Showing posts with label Wal-Mart. Show all posts
Showing posts with label Wal-Mart. Show all posts
Distributism in the Populist Moment
Life is full of pleasant things, regularly coming at times when they are least expected. Today just so happened to be one of those days. As I went out to check the mail, I noticed that my edition of The Week magazine had arrived. And there, on the cover, was a splendid picture of people rioting around the idol (i.e. the statue of the bull) in front of the New York Stock Exchange. The people with their fists in the air, shouting at the symbol of swinishness, pulling it down from its pedestal in a way reminiscent of the famous topple of Saddam’s statue, and the words “Populist Uprising” gracing the bottom of the page. The image beautifully captured the sentiment, and the words accurately reflected the image. It was spectacular in the truest sense of the word
Unfortunately, as with many articles of this nature, my joy was quickly and significantly diminished. The story was on page 18 in the Talking Points section and it only consumed the larger part of the upper-half of the page. That aside, the article was concerning to the $500,000 salary cap Obama has issued for all bank CEOs to receive per-annum. While I should have paid more attention to the cover of the magazine (which has the words “the new, $500,000 limit on CEO salaries” as the tag line), I figured that the story would deal with… well, the overall uprising of populism.
It was the earlier portion of January, 2008, when I began speaking more about populism, and in particular what I saw as the rise of populism in
I still stand by my predictions, and I believe most of the indicators are pointing in that direction. Sadly, I don’t see this rising tide lasting too long before it breaches.
People are angry, this much is sure. But they either don’t really know why they are angry or they are taking it out on the wrong things. A casual conversation with Johnny Q. Public will get you an earful of emotionally charged tirades concerning the salaries of CEOs, how Scooter’s Hardware is going out of business because they can’t compete with Wal-Mart, and how the average Joe just can’t make the kind of living he used to with a hard day’s work. In all likelihood, you’ll even hear them talk about the hucksters and swindlers in Washington and Wall Street.
None of this is necessarily problematic. What is problematic is how this tirade is followed up with the same old song and dance that got us here in the first place. The very same person will go to the grave defending state capitalism, quoting “the ole Gipper” by saying “Government is the problem.” This person may be on their way in (or even out!) of Wal-Mart, while Scooter’s is just one mile up the road. He’ll stand by the wage-slave concept, decrying a Living, Family, Just Wage or vocational organizations as socialism. And he’ll probably tell you (depending on how the next few years go) that all we need to do is get more “conservative” Republicans like Sarah Palin in office to begin “taking care of business.”
If you haven’t been formally introduced to this person, or the mass of individuals he happens to represent, you haven’t been in the
This isn’t to deny the ray of light peaking through the clouds. Not at all! It is simply admitting that, as of yet, it is little more than a sunbeam piercing through the clouds of convention tomfoolery. It’s a mere acknowledgment that the masses aren’t as angry with the socio-political apparatus as they are with who may be in control at the time. It’s a blame game, with all their bets being on top-down measures to make all the difference.
Yet even here it is not entirely doom and gloom. This underlying sentiment is real, it is emotional, and it is angry. What is required is good old distributist education. While a large portion of the populace may be experiencing frustration with the status quo, they need to realize that the answer is not found in merely tweaking the status quo, or even crossing their fingers in hope that those on Capitol Hill who just so happened to micromanage the status quo will make all the difference.
Distributists, then, are living in a time of great opportunity. People are dissatisfied, and they are willing to listen to “new” ideas. Better yet, most do not realizing that those “new” ideas are far from being “new.” Capitalists have had their chance. Socialists have had their chance. Now it is time for distributists to have their day in the sunbeam.
How long this uprising lasts is unknown. But it would be foolish not to take advantage of a brilliant opportunity to direct this populist moment towards a more humane political economy.
Read more...Distributism is Dying...
... or so I've been told.
It wasn't but four years ago that I stumbled upon Distributist Perspectives Vol. 1. It was a Christmas gift from my parents. Along with it came two other books. The first was "I'll Take My Stand" by the Twelve Southerners. The second was "Who Owns America?" edited by Agar and Tate. Unbeknownst to me, the writers and content of both "I'll Take My Stand" and "Who Owns America" were in some way or another linked to those persons and ideas contained in Distributist Perspectives Vol. 1. Chalk it up as a strike of providence.
