The Third Pillar: How Markets and the State Leave the Community Behind

by Raghuram G. Rajan

Different communities will have different views on business – for example, the kind of business they want operating in their communities. Some will want big-box retailers like Carrefour or Walmart, while others will prefer small local main- street grocers and shops, even if they cost more. Communities should have the power to determine the nature of local production (such as the production of retail services through big-box or small mom-and-pop stores), provided they do not directly impede domestic trade in goods and services. Local business will attempt to influence decisions on which kind of businesses can locate in the community, and they will do so keeping in mind their profits. Yet there will be two checks on these influences being excessive. First, so long as local residents can travel outside the community to patronise businesses elsewhere, and so long as they can order goods and services from around the country, the extent of profit local businesses can make will be limited by locals’ preference for convenience and timeliness. Second, the democratic decisions of the community will trade off the desire to help local businesses and preserve local ambience and jobs against the higher costs of goods and services. If the latter become excessive, the community can always allow more competition. So long, therefore, as there is no explicit barrier such as a tariff wall set around the community, the community should be allowed to determine business zoning decisions.

Big box vs mon n pop retail