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Source link: http://archive.mises.org/7659/class-war-and-wal-mart/

Class War and Wal-Mart

January 16, 2008 by

The general bias against Wal-Mart extends far deeper than any generic bias against capitalism or against Wal-Mart’s success. The people who hate Wal-Mart seem to have few scruples about shopping at Bed, Bath & Beyond or Target. Even if Target enjoyed a market share similar to that of Wal-Mart, it’s difficult to imagine the same culturally based disdain being directed with nearly as much passion at Target as has been the case for Wal-Mart.

Wal-Mart has long served its low-income customers well, and it has improved the lives of many by making food, toys, tools, and clothing more affordable for millions. Being hated by the wealthy and powerful is perhaps the high cost of serving those with low incomes, and Wal-Mart will no doubt continue to encounter resistance from those who don’t need its services for some time to come. FULL ARTICLE

{ 69 comments }

Jason January 16, 2008 at 8:46 am

I certainly noticed the change in marketing. I work for Walmart part time, to earn a few extra dollars. I noticed when we did away with our vests and remodeled our stores. I hate the fact, that when a customer comes in to our store, they cannot tell a manager from a regular employee without asking. I hate the new flash style, that does not reflect the thrift of our customers. Also, customers constantly complain about the loss of lay away. I certainly understand, that walmart is trying to survive, but I hate to see there hand being forced. We still have some of the lowest prices around, but I do not know how long that will last.

I like the poor. January 16, 2008 at 8:55 am

I like the poor. I want them to do the following:
1. Purchase the products they want at the lowest possible prices.
2. Stop having to fund retirements of wealthy Americans and use that money to fund their own. In other words kill the biggest theft of from poor people in the history of the world: Social Security!!!!
3. Stop the welfare and warfare state that steals their money through inflation.
4. End eminent domain, especially the subset that steals property and does not use it for PUBLIC use.

On the other hand the academic elite, country club Republicans and progressives hate the poor. They do exactly the opposite to them:
1. They want them to purchase goods made where they want at prices they determine.
2. They force poor people to pay social security and get low returns on their money.
3. They initiate wars and expand social programs for the wealthy and steal the money through inflation.
4. They use eminent domain to steal property for any project no matter who receives the benefits.

Richard January 16, 2008 at 10:02 am

Attn: “I like the poor”

Read my essay, “The Poor,” and read my essays about the DARK ASPECTS of capitalism in the second link:

The Poor
http://povertygroups.blogspot.com/

Corporate America: What Went Wrong?
http://corporateamericawhatwentwrong.blogspot.com/

David Spellman January 16, 2008 at 10:58 am

I like I like the Poor’s comments. I read the articles cited by Richard. While Richard makes some interesting points, I don’t agree with the underlying thesis the “White Culture is the Right Culture.” It is true that there are class, culture, and race conflicts, but these are an outgrowth of political competition, not economic competition.

In a truly free society with unfettered economic interactions, there is no reason to believe that all people could generally get along and prosper. Saying that America needs a White culture to be stable and successful is a non sequitur when you appeal to a genetic basis for cultural identity.

Basically, your arguments sound like the plaintive bleating of a once dominant civilization in the death throes of being replaced. Rome didn’t like all those barbarians coming in and changing the culture and economy, either. Look how much good it did to fight it…

fundamentalist January 16, 2008 at 11:12 am

My daughter just wrote a paper on Wal-Mart for a business class. I read it and discovered that Wal-Mart’s new advertising campaigns are trying to attract a wealthier customer in order to boost profits because single-store sales are pretty flat. I don’t think Wal-Mart worries about government pressure too much.

I’m a big fan of Wal-Mart. McKinsey and Co. has credited Wal-Mart for single-handedly raising productivity in the US during the ’90′s with its management model. Some people claim that Wal-Mart has done more for the poor by lowering the prices of food and clothing than all government programs put together.

Wal-Mart got a bad image of running mom-and-pop stores out of business years ago when it concentrated on small towns. A whole new industry sprang up devoted to consulting small businesses in small towns on how to compete with Wal-Mart. But Wal-Mart threatened few small stores in small towns; the greatest threat to small stores in small towns were good highways on which citizens of small towns fled small towns on weekends and shopped at larger stores in bigger towns. Wal-Marts reverse the flow by keeping more business in small towns and increasing the tax revenue for small towns.

Why do socialists hate Wal-Mart? Because it’s the biggest corporation and they consider all corporations to be evil by definiton. I have tried to warn conservative friends who hate Wal-Mart that socialists will use Wal-Mart to chip away at capitalist institutions, but they don’t care. Hating Wal-Mart is more popular than hating cigarette makers. Come to think of it, socialism is all about hate.

severin January 16, 2008 at 11:18 am

I shop at Wal-Mart all of the time. I prefer it over other places in part because I feel like I have a duty to stick to these pretentious liberals. If I save a few dollars at the same time, then bonus for me.

Michael A. Clem January 16, 2008 at 11:26 am

Without Sam Walton running things, Wal-Mart is just another corporation, and will do whatever is economically and politically feasible to do. It is puzzling why other corps don’t get the same amount of hate, unless it’s just that Wal-Mart is the current most successful retailer. Perhaps once they fall from the top of the heap, the new leader will start to get all the heat.