Upon reading these books, it didn't take me long to see the similarities. All three were traditionalist, skeptical of all things big, and agrarian to the core. Furthermore, the writers all appeared to see a connection between the political economy and culture. They talked of art, literature, and architecture. In brief, there was a consensus amongst the contributors that the debates surrounding the political economy were not merely academic. Rather, these debates hit to the very center of who we are as individuals, as a city, and as a nation.
Some may insist that the ideas advanced within these books fall within the losing column of history. I would beg to differ, though only with the luxury of hindsight. While one should readily admit that there was relatively little progress made during the lifetimes of these particular men, it would be foolish to confine the win and lose columns of history to the lifespan of a group of writers.
At any rate, there are those who point to the burgeoning of Big Business, Wall Street, and the service economy as proof that the American people have no interest in the ideas typically associated with distributism. Some may even note the fact that a large portion of Americans claim to love Capitalism, while very few have ever heard the word distributism, and even less of its substance. These facts, at least for the anti-distributist, serve as evidence that distributism is on its deathbed waiting to be put out of its misery. Or, if they are generous enough to grant that there will always be a remnant of those willing to identify themselves as distributists, they will ridicule the school of thought as a fringe movement made up of discontents and those overly infatuated with all things nostalgic.
But are these so-called evidences proof, as the antagonist would insist, that distributism is dying? As I said earlier, I would answer this in the negative. For these so-called evidences can be seen and interpreted in many other ways.
Take for instance Big Business. It certainly appears to be thriving. On the other hand, even giants like Wal-Mart are having to rally the troops in hope of figuring out ways to bypass what has recently become a storm of opposition. One need only watch the documentary "Wal-Mart: The High Cost of Low Price" to see just how strong, and coordinated, the opposition has become.
But this, in and of itself, does not answer the question as to why so many people continue to frequent these behemoths. Truth be told, the answers are as simple as they are complex. We know that there many shoppers that have been pigeonholed into believing that they cannot afford to shop anywhere else. There are others who could shop elsewhere, and who decry the loss of small business, but who would prefer watching the local hardware dealer go out of business than to pay what could only be described as a reasonable price for goods and services of better quality. Sadly, there are also those who simply don't care what happens to their neighbor, so long as they save a few pennies here and there. Of course, they shun from their conscience all guilt for having fed companies that rely for their existence on what amounts to nothing less than slave labor in foreign countries. For these particular shoppers, it is a matter of "out of sight, out of mind." To make matters worse is that the vast majority of these people don't realize that their low prices are also tied to government subsibies. These come from local, state, and federal dollars, and they come in frequency and figures that would be the envy of any local business owner. So while the answer to this question may seem easy to the antagonist, the truth of the matter is that the issue is much more complicated than it may first appear.
Wall Street is an entirely different story. The average Johnny Q and Sally Sue have little care for what goes on there. As The Nation pointed out so accurately in 2002, people don't typically go to work in order to purchase stocks. Where the common folk of yesteryear may have been somewhat indifferent to Wall Street, this can no longer be said. Instead, indifference has turned into outrage. Faulty prices, rabid speculation, credit swaps, and the stock market's subtle, but now apparent, interconnectivity with even those who know little about the numbers and letters flashing across the bottom of the television screen, has resulted in a collective man-hunt, with Wall Street as its target. Add to the flames the "revelation" concerning the government's obvious preference for the well-being of Wall Street insiders over against the common good, and you have a sure recipe for populist outcry.
People are outraged. This much is certain. But what is more telling than their outrage is their not wishing to better familiarize themselves with the beast. Rather, many prefer to see it go the way of the dinosaur, or at least to be treated like a plague that needs isolation and strict supervision. Regardless of how the hucksters on Wall Street and Pennsylvania Avenue wish to spin this, the American people have quickly grown a healthy distaste (and distrust) for Capitalism's casino and the gamblers who frequent its halls.
As for capitalism, while the word is commonplace amongst the citizenry, very few know what it really entails. Most tend to boil it down to a free market where people can compete with others and earn money along the way. This is typically dovetailed with the notion that less government intervention is good.
While all this sounds well and good, it fails to take into account the fact that, as Chesterton put it, one of capitalism's greatest inadequacies is that it creates too few capitalists. To add insult to injury, the average citizens knows as little about little of the current status of wealth in the United States as they do about the meaning of capitalism. I'm willing to bet the farm that were the citizenry to be fully aware of the figures concerning the distribution of wealth and land in this so-called capitalist society, they would, unlike Chesterton, be astounded.
