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Another problem is that US Business is so Corpratized and Franchised, there are fewer and fewer small businesses to support other small businesses. Target is not going to hire Owen Consulting, a one-person startup by a 20-year Marketing Industry Veteran. They are going to hire a big Madison Avenue Company. And there aren't enough small fry to solicit. The number of self-employed has been declining for the last half-century.
Why should I pay to dredge Harbors for Panamax Shipping from China? Let COSCO pay for it. Why should I pay a fortune to spy on Petrobras? Let Exxon-Mobile spy on Petrobras with it's own money.
If you want to talk about getting government out of the business of tilting the playing field in favor of big corporations, at the expense of small businesses, I whole-heartedly agree with you.
MisdemeanorRebel
2014 Apr 21, 7:19am
LOL. That's called bad entrepreneurship. Their failure leave room for someone else to enter and do a better job for the potential customers.
Again, most "Middle Class" people couldn't afford either cash or loan any reasonable storefront setup - even in the neighborhoods where they live! The idea that they fail - often on the verge of being successful - simply for lack of capitalization is a market failure - the failure of the market to offer reasonable rents or loans.
The instance of the retiring restaurant owner? That's pretty rare. He'd get the money up front with no risk by selling the facility to Carabad's Italian Grill.
LOL. That's called bad entrepreneurship. Their failure leave room for someone else to enter and do a better job for the potential customers.
Again, most "Middle Class" people couldn't afford either cash or loan any reasonable storefront setup - even in the neighborhoods where they live! The idea that they fail - often on the verge of being successful - simply for lack of capitalization is a market failure - the failure of the market to offer reasonable rents or loans.
All businesses eventually fail. That's just how the real world works. If a business fails before it even gets off the ground, then the founder bit off more than he/she could chew . . . a mark of bad entrepreneurship. There are plenty other businesses that can be started with near-zero capital requirement. No one is owed to make a small fortune, by starting with a bigger one. LOL. Advertising on Craigslist to cook at the homes of McMansion owners would cost nothing.
The instance of the retiring restaurant owner? That's pretty rare. He'd get the money up front with no risk by selling the facility to Carabad's Italian Grill.
If restaurant owners do not retire, then there is no room for new restaurants beyond population growth and increasing consumer propensity to dine at restaurants. In reality, every single restaurant owner has to retire! Either he/she retires while alive, or his heir having no interest running the restaurant and therefore selling it (retiring the restaurant) after the death of the earlier owner.
BTW, it's interesting that you avoided addressing the widespread retail vacancies. If the fledgling chef doesn't want to negotiate with owner of the empty spaces, that's his/her own problem.
Indiana Jones
2014 Apr 21, 8:01am
If this happens, this is the end of the executives and owners, as well. Once robotics goes global, how will the masses participate in an economy? How will the corporations survive if the consumers can't buy the products? They are digging their own graves by their creations.
Folks, a lot of ppl don't get it, starting circa ~2025, a lot of work will start to become automated due to robotics/AI
MisdemeanorRebel
2014 Apr 21, 8:08am
BTW, it's interesting that you avoided addressing the widespread retail vacancies. If the fledgling chef doesn't want to negotiate with owner of the empty spaces, that's his/her own problem.
I'll address that.
Why is it that almost every declining downtown I visit, they're asking sky-high prices for retail rents, despite substantial vacancies?
Tax-write offs are more valuable than the tenant's rent, esp. if the same owner (and that's typical with plazas or large buildings) can use the empty space to offset more profitable properties elsewhere.
We need to eliminate write-offs for empty commercial space. Then they'll have to rent out at what the market can bear, rather than choosing the tax break.
Indiana Jones
2014 Apr 21, 8:11am
Yes, the U.S. is not true capitalism either. Just as we got closest to a true free market, the soviet union probably got closest to communism, but they still ended up with a dictatorship in the end. China never got even close. I am not expert on Chinese history, but it seems to me that China has had a centralized power for thousands of years, and they will name it whatever happens to be the best propaganda tactic, whether communism 60 years ago or capitalism now. The smaller elite ruling the masses hasn't shifted.