Person January 16, 2008 at 12:39 pm

Actually, some products are transported to Wal-mart on public roads. Therefore, any dislike of Wal-mart whatsoever is 100% justified. [/libertarian trying to rationalize dislike of Wal-mart]

Yancey Ward January 16, 2008 at 1:09 pm

The emphasis on Walmart has a different origin than the fact that it caters (or did at one time) to the less wealthy- the company was based in and associated with the southern states of the US at one time. Read any liberal/progressive blog and the comments- they despise southerners.

Henry Miller January 16, 2008 at 1:30 pm

City folks talk about the mom and pop stores that Wal Mart ran out of town, but they didn’t know or forgot that those mom and pop stores had bad service, were only open 9-4 m-f (I work 8-5), and maybe 9-noon on Saterday (after friday night I didn’t want to get up that early). Then they charged to twice the price for that. (Though in all fairness the mom and pop store generally had a higher quality of goods, it wasn’t worth the extra price).

Maybe in the big cities mom and pop stores were better, I don’t know. I do know that the few mom and pop stores that had service worth their prices had no problems when Wal Mart came to town.

I’ve tried shopping at Target and Kmart. Everything I hear against Wal-Mart is worse at the other stores – more foreign made junk. Worse service, and they are less likely to have what I want (note that girls tend to like Target – they seem to have found things that girls want, but they don’t have what guys want from a store)

Mrhuh January 16, 2008 at 1:44 pm

“Actually, some products are transported to Wal-mart on public roads. Therefore, any dislike of Wal-mart whatsoever is 100% justified. [/libertarian trying to rationalize dislike of Wal-mart]”

Let’s not also forget the fact that Wal-Mart is currently known for accepting subsidies from the government, using emminent domain, and supporting an increase in the minimum wage. Of course it is true that many don’t care about these things are despise Wal-Mart for the good things it does. For those who complain about Wal-Mart running Mom-and-Pop stores out of business, it should be pointed out that government intervention in the economy is the main cause of anti-small business practices through numerous taxes, regulations, inflation, etc.

billwald January 16, 2008 at 1:54 pm

Thread has many interesting components. In the bad old days the farmers couldn’t afford the time or the gas to drive to a real city to get a good price so were held hostage by the small town stores. Story is that Sam Walton would fly over the fields looking for an intersection of roads that connected 3 small towns. There he would build a store.

Second, compare WalMart and COSTCO. In the Seattle Metro area COSTCO has the better prices and pays good union wages. Why, then, does the typical COSTCO customer have a higher than median wage? For the same reason that historically the chain stores have the least coupon redemption in poor neighborhoods?

Third, Jesus made good mathematical and sociological sense when he said, ‘The poor you will always have.’ Why? Because it is the bottom half that makes the top half possible. Socially, money functions to rate one’s social status. If where there no such thing as money humans still devise a method of determining social status.

Fourth, it seems to be human nature for people to self segregate on the basis of status. Consider the Target and Kmart stores. Around here, Everett, WA, both chains sell the same merchandise for about the same prices. The Target stores cleaner and neater and their patrons appear cleaner and neater than those of the Kmart stores.

Paz January 16, 2008 at 2:46 pm

I have worked for wal-mart. I would say that wal-mart is leaps and bounds better than communism. However their structure is very bureaucratic and authoritarian. I think they get that way through massive subsidies. If the market was free, they wouldn’t be able to be so bloated and they wouldn’t treat their employees with so much disdain.

http://www.goodjobsfirst.org/pdf/wmtstudy.pdf

To the best of my knowledge this study is peer reviewed.

Paul Marks January 16, 2008 at 3:09 pm

The critics of Walmart just refuse to understand. You will not “save manufacturing” by demanding that retailers not by the cheapest goods – you will save manufacturing by making sure you make the cheapest goods, and the best quality goods (and quality is not determined by what flag is on the goods).

This has been true since the start of the industrial revolution.

Abraham Darby in 1709 did not say “buy my iron, it is more expensive”.

John Kay in 1738 did not say “use my flying shuttle, it will increase the cost of making cloth”.

Price and, yes, quality are what is important – not flag waving as a way of putting money in the pockets of the politically connected.

Paul Marks January 16, 2008 at 3:16 pm

Before someone screams “low wages”, British manufacturing wages were HIGHER than any in Europe – that is exactly why people were so keen on developing labour saving technology.

And NO wages for most people did not fall over the industrial revolution – they went UP.

As for “public benefits for corporations”.

There have always been limited liability trading and manufacturing enterprises – long before the limited liability statutes of the 19th century. There is nothing unlibertarian about limited liability – as long as people trading with such an enterprise KNOW IN ADVANCE.

On roads and other such:

It is not possible to know clearly what is a “public benefit” and what is “private” one.

So Federal, State and local government should not steal land “even” for “the public benefit”.

If a road or rail link is really for the “public benefit” it will be profitable and will be built without any need for taxpayer’s money.

Paul Marks January 16, 2008 at 3:19 pm

Lastly.

To confuse the present condition of the United States, where local State and Federal government spending takes more than a third of the economy and Federal regulations alone run to 70,000 pages, with free enterprise “capitalism” is utterly absurd.

And the above leaves out the government credit-money dependent financial system.