Let's take the 2006 Federal Reserve, Department of Treasury survey as a practical example. We begin with $100. Then we add 100 people. Now, a perfectly equal distribution of wealth (which is not the goal of distributism) would be $1 per person. As it stands right now, the 50 individuals at the bottom of the stack have $0.05. Collectively, they make up $2.50, leaving $97.50 to be divided between the remaining 50. The next 40 have $0.70 of wealth, or $28 collectively. The next nine have $4 of wealth, or $36 collectively. Now this leaves one person remaining. This single individual would, per $100 mentioned earlier, have in his or her sole possession $33.50.
To say that this is horrifying would be to trivialize the meaning of horror.
One may rest assured that when these figures come to light, as they are with the passing of every day, people will begin to see the forest for the trees. They'll begin to connect the dots, finding a line between Big Business, Wall Street, and what parades around as capitalism. It is here, at this moment and at this time that distributists can smile and wink at the antagonist, knowing full well that the confidence of the naysayer was built on what was little more than a phantasm waiting for the right moment to disappear.
Distributism isn't dead. It isn't even dying. No, distributism is coming to light. It is, as John Medaille would say, "the wave of the future."
The road is destined to be hard, as money and power never fail to put up a good fight. But those rumbling underfoot, fueled by ideas penned by those of old, may be too much for even the giants of today to withstand. In the end, being perceived as finding a home in history's losing column may have turned out to be a boon rather than a bust.
Read more...The Big Empty Box (Store)
Stacey Mitchell of The Institute for Local Self-Reliance reports that empty big-box stores are about to join the foreclosed homestead as a defining feature of the American economic landscape:
Within a few months, more than one-eighth of the country's retail space will be sitting vacant, according to some estimates. That's about 1.4 billion square feet, or 50 square miles, of empty store space, ringed by roughly 150 square miles of useless parking lot.
It will be tempting to blame the weak economy for all of this wreckage. But the recession has merely been the trigger. This avalanche of vacant retail, much like the mortgage crisis, has been a long time in the making.
Since the early 1990s, the pace of retail development has far outstripped growth in spending. Between 1990 and 2005, the amount of store space in the United States doubled, ballooning from 19 to 38 square feet per person. Meanwhile, real consumer spending rose just 14 percent.
Stacey Mitchell is the author of Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America's Independent Businesses. which we reviewed here.
Buy it Up--Break it Up--Fund it Right!
The new president has hit the ground running and I wish him well. But I have my doubts. He is not at all like the stumble-bum he replaces, of course. Rather, he is a thoughtful and intelligent man. And on economic matters, “The audacity of hope” is backed up by an economic team of truly impressive credentials. Indeed, this may be the most highly qualified group of people ever to serve in government.
And that's the problem. All of them are super-competent to be sure, but they are competent in the very techniques that caused the problem in the first place. They will attempt to solve the problem at the level of thinking that created it. Their plan is for a massive stimulus, and it is easy to see why. They believe it will work for the simple reason that it has worked. Indeed, since at least the 30's, and certainly since the 40's, the economy has been dependent on massive government expenditures—a permanent stimulus economy. And in general, this approach worked for a long time; the economy was more or less stable and prosperous, and the periodic shocks were mild and short-lived by pre-war standards. Given that record, they may well be excused for believing that the Keynesian magic will work yet again.
But in truth, it will not work because, for some time now, it has not worked. No one since World War II has practiced fiscal stimulus as much as did George Bush. Think on this: In only eight years, Bush took all that debt accumulated from Andrew Jackson (the last time our debts were paid) through Bill Clinton, and doubled it. He added more than $5 trillion to the debt. Under such a tremendous stimulus package the economy should be booming; there should be labor shortages and resource scarcity and real—rather then merely monetary—inflation. But the economy is not booming, but bombing, and instead of inflation we have deflation, which is far more damaging. Instead of a real expansion, we got a mere credit bubble in housing. People thought they were richer because their homes cost them more, a strange kind of wealth.
In opposition to Obama's plan, the Republicans want more of the same. But the Republican stimulus plan differs only in the details. Stimulus by “tax cut” is still stimulus. And it really isn't cutting taxes because it doesn't really cut spending. It is not tax-cutting, but tax-shifting, from the current generation to the next; it is charging our children for benefits we receive. This is not only uneconomic, it is immoral at the deepest level.
