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Saturday, July 25, 2009

Some Perspective on Alderman Mell and the Walmart Proposal

Several years ago, I had a client that did a lot of work in the Phillipines and Thailand for Motorola. He told me the difficulty that Motorola had in doing business in a country like the Phillipines. That's largely because Motorola has a strict policy against being involved in illegal activities like bribery. Of course, when doing business in the Phillipines, that was simply a normal part of doing business. So, Motorola would use intermediaries and other agents in order to avoid directly paying bribes. You can imagine how such an environment is for a private company to do business in. In fact, there is one common threat with any third world nation and that thread is corruption. Economies simply can't expand and prosper if in order to business several government officials have to be paid off in the process of every deal.

For nearly four years, Walmart has attempted to get a project approved by the city of Chicago to build a superstore in the Chatham area. For four years, that request hasn't merely been denied but it hasn't even been given a vote. Never during that period of time has any politician given any reasonable explanation for why their request has been stalled. In Walmart's only store in Chicago, the store has generated just over $10 million in tax revenue in about two years. It has employed 400 people. Furthermore, a Bank of America, Dunkin Donuts, among more than a dozen other retailers have built commercial space in the area since the Walmart went up. Despite this, their request continues in limbo with absolutely no explanation for when it will move forward and why it hasn't yet.

Now, I don't mean to suggest that the city of Chicago is anything like the third world, however, I will suggest that politicians with agendas besides the growth and prosperity of the areas they serve only hurt the economy as a whole. It is in that context that we should view the fight over the Walmart in Chatham on 83rd and Stewart. Walmart is willing to build 150 thousand square foot store. They are ready and willing to hire about 400 UNION employees all from the Chicagoland area. They can even finance the project all entirely with their own money. Then, they'll hire about 500 employees to operate the store. The citizens of the area want the store. A poll by McKeon & Associates in June, 2007 found that 82% of the residents the ward wanted a Wal-Mart Supercenter. Finally, the area where the store will be is a plot of dirt currently.

Yet, we are headed into the fourth year that Walmart has lobbied to get permission from the city to build the store. The man currently most responsible for holding this up is Alderman Richard Mell. Walmart's bid for approval is stuck in the rules committee he heads. Most have speculated that his motivation have to do with Walmart's refusal to unionize. Of course, this is strictly speculation. That's because all major media in Chicago, including both newspapers the Sun Times and Tribune, have attempted to reach out the Mell and he refuses to explain exactly why their bid is still not moving forward.

Let's lay the cards on the table. Walmart's survival is NOT tied to the store here in Chicago. They will continue to make billion dollar profits yearly with or without. In fact, their spokesperson, Tara Steward, told me diplomatically that Walmart is determined to build the store because they've been in the neighborhood and they've received overwhelming support of the project by the residents. The alderman in the area, Howard Brookins, fiercely supports the project. Chicago's current unemployment rate is north of 10%. Even if Walmart's superstore gets built, the effect on overall unemployment will likely only change marginally. As such, the effect for both entities, Walmart and the city of Chicago, will be marginal.

What this fight is though is a microcosm of a city that welcomes business in a "boy's club" manner. If your business is a friend of the city, the city welcomes you with open arms. If you're deemed a villain, like Walmart has been, then the city does all it can to make your entry into the city painful. Walmart has created a full throttle Chicago media campaign to drive their message home to local residents, but how many businesses can afford the sort of campaign that Walmart is engaged in. Furthermore, how many companies can afford the long battle that Walmart is determined to win?

What this battle clearly shows is that Chicago politicians have created an environment that is not business friendly. It may NOT be on the scale of pay offs to government officials. (though I bet some would argue) Still, when politicians make conducting business painful and expensive, it hurts business in their locality. All Richard Mell has done is told all businesses that the only ones welcome are those the politicians deem worthy. Just try and imagine an economy in which the only business done is that done by those with connections to local politicians. That's the message of the fiasco surrounding the Walmart. The politicians of the city of Chicago are telling businesses that the only businesses that will go up are their kind of business. That's corrupt and corruption breeds economic stagnation.

1 comment:

Anonymous said...

Google search -- about 19,700,000 for "Chicago, Corruption"