Patrick January 16, 2008 at 3:30 pm

Why does Wal-Mart receive so much criticism while other “big box” stores do not? One possible reason, overlooked by the author, is that their business model set the tone for the other major discount chains mentioned to follow suit. For those who disagree with that particular business model, of course they’re going to attack the source rather than the followers. The parents (i.e. disgruntled Wal-Mart haters) are going to save most of their vitriol for the Pied Piper, not for the children he led astray.

My family shops at Wal-Mart for certain things (toiletries, household cleaners, etc.) where quality is consistent with what is found at other stores. I rarely if ever buy food there or anything else you would expect to be of high quality (e.g. electronics, durable goods) because, in my personal experience, the products Wal-Mart sells are comparatively shoddy. No great surprise given how little goes in to producing them in China or wherever.

The whole “anti Wal-Mart” fervor is not really about Wal-Mart per se nor, as the author argues, an attack on the poor (I couldn’t give a rat’s you know what where the underclass shops). Rather it’s an indictment of what we’ve become in this country. Sure, low prices are great, but so is a self-reliance on making our own things (i.e. having a manufacturing base), and having jobs that allow many of our citizens to move into the middle class or beyond, plus making things that are of high quality, which I don’t think is a high priority with corporations who do most of their producing in the third world and then re-sell it at Wal-Mart and other places. Economics aside, what obligation do we have to the people of China and elsewhere to provide them with jobs and a rising standard of living?

Wal-Mart is just one aspect of a much larger issue regarding the problems of our economic system. I invite everyone to take off their big corporate hat, get out of the boardroom, and read Pat Buchanan’s latest column:

http://www.chroniclesmagazine.org/?p=482

Michael A. Clem January 16, 2008 at 4:56 pm

Economics aside, what obligation do we have to the people of China and elsewhere to provide them with jobs and a rising standard of living?
Wrong question. Wal-Mart has helped the poor in America with THEIR standard of living. And it IS economics that explains that. It’s not about helping Chinese people, it’s about helping Americans.

ktibuk January 16, 2008 at 5:35 pm

Poor people of China and poor people of USA trade with each other through WalMart, while both governments are trying to sabotage the whole thing.

There are a lot of them on the each side so the volume is big.

Trade benefits both parties and the poor people are the ones that need benefits the most.

Nick January 16, 2008 at 6:53 pm

Shopping at Wal-Mart’s competitors is apparently fine just as long as one doesn’t shop at Wal-Mart itself…

Hmm, why is it that any use of the free market to political ends drives certain libertarians absolutely batshit.

It’s ok to make a meaningless choice (pick the blue vs the green shirt), but God forbid you consider your personal values when shopping.

If you had any self respect or consistency to your views you would be encouraging and promoting market choice. If liberals don’t like Wal Mart’s vicious labor practices, their destruction of local entrepreneurs, or simply the quality of their poorly made low quality goods that’s their right.

Bryan January 16, 2008 at 8:35 pm

Nick,

It’s not that we’re arguing against consumer choice. We’re arguing against government intervening against wal-mart. On the flip side, we also argue against government invtervening in wal-mart’s favor. Doing so take the power away from the consumer to either feed or starve a business. Ultimately, all government regulation disenfranchises the consumer by taking away his ability to dictate what happens to a business.

Let it be.

fundamentalist January 16, 2008 at 8:36 pm

Patrick: “but so is a self-reliance on making our own things (i.e. having a manufacturing base), and having jobs that allow many of our citizens to move into the middle class or beyond…”

The debate over the benefits of free trade has been going on for about 600 years, so I doubt we’ll settle it today. But you won’t find much support for “self-reliance” from most economists, especially the Austrian ones on this site. All of the great economists, from Adam Smith on, have taken the side of free trade, except for Keynes. Emperically, the data overwhelmingly shows that international free trade enriches the middle class of participating countries. So I can’t understand why intelligent people like Pat Buchanan are so ignorant about it.

As for Wal-Mart destroying manufacturing jobs, it just ain’t so. The products Wal-Mart imports from China haven’t been produced in the US for decades. They’re consumer products, like clothing and toys. The manufacturing jobs to produce those things left for Japan in the 1950′s. China doesn’t compete with the US for manufacturing; it competes with Mexico and other third world countries.

As for US manufacturing, it grows daily and has suffered downturns only in recessions. In inflation adjusted dollars, the US manufacturing sector is large now than it has ever been. The US is has the largest manufacturing sector in the world. Our manufacturing sector by itself is larger than China’s entire economy. But we don’t manufacture toys or underware, the things that ignorant journalists like Buchanan obsess about. We make airplanes, heavy construction equipment, gas turbine engines, things that Wal-Mart doesn’t sell.

China is no threat to US manufacturers, but protectionism, like what Buchanan preaches, taxes, inflation and regulation are major threats to manufacturing in the US. I guess Buchanan would gladly give up the manufacturing of airplanes in the US if we could restore the US dominance in toy and underware manufacturing.

Patrick January 16, 2008 at 8:38 pm

Wrong question. Wal-Mart has helped the poor in America with THEIR standard of living. And it IS economics that explains that. It’s not about helping Chinese people, it’s about helping Americans.

Any help that lower Wal-Mart prices have had in improving the standard of living among the poor is more than offset by the depressed wages low-skilled American workers (generally the poor) now receive, thanks to such things as the refusal of our government to crack down on illegal immigration. We are not helping ourselves by importing MORE poor people, and that will NOT ultimately improve the vast majority of Americans’ standard of living.