The bubble did not make people richer (save for a few insiders), it just meant they were maxed out. Maxed on their mortgage payments, their credit cards, their car loans, their student loans. Their wages did not keep pace; in fact, the median wage declined and the economy was sustained by oceans of debt. The stimulus plans have introduced structural abnormalities into the economy such that it will no longer respond to stimulus. Reliance on the government as consumer of last resort has resulted in a structure that favored global production over national income, the FIRE economy (“finance, insurance, and real estate”) over the real economy (real production of goods), low wages over fair ones, and gargantuan size over human scale. It is this last point that is particularly troubling, since this gargantuan institutions have proclaimed themselves to be “too big to fail,” and exercise economic blackmail over the whole republic.
The problem with this claim is that it is correct. But the proper response is not to give into the blackmail, not to negotiate with crooks, but to make sure that the blackmailers are never in a position to control the whole economy, to demand trillions in ransom whenever they get themselves (and us) into trouble. Now, it would be mere carping by distributists to point out the problems if we could not offer solutions. But we do have solutions, and it is time to offer them, time to end the era of big business that depends on big government, on subsidies from the general public to private profits. I have nothing against profits—when they are earned; I have everything against profits that are the result of subsidies and privileges. The distributist solution to all of these problems can be summed-up in a few words: Buy it up! Break it up! Fund it right!
Too Big to Succeed
Citibank, the nation's largest bank, has received a $20 billion bailout, along with government guarantees for $300 billion of shaky assets; in addition to giving the bank an enormous amount of money, the public assumes all of the risks of being a banker, while Citibank gets to keep all the profits. That is to say, the profits are privatized but the risks are socialized, combining the worst features of capitalism and socialism in a toxic combination. Citibank is no ordinary bank. Together with JP Morgan/Chase, it owns the controlling interest in the New York Federal Reserve Bank, which in turn owns 53% of the Federal Reserve System. This makes the entire banking system sensitive to the needs of two New York banks. The President of the New York Fed has a permanent position on the board of the Federal Reserve. And who is that outgoing New York Fed President? It is none other than the new Secretary of the Treasury, Timothy Geithner.
But the banking system is more than New York and more than the Fed. Most of the regional banks did not engage in the risky behaviors of the New York banks. They made sensible loans. But Citi had no reason to be sensible; with their size and influence, they knew that they could not be allowed to fail. No matter what happens, they must be protected from the consequences of their own actions. Yet, their actions weakened the whole economy, which is weakening the books of even the most cautious banks; with the economy failing, even formerly reliable borrowers cannot repay their loans. The solution is not to bail out failure. Rather it is to ensure that no entity every again can be large enough to hold hostage the public purse. Don't bail it; that just reinforces a power structure that can no longer succeed. Rather buy it up and sell it piecemeal to the regional banks. The market capitalization of Citi was only $19B as of yesterday, or less than they received in the bailout. The toxic loans can be sold for whatever the market will bear; the healthy parts will make the remaining banks stronger, but none of them will be strong enough to dominate the banking business. Buy it up and break it up.
Of course, they may not want to be bought, and if they can find private investors to draw them out of this hole, that's fine too. But I doubt if they can find buyers without the government providing guarantees. In other words, everybody has found out what the distributists always knew: they are too big to succeed without the help of big government. They believe they can blackmail the public, but the truth is just the opposite: they are dependent on us and we may do as we wish.
The same plan holds true for other enterprises that need bailouts, such as the Big Three automakers. The obvious problem with these companies is that they are too big and there are only three of them. Japan, a much smaller nation, supports nine auto companies. The market price of GM was only $2.1B yesterday. If the public is taking their debts, then let us take possession as well. Buy them up, and then re-sell them to the workers in exchange for some of the long-term commitments. Break them up into the various sectors: engine companies, transmission companies, body works, etc. They could be converted over time into worker-owned companies.
Then, anybody who wanted to enter the automobile business could do so with a comparatively small investment; instead of manufacturing the whole car, they could purchase all the parts and assemble them according to their own designs and perceived market needs. Indeed, the auto companies have already laid the ground work for this by outsourcing so many of their parts and selling off so many of their plants. At some point, the central office losses any real power and its remaining functions can be duplicated by any number of start-ups for a relatively modest investment. At that point there is no reason we couldn't have nine automakers, or 19. Choices would go up, prices would go down, and local manufacturing would increase.
