"There is always a philosophy for lack of courage."—Albert Camus

Saturday, October 15, 2005

Movement Economics

Our new, courteous, welcome, and breath-of-fresh-air correspondent Connie Deady writes:

Perhaps maybe the face of small business is changing. I'm a small consulting business (me and hubby). But where I live, lots of small retail businesses have had to close because they can't financially compete with large chains. Maybe it's not bad, but it is changing from ownership to worker.

Personally, I'd love to see more Republican support for small businesses.


Well, I think the GOP support for business in general obscures its support for small business, which employs about half of Americans, if I recall. Big business is actually closer to Hobbes' Leviathan, and elicits support from both parties alike as an easy mark to tap for political cash. (Republicans like it because it's business, Democrats like it because it's big and therefore more easily centralized and controlled. But it's mostly about the cash, and its contributions are self-interestedly fair and balanced.)

If I may imprudently help the other side, a Democrat push for "Buy American" (the current [or any] administration could hardly start an ideological trade war with China) would have great resonance in this here USA. Breaking our addiction to cheap but largely crap consumer goods from foreign shores would make economic sense as well as support our fellow Americans of the working class.

Not much downside, except for screwing with Wal-Mart, where America tends to go on Sundays after church, if not instead of...

29 comments:

Jay D. Homnick said...

Tom, in the mid-90s, when the Republicans were capturing and consolidating the lead in Congress, they used to tout their small-business initiatives heavily. But Connie may have a point that we are hearing less of that lately.

And if I may be permitted a small Spoonerism, more often than not Wal-Mart is a mall wart.

Matt Huisman said...

"If I may imprudently help the other side, a Democrat push for "Buy American" (the current [or any] administration could hardly start an ideological trade war with China) would have great resonance in this here USA."

And we'd all nod our heads as we stand in the checkout line at Target instead of Wal-Mart. Whoopee.

"Not much downside, except for screwing with Wal-Mart.."

Unless you're poor and have to pay higher prices for all of your necessities, and travel farther and more often to get them. Of course, at least we'd all feel good knowing that college graduate independent retail store owners have their six-figure incomes protected, and that autoworkers averaging absentee rates around 20% with ridiculous pension schemes are making our products rather than, gulp, one of those foreigners.

connie deady said...

Thanks for the kind words Tom.

Of course the rub is that we all buy Walmart or Target because they are cheap (why buy a blender or a toaster or lightblubs at an expensive price). I also admit to stopping at Sheets on my drives into town for gas and coffee and a breakfast sandwich because the gas is cheap and the variety of coffee, and creamers is the best.

However, despite the cheaper prices, we try to get our computer stuff from a local computer store because of service. Have you ever tried to get an electronic item fixed by Circuit City? Contact the manufacturer.

Maybe it isn't really a concern, but the strength of America has always been our initiative and I still believe small business is our backbone. I'd at least like to see politicians talking about the issue of whether it is declining.

Plus as a small business person, it's really hard to put aside those quarterly payments. Most goes to social security. I doubt I'd have the fortitude to actually invest the money myself. But we pay for our own health insurance, retirement, etc. It would be nice to know that anyone out there cared.

I also have to admit that I don't understand matt huisman's point.

Kathy Hutchins said...

Breaking our addiction to cheap but largely crap consumer goods from foreign shores would make economic sense as well as support our fellow Americans of the working class.

Since I know Tom, I'm not going to jump to conclusions about this statement. But I have to say that, had it come from a stranger, I'd be on a tear about snotty West Coast brie eaters and their contempt for the economic realities of low rent life in flyover country. And speaking of "over" -- "Buy American" is a slogan for persuading ordinary people to overpay for goods while overlooking their defects. Ford and GM can bleat Buy American all they want; after the way their shoddy products disintegrated before my very eyes the only American car I'd buy is Jeep, and it's really German now anyway.

Here is more on the experience of one sad lady in search of a cheap plastic bucket in the land of Big Box Hatred.

Tom Van Dyke said...

Hehe, Kathy. I do not doubt that you can't buy a bucket in Virginia. Most of ours here in California are snuck in illegally across the border and sold at freeway exits along with flowers, oranges, and peanuts.

I was thinking more of all those dozens of broken Chinese toys in your kids' room, not our marginally useful union-built US automobiles. Surely we can make crap toys too.

Nor did I think the Democrats would actually say "Buy American" and actually mean it. It just seems like some good political coin. American brie? Hah!