My point for bringing up China was that it has never been American business’s obligation to help third-world nations find their comparative advantage(s). China’s comparative advantage with the U.S. is that they can provide cheap labor, which doesn’t necessarily mean lower prices here, and in the long run that harms the potential of their native born to be innovators since many end up working for multi-nationals who pay subsistence wages.

Patrick January 16, 2008 at 9:32 pm

To fundamentalist:

I’m whole-heartedly in favor of free trade myself. It’s just that it’s not happening right now. For example, our exports to Europe are slapped with various VAT’s which makes American products more expensive. Is that fair trade? If true free trade existed, I don’t think our trade deficit would be so high.

As for Wal-Mart destroying manufacturing jobs, it just ain’t so. The products Wal-Mart imports from China haven’t been produced in the US for decades. They’re consumer products, like clothing and toys. The manufacturing jobs to produce those things left for Japan in the 1950′s. China doesn’t compete with the US for manufacturing; it competes with Mexico and other third world countries.

I have a feeling that the cost to produce toys and clothing did not greatly decrease when they moved to Japan given the high cost of living in that country.

When you say it’s China vs. Mexico, isn’t the real fight about which country the AMERICAN manufacturer is going to relocate to?

As for US manufacturing, it grows daily and has suffered downturns only in recessions. In inflation adjusted dollars, the US manufacturing sector is large now than it has ever been. The US is has the largest manufacturing sector in the world. Our manufacturing sector by itself is larger than China’s entire economy. But we don’t manufacture toys or underware, the things that ignorant journalists like Buchanan obsess about. We make airplanes, heavy construction equipment, gas turbine engines, things that Wal-Mart doesn’t sell.

We didn’t simply start manufacturing airplanes, construction equipment, gas turbine engines, etc. once all the toy and underwear manufacturers went abroad…we’ve always made those things! This isn’t news. However, there is no guarantee the manufacturers of such things will stay in America in the future.

What we manufacture may bring in more dollars than ever before, but I dare to guess fewer people work in the manufacturing sector than they did decades ago, and that has not helped incomes keep pace with inflation.

Taxes, regulation, and inflation are indeed threats to manufacturing….and so is the seductive force of improving the bottom line by shifting operations to foreign lands to drastically cut labor costs.

mike s January 16, 2008 at 10:58 pm

The political class extorted real dollars from the tobacco companies under the guise of subsidizing medical costs. That was an easy sale considering the gutless response of the tobacco CEOs. I would enjoy reading an investigative account of where that money was actually spent. Microsoft was similarly looted under the pretense of imaginary monopoly pricing. It is surely upsetting to the criminal class that the most they can obtain from WM is limited to zoning and the occasional infrastructure improvement, while WM gets the credit. Free and open trade works in the long run even though there may be temporary dislocations, usually the result of federal government caused distortions. If you have any doubts read Milton Friedman and then review the history of the “Japanese miracle”, i.e. their banking system and the nearly 20 year recession the peasants lived through. For the record I managed an ITW plant for 20 years that was closed last year; the the business was moved to Mexico, China, and under utilized USA plants. Capitalism should be a a process of destruction and rebirth. Jefferson was right when he said we needed a little revolution now and then to keep the elected officials in line. God bless America.

IMHO January 17, 2008 at 1:08 am

“Essentially, Wal-Mart is associated with tacky poor people, while the middle and upper classes can reserve for themselves the more respectable environs of other retailers.”

Take a drive through a Wal-Mart parking lot and you will find the kinds of cars that the average poor person could not afford. They may not want to admit it, but the middle and upper classes shop there as well.

Chad January 17, 2008 at 1:33 am

On a side note, that has to be one of the most clever accompanying pictures for a Mises article I have seen yet. Whoever comes up with those ought to be credited, because he or she does a great job of summing up an article of a thousand words in one picture.

P.M.Lawrence January 17, 2008 at 2:01 am

Paul Marks, you write ‘Before someone screams “low wages”, British manufacturing wages were HIGHER than any in Europe – that is exactly why people were so keen on developing labour saving technology. And NO wages for most people did not fall over the industrial revolution – they went UP.’

We’ve just had a thorough going over this ground at Meeting Ricardo in the Stables. I won’t go over it all again now I’ve linked to it, but here are some relevant details. You are only right about rising wages in one of three limited senses:-

- if you meant wages for those in work, not wages over the whole pool of the workforce (survivor bias raises this);

- if you meant just cash wages, not real wages including wages in kind;

- if you meant over the whole period of the Industrial Revolution.

The thing is, from the beginning of the Industrial Revolution until the 1830s British real wages in cash and in kind over the whole workforce were stagnant, and possibly for a decade or two after that as well.

About British manufacturing wages starting out high, it’s important to note that these often went to independent contractors with their own capital doing the work under the putting out system. Their revenue was not simply high wages but included a return on investment. The incentives to displace them were the same, however.

Private Freedom January 17, 2008 at 6:19 am

I’m not sure if anyone has said this already, but if someone tells you that Wal-Mart is “evil” or “corrupt”, or “ruining the country” due its “excessive greed”, instead of responding in your own language, that is, in favor of of free markets, simply speak THEIR language and lay this on them:

“Did you know that Wal-Mart is the Number 1 cash donating company in the whole country?”