Fund it Right
In our industrial system, government is the consumer/employer of last resort. Government spending is $5 trillion of a $14 trillion economy, or more than one-third. Much of this spending constitutes a huge system of subsidies to large businesses, subsidies that are so in-grained that we no longer see them as such. For example, The “freeway” system is a huge subsidy to shippers and privileges global and national production over local and regional manufacturing. Indeed, without these subsidies, it would be difficult for global producers to compete with locally-made products, even with absurdly low-wages. But the transportation systems are the least in need of subsidies. It is easy to allocate these costs to the users through weight-based tolls. The “weight-based” portion is important because the greatest damage to the roadbeds comes from heavy trucks. With costs allocated to the cost-causers, subsidies disappear, and the dynamics of production change.
The most immediate result of tolls would not be a success, but a failure, namely the failure of the “big-box” retailers such as Wal-Mart. The distribution model of these companies depends on the current system of subsides and would not survive without them (see http://distributism.blogspot.com/2007/10/subsidizing-wal-mart.htm).
This huge system of subsidies also imposes high transaction costs on the economy. Even hiring a nanny requires a vast amount of paperwork and the payment of employment taxes. These transaction costs work against small businesses and in favor of giant ones. The transaction costs make it more difficult for start-ups to get started, but they are a mere nuisance to big corporations. The form an entry barrier which protect big businesses from competition. The greater part of the burden of taxation falls on labor and capital, when it should fall on the rentier (see http://distributism.blogspot.com/2009/01/chapter-xv-taxes-economic-rent-and.html)
But Will it Happen?
Clearly the Obama administration is not thinking along these lines, and are unlikely to adopt any of the solutions of distributism. Does this mean that the discussion is merely theoretical with no chance of implementation? Not at all. The current system has reached its limits, and the attempts to save it will only make it worse. Distributism, in one form or another, is the wave of the future. The only question is how long and by what means will we get there. Distributists need to organize now, and to join whenever possible with similar and allied movements like Mutualism, Georgism, coop movements, and the like.
The current system has no future, and attempts to “stimulate” it will only result in an economic monster even more unstable than what we have. The “bail-outs” will only subsidize failure, and cannot long endure. There will undoubtedly be a time of great turmoil, with all sorts of solutions proposed. In such times, nearly anything can happen, including many unpleasant things. But we need to be in a position to show the nation the way forward, the only way that will work.
Read more...Sometimes Low Prices...Sometimes
Times being what they are, Christmastide has become a bargain hunt as people seek to stretch their hard-won and limited gift-giving dollars. In such circumstances, the image of the Wal-Mart “happy face” bouncing around the store and knocking down prices is particularly appealing. After all, shopping, even in good times, is about trying to get a good bargain. However, one might might ask if the prices are really all that low. They are indeed perceived to be low, but perception and reality are not always the same things. There is in fact a whole science devoted to creating the perception of low prices without having to deliver the reality.
One way to create this impression is the use of “signposts” and “blinds.” Signposts are items like milk and light-bulbs for which the average shopper is likely to know the going price. These products are often sold by the “big-box” stores below their cost. This accomplishes two things: it creates an impression that the whole store contains bargains and it puts pressure on independent retailers and helps to drive them out of business.
But signposts are only 5% of the merchandise. The rest are “blinds,” goods for which the shopper is likely to have only a vague notion of the market price. For the blinds, the buyer is likely to judge the price by the signposts and assume there is a bargain when in fact there is not. This is only one of the techniques used to divorce appearance from reality. These techniques are detailed in Stacy Mitchell's Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America's Independent Businesses.
The High Cost of Low Prices
Ms. Mitchell challenges the Wal-Mart swindle on grounds other than prices. These stores involve a high cost to our economy, to our communities, to the environment, and to the very fabric of out democracy. By concentrating retailing power in a handful of mega-corporations, we have created monopsonies. Monopsonies are just like monopolies, except that is applies to “one-buyer” rather than “one seller.” Most of those who produce products for the retail market are dependent on getting shelf-space at Wal-Mart, Costco, Lowe's, Office-Max and similar mega-retailers. This gives enormous negotiating power to the big-box stores. In fact, the discussions between the producers and these mega-retailers cannot be called “negotiations” in any real sense of that term; the power is all on one side. Hence, the big-box stores dictate to the producers; they dictate where their goods will be made, how they will be made, what price they will carry, what costs of retailing the producer will bear, and many other things besides, things that would never happen in a real negotiation, where the power between the sides was roughly equal.
