The Brandeis Option: Risk-Aversion vs. Entrepreneurship

by Martin Harris

Recent events in entrepreneurship and recent stats for increased American risk-aversion confirm the foresight of SCOTUS Justice Louis Brandeis, whose advocacy for Federalism –less central governance, more State differences, the laboratories-for-democracy concept– has frequently been recited in these column-inches, but not in ways he might have foreseen. In the oldest profession, agriculture, its newest, mostly small-scale, frequently organic, practitioners constitute the fastest-growing (no pun intended) but still quite small economic sector; in the newest profession, information technology, innovation and entrepreneurship are leaders within an overall US new-business-venture sector showing steady shrinkage in growth rates. Two recent news reports illustrate.

One comes from Wisconsin, where a mini-farmer charged with illegal sale of raw milk won his day in court when his buyers-club method of customer involvement was exonerated of law violation. A new label for this arrangement, concierge agriculture, parallels the concierge medicine label for physicians forming similar patient groups; both innovations enable avoidance of legal prohibitions against the once-traditional free market practices of offering goods and services to any willing and paying purchaser. “This is a huge win for food rights”, said Liz Reitzig, a founder of Farm Food Freedom Coalition, a group advocating for greater consumer access to unprocessed food”, quoted in a 28 May Wall Street Journal newspiece on the legal victory for mini-farming, which is more profitable to producers largely because, unlike their large-scale commodity production counterparts, they can capture the retail market through direct-to-consumers sales while traditional growers necessarily sell to intermediates at much lower farmgate prices. A recent Acres USA report cited Vermont as the State with the fastest-growing (again, no pun intended) mini-farm sector. The other comes from Washington, where federal data-crunchers report on a nationwide decline in entrepreneurship thus: “A smaller share of US businesses are new companies…and the share of the labor force working at new companies has fallen…the start-up rate is falling…worker migration rates (moving to better jobs) have been falling for more than 20 years…fewer workers are quitting their jobs…adults are changing jobs less often…fewer new jobs are being created…companies are keeping more cash on hand…a declining share of venture capital is going to seed new firms…and more than 40% is going to one place”, a 3 June WSJ newspiece reports. The “one place” is Silicon Valley, a no-longer-geographically-specific label which now defines such blue-politics urban centers as San Francisco and Boston, Austin TX and Denver, CO, where the stats show growth in innovation and investment. In contrast, recent Rutland Herald reports on Vermont’s largest computer industry figure, IBM, reducing employment, mark it as one of the faster-declining States, Silicon Valley-wise.

To whatever extent economic growth in favored sectors can be directed by State politicians –Wyoming recently declared its intention to become “the broad-band State”– either by specific industry targeting (think Wyoming) or by infra-structure investment (think the Massachusetts I-495 “miracle” electronics focus back in the InterState-building 60’s) or by regulatory practice (think Pennsylvania’s natural-gas and oil renaissance, where Edwin Drake drilled the first US well in 1859, without Harrisburg involvement); or whether it just happens as a result of a sum of individual decisions, like Vermont’s ag-image shifting, over the last 50 years, from one of commercial-commodity dairy operations to one of small-scale, niche-market, producer-to-consumer arrangements, we don’t know with certainty. We do know that States can, by political-ideology choice, establish supportive tax and regulatory climates for business (think TX) or negative ones (think VT) and experience business expansion or contraction accordingly. But we also know that sometimes the State’s business climate is apparently irrelevant, which explains why San Francisco, which was part of the original, geographically-real Silicon Valley, from Marin County at the north end to San Jose at the south end, is now part of the “virtual” one; while small-scale ag, innovatively managed as the WI example illustrates, can prosper even in that heavily regulated blue State. Parenthetical note: in Vermont, Golden Dome new-found enthusiasm for min-farming might expand to include specifically legislating for “buyers’-club” agriculture: we’ll see how deep that professed enthusiasm really is by what the pols do (or don’t do) in their next legislative session. That would an exercise of the Brandeis thesis indeed. There are multiple ironies in all this, chief among them (Humble Scribe opinion) the extension of the “gated community” physical concept to the “gated enterprise” virtual concept, with such professions as medicine and law offering memberships to clients promising the same advantages as low-price retail (CostCo has been doing so for decades) and, now, small-scale farming (community-supported agriculture was its original label) in terms of consumers and suppliers forming exclusive clubs, of the same legal type as, in housing, has long been decried by the Progressive Left. Which brings us back to the Freedom-of-Association principle.

Supposedly enshrined in the First Amendment, it isn’t. Instead, in a pair of Supreme Court cases involving the JayCees (1984) and the Boy Scouts (2000) emanations and penumbras of privacy were found, so that groups which may not exclude the unwanted for “unrelated” reasons may legally exclude them, for “related” ones, presumably like not owning a house within the walls-and-gates of the community, or not having a business-issued paid membership card. What’s interesting here is that for the new Rural Gentry, a substantial, if not totally dominant, economic and political force in blue States like WI and VT, the exclusive practices they decry when practiced by the Right –think golf clubs and charter schools—they embrace when personally convenient: think the statistical evidence for private-school preferences by Progressive politicians in Washington, and think the anecdotal evidence for community-supported agriculture, farmers’ markets, and buyers’ clubs, patronized more by the rural gentry than by all the other socio-economic sectors in such blue States. It’s because of that RG political clout (HS guess) that the judge in the raw-milk case found emanations and penumbras enabling him to legitimize the buying of raw milk (by club members), frowned upon by most State governments because of retailer lobbying supposedly based on product safety but more likely based on market-share fears. He ruled that raw milk selling couldn’t be mentioned in his court case.