Future Shock in the Grocery

"Technology, by its nature, is dynamic, forward-looking. Every development, every invention, every improvement upsets the status quo, changes the people and society, threatens the Establishment."—Ben Bova, editor of Analog

Future shock is as old as the Industrial Revolution. In 1815 fearful English workers, led by half-wit Ned Lud, set upon and destroyed labor-saving textile machines. Although the Luddites failed to prevent the introduction of the new machinery, their spiritual descendants have never given up attacking technological advances that threaten their content with the status quo. But today's opposition to new developments goes beyond simple fear of the new and unknown. The man in the street may react with this type of generalized fear, but all too often his fears are encouraged by relatively small vested interests which stand to lose from new developments. These amplified fears then become the excuse for new laws prohibiting or restricting the use of new technology which is designed to benefit consumers.

Two examples of this process are occurring today in America's supermarkets. One concerns the introduction of the Universal Product Code (UPC), the pattern of lines and numbers now appearing on most grocery items. The UPC, a key element in computerized check-out systems, is a symbol which encodes the manufacturer's name, product type, and package size. It is designed to be read by a scanning device at the checkout counter, hooked into a computerized cash register terminal. The terminal automatically looks up the product's current price and sales tax to compute the bill, and prints both the price and the product's name on the customer's receipt tape.

The Grocery Manufacturers' Association spent millions of dollars developing the UPC system because of the substantial economies it can bring to supermarket operations. In addition to such benefits as faster checkout, instant inventory, and automatic reordering (which are made possible by the computerized cash register), the UPC's big payoff comes from eliminating the costly, labor-intensive step of stamping the price on every one of the 170 billion cans and boxes sold by grocers each year. (The price would still be marked on the shelf, of course.) The GMA estimates that full implementation of the UPC will save several hundred million dollars each year, and permit the average supermarket to reduce its number of retail clerks from 22 to 18.

Predictably, the Retail Clerks International Association is up in arms over the UPC plan. According to the GMA, the union is funneling money to consumer groups to agitate against UPC and, regrettably, many consumer groups are falling into line. The Consumer Federation of America, representing 208 member organizations, is waging a propaganda war against "packages without prices," arguing that buyers will be unable to comparison-shop, despite the presence of prices on both the shelf and on the register tape, and the advantage of having an itemized register tape containing the name as well as the price of each item. (The consumerists also point out that the new system could make it easier for supermarkets to commit fraud—which may be true, but is relatively easy for either officials or consumer groups to check up on.) The CFA and the Retail Clerks union are backing a Federal "Price Disclosure Act" which would force stores to continue stamping prices on every item, regardless of their investment in UPC. Already 59 members of Congress have endorsed the bill, and similar measures have been introduced in more than a dozen states, including California, Arkansas, and Maryland.

The other new development also concerns computerized systems and supermarkets (among other locations). This time the issue is the computerized remote banking terminal, an innovation that permits bank teller service (deposits, withdrawals, check-cashing) at such convenient locations as supermarkets, airports, and department stores. Part of the problem here is that banking is highly regulated, with different categories of banks prohibited from competing with one another. Thus, since the different regulators have moved at different speeds to permit use of Customer-Bank Communications Terminals (CBCTs), problems have arisen. The process began with a ruling by the Federal Home Loan Bank Board in January 1974 allowing Federally-chartered savings and loans to install CBCTs, followed in December of that year by the Comptroller of Currency's ruling that national banks could do the same thing; the latter ruling established that CBCTs were not legally bank branches, and thereby were not to be restricted by state bank branching laws.

Innovative institutions quickly took advantage of these rulings—and soon ran into Luddite reactions from their conservative competitors, in league with the State. First Federal Savings and Loan of Lincoln, Nebraska installed CBCTs in two Hinky Dinky supermarkets. Five commercial banks, rather than mount an aggressive attack on the laws preventing them from doing likewise, promptly obtained an injunction against First Federal, charging unfair competition. After much harassment by the Nebraska attorney general, leading to a six-month shutdown of the system, the Nebraska Supreme Court ruled in May that the CBCTs were not acting as S&L branches. There are now terminals in 21 Hinky Dinky supermarkets, and two other S&Ls have teamed up with First Federal to offer the service. Elsewhere, the City National Bank and Trust of Columbus, Ohio, is installing 125 CBCTs in 60 major stores and supermarkets, and Atlanta's Citizens and Southern National Bank is franchising its "Instant Bank Key" CBCT system to smaller banks in seven southeastern states. Both Bankamericard and Master Charge are planning similar systems.

Nonetheless, many smaller banks are afraid of the challenge posed by CBCTs, and are backing legislation to prohibit their use. The Ohio state banking superintendant is suing banks in Cincinnati and Dayton that are trying to set up CBCT systems, a similar suit is under way in Colorado, and the 7800-member Independent Bankers Association of America is suing the Comptroller of Currency seeking to overturn his ruling that CBCTs are not branches. Comptroller Smith retreated a step in May by announcing a new rule that prohibits CBCTs from being located more than 50 miles from a bank branch. And Sen. William Proxmire has introduced legislation to prohibit all CBCT operations until a Federal study commission has decided how they should be regulated, around the end of 1976.

These examples demonstrate once again the dynamic, ever-changing nature of capitalism. And sadly, they also demonstrate that Luddism is still with us. Only today, instead of destroying isolated machines, the Luddites have access to the machinery of total, nationwide coercion: the State. Defenders of economic freedom must fight not only the specific laws restricting innovation but also the underlying conservative, anticonsumer attitudes that revere the status quo. It is these attitudes that sanction the special pleadings of those who cannot or will not face the challenges of a dynamic, competitive economy.