The thing that the retailers most demand is that the producers off-shore their production. Wal-Mart and others maintain a list of Chinese and other foreign manufacturers that the producers are encouraged, or even required, to use. These stores have been a big force in the destruction of American manufacturing.
They have also been a big force in the destruction of American business. The stores destroy local commerce, built on a dense network of independent businesses. These businesses are part and parcel of their local communities; they participate in civic affairs, they support local projects, they buy the ads in local papers, they support the high-school football team, and enrich community life in hundreds of ways.
What About the “Free” Market
Despite all these problems, one might counter that this is simply the way capitalism works, and that no one can complain because some people have found a better business model for retailing. Alas, this argument fails on two grounds: one, the creation of monopsonies is counter to the free market, and; two, the big-box retailers are creatures of government subsidies. Concerning the first point, all free market theory depends on the “vast number of firms” assumption, the idea that no firm is powerful enough to affect prices; production (and retailing) is spread over so many firms that each one is a price-taker rather than a price-maker. But clearly, the big-box stores are price-makers, and thereby make a mockery of any coherent free-market theory.
But aside from that, the big-box stores are practically creatures of government power. Ms. Mitchell details the many subsidies they receive from cities desperate for development. These numbers are startling enough. However, the author actually ignores the bigger subsidies that these firms receive from the federal government and even foreign governments. Indeed, the big-boxes could not exist without the “freeway” system, a system which is actually a series of subsidies from the cities to the suburbs. (See Free Markets, “Free”ways and Falling Bridges.) Further, they receive huge subsidies as a result of Chinese currency manipulation (See Subsidizing Wal-Mart.)
Bad Business
It would seem that these stores are at least good business models; that is, they grow fast and make a lot of money for the investors. However, it often turns out that what is good for an investor is bad for the economy. Any business can make a lot of money by firing its workers and outsourcing production to low-wage countries. But if every producer does this, a conundrum arises: when the business fires its workers, it also fires its customers; as G. K. Chesterton points out, these are the same people, and you cannot pay a man like a pauper and expect him to spend like a prince. Now, it may seem as if we have been doing just that for the last 30 years, for while the median wage has stagnated, families are buying more “stuff” than ever.
How do we accomplish this hat trick? By two methods. The first was to put more family members to work. More and more homes became two-income households. But even that was not enough to sustain consumption. For the last 20 years, we have made up the difference between the stagnating wage and increased consumption by the extensive use of consumer credit. In other words, we have created a plastic economy, an economy built on credit cards. But this is a house of (credit) cards, and like all such houses, it is destined to collapse. That, in fact, is what we are witnessing at this very moment.
Fighting Back
The triumph of the Big-box stores may seem inevitable, but it is not. Rather, it is destined to fail, and that quickly. Our task is to decide how we will rebuild the economy along more sane and rational lines. In the meantime, these stores can be defeated. Once communities understand their real impacts, it proves to be very easy to keep them out. Ms. Mitchell recounts how many communities have defeated the great powers, and in the meantime rebuilt there own community retailing base.
The Big Box stores really are a government-sponsored swindle, but their days are numbered because the economic model that supported them was never sound to begin with. Distributists understand instinctively that such models will not work. Now the rest of the world will learn the same lesson. I advise everybody who wants to fight the power of these stores and to rebuild out shattered economy to read Ms. Mitchell's book.
Read more...Subsidizing Wal-Mart
The recent collapse of the dollar vs. the Euro has intensified the debate over whether we should have a “strong” dollar vs. a “weak” dollar. The extent of the collapse is indicated by the fact that in January, 2002, you could buy a Euro for $0.86. Today, you will pay nearly $1.43, a whopping 66% increase. Should the United States have a strong dollar or a weak one? In an economy that didn't depend on the imports, the question would not be important. But, as we are dependent on foreign oil and foreign goods, the question is of critical importance to each and every American. They may find (as I do) the question of exchange rates to be supremely confusing, not to mention boring. Nevertheless, the price of the dollar affects each and every American consumer and worker, and does so every day.
Jane Jacobs, in Cities and the Wealth of Nations: Principles of Economic Life, explains the way currency fluctuations are supposed to work:
When a nation's currency declines in value relative to the currencies of the other nations with which it trades, theoretically the very decline itself ought to help correct the nation's economy. Automatically its exports become cheaper to customer nations, hence its export sales should increase; and at the same time, its imports automatically become more expensive, and this should help its manufacturers. Theoretically, then, a declining national currency ought to work automatically like both an export subsidy and a tariff, coming into play precisely when a nation begins to run a deficit in its international balance of payments... Furthermore, this automatic export subsidy and tariff ought to remain in play precisely as long as it is needed, no longer.