OK, you can say that just like some people will claim that united states is not "real capitalism." The fact remains that soviet union was the most powerful communist empire that ever existed and united states remain the most powerful capitalist nation.
Automation will vastly increase the output from some sectors of the economy, thereby making the products ridiculously cheap, therefore pushing workers and executives alike to other sectors of economy. Meanwhile, new sectors will emerge due to the cheapness of those products.
80% of the US population used to be farmers, and people used to spend more than half of their entire household budget on food. Automation by first steam then diesel powered machinery, then transportation, made food much much less expensive. Now a typical American household spends less than 15% of total household budget on all food, and less than 1/3 of that go to the actual farm output (the rest to processors and retailers). Farmers account for only 2% of the population . . . meaning 78% of the US population have found work elsewhere . . . including burning food as fuel!
If this happens, this is the end of the executives and owners, as well. Once robotics goes global, how will the masses participate in an economy? How will the corporations survive if the consumers can't buy the products? They are digging their own graves by their creations.
Folks, a lot of ppl don't get it, starting circa ~2025, a lot of work will start to become automated due to robotics/AI
Indiana Jones
2014 Apr 21, 8:17am
This is a huge point and I completely agree with you. This is why the system I describe will only work when we corral up the sociopaths and disempower them completely.
the sociopaths rise to the top. The scums rise to the top whenever violence is used. As simple as that. A far less costly way to eject sociopaths is usually not banishment by a government, but simply the other members individually choosing to not do business with the sociopaths. Of course, defense against trespassing is a different story.
What you wrote only conveys the idea that you have not owned any property, commercial or residential ;-) Commercial vacancy is very expensive to the owner. The cost of upkeep is a write-off regardless whether the property is occupied or not, so deliberately leaving it empty makes no economic sense whatsoever. The lost rental revenue goes directly to the bottom line. Some commercial properties are empty or the asked rent is too high simply because the owner does not wish to run the risk of short term unreliable tenant mess up the place or run into city code violations that the owner then would have to fix.
BTW, what you describe also does not jive with reality on the ground. Mall owners often offer free rental for the first several months during economic downturns, so as to avoid having the mall looking vacant; sometimes even agreeing to equity positions instead of collecting rent. It seems to me that you never even tried to talk to the vacant space owners.
BTW, it's interesting that you avoided addressing the widespread retail vacancies. If the fledgling chef doesn't want to negotiate with owner of the empty spaces, that's his/her own problem.
I'll address that.
Why is it that almost every declining downtown I visit, they're asking sky-high prices for retail rents, despite substantial vacancies?
Tax-write offs are more valuable than the tenant's rent, esp. if the same owner (and that's typical with plazas or large buildings) can use the empty space to offset more profitable properties elsewhere.
We need to eliminate write-offs for empty commercial space. Then they'll have to rent out at what the market can bear, rather than choosing the tax break.
Indiana Jones
2014 Apr 21, 8:22am
Realism is hindered by the fact that one is limited in believing what already is. Idealism is unhindered because it believes in the possibility of what could be.
MisdemeanorRebel
2014 Apr 21, 8:24am
The cost of upkeep is a write-off regardless whether the property is occupied or not, so deliberately leaving it empty makes no economic sense whatsoever.
It must, because they refuse to budge on rents. I've seen the same places advertised for years, and they're expensive and always empty. Why do the landlords keep holding it?
These aren't McMansion owners insisting on 2006 prices, these are powerful families and large organizations owning these properties.
MisdemeanorRebel
2014 Apr 21, 8:27am
Landlords then have the choice of decreasing rents in order to fill space — and take a risk on whether the businesses will be viable enough to stick around — or they can keep the rents at a higher level, leave the spaces empty and come up with another plan.