Love,
Tom
Proud Double-Honda Owner
Since 1991

Matt Huisman said...

"I also have to admit that I don't understand matt huisman's point."

All I'm saying is that 'Buy American' is usually code for 'Give me more money, even though I don't deserve it.' And not only that, but the notion that we all should 'Buy American' disproportionately affects the poor. If you're poor, shopping at Wal-Mart allows you to buy a lot more stuff than you would be able to at mom-and-pop shops. Your life, materially speaking, is significantly better because of the Wal-Mart-ization of America.

connie deady said...

You obviously don't live in a strong union area. :)

I remember last year some large corporation, whose name I am drawing a blank about, wanted to put a business/plant? in our area. Basically it was loudly protested, even though the coal companies leaving all those years ago have cost the loss of a lot of jobs.

However, the reason it was protested was because they were known for recruiting Hispanic employees because they were willing to accept the lower wages, and the lovely locals were very much opposed into a recruiting a large minority population into a very white ethnic area.

Issues are very complex sometimes.

Tlaloc said...

"If you're poor, shopping at Wal-Mart allows you to buy a lot more stuff than you would be able to at mom-and-pop shops. Your life, materially speaking, is significantly better because of the Wal-Mart-ization of America."

I have to disagree. Sure at first it may seem nce that you can pay less for the same goods. The problem is that of course that isn't Walmart's only affect. For instance there's the issue of how much of the money you spend stays in your local area. By siphoning funds out of local economies back to it's corporate headquarters Walmart is hurting those same local economies. Additionally when said poor person looks to get a job and his/her only option is Walmart they are drastically worse off than with smaller more accountable local employers.

Matt Huisman said...

First of all, the 'smaller more accountable local employers' line is a bit of a myth. The local butcher or clothing store is not paying anyone exorbitant sums of money.

Second, Wal-Mart's success is largely due to their abilities in purchasing and logistics, not lower labor rates. Should we outlaw all mass produced goods because they cheat by using superior systems and processes? How do you differentiate between what they do and say McDonald's or IKEA?

As to whether or not Wal-Mart siphons off funds from local economies, isn't that a normal part of trade? Presumably each micro-economy has the ability (and should actively seek) to sell it's wares outside its borders.

Is there something specific to Wal-Mart that you don't like or is it capitalism in general?

Tlaloc said...

"First of all, the 'smaller more accountable local employers' line is a bit of a myth. The local butcher or clothing store is not paying anyone exorbitant sums of money."

As someone who has worked both for small local businesses and for giant conglomerates I can assure it's not at all a myth. Smaller local companies don't have the resources to ignore worker issues the way that Behemoths like walmart can. Because the owners are usually directly involved the businesses also tend to be much more humane.



"Second, Wal-Mart's success is largely due to their abilities in purchasing and logistics, not lower labor rates."

Perhaps but that doesn't change the fact that their compensation is kept awfully low.



"Should we outlaw all mass produced goods because they cheat by using superior systems and processes?"

Walmart doesn't manufacture anything, they are a sales outlet. You can sell the exact same good through a local outlet, and it's healthier for the local economy. But since you raise the issue, locally produced goods are often a better purchase precisely because they don't divert local funds to distant manufacturers. Of course in some industries its difficult to do so (heavy industries require such large infrastructure costs as to make having local plants impractical). Still when you can buy local you are generally better off doing so.



"How do you differentiate between what they do and say McDonald's or IKEA?"

I don't think I do. McDonalds is also a terrible company as far as stripping communities of wealth while returning only barely compensated unfulfilling jobs in return. IKEA I'm not very familiar with.


"As to whether or not Wal-Mart siphons off funds from local economies, isn't that a normal part of trade? Presumably each micro-economy has the ability (and should actively seek) to sell it's wares outside its borders."

Except that such an ideal system is destroyed by companies like...um...Walmart which seek to drive all rivals out of business and operate as a monopoly venture. It doesn't take much knowledge of business and geography to realize that the US can only support a few monopolistic businesses and that that number is far lower than the number of towns and cities across the US.



"Is there something specific to Wal-Mart that you don't like or is it capitalism in general?"

There are many things about walmart I don't like. They are a predatory business that uses their huge size as a weapon to attack local businesses and drive them into bankruptcy. At the same time they offer little to nothing back to the communities they feed off of. Not coincidentally this is the same thing I don't like about companies like Microsoft and Starbucks.
As for capitalism, well lets say that if it worked the way it's proponents claimed I'd be all for it but it doesn't, never has, and never will. Much like communism it's a nice idea that fails in execution. Capitalism has a place in society, I believe, and that place is the production and sale of luxury items. In any other area it is an incompetent and irresponsible way to run things.