In other words, currency fluctuations function as an automatic way of balancing trade, no government intervention required. No spurious debates on free trade and protectionism, no political wrangling of any sort. However, in practice this doesn't actually happen. The major reason this happens is that we don't just import and export goods, we also import and export money, and these capital flows work in the opposite direction of trade flows, thereby confusing the signal.
International imports and exports of capital work in just the opposite way. If a country has been importing more capital than it has exported (by borrowing abroad, for example), the value of its currency is automatically bolstered. Conversely, if it has exported more capital than it has been importing (by lending, making gifts, paying interest on prior foreign loans, exporting the profits of foreign-owned industries), the value of its currency is automatically depressed to that extent.
This gives governments a way to manipulate the currency of another country, if they have a mind to. They can simply lend the gullible country vast amounts of money, keeping the value high, or buy up its currency to hold in reserve. Why would any country want to do such a thing, since it would not only be very expensive, but constitute a trade war and perhaps provoke a reaction? Well, in the short term, to smooth out trading fluctuations, such manipulation does no harm. However, a country convinced that it can only grow by exports and not by raising the living standards of its own people (thereby expanding its internal market) may well elect to manipulate its trading partner's currency. Is there such a country so ignorant of basic economics that it would spend its valuable capital to shore up the currency of another country rather than invest it in its own? Yes, there is.
That country is Communist China.
Granted, they are new to this whole “market” thing, and so perhaps haven't gotten it down yet. And since they have a long history of abusing their own people, a little more “market” abuse would hardly seem to make any difference. Finally, their “success” in international markets creates a strong constituency for continuing a rather foolish policy. But this success isn't real, and it is coming at a terrible price for their own people, a price that will one day have to be paid.
The Chinese also have another way of “cheating” in the game of international trade. They can simply “peg” their currency, the Yuan, at an artificially low rate. That is, they can guarantee that no matter how strong their currency gets, they will still give the same amount of dollars from for each Yuan; they alow the Yuan to trade only in a very narrow range (about 13 or 14 cents). In effect, this is an export subsidy and an import tariff by another name.
And this brings us to the subject of Wal-Mart, the “low-price” people. Wal-Mart just happens to be Communist China's largest trading partner, but its “low prices” are not the result of either a free market or of free trade. Rather, it is the beneficiary of government manipulation of the markets. In fact, Wal-Mart is an island of corporate privilege floating on a sea of public subsidies. These subsidies and privileges come from every level of government. At the local level, they often get special zoning and tax treatment from governments desperate for development, even if such “development” means impoverishing local entrepreneurs. At the state and federal level, the whole business plan is in fact a creation of the highly subsidized “freeway” system, (see “Free Markets, Free-ways, and Falling Bridges”), without which Wal-Mart would not exist. And our own government, for political reasons, tends to keep the value of the dollar artificially high (although that policy is weakening). But the biggest subsidy comes not from our government, but from the Chinese Communists. It is a subsidy that, in the long-term, must impoverish both countries. Our manufacturing is hollowed out, while the real needs of the Chinese people are ignored.
America has nothing to fear from real free trade and truly free markets. We benefit from having strong trading partners; the rise of Japan, Europe after the devastation of war, Taiwan, Korea, Singapore, etc., makes both us and them stronger. And on a level playing field, American workers and American firms can compete. Some firms it is true, have lost out, such as the auto industry. However, in that case it took a near conspiracy of stupidity on the part of both the companies and the unions, who worked hard in favor of their short-term interests and against their own long-term good. In more normal, and less arrogant companies and unions, even a small perception of the realities is sufficient to get them to adjust their products, technology, and compensation plans to counter the foreign competition. And this benefits everybody.
American consumers believe that they get a benefit from Wal-Mart's low prices, while American workers believe that they pay a high price in jobs, dignity, security, and even national survival. So who is right? The answer is that they both are. But the costs and benefits are not symmetric. American do get lower prices, in the short-term. But only at the cost of enormous and unsupportable trade imbalances, imbalances that most, sooner or later, come out in higher prices, higher taxes, higher interest rates, and higher unemployment or “reduced”employment (e.g., replacing well-paying factory jobs with poorly-paid “service” economy jobs, like maids or hamburger flippers). The benefits are short term, the costs are devestating to the economy and to the dignity and well-being of the workers, their families, and the country.