That ought to make them eat crow. (Because it’s true)

fundamentalist January 17, 2008 at 8:45 am

Patrick: “When you say it’s China vs. Mexico, isn’t the real fight about which country the AMERICAN manufacturer is going to relocate to?”

No. As I wrote before, most of those jobs left the US decades ago. Mexico and China compete to sell to the US.

Patrick: “We didn’t simply start manufacturing airplanes, construction equipment, gas turbine engines, etc. once all the toy and underwear manufacturers went abroad…we’ve always made those things!”

Are you saying that we have never invented anything new? Or that the manufacturing of producers goods hasn’t expanded? As Ricardo demonstrated with comparative advantage, we specialized in what we do well and let others make things we had a disadvantage in.

Patrick: “What we manufacture may bring in more dollars than ever before, but I dare to guess fewer people work in the manufacturing sector than they did decades ago…”

You’re right there, because huge productivity increases have enable workers to produce more than ever. Employment in manufacturing has grown slowly, but wages have grown rapidly in manufacturing.

“…and that has not helped incomes keep pace with inflation.”

So how do you explain the fact that average real wages have increased constantly for the past 20 years in spite of the fact that we have exported millions of manufacturing jobs and imported millions of immigrants?

Patrick: “Taxes, regulation, and inflation are indeed threats to manufacturing….and so is the seductive force of improving the bottom line by shifting operations to foreign lands to drastically cut labor costs.”

You focus on a very limited part of the problem—lost jobs. You should take an economic lesson from McDonald’s. In one of their commercials, they encourage people to eat from the dollar menu because they can spend the money they save on other things like music. That’s really good economic thinking for today. Because Americans can buy toys from China for less than they could buy them from an American manufacturer, they can spend the money they save on other things, and those other things often create whole new industries. So exporting low paying jobs to China is only half the story; the flip side is the creation of new jobs in the US as a result of the money saved.

As with most mercantilists, you are obsessed with manufacturing, as if manufacturing alone is the source of national wealth. If that were true, you would expect Florida to be a very poor state because it has almost no manufacturing. But it’s not. It’s a very affluent state. Why would that be?

Patrick January 17, 2008 at 11:35 am

No. As I wrote before, most of those jobs left the US decades ago. Mexico and China compete to sell to the US.

So you deny that no American companies have ever closed manufacturing plants and relocated in third-world countries? Are you saying that all manufacturing plants owned in third-world countries are owned locally?

Are you saying that we have never invented anything new? Or that the manufacturing of producers goods hasn’t expanded? As Ricardo demonstrated with comparative advantage, we specialized in what we do well and let others make things we had a disadvantage in.

I said no such thing. I only said we’ve always produced and made innovations to the things you mentioned. You write as if they came out of the sky one day.

So how do you explain the fact that average real wages have increased constantly for the past 20 years in spite of the fact that we have exported millions of manufacturing jobs and imported millions of immigrants?

That’s convenient that you use the last 20 years, a relatively low inflation period in our history. Do your figures show that real wages have increased or been steady, say, over the past 60 years, a period which includes both periods of low inflation and stagflation?

You focus on a very limited part of the problem—lost jobs. You should take an economic lesson from McDonald’s. In one of their commercials, they encourage people to eat from the dollar menu because they can spend the money they save on other things like music.

Perhaps McDonald’s should advocate eating off their dollar menu and then having people use the savings to pay down their credit card debt or their mortages.

Because Americans can buy toys from China for less than they could buy them from an American manufacturer, they can spend the money they save on other things, and those other things often create whole new industries.

Like what?

As with most mercantilists, you are obsessed with manufacturing, as if manufacturing alone is the source of national wealth. If that were true, you would expect Florida to be a very poor state because it has almost no manufacturing. But it’s not. It’s a very affluent state. Why would that be?

Mercantilsm: an economic system to increase the wealth of a nation by strict government regulation of the entire national economy through policies designed to secure a favorable balance of trade, the development of agricultures and manufactures, and the establishment of foreign trading and monopolies.

I’ve never advocated that government regulate any aspect of the national economy in any of these exchanges. I don’t have to tell you what a stupid idea that is, so you can keep your labels to yourself. Trust me, I’m one of the biggest free market, low-tax, anti-regulation advocates you’d ever want to know. I also think we can have some sort of balance to help OUR FELLOW CITIZENS who, through no fault of their own, are on the left side of the Bell Curve.

As far as your Florida example, I’m well aware that individual states in our fine Republic have their own competitive advantages with other states. Which is super. The money still stays at home.

Inquisitor January 17, 2008 at 12:05 pm

Let’s see… subsidies, MW regulation, public transportation… how is Wal-Mart not aided by government? Like it or not, many corporations are as large as they are because of government help. Patrick definitely has a point in that there is currently no such thing as free trade; add in the Fed’s actions (i.e. counterfeiting), and you have little resembling a free market at all. WM definitely deserves praise in some regards, but like MS it too is a beneficiary of government assistance.