Matt Huisman said...

"Perhaps but that doesn't change the fact that their compensation is kept awfully low."

Their managerial jobs pay reasonably well, but they don't pay a premium for low-skill labor. Should they?

Many small store-fronts pay more for their staff because they ask them to double as managers when they're not around. Or looking at it another way, they pay managers to sweep the floor because they're unable to figure out how to staff their operation appropriately. Wal-Mart has figured out how to divide the labor, and pay accordingly.

"Walmart doesn't manufacture anything, they are a sales outlet. You can sell the exact same good through a local outlet, and it's healthier for the local economy."

Not exactly. The local outlet can't get their hands on as much as Wal-Mart, and will certainly pay more for it.

"...locally produced goods are often a better purchase precisely because they don't divert local funds to distant manufacturers."

But what is the definition of locally produced, and who gets to decide? We both know that adherence to this logic will lead to fewer choices of lower quality for more money.

And what if the locals just aren't very good at making widgets? Say I live in Indiana, and I'm looking for a bottle of wine...do I really have to buy the stuff from my local Indiana wine grower?

"At the same time they offer little to nothing back to the communities they feed off of. Not coincidentally this is the same thing I don't like about companies like Microsoft and Starbucks."

How does Starbucks use its size to destroy local business? They've helped raise prices. And Microsoft enables businesses around the world to do incredible things that they otherwise couldn't without them. Their products are what they give back to the communities they enter.

"Capitalism has a place in society, I believe, and that place is the production and sale of luxury items. In any other area it is an incompetent and irresponsible way to run things."

I'll bet you that I could walk through your home/office right now and make the case that about 95% of what you have is a luxury item...so I guess I'll agree.

Certainly capitalism has its flaws, but so far, it is the least worst system I've seen.

Tlaloc said...

"Their managerial jobs pay reasonably well, but they don't pay a premium for low-skill labor. Should they?"

In adition to low wages they also provide lousy benefits. There's absolutely no reason for them to given walmart's obscene profit of about a billion dollars per month. Are you telling me you don't see anything wrong with a company using it's large size to destroy competitors and then provide substandard wages and benefits while still making fat cash?



"Many small store-fronts pay more for their staff because they ask them to double as managers when they're not around."

Sometimes sure. And? In small stores the owners are often face to face with employees. That makes a huge difference in whether they decide to treat them like human beings or not.



"Not exactly. The local outlet can't get their hands on as much as Wal-Mart, and will certainly pay more for it."

Sure. Again...and? So they may not have a billion dollars a month of profit. Boo hoo.



"But what is the definition of locally produced, and who gets to decide?"

It's easy to decide, you compare two products, one comes from the next town over, the other comes from Taiwan. Distance isn't a really complicated issue in general.



"We both know that adherence to this logic will lead to fewer choices of lower quality for more money."

Possibly, but it'll also lead to a stronger local economy and hence be better for everyone in the local community. The only losers are non-local corporations.



"And what if the locals just aren't very good at making widgets? Say I live in Indiana, and I'm looking for a bottle of wine...do I really have to buy the stuff from my local Indiana wine grower?"

Of course not, but if you can buy a reasonably comparable bottle locally you are better off doing so. And more to the point if a large corporation tries to squeeze your local wine producers out while offering only slightly cheaper prices you are best off not patronizing them.



"How does Starbucks use its size to destroy local business?"

Are you kidding? Starbucks is famous for putting stores down right next to locally owned coffee shops. Then purely due to the fact that they are a large company and can absorb a loss much easier they can push their competitor out of business. And it gets worse. Sometimes Starbucks will buy out the leases of successful coffee shops and evict them.
Read up



"And Microsoft enables businesses around the world to do incredible things that they otherwise couldn't without them."

The only reason those businesses couldn't do them without microsoft is because microsoft works so hard to kill any competitors with illegal monopolistic activities. Besides it isn't even true anymore. Businesses could (and some do) take advantage of open source operating systems and software which are immune to Microsofts bullying purely due to their not being a business in the first place. Microsoft has always been a home of mediocre (at best) programming. What it has done very well is to attack it's rivals in every underhanded way imaginable. In short it has subverted the supposed invisible hand that normally would have crushed microsoft's business under the weight of it's own mediocrity.