What's to be done? The American government must inform the Chinese that they must end their artificial currency policies and let the market price prevail. At the same time, America must get its own fiscal and monetary house in order, and not depend on huge loans from foreign governments to finance its day to day operations. Naturally, this must be done prudently, over an appropriate period of time. If the Chinese Communists persist in this trade war (to call it what it is), then we should “adjust” their currency for them, by gradually raising tariffs over a three to five year period to bring the costs of Chinese products to what they should be if their currency were correctly priced. On a level playing field, Americans can compete even with subsistence wages and low-cost lead painted products. This policy would benefit the Chinese people as well, as their government would have more funds to invest in the needs of their own people, and less supporting a corrupted American regime. Of course, such a policy will not be painless. Prices at Wal-Mart will rise and the happy-face price-cutter will not be quite as happy. But the pain will be short-term, the gain will be long-lasting. Just as the fall in the dollar has increased our exports to Europe, so the rise of the Yuan both cut imports and increase exports. That's the way it's supposed to work.
To answer our original question, the dollar should be neither “strong” nor “weak”; it should be right, its priced based on actual market conditions. But neither American nor Chinese trade policy can be based, in the long-term, on simply subsidizing Wal-Mart.
OCA Calls For New Wal-Mart Boycott
This press release comes from the left-wing Organic Consumers Association (OCA), and is dated January 17th.
The OCA, in past open letters and articles, warned of how the infamous retail behemoth Wal-Mart has been selling food products labelled "organic" - but were otherwise. An ally of theirs, the Cornucopia Institute of Cornucopia, Wisconsin, linked to an January 18th article from the centrist Business Week magazine. Wal-Mart is in trouble with officials from the Department of Agriculture and the Wisconsin government for knowingly selling "organic food" that doesn't come under Federal guidelines for being organic.
Furthermore, the food doesn't come from growers in America and Canada, but is sent from Brazil and Communist China. Their standards of what constitutes "organic" is much lower than those of Washington and Ottowa.
As reported by the OCA, Wal-Mart has already lost between 2% and 8% of it's global customer base. It had to withdraw from both Germany and South Korea, though - as we reported earlier - it is trying to enter the Indian market with a major retail partner there. This news of their defrauding the public and muddying up "organic standards" will only hurt their sales and stock worth further.
As Wal-Mart has declined to answer both the OCA and Cornucopia Institute's open letters and warnings, both groups have called for a boycott of Wal-Mart and similar "big box" stores. We at the Review agree and join them in advocating such a boycott.
Distributism, on principle, is opposed to chain-stores. It supports local legislation to shrink their size and power wherever possible, as well as laws to protect and support small shops and retail co-operatives. Until such laws are in place wherever we live, we should either boycott the chain-stores for good or cut down our shopping there as much as possible.
We hope and pray the OCA-led boycott of Wal-Mart for it's deception of it's "organic foods" line will be successful. Inform your friends and neighbors and do your part to make this boycott work.
Sacramento Says No to Wal-Mart
This report, written by Terri Hardy, comes to us from the Lodi News-Sentinel of Lodi, California.
The Sacramento City Council - not known to be anything close to the anti-family secular Leftist government in San Francisco or Los Angeles - has voted without opposition to limit or outright ban "big box" type superstores
from opening up in their city. "Big box" stores like Wal-Mart, Target and such draw business away from smaller competitors, reducing competition and thus eliminating jobs. The ordinance demands surveys and studies on how such an opening of a "big box" store would affect the local economy and tax base.
This is a good step from the city council in protecting small businesses and grocery stores from monsters like Wal-Mart. No doubt the superstore behemoth will challenge it in court, but we hope and pray their challenge will fail. This is Distributism in action, fighting big business without big government stepping in to worsen the mess.
Again, congratulations to Sacramento.
Powerful Essay Against Wal-Mart
This essay was written by Silvia Ribeiro, translated into English for the far-leftist magazine Z-Mag, and put up on the controversial news website Rense.com.
Other major chain-stores are just as bad, but Wal-Mart is a colossus among them. Let this essay be further encouragement among us to change both laws and consumer spending patterns to bring down this colossus for good...no matter how long it takes.
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