What is another plan?
“[Renters] can only be helped so much. As a landlord, I can drop the rent and keep the tenant, or keep the space empty and write it off on taxes,†Sideris said. That’s especially true for landlords who own other, more profitable properties.
http://www.nj.com/washington-township-times/index.ssf/2013/09/its_everywhere_vacant_storefro.html
The cost of upkeep is a write-off regardless whether the property is occupied or not, so deliberately leaving it empty makes no economic sense whatsoever.
It must, because they refuse to budge on rents. I've seen the same places advertised for years, and they're expensive and always empty. Why do the landlords keep holding it?
These aren't McMansion owners insisting on 2006 prices, these are powerful families and large organizations owning these properties.
Just because they advertise for a price doesn't mean they are not willing to take 50% off the price or agreeing to first 3 months for free. Talk to them if you have a good idea on how to use the space. Mall owners routinely offer free rent for several months to attract shops during economic downturns. For owners of malls and other commercial spaces, vacancy is blight.
Landlords then have the choice of decreasing rents in order to fill space — and take a risk on whether the businesses will be viable enough to stick around — or they can keep the rents at a higher level, leave the spaces empty and come up with another plan.
What is another plan?
“[Renters] can only be helped so much. As a landlord, I can drop the rent and keep the tenant, or keep the space empty and write it off on taxes,†Sideris said. That’s especially true for landlords who own other, more profitable properties.
http://www.nj.com/washington-township-times/index.ssf/2013/09/its_everywhere_vacant_storefro.html
LOL! Did you notice the article talking about the $400 rent increase due to property tax increase? Most commercial spaces are contracted on triple-bases: tenant responsible for tax, insurace and utilities. Quite unlike residential properties. The author (and you) didn't realize that "rent increase" is actually the government raising rent!
MisdemeanorRebel
2014 Apr 21, 8:30am
How are the landlords that are refusing to budge on $/SF surviving? The article mentions stores being empty for years. Certainly Getting $30/SF is better than $0, right?
How are the landlords that are refusing to budge on $/SF surviving? The article mentions stores being empty for years. Certainly Getting $30/SF is better than $0, right?
1. You have to have someone willing to pay $30/sf for the space to be occupied;
2. Sometimes prices coming down takes time. The slower the owner's reaction to declining prices, the more damage it is to his own bottom line, just like people who lost their shirt not selling quickly enough during stock market crashes. The article mentioned some owners dropping from $55/sf to $40/sf in few years, so obviously the owners are reacting. The government however is raising rent in this bad economic condition, as your previous article pointed out unintentionally.
Realism is hindered by the fact that one is limited in believing what already is. Idealism is unhindered because it believes in the possibility of what could be.
This is why the system I describe will only work when we corral up the sociopaths and disempower them completely.
Glad that you are pointing out the reality check on such an idealistic / utopian dream: the violence involved to corral up the sociopaths and disempower them completely would by itself cause scums to rise to the top . . . not to mention new people are constantly born and power corrupts.
MisdemeanorRebel
2014 Apr 21, 10:45am
The slower the owner's reaction to declining prices, the more damage it is to his own bottom line, just like people who lost their shirt not selling quickly enough during stock market crashes.
Yep. No one ever went broke from taking profits too early.
The government however is raising rent in this bad economic condition, as your previous article pointed out unintentionally.
I agree. The problem in NJ is that every service imaginable happens on the smallest level possible. Fire, School, even Health and Safety inspections, are all done on the localest level, hence the high taxes. California is at the opposite extreme: the sales and income tax is too damn high, and the property tax too damn low. Actually, NJ sucks at all 3. Probably because it seems to me Realwhores make up most of the Freeholders (local Council).
What is the bigger burden on entrepreneurs, the failure of the market to adjust prices, or the increased property tax?