"I'll bet you that I could walk through your home/office right now and make the case that about 95% of what you have is a luxury item...so I guess I'll agree."

A lot of it certainly is. Computers, DVDs, books. Here are some that aren't: food, water, power, communications. Capitalism should never be allowed near any of those.



"Certainly capitalism has its flaws, but so far, it is the least worst system I've seen."

And communists say the same thing about their system. Lets stop settling for a flawed system and work on getting one that actually does work.

The Classic Liberal Anonymous said...

Tlaloc...you are basically saying that buying locally (and paying more) will lead to a stronger local economy.

I've heard this rhetoric hundreds of times, but never seen a valid explanation.

Exactly how does having less disposable income help the local economy?

In fact, if I can save 10-20% at WalMart (and my wife certainly does when she shops there) I can spend that saved money on, say, dinner at a local restaurant, tickets to the local theater, etc...

Tlaloc said...

"Tlaloc...you are basically saying that buying locally (and paying more) will lead to a stronger local economy. I've heard this rhetoric hundreds of times, but never seen a valid explanation."

Fair enough. Think about it in ecological terms. Ecology is essentially the study of how energy moves through biological systems. Economics is much the same with the idea that you can trace money or value instead of energy and find that many of the same patterns exist.

Your local economy then is say a small tidal pool. It's fairly isolated from the larger economic world around them but not totally cut off. There is some amount of give and take. The ecology of the pool (the flow of energy between organisms) has developed in response to this situation.

Now along comes a raccoon. A creature totally alien to your little tidal pool. The raccoon can reach right in and pull out various tidal pool inhabitants to eat. And it does so. But the raccoon doesn't defecate or die (and decompose) in your little pool. As a result the intervention of the raccoon is a net loss of energy for the tidal ecology. It eats tidal pool organisms and hence pulls the energy invested in them out of the pool and then returns to it's own habitat in which to use that energy and pass it on to other organisms.

Similarly when Walmart opens up a store and puts other businesses into bankruptcy it becomes a conduit by which money in the local economy gets funneled out and away. No matter how efficient walmart might ever be it's impossible for them to run a store that doesn't pull some amount of money out of the local economy because of course these stores have to support the management levels of the business which reside somewhere else.



" In fact, if I can save 10-20% at WalMart (and my wife certainly does when she shops there) I can spend that saved money on, say, dinner at a local restaurant, tickets to the local theater, etc..."

So lets say you have $100 to spend a month. Before Walmart came to town you spent all $100 on groceries at the local store. The local store naturally spent that money on wages, buying local produce, and so on. Lets neglect taxes so we can say that all of that $100 stayed in your local economy.
Now walmart moves in. Now you spend $85 to get the same stuff and spend the other $15 on the local cinema. Great, except that walmart peels off a good $20 of the $85 you gave it and ships it off to peoria or wherever they are located. Then they spend the other $65 on slaries and buying from non-local producers (there goes another $20). SO at the end of the month your local economy which would have kept all of the hundred you normally spent now keeps only $60. The result is that the local economy becomes depressed.

Here's more:
"Two years ago Mitchell set out to quantify the long-held assumption that buying from independent businesses helps local economies, and that chain stores drain money from communities in which they do business.

Eight small businesses in mid-coast Maine cooperated with Mitchell by providing her with detailed information about their finances. She used public information to estimate the operation of a typical big-box store such as Wal-Mart or Target. "What we found is that locally owned businesses recycle a much bigger share of the dollars that they take in back into the local economy. Probably the most significant piece is that locally owned businesses buy goods and services from other local businesses," she said. "So they get their printing done locally, they hire a local accountant. So when you spend a dollar at a locally owned business, that not only goes to support that particular retailer, but it sends this ripple of economic benefits through your community. With a typical sort of big-box national chain, very little of the dollars that they take in actually stay in the local economy. "

Mitchell determined that for every $100 spent locally, nearly $54 ended up back in the state of Maine's economy. She says most of it was spent in the county where the store was located.

She estimates for every $100 spent at a chain store, such as Target or Wal-Mart, all but about $14 flows out of state, destined for far-off corporate headquarters and various suppliers.

Similar surveys conducted in Austin, Texas and in an area of Chicago reached similar conclusions. Most of the money chain stores collect leaves the community, but nearly half of local, independently-owned store revenue is spent again locally."
Source

Matt Huisman said...

"In adition to low wages they also provide lousy benefits. There's absolutely no reason for them to given walmart's obscene profit of about a billion dollars per month."

