The Medford Market Cooperative: An Investment that Restores Balance

1 02 2008

Speech Delivered

By Torrey Byles

Chairman, THRIVE

To the Friends of the Medford Market Cooperative

September 6, 2007

 

Why am I here tonight? I am committed to reforming our economic and financial system. And part of my strategy to do this is to strengthen local economies. That is why I am a volunteer board member of THRIVE. At THRIVE our programs aim to strengthen locally owned businesses and to empower communities to determine their economic destinies as they see fit.

 

My background and expertise is as a systems and business analyst who measures the economic impact of information systems on business performance, and how they can even alter industry structure, by for example, eliminating middlemen and transaction costs.

 

The ENRON scandal was my wake up call. And today’s current situation in the global financial markets, including the real estate bubble (the second bubble in the past 7 years) only strengthens my belief and commitment that strong local economies are crucial to our well being.

 

We have a disconnect between the FINANCIAL and the REAL in our economy. We value and emphasize the financial aspect – money – more than is appropriate. We have lost sight of the underlying resources, assets, quality of our work, quality of our commercial relations and quality of our community and life.

 

We want positive financial returns on our investments and our nest eggs. This is well and good. But we also want real quality of life and real human welfare.

 

To get back in balance, we need to remember that getting the REAL qualities and assets that we desire in our lives is not always the same as strictly getting a FINANCIAL return on investment. There are non-financial outcomes to our economic behaviors that may not be readily quantifiable with dollar signs but are nevertheless valuable to us.

 

We need to put more attention, effort, time and money into things that won’t always result in strictly generating more money, but rather generate a quality of life that we desire and think to be good.

 

Creating a grocery food market here in Medford is a perfect opportunity to create this new balance.

 Why is the Medford Market Coop a good opportunity to help us bring back balance in our economic lives? 

I will give you FOUR reasons.

 

ONE: Food retailing is a cornerstone to human life. By creating and owning a food distribution enterprise in unison with our friend and neighbors of our immediate community insures us of quality and control over the most basic requirement of our lives.

 

Establishing a community owned food market, owned and managed by locals, is akin to establishing a local hospital, schools, or other public infrastructure assets such as the Irrigation Ditches of the Rogue Valley that have provided such incredible value over the past 80 years. These are basic public goods that we all share.

In the coming years, we can expect dislocations in food distribution resulting from rising energy costs and contaminations. It will be a prudent move for us to have an active hand in managing our own food supply.

 

TWO: The democratic structure of a cooperative insures us as a community, a high degree of economic self determination and social equity.

 

There is no middleman, profits are rebated to owners, we pay only for cost of goods sold and administrative overhead. There is no remitting of profits outside of our region to non-local owners. The money in this operation is appropriately and equitably allocated to the work, energy, and material involved in delivering the final products to us, the customers. We are essentially users of our own collectively created and managed food delivery service asset.

 

Collectively owning it allows us to have active participation in its management and ongoing success. This means that we offer our direct feedback with purchasing and verbal suggestions on the products we want, we help market and publicize the enterprise, some of us or our children will work there, and importantly, some of us who are already business owners, will sell our products and services to the market.

 

This kind of direct participation by the community makes the Medford Market a democratic institution that gives us REAL democratic control over our economic destinies

 

Democracy and activism to insure the public good is not only about occasionally voting about this issue or that. It also means being engaged with each other and actively, daily managing the collectively held assets of our communities, including our schools, our health facilities, our food assets, and the enterprises where we work.

 

This restores balance and is important to building REAL value in our lives. It is part of the REAL return on investment in this Medford Market.

 

As an institution of economic democracy, the investment in Medford Market is greater act of social activism than the ordinary mutual fund or individual stock investment.

 

By contrast, there are major enterprises, in fact whole industries in the Rogue Valley that are completely out of our control. Harry and David is privately held by a New York City investment banker, Bruce Wasserstein. A French multinational, Sodexhu, runs all the school cafeterias in Jackson County.  An Australian, Rupert Murdoch, owns the area’s two major newspapers.

 

Outside ownership imperils our ability to make choices in our work, our communities, and our economic destinies.

  

THREE.  According to its charter, the Medford Market is “determined to include local businesses in its products lines.”

