Great Debate Folks.
Remember that any economist worth his salt will approach his art with a great deal of humility. My father likes to joke about the two handed economist who says on the one hand things may be bad but on the other hand .......
Anyway my own opinions with an admitted iron in the fire is that we are somewhere in between the two extremes debated on this forum.
To be sure, I have an economic theory predicated on the mathematical principle of the least common denominator. To try and simplify and explain it belies the concept that all economic activity will revert to the lowest level of performance. Much as water flows downhill and accumulates in streams, rivers, lakes, and ponds the economy will flow towards end providers of value.
Lets pick on Wal-Mart. Obviously, its shameful that they pay their employees peanuts. But shoppers want value so thats where they go. Other businesses that compete with Wal-Mart are then forced to lower wages and end prices of their goods and services or Wal-Mart takes their customers and forces them into bankruptcy. When other businesses lower wages to compete with Wal-Mart then WMT stands up and announces that they pay competitive wages and they arent to blame. Its a viscious cycle and the wages trend to the least common denominator. WMT dropping American suppliers to buy cheaper products from China isnt helping matters and again wages fall to the least common denominator.
Some like Warren Buffet claim that WMT has kept inflation in check and is good for the country. As a two handed economist, I ask at what cost has this been achieved. I know for a fact that WMT starts their employees off at .25 cents above minimum wage and that 1990 salaries began at $4.50 and 2004 salaries begin at $5.40. 10 states have higher than federal minimum wage laws but you get the picture. Adjusting for inflation, the new WMT employee that started yesterday is being paid far less than the WMT employee that started in 1990. A few stores here and there pay more to accomodate high demand areas of employment but its not much more.
The profits WMT generates are staggering but their million plus employees often live at the poverty level. The Walton family is worth more than Warren Buffet and Bill Gates combined and yet their employees often starve. I know that its not uncommon for WMT stores to have internal fund raising efforts for poverty level employees that go through normal crises events that others could handle with more ability. Additionally, WMT "encourages" their employees to do most of their charity work such as raising money for Childrens Miracle Network, United Way, WMT political action committee, and other charitable causes that WMT likes to take credit for as for being benevolant in their community.
The University of California at Berkeley did a study and found that WMT employees were so poorly paid that California had to pay out close to $100 million per year in taxpayer assistance to poverty level workers who needed it. Among programs cited were food stamps, housing assistance, welfare, education assistance, health care, and many other government programs to help those considered poor. UCB stated that each WMT store required about $300,000 in government assistance to keep its employees functionally poor. UCB based the study on employees making $9.70 per hour while WMT contended that the numbers were wrong because their employees in California averaged $10.37 per hour. UCB stated that each employee in California required almost $2000 per year in government assistance to help them get by while other retailers in California averaged over $14 per hour in wages.
I will flat out state in no uncertain terms that in Texas which doesnt have a higher than national minimum wage that WMT employees frequently start at $5.40 an hour and arent even close to the $9.70 average that California has. WMT's raises are infrequent (once per year) and small (perhaps .30 cents per year). I have a friend thats worked for WMT for 15 years and makes $8.60 per hour. She works hard and you dont last 15 years at WMT unless you do. She does get government assistance and it makes me want to puke that I have to pay taxes to subsidize the employee wages of the largest most succesful and powerful corporation in the world while the richest people in the world (the Walton family) continue to rake in more billions of dollars while their employees starve. Those cheap prices come at a cost.
Obviously, its hard to find places to shop other than WMT because they dominate the industry. We talk a lot about Supertech filters and GF-4 oil and WMT is frequently the place to find them.
I dont think a day or single store is representative of the economy of WMT but their post thanksgiving ad this year stunk and many of their specials you could find at WMT.com without the hassle of fighting other customers at 5 AM to get them.
As for myself, I ordered a couple of DVDs from WMT.com and went to Sears and bought some gear wrenches without the hassle that others endured. I might have missed a sale or two at WMT but who cares?
I applaud those that take a moral stand against WMT and boycott the place but in reality they dominate retailing and avoiding WMT is difficult and especially so when you live in a small to medium size town where WMT has decimated most of the former small businesses in the area. My town had 8 hardware stores before WMT showed up and now we have 2 and our local ACE hardware store makes more money selling candles than tools. Its hard to avoid WMT considering the circumstances.
In the end, WMT will get it comeuppance. Greed will take over and sink the company. Suppliers will rebel against the companys heavy handed tactics and employees wages will have to rise. Politicians will wake up to the costs of low wages and force change. Greed enhancing measures like understaffed service, dirty stores, freight thrown on the floor, long checkout lines, shopping carts banging into cars on the parking lot, and all those other little things customers hate will eventually catch up to WMT. There are 5 stages in any endeavor and they are:
1. The dream or idea that sparks conception
2. Effort and work to achieve production of the dream.
3. Success and reward
4. Taking reward and success for granted
5. Eventual failure
WMT is in stage four of the cycle.
As far as debt, I have to agree that the entire portion of our so called economic expansion has been financed by the willingness of American citizens, businesses, and government entities to take on debt and spend money not yet earned. I know of churches that have taken on debt that cant be paid back and towards which banks are unwilling to foreclose. One church in my town was quitely sold so two churches could swap buildings and accomodate the banks that held the notes on them. We have grown the economy based on individuals, businesses, corporations, other entities, and governments from local towards national accumulating more debt.
Those that follow statistics estimate that close to 40% of the people in this country will go bankrupt in the next couple of decades. Honestly, Ive never defaulted on anything that Ive ever owned and even I get called by moron credit counselors at least 4-5 times per week. Debt and bankruptcy doesnt seem to have the moral stigma that it did when I was a boy. Its almost commonplace and expected and encouraged and its the foundation of our countries economic strength.
Even with these problems there are some signs of positive developments in this country. You look at a company like Honda of America and they hire American engineers to design vehicles built in American factories with 75% American made part content and they pay taxes on their profits like an American corporation and they are making money hands over fists. Still, here in Texas if you buy a "Japanese" car there are a whole lot of people that look at you like you are a communist and remind you that their cousins great grandfather gave his life fighting the evil Japanese that attacked this country 63 years ago. The fact that the Saturn Vue uses the same Japanese built engine as does the Pilot doesnt register. The fact that HMC is traded on the New York stock exchange doesnt register.
Anyway, my point is that Honda can come here and hire American engineers to design a car then build a factory that employs American workers and use mostly American built and supplied parts and make a fine car that Americans buy, appreciate, and use.
Therefore, when you open the window and look for cracks of light dawning in the darkness you can find them.
Anytime we discuss economics then its best to at least try and leave the discussion of the art on a positive and hopeful note. There are problems but there are also showcases of hope that prove that Americans work hard, are innovative, can produce good products. There are still areas of expertise where we can lead the world and our economy will benefit from them.
Happy Motoring All,
Bugshu