Well, not quite. I'm sure it's not a good enough reason for you, but their shareholders are hoping that the company continues to grow. In order to do that they need to reinvest in the business. Wal-Mart's net cash flow last year was less than $300k. Looks like their employees will still be forced(?) to work for (gasp) market-based salaries.

"Possibly, but it'll also lead to a stronger local economy and hence be better for everyone in the local community. The only losers are non-local corporations."

Except for the fact that I now have to drink wine made in Gary, IN...and surf the net on computers manufactured in Merrillville, IN...and maybe I should only buy oil pumped within 10 miles...or is it 20...maybe I'll just call you when I'm not sure.

"And more to the point if a large corporation tries to squeeze your local wine producers out while offering only slightly cheaper prices you are best off not patronizing them."

Maybe. But is the reverse true? Should our local producers not sell anything outside of our area? Of course, it's not economical for me to make my widgets unless I build a plant large enough to sell them to nationally...but that's not fair to other would be widget-economies...I guess I just won't make widgets...and of course, I won't need to hire any locals.

You keep viewing your local community as something to be protected. Certainly that is a noble goal, but is it always right? Don't some things occaisionally need to be pruned (or die)? I'm not saying it's always fun or easy, but death is life's change agent...it's necessary. Markets help people make good decisions on where to direct their efforts, and where to cut their losses.

We've existed with greedy corporations for a long time now, and it seems hard to believe that things would be better we had never had them.

Tlaloc said...

"Wal-Mart's net cash flow last year was less than $300k. Looks like their employees will still be forced(?) to work for (gasp) market-based salaries."

Matt you aren't paying attention. Wal-mart's employees AREN'T making a market based wage, they are making a substandard wage compared to the market, that's precisely why I say Wal-mart's benefits and pay scale suck. The reason Wal-mart can do that is because they use their large size to strangle their competitors and thus reduce and competitive pressure on their company to pay a market wage and provide market benefits.



" Except for the fact that I now have to drink wine made in Gary, IN...and surf the net on computers manufactured in Merrillville, IN...and maybe I should only buy oil pumped within 10 miles...or is it 20...maybe I'll just call you when I'm not sure."

You've retreated to absurdity because you know you've lost your case. I explicitly said that you should buy local assuming you can get a reasonably comparable product even if it costs somewhat more. I also explicitly said that heavy industry goods (including the semiconductors for the computer) are probably going to be have to be purchased from farther away because of the infrastucture costs of the plant. And finally I also explicitly already answered your bizarre contention that you can't discern between a product made closer to you and one made farther away. If you want to try a reductio ad absurdum ploy don't be surprised when I shove back down your throat.



"Maybe. But is the reverse true? Should our local producers not sell anything outside of our area?"

No I didn't say that. It's fine to try and sell outside of the local area, afterall there may well be people who cannot get locally a comparable good. There's nothing predatory about that. The issue is that Wal-mart, Starbucks, and Microsoft go to great lengths to destroy those local sources of comparable goods. That violates the most basic tenet of capitalism ("competition is desirable") and yet here you are as a nominal capitalist defending it. Curious.



"Don't some things occaisionally need to be pruned (or die)? I'm not saying it's always fun or easy, but death is life's change agent...it's necessary."

If I was arguing that tax dollars should be used to keep failing local businesses afloat you'd have a point. But I'm not. What I'm arguing is that patronizing predatory foreign businesses will inevitably hurt you by hurting the local economy in which you live.

In other words if Abe's Hardware store goes out of business because it was poorly run or because Stan's hardware market downtown is simply better that's fine. But if it goes out of business because Home Depot puts a mega store across the street, pays their workers a substandard wage, and buys out Abe's lease and evicts him...well I think you'd have to admit that's just a tad bit different.



"We've existed with greedy corporations for a long time now, and it seems hard to believe that things would be better we had never had them."

You mean other than a cleaner environment, sensible energy production, workable mass transit, the lack of conspicuous consumption, healthier self image, better education, better criminal justice system, better health and better health care? That's just a small list of the things that would have been infinitely better had business never been allowed to run wild.

James Elliott said...

Are you kidding? Starbucks is famous for putting stores down right next to locally owned coffee shops. Then purely due to the fact that they are a large company and can absorb a loss much easier they can push their competitor out of business. And it gets worse. Sometimes Starbucks will buy out the leases of successful coffee shops and evict them.
Read up


Macho Taco has been doing the same thing to the best family-run Mexican restaurants in downtown San Jose. Bastards. Bring back The Iguana!

