Another reason why supporting local is VITIAL to our economy!!
Basic economic theory demonstrates that when firms have to compete for customers, it leads to lower prices, higher quality goods and services, greater variety, and more innovation. Competition is critical not only in product markets, but also in labor markets.
Healthy market competition is fundamental to a well-functioning U.S. and local economy. Basic economic theory demonstrates that when firms have to compete for customers, it leads to lower prices, higher quality goods and services, greater variety, and more innovation. Competition is critical not only in product markets, but also in labor markets. When firms compete to attract workers, they must increase compensation and improve working conditions.
There is evidence that in the United States, markets have become more concentrated and less competitive across a wide array of industries: four beef packers now control over 80 percent of their market, domestic air travel is now dominated by four airlines, and many Americans have only one choice of reliable broadband provider. There are a number of reasons for these trends towards greater concentration, including technological change, the increasing importance of “winner take all” markets, and more lenient government oversight over the last 40 years.
When there is insufficient competition, dominant firms can use their market power to charge higher prices, offer decreased quality, and block potential competitors from entering the market—meaning entrepreneurs and small businesses cannot participate on a level playing field and new ideas cannot become new goods and services.
Research has also connected market power to inequality. In an economy without adequate competition, prices and corporate profits rise, while workers’ wages decrease. This means large corporations and their shareholders gain wealth, while consumers and workers pay the cost. The pandemic and current season of inflation has further underscored the dangers of an economy that depends on a few companies for essentials, exemplified by the supply chain problems we face when a small handful of corporations creates bottlenecks for a critical product.
Please support local! Small, locally-owned businesses are the backbone of the American Economic System!