Patrick January 17, 2008 at 12:19 pm

Let me correct my spelling:

As far as your Florida example, I’m well aware that individual states in our fine Republic have their own comparative advantages with other states. Which is super. The money still stays at home.

newson January 17, 2008 at 7:27 pm

patrick says:
“That’s convenient that you use the last 20 years, a relatively low inflation period in our history.”

i imagine you’re talking cpi here, and don’t appreciate that the austrian definition of inflation is growth in the money supply, not cpi growth. without understanding this, you cannot understand how the austrian analysis differs from the other schools of thought. check out the federal reserve charts of the various money supply indices, and then compare these charts to the stock market, the real estate market, the commodity markets, the art market etc.

using cpi figures to speak about inflation is fraught with difficulties. mises.org is full of articles on the biases inherent in the cpi measure.

i would argue differently; in the last twenty years, we have witnessed very high inflation which has profoundly distorted exchange rates, and as a consequence, trade and consumption patterns.

it is hard to imagine how differently things would have evolved, had the gold standard remained in place. globalization one hundred years ago was just as strong as today (if not more so), but had far fewer of the malign characteristics that mark our era.

however, given that mercantilism and macroeconomic policy madness are the order of the day (and the foreseeable future), i cannot see how hobbling walmart is going to improve anything. hate the sin, love the sinner.

fundamentalist January 17, 2008 at 8:14 pm

Patrick: “I only said we’ve always produced and made innovations to the things you mentioned. You write as if they came out of the sky one day.”

I don’t get your point. What does the fact that we have always had innovation to do with sending manufacturing jobs overseas? My point was that we have a strong, vibrant manufacturing sector in spite of the jobs we export. The fact that we’ve always had a strong manufacturing sector doesn’t change anything.

Patrick: “That’s convenient that you use the last 20 years, a relatively low inflation period in our history. Do your figures show that real wages have increased or been steady, say, over the past 60 years, a period which includes both periods of low inflation and stagflation?”

What does inflation have to do with it? You’re worried about sending jobs overseas and immigration lowering wages in the US. I pointed out that we have exported more jobs and imported more immigrants in the last 20 years than at any period before, yet wages are growing. Inflation has nothing to do with it.

Patrick: “I also think we can have some sort of balance to help OUR FELLOW CITIZENS…”

Please explain how you would do that without government regulation.

Patrick: “As far as your Florida example, I’m well aware that individual states in our fine Republic have their own competitive advantages with other states. Which is super. The money still stays at home.”

Now try a simple mind experiment: imagine that Florida seceded from the Union. Would it suddenly become poorer because it has no manufacturing? It would certainly have a huge trade deficit. Or imagine that Mexico became out 51st state. Would the rest of the US be better off because the money stayed at home? The point of most Austrian economists is that political borders, and national accounting systems, are arbitrary units when it comes to economics. They don’t mean anything.

newson January 17, 2008 at 8:18 pm

the danger of pointing out the inequities and trade distortions caused by state intervention is that the cry goes out for more “fair trade” or further government oversight.

ultimately it’s the shape of government that determines the shape of commerce (notwithstanding licit or illicit influence peddling by business).

history abounds with lessons. hitler’s rise was abetted or tolerated by german industrialists, who naively believed that they could coopt him and mould his agenda. big mistake. i’m sure there were many powerful business lobbies in venezuela who thought they would be running chavez, not vice versa. things probably weren’t any different in zimbabwe in their long descent into darkness.

Bill January 17, 2008 at 9:07 pm

As a Libertarian I see no problem with any of the big box stores competing with smaller local stores in a REAL FREE MARKET.
The problem with all large discount stores is that they get special tax breaks and zoneing wavers from local goverment being lured in by the prospect of new jobs or being coerced by threats from the companys building in communitys close by so there wont be any new jobs in there community.
Untell local goverment officals end all tax breaks and zoning wavers for big business or better yet end all taxes and zoning laws people should be angry.

Tardigrade January 17, 2008 at 9:24 pm

Wal-mart demands absolute low prices from its suppliers. Take chicken for example. It comes, mostly, from Tyson foods. Tyson foods has poor living conditions for the chickens. Who cares about chickens well being? The poor should. When chickens are crammed together it creates a risk of large scale avian bird flu. You know, like in China. The US gov spent 8 billion in tax money to create a stock pile of a vaccine. That is an 8 billion dollar subside to Wal-mart. Where do taxes come from? People, and taxes most effect the poor. A similar situation is being seen in “unsafe” toys from China. I believe Mr. Obama is campaigning on safe toys for children. This can only be done with another similar subsidy to Wal-mart. Wal-mart and similar companies should ensure safe toys not a gov program. and so on…

Patrick January 17, 2008 at 11:51 pm

What does inflation have to do with it? You’re worried about sending jobs overseas and immigration lowering wages in the US. I pointed out that we have exported more jobs and imported more immigrants in the last 20 years than at any period before, yet wages are growing. Inflation has nothing to do with it.

You used the term “average real wages” in your previous post. When people use that term, they’re talking about wages measured in purchasing power and not by their nominal value. So, contrary to your assertion, the rate of inflation has everything to do with determining whether average real wages or going up or going down. I again pose my previous question whether average real wages are up or down compared to 50 or 60 years ago.

Please explain how you would do that without government regulation.

Even if it were possible to change it with government regulation, I wouldn’t advocate it because, like I said before, I’m one of the biggest hands-off capitalists you’d ever meet. This is something only people’s hearts and minds can change. Unfortunately, we live in an era where some feel the maximization of profit (which is a different concept than making a profit) overrides any concern for our fellow citizens much less the survival of our Western civilization.