The Classic Liberal Anonymous said...

"Matt you aren't paying attention. Wal-mart's employees AREN'T making a market based wage, they are making a substandard wage compared to the market, that's precisely why I say Wal-mart's benefits and pay scale suck"


Hmmm ... according to Tlaloc, Joe Schmo has a choice between working at job A and getting paid X or working at WalMart getting paid Y, where Y < X.

Are you suggesting that if Joe chooses to work at WalMart that he is making the wrong decision?

Tlaloc said...

"Hmmm ... according to Tlaloc, Joe Schmo has a choice between working at job A and getting paid X or working at WalMart getting paid Y, where Y < X."

No matt what I'm saying is that Joe Schmo has a choice of working at the local store making X. Then a year later Wal-mart has moved in and bankrupted the local store through predatory business practices. Now Joe only has the choice of working for Walmart who pays Y. According to market research (including by the wall street journal that uber-lefty rag of capitalism bashing) walmart pays a wage that is less than market for it's field. In other words Y < X.

Why are you pretending that this is a difficult concept?

Matt Huisman said...

"Matt you aren't paying attention. Wal-mart's employees AREN'T making a market based wage, they are making a substandard wage compared to the market, that's precisely why I say Wal-mart's benefits and pay scale suck."

Wal-Mart figured out that you don't need to hire full-time college graduates to push boxes, and that there is sufficient part-time labor available to staff their stores. That pushing boxes full-time for a living, just like many jobs before it, has turned out not to be a lucrative career is not Wal-Mart's fault, and it's time for people to set their sights on other things.

And this notion that Wal-Mart somehow magically creates a depressed labor market prior to their arrival doesn't make any sense either. Do some businesses close after Wal-Mart arrives, absolutely. But the good ones adapt and remain successful.

"In other words if Abe's Hardware store goes out of business because it was poorly run or because Stan's hardware market downtown is simply better that's fine. But if it goes out of business because Home Depot puts a mega store across the street, pays their workers a substandard wage, and buys out Abe's lease and evicts him...well I think you'd have to admit that's just a tad bit different."

I'm with you on the lease buy-out (assuming the worst - I don't disagree that there are tactics that should be outlawed), but not on the others. Does Abe's Hardware get squatter's rights and no one is allowed on his turf? If I run an law firm and pay my staff lawyers $100,000/yr and someone else comes along and pays theirs $60,000/yr and uses para-legals and does better legal work, do I get to complain that they're using predatory tactics?

"What I'm arguing is that patronizing predatory foreign businesses will inevitably hurt you by hurting the local economy in which you live."

I understand you're point, and agree that their are risks and consequences in ignoring it. However, I believe history has shown us that competitive pressure does a very good job of encouraging the necessary changes that we all need to make to be able to thrive in this world. I also believe that history has shown that we are up to the challenge, and that the changes we've made have been to our benefit.

"That's just a small list of the things that would have been infinitely better had business never been allowed to run wild."

There's always room for improvement, but I don't see many other utopias out there either.

Matt Huisman said...

"Why are you pretending that this is a difficult concept?"

You are saying that Wal-Mart creates an environment where people HAVE to accept lower paying jobs. I'm saying that Wal-Mart has redefined the jobs, and is finding workers willing to accept lower wages than those under the previous paradigm.

In addition, I'm saying that its delusional to believe that 'box pusher' is a lucrative full-time career in retail, and that long-term people are better off accepting that reality and moving on.

I understand your point that this poses a risk to the local community, but I'm optimistic that we'll be able to overcome the short-run changes and be better off long-term. In the end, excessive protectionism only leads to a harder fall once the reality of the situation kicks in.

Tlaloc said...

"Wal-Mart figured out that you don't need to hire full-time college graduates to push boxes, and that there is sufficient part-time labor available to staff their stores."

For someone who is pro-capitalism you have surprising little faith in markets. Given that Wal-mart pays below market average you are saying that of the thousands of businesses involved in this field only Wal-mart figured out they didn't have to hire college graduates. Sure Matt, sure.



"And this notion that Wal-Mart somehow magically creates a depressed labor market prior to their arrival doesn't make any sense either. Do some businesses close after Wal-Mart arrives, absolutely. But the good ones adapt and remain successful."

If you want to ignore the studies of the matter including by pro-business outlets that say your intuition of the matter is faulty there's not much I can do to change your mind.



"Does Abe's Hardware get squatter's rights and no one is allowed on his turf?"