 

This is very important for three separate reasons.

 

I’ve already alluded to two of them.

 

i.) Sourcing product from local food producers minimizes the risk of food-price inflation due to rising fuel costs. Stuff is closer and doesn’t require as much transport as the usual chain supermarket. (The average distance a product travels to be sold in a supermarket is 1500 miles.)

 

ii.) When it comes to the public health issue of insuring the availability of healthy, nutritious food that is safe to eat, there is no better policy than sourcing food locally. Food contamination is almost a daily occurrence in the headlines these days. Did you know that one peanut butter plant in Georgia supplies 30% of the nation’s peanut butter consumption? This kind of big scale, global operation – which is the norm for modern business – constitutes a systemic threat to all of us. We may enjoy low unit costs – i.e. low prices – with such scale. But there are externality type costs associated with this. When a batch of product is tainted, whole swaths of the population are threatened. And that is what happened last year with this plant.

 

And, iii.) for the Medford Market to buy from local suppliers will have a multiplier effect on gross regional income.  The Medford Market buys from local companies, the incomes and profits of these local business owners rises. They in turn can spend more, some of which will go to locals. Typical multipliers range from 1.5 to up to five times the initial sales. The Medford Market anticipates sales of $2 million in its first year of operation. If it sourced half of its cost-of-goods sold locally, this could translate to a total increase in regional income of five to $10 million.

 

Multipliers can work in reverse too. Out-of-region companies, esp. big retailers who source all product outside of the region, can act to lower regional income. Many small towns around the country have been devastated and have even disappeared with the arrival of regional big-box stores that throw local merchants out of business.

 

While lower prices from these stores temporarily increase our net incomes, as we and our community members lose our businesses, our collective income falls.

 

Low prices and their effect on disposable income is a superficial and short term phenomenon. In the end, such business models concentrate wealth into fewer hands.

 

My last and FOURth point about the Medford Market is that I believe their sales projections for this store are very achievable. I believe that they are being way on the conservative side in fact.

 

I want to say in conclusion, that in making your decision about investing in the Medford Market, please consider that the FINANCIAL rate of return of invested money, which in this case is FOUR PERCENT, is not the REAL rate of return on your investment. There are valuable things that will result from the creation of this asset, even though their value may be difficult to quantify precisely.

 

  • Local control, governance and economic self determination.
  • Protection of public health and food-price inflation by direct control and local sourcing of food supply.
  • The added flourishing of local businesses that sell product thru the market.

 

The Medford Market is a perfect example of a triple bottom line company. It is financially viable. Its social-equity bottom line is that we are all part owners and we control it, and with it, our health and economic destiny. And, its environmental bottom line is that its scale of operation is intended for the local population and community. It does not plan to grow infinitely to dominate the world.

 

Finance can be defined as economic actions indexed by money. The danger of this is that we get fixated on money only, and not the other systemic and intangible values that are not indexed solely by money.

 

Because of externalities and subsidies, low prices don’t necessarily reflect low costs to society. High returns on investment do not necessarily deliver us true wealth.

 

We can certainly make a lot of money by investing in:

 

         tobacco companies that focus on getting teenagers addicted to nicotine,

         big banks whose greatest profit center is credit-card debt interest rates of 35% and higher,

         big pharmaceutical companies that have unbreakable annuity streams of patent-protected products,

         military-industrial companies whose profits surge with war,

         agribusiness giants whose chemicals and genetic products we effectively have to purchase with every meal we eat,

         privatized prisons whose number-one operational metric for performance is OCCUPANCY,

         big retailers that throw local merchants out of business and suck subsidies from local municipalities,

         corporations that move operations out of the country to low wage areas.

 

We can make a lot of money by putting our money into these kinds of enterprises. These business models are cash cows.

 

But God help us and our offspring as to the world we create by such investments.

 

Our economic choices concerning what we build, produce, how we work, the relations we have with each other, what we collectively want in our community transcend merely the FINANCIAL.

 

The Medford Market is an opportunity for us to move away from these traditional investment alternatives where it is only about money and financial return. The Medford Market is about empowering us to control our economic destinies, to self-strengthen our community, and to generate the valuable assets, infrastructures and qualities of life that are REAL to us.

 

Thank you.

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