Now try a simple mind experiment: imagine that Florida seceded from the Union. Would it suddenly become poorer because it has no manufacturing? It would certainly have a huge trade deficit. Or imagine that Mexico became out 51st state. Would the rest of the US be better off because the money stayed at home? The point of most Austrian economists is that political borders, and national accounting systems, are arbitrary units when it comes to economics. They don’t mean anything.

I guess my previous point was taken because now I’m being asked to do “simple mind experiments” regarding events whose chances of occurring are zero.

I presume the Florida economy would suffer because, on their own, they would actually have to start taxing their citizens, and we all know taxes discourage economic growth.

As far as Mexico becoming the 51st state – an absolute disaster for the Republic as the massive increase in the poverty rate would lead to an even more bloated federal government, especially in the area of entitlement spending. And that doesn’t even touch the cultural/political problems that would ensue.

How’s that?

Political borders may or may not mean much to Austrian economists, but they sure as hell keep the world at relative peace and go a ways toward preventing ethnic bloodbaths. Unfortunately, when those political boundaries are crossed, which is frequent, a lot of stuff hits the fan. In places like Iraq and Sudan, allowing each ethnic group to have more autonomy would go a long ways toward creating more stability, and that is always good for economic growth anywhere.

Economics explains a lot, but it doesn’t explain everything.

bill January 18, 2008 at 12:48 am

Hey Tardigrade While I agree the poor and really all of us should care about the living conditions of chickens we eat bird flu is not really something we need to worry about.According to the WHO in the passed 5 years 217 people died of bird flu and while that is sad its nothing when you learn that 36,000 people in the United States die from Common Influenza each year. If you do a yahoo search on “bird flu epidemic hoax” you will find a number of articles that show that $8 billion stock pile subsidised not walmart but Donald Rumsfeld who got a $2 million boast in the value of some pharm stocks he owned and since it is realitively apprent ,at least to me,that there is no major threat of a bird flu pandemic it was $8billion American tax dollars down the crapper.
Any way your point about Obama was absolutly right there is no reason the goverment should waste more of are tax money on a new buerocracy designed to do the job walmart should do itself.
Anyway Im sorry about getting off topic I just hate all the fearmongering politicans and idiot scientists have subjected us to.

(P.S. sorry for bad spelling.)

fundamentalist January 18, 2008 at 8:32 am

Patrick: “I again pose my previous question whether average real wages are up or down compared to 50 or 60 years ago.”

All you have to do is look at the BLS data. Of course real wages are higher than 50 or 60 years ago. They declined between ’73 and ’90, but we have recovered from that completely.

Patrick: “Unfortunately, we live in an era where some feel the maximization of profit (which is a different concept than making a profit) overrides any concern for our fellow citizens much less the survival of our Western civilization.”

So you support free trade even though you think it’s harmful? Why would you do that? Ricardo proved that free trade benefits a nation far more than even fair trade. I certainly wouldn’t support free trade if I thought it was harmful to the US.

Patrick; “I presume the Florida economy would suffer because, on their own, they would actually have to start taxing their citizens, and we all know taxes discourage economic growth.”

A lot of things would change if Florida seceded and Mexico joined the US, but we were discussing the effects of free trade and manufacturing on a nation’s wealth. My point was that changing the borders wouldn’t change anyone’s wealth, even though the manufacturers in Mexico would be counted as US manufacturers, no wealth would change hands. All that would change would be the national accounting figures. If Florida seceded and became a separate nation, it wouldn’t be any poorer because it had no manufacturing base. It would continue to do business with the other states as it had been and continue to be as wealthy.

Patrick January 18, 2008 at 9:38 am

All you have to do is look at the BLS data. Of course real wages are higher than 50 or 60 years ago. They declined between ’73 and ’90, but we have recovered from that completely.

Can’t you provide a link (and not just to the main site of BLS)? I want to be enlightened.

I found this table which uses BLS data and provides a contrary view, at least since 1964:

http://www.workinglife.org/wiki/index.php?page=Wages+and+Benefits%3A+Real+Wages+(1964-2004)

So you support free trade even though you think it’s harmful? Why would you do that? Ricardo proved that free trade benefits a nation far more than even fair trade. I certainly wouldn’t support free trade if I thought it was harmful to the US.

I support free trade because I’m a capitalist. That doesn’t mean I can’t be critical of the way certain aspects of it work in practice. As I said before, we don’t have real free trade now, especially in regards to Europe.

Let me quote J.G. Collins:

“[Ricardo] predicted that over time, the ‘market price’ for wages – the going rate for labor – would approximate the ‘natural price’ for wages – the cost of a worker’s subsistence. Ricardo’s theory is sound enough: market wages, indeed tend to mirror the cost of living.

But Ricardo’s point of reference was the nation-state. He was contemplating English and Spanish workers and the cost of labor rising and falling in relation to national populations and fortunes. Writing 200 years before container ships, instantaneous electronic communication, ‘just-in-time’ inventory systems, and multinational corporations, Ricardo could not foresee that the wages of a press operator in Buffalo, New York would be determined by the cost of living for a press operator in Bangalore, India.”

A lot of things would change if Florida seceded and Mexico joined the US, but we were discussing the effects of free trade and manufacturing on a nation’s wealth.