If the only reason a competitor can afford to compete is because it is a giant company that can afford to take a loss long enough to price war the small guy out of business then that is fundamentally anti-capitalism. Again as a supposedly pro-capitalism guy you should be against this. If on the other hand a local store opens up that simply works better that's an entirely different matter. It's about using a bloated companies power to practice predatory business practices which end up hurting the targetted community.



"However, I believe history has shown us that competitive pressure does a very good job of encouraging the necessary changes that we all need to make to be able to thrive in this world."

On the contrary history definitively shows us that without a lot of regulation and control these supposedly free markets quickly become dominated by monopolistic ventures or price fixing schemes among supposed competitors.
Microsoft
US steel
Standard Oil
Ma Bell
and so on...
This is just another place where economic theory fails to accurately predict real world eventualities.



"There's always room for improvement, but I don't see many other utopias out there either."

Certainly but under the rule of business the world is quickly sliding toward a dystopian future. I mean really how much worse a job could any other system do? In what important way has our domination by the mentality of the bean counter really paid off? Has it helped science? No, in fact it's retarded scienctific progress by only paying for science that turns a profit. Has it advanced art? No because only mass produced crap makes money and again only art that makes money gets funded. Has it led to a rational and reasonable system of government? No because business is founded on the most unrational of concepts: that consumption is always good and needed. The only area in which you might argue business has done better than any other system is the field of luxuries. Neat. But like Miers resume it's not nearly good enough.

Tlaloc said...

"You are saying that Wal-Mart creates an environment where people HAVE to accept lower paying jobs."

To do the same job yes they have to take a lower wage, it's not just me saying this, it's also the economic studies on the matter.



"In addition, I'm saying that its delusional to believe that 'box pusher' is a lucrative full-time career in retail, and that long-term people are better off accepting that reality and moving on."

Whether it's long term or not is irrelevent. Other companies pay more and give better benefits to the box pushers. Wal-mart doesn't.

Matt Huisman said...

"For someone who is pro-capitalism you have surprising little faith in markets. Given that Wal-mart pays below market average you are saying that of the thousands of businesses involved in this field only Wal-mart figured out they didn't have to hire college graduates. Sure Matt, sure."

Wal-Mart was among the first to use part-time labor on such a wide scale. Now they are widely copied in the big-box world. When compared to other big-box outlets or other part-time service labor, their pay rates are very similar. If you want to compare them with teamsters or hardware store owners sons or elevator operators or some other category from the past, I'm sure they pay less.

"If the only reason a competitor can afford to compete is because it is a giant company that can afford to take a loss long enough to price war the small guy out of business then that is fundamentally anti-capitalism."

Wal-Mart doesn't need to take losses, their prices are already low enough. Starbucks moves in across the street from you and charges twice as much (let's assume that there is at least one Starbucks that entered a market without a predatory lease scheme).

"On the contrary history definitively shows us that without a lot of regulation and control these supposedly free markets quickly become dominated by monopolistic ventures or price fixing schemes among supposed competitors."

Every system requires a lot of regulation and control...ours provides the most freedom/opportunity. Monopolies are an issue, and I could be convinced that more should be done here, but they are not the inevitable fate of capitalism.

"Certainly but under the rule of business the world is quickly sliding toward a dystopian future. I mean really how much worse a job could any other system do?"

Let's see...we could stand in bread lines all day...or put our name in for the car lottery...or, well, you get the idea.

Tlaloc said...

"Wal-Mart was among the first to use part-time labor on such a wide scale. Now they are widely copied in the big-box world. When compared to other big-box outlets or other part-time service labor, their pay rates are very similar. If you want to compare them with teamsters or hardware store owners sons or elevator operators or some other category from the past, I'm sure they pay less."

I'm sorry Matt but that simply isn't the case. I've seen the walmart benefits compared both to the US average AND to the average for their business type and in both cases Walmart is below average.



"Starbucks moves in across the street from you and charges twice as much (let's assume that there is at least one Starbucks that entered a market without a predatory lease scheme)."

I'm not following you here. I think you left out something.



"Monopolies are an issue, and I could be convinced that more should be done here, but they are not the inevitable fate of capitalism."

They are the inevitable fate of free market capitalism. You know, the kind that people like the Cato Institute rah-rah for. The very fact that Capitalism has to have severe reguklation in order to function at all is an obvious indicator that it's a very poor system. Rather than based on negative feedback loops like every stable system it is based on positive feedback loops, and hence immediately runs out of control when left alone.