Let's take two hypothetical cases:
$55/Sqft/Year * 1200 Sqft = $66,000
No "Tax" Increase
OR
$40/Sq Ft/Year * 1200 sq ft = $48,000
and
$48,000 + ($400*12) = $52,800
I'm being generous and assuming the $400 extra a month is all going to tax increases and is not at least partially a landlord's excuse to exploit a recession-resistant business to the fullest (or squeeze out a tenant for a better paying customer).
For me, I'll take the latter and enjoy my extra ~$13,000.
MisdemeanorRebel
2014 Apr 21, 10:48am
The short of it (too late) is, I'd rather low entrepreneurial costs and high rentier costs, than the other way around. Encourages an ownership society of Middle Class individuals, balanced between socialism and capitalism.
What is the bigger burden on entrepreneurs, the failure of the market to adjust prices, or the increased property tax?
Let's take two hypothetical cases:
$55/Sqft/Year * 1200 Sqft = $66,000
No "Tax" IncreaseOR
$40/Sq Ft/Year * 1200 sq ft = $48,000
and
$48,000 + ($400*12) = $52,800
The two are not at all comparable. A lease amount is from a mutually consensual contract commitment. The property tax is a forcible taking, and a raise during recession at that.
The short of it (too late) is, I'd rather low entrepreneurial costs and high rentier costs, than the other way around. Encourages an ownership society of Middle Class individuals, balanced between socialism and capitalism.
That means you should be for the lowering of government tax rate. The government bureaucrats are the ultimate rentiers. Housing service providers and commercial space providers are not rentiers but service providers just like hotels and phone companies, and probably have far less economic rent than phone companies and cable companies; heck, probably enjoy less economic rent than most existing restaurants and supermarkets have in terms of local exclusivity and therefore price setting power. The government however is the ultimate monopoly, therefore the rentier class.
The comparisons should be quite obvious: the commercial space owners in the article are cutting their prices by 27% ($55 to $40) at the least. . . not even restaurants and supermarkets are reducing prices by 27% across board in this economy. The cable companies are raising rates slightly. The government is raising taxes big times! The relative economic rent those various players have in the economy should be quite obvious.
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http://www.oftwominds.com/blogapr14/alienated-work4-14.html
"In Marx’s view, workers were alienated from the product of their work because they did not own the product or control the means of production. Marx argued that the absence of ownership and control was also an absence of agency (control of one’s destiny) and meaning. Workers were estranged from the product of their work, from other workers and from themselves, as the natural order of the product of work belonging to the one who produced it was upended by capitalism.
...Marx characterized this separation of work from ownership of the work and its output as social alienation from human nature. Capitalism, in his view, did not just reorder production into enterprises whose sole goal was profit and accumulating more capital; it destroyed the natural connection between the worker, the processes of work and the product of his work.
...The marketplace's commoditization of everyday life--both parents working all day for corporations so they could afford corporate childcare, for example--created two alienating dynamics: a narcissistic personality crippled by a fragile sense of self that sought solace in consumerist identifiers ( wearing the right brands, etc.) and a therapeutic mindset that saw alienation not as the consequence of large-scale, centralized commoditization and financialization but as individual issues to be addressed with self-help and pop psychology.
...It is important to understand that corporations exist to make a profit and accumulate capital, for if they do not make a profit and accumulate capital they will bleed capital and disappear. To believe that organizations dedicated to making a profit could magically organize society in ways that benefit every participant is nonsense. Corporations organize labor and capital to accumulate capital. It is absurd to expect that such organized self-interest magically optimizes the social order.
...Rather than rely on centralized states and corporations to organize labor and capital, collaborative networks can do so without alienating workers from their work and disrupting the sources of meaning."
For all the Worker Bees out there: Read this. This is NOT about Marxism, it is about a different way of thinking about what you are doing everyday. There are fundamental things that need to change structurally and why not start by looking at your own job? If enough people can open to the idea of moving into an economy that is not corporate and elitist based, things can shift into a new paradigm.