant increase in the number of chain grocery stores.  While the Co-op might have been the biggest fish in a small pond, it’s original concept of saving money by purchasing in bulk could in no way compete with much larger grocery stores with hundreds of outlets throughout the country.

The share dividend decreased regularly to the point where there was no dividend at all and the rebate percentage declined precipitously as shoppers found themselves with far less expensive alternatives.  On May 5, 2009, The Hyde Park Cooperative Society filed a petition of bankruptcy under Chapter 7 in the Northern District of Illinois.  The store was subsequently taken over by one of the smaller, multi-store chains, Treasure Island and is still operating under that name.  Seeing the writing on the wall, I had divested myself of my interest in the Co-op a decade earlier.

There are several points I hope that my readers will take away from this story.

The first is that when ideology, no matter how well-intentioned, is the driving force behind making business decisions even though that philosophy flies directly in the face of economic reality, that business is, sooner or later, doomed to fail.

The second is with regard to bankruptcy law – and the presidential campaign.

Much has been made, particularly by the junior senator from Massachusetts, Elizabeth Warren about the horrible things that Donald Trump has done to people because of his using the bankruptcy laws to his advantage.  She has painted a picture of his using those laws to “stiff” small companies and “cheat” them out of monies that were due to them.  So a word on bankruptcy law is in order.

If you’re familiar with the novels of Charles Dickens, you already know that he was a crusader for social justice.  One of the most egregious evils he identified was the existence of debtor’s prisons.  Yes, back in Dickensian England, a person could be imprisoned for failing to meet his debt obligations.  Bankruptcy laws came about as a reform to this form of societal punishment, recognizing that sometimes people found themselves in situations that were out of their control and the law was formulated to allow that person to make a fresh start.

As I mentioned, the individual who has most aggressively inveighed against Mr. Trump for following the law is Sen. Elizabeth Warren.  During her less than stellar career, Sen. Warren, prior to her election was a professor at Harvard Law School, among other venues. While there she gained a reputation as one of the nation’s foremost experts in and exclusively taught students – you probably guessed it – bankruptcy law.  It’s a bit hard for me to comprehend why a person who has spent a career teaching and representing clients in bankruptcy cases would hold such a negative view of that very law.

But then, I did sell my interest in the Hyde Park Co-op – before that very liberal organization had to resort to that same law.  Just saying …

 

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