"Let's see...we could stand in bread lines all day...or put our name in for the car lottery...or, well, you get the idea."

The problem though is that these examples of the failings of communism are frm when communism was trying to emulate capitalism. The Soviet Union wanted to match our disgusting display of conspicuous consumption. And they failed miserably. But more important than the failure is the realization that the goal was wrong in the first place.

Matt Huisman said...

"Starbucks moves in across the street from you and charges twice as much."

This was in response to your comment regarding predatory pricing techniques. I'm saying that neither company 'outlasts' the competition with prices below what they normally charge. Wal-Mart's prices are not any lower on Day 1 than they are on Day 1,000 (low prices is what they do). Starbucks doesn't even bother to compete on price, so I don't see how they can be cited as a predatory pricer.

"The very fact that Capitalism has to have severe reguklation in order to function at all is an obvious indicator that it's a very poor system."

Don't all economic systems require severe regulation? I may not be looking at this the way you do, but socialism/communism seem like extremely regulated systems.

"Rather than based on negative feedback loops like every stable system it is based on positive feedback loops, and hence immediately runs out of control when left alone."

I guess my answer depends on how much you think our system uses external controls. I could say that we should have expected more frequent and more severe crashes if we operated in a truly positive feedback loop system, but I suppose you would counter that by saying it is heavily controlled.

If we left capitalism alone, you say that we would see monopoly as the end result for all non-luxury items (because the strong get stronger and exploit the weak). I might agree with that, except that my definition of luxury items is probably a LOT broader than yours (for example, In-and-Out Burgers will never be destroyed by McDonalds').

"The Soviet Union wanted to match our disgusting display of conspicuous consumption. And they failed miserably."

Conspicuous consumption of bread? You'd think they'd have been able to get that part right.

"But more important than the failure is the realization that the goal was wrong in the first place."

But this is where your solutions seem to get really tricky. What should the goal be and who should decide?

Maybe I'm not understanding what this place of yours would look like, but my guess is that it would rely on each person to do their share so that we can all prosper. Except that you won't always feel like me and my friends are living up to our end of the bargain. (And how would we determine that anyway?) So what happens then? You either migrate to a form of capitalism (income disparity and all) or one of us learns how to oppress the other.

Tlaloc said...

"This was in response to your comment regarding predatory pricing techniques. I'm saying that neither company 'outlasts' the competition with prices below what they normally charge."

Perhaps predatory pricing is the wrong term. Lets put it this way: Starbucks, or wal-mart, can roll into town, sell for the same or slightly lower pirce by virtue of the fact that they are buying in such huge bulk amounts that they can get the same or nearly the same goods at lower cost. This puts a huge price-to-cost burden on the small town business. Now you might say that Wal-mart is therefore more efficient except that efficiency has nothing to do with it, it's purely a factor of the size of the buyer, and in order to be able to sell in the quantities that make buying in bulk quantities worthwhile they have to put all the local competitin out of business (which of course they do). Furthermore in order to get the quantities sufficient to get bulk discounts they are far more likely to e buying from farther away producers which exacerbates the issue of money getting siphoned from the local economy.



"Don't all economic systems require severe regulation? I may not be looking at this the way you do, but socialism/communism seem like extremely regulated systems."

True but Capitalism is founded on the concept that it DOESN'T require regulation. That fundamental tenet of capitalism is explicitly wrong. The invisible hand is non-existent or far too atrophied to exert the control economists claim it will.



"Conspicuous consumption of bread? You'd think they'd have been able to get that part right."

No but in trying to match our military spending, our space spending, our luxury spending and so on they compromised even their ability to provide bread. Again let me point out that I'm not great fan of communism, I believe it's another system that sounds fine and works poorly.



"But this is where your solutions seem to get really tricky. What should the goal be and who should decide?"

I think the goal has to be that everyone gets what they need, they can earn what they want by working for it. In other words provision of human needs to all citizens and allocation by regulated capitalism of luxury items.

The Liberal Anonymous said...

In-and-Out Burgers will never be destroyed by McDonalds

You don't think so? McDonalds is the nation's largest buyer of potatos. Maybe they'd just tell the potato produces that they would lose their contracts if they sold potatos to In-N-Out. In an unregulated market, I'm sure that's exactly what they'd do.

The goal of every business is to shut its competitors down. That's how you get ahead. That's a main motivating force behind every corporation.

The Liberal Anonymous said...

And yes, I know. No Dan Quail jokes, please.