Maybe you were discussing that. I tend to look at the bigger picture because there are always diverse factors affecting an economy. You may find it strange that I admit something like that, but you’ve been so consumed with trying to paint me with the scarlet “M” that you’ve overlooked or misconstrued a lot of what I’ve written. It’s noble what you’re doing.

My point was that changing the borders wouldn’t change anyone’s wealth, even though the manufacturers in Mexico would be counted as US manufacturers, no wealth would change hands. All that would change would be the national accounting figures. If Florida seceded and became a separate nation, it wouldn’t be any poorer because it had no manufacturing base. It would continue to do business with the other states as it had been and continue to be as wealthy.

That might be the case if all other things were equal or unchanged. But they’re not, and you know that. If, as you argue, the people of Florida would be assured of their same standard of living and continued economic growth if they were an independent nation, why don’t you think they’re looking into it? Why isn’t California, which by itself has one of the largest economies in the world?

fundamentalist January 18, 2008 at 1:24 pm

Patrick: “I support free trade because I’m a capitalist. That doesn’t mean I can’t be critical of the way certain aspects of it work in practice. ”

What do you like about capitalism, then, if you don’t like free trade? Free trade is the heart and soul of capitalism. And socialists might ask you if you think free trade is so harmful, why not advocate government regulation? After all, the greedy corporations are enriching themselves at the expense of American workers. Why not do something about it?

I haven’t been able to find data on wages on the BLS web site. That thing is really confusing. But here is the site of the prez’s economic report of 2007 that has data it claims it got from the BLS: http://www.gpoaccess.gov/eop/tables07.html

You have to scroll down to the table B-47. Hours and earnings in private nonagricultural industries, 1959-2006 and open it.

Patrick: “..Ricardo could not foresee that the wages of a press operator in Buffalo, New York would be determined by the cost of living for a press operator in Bangalore, India.”

It doesn’t matter. Besides, I wasn’t talking about Ricardo’s work on wages. He and Smith had a few problems in those areas, especially with the labor theory of value. But Ricardo’s work on the benefits of free trade, even unilateral free trade, have stood the test of time, have been refined and are still taught in econ. Pick up any recent text book on international trade and the math will be there and it’s not very difficult.

Patrick: “…you’ve been so consumed with trying to paint me with the scarlet “M”…”

You may not advocate gov regulation, but you have exactly the same economic ideas as the early mercantilists.

Patrick: “That might be the case if all other things were equal or unchanged. But they’re not, and you know that.”

You don’t seem to understand how economists study particular issues. You have to isolate them and hold other things constant or you’ll end up being confused because of the interactions of other factors. It’s a standard technique in all sciences. To study the effects of manufacturing on wealth, you must hold all other things constant, or you won’t be studying manufacturing, you’ll be studying all of the effects at the same time and you won’t be able to tell which factor is causing which effect. Tax policy can effect wealth, but what does that have to do with whether or not a nation can be wealthy without a manufacturing base?

Patrick January 18, 2008 at 5:24 pm

What do you like about capitalism, then, if you don’t like free trade? Free trade is the heart and soul of capitalism. And socialists might ask you if you think free trade is so harmful, why not advocate government regulation? After all, the greedy corporations are enriching themselves at the expense of American workers. Why not do something about it?

I guess I’m just not as dogmatic as you. Economic theory can explain the world in black and white terms, but that’s not the world we live in.

I haven’t been able to find data on wages on the BLS web site. That thing is really confusing. But here is the site of the prez’s economic report of 2007 that has data it claims it got from the BLS: http://www.gpoaccess.gov/eop/tables07.html You have to scroll down to the table B-47. Hours and earnings in private nonagricultural industries, 1959-2006 and open it.

If you bothered to look at Table B-47, you would have seen that it shows the exact same figures as the table I linked to. Yes, real wages are up slightly from 20 years ago, but lower than when records apparently started being kept in 1964 and far lower than the peak years of 1972-73 Conclusion: Real average wages are down from 40 years ago.

Checkmate.

You may not advocate gov regulation, but you have exactly the same economic ideas as the early mercantilists.

Sounds oxymoronic. Mercantilism by its very nature endorses strict government control. I don’t.

You don’t seem to understand how economists study particular issues. You have to isolate them and hold other things constant or you’ll end up being confused because of the interactions of other factors. It’s a standard technique in all sciences. To study the effects of manufacturing on wealth, you must hold all other things constant, or you won’t be studying manufacturing, you’ll be studying all of the effects at the same time and you won’t be able to tell which factor is causing which effect. Tax policy can effect wealth, but what does that have to do with whether or not a nation can be wealthy without a manufacturing base?

I earned a business degree so I am quite familiar with how studies in the sciences are done. You keep browbeating me about manufacturing’s effects on a nation’s wealth, which is not the subject I meant to bring up in my initial post, though it may have sounded that way to you due to my lackluster writing skills.

I freely admit that manufacturing by itself does not determine a nation’s well-being or wealth, and I’ve never said anything to the contrary. Perfect examples of that would be Vatican City and Monaco. The USA, however, isn’t Vatican City or Monaco. Our citizens, and the citizens of most nations, are not like the people of those two countries, nor are they like the children of the ficitional Lake Wobegon i.e. above average. In other words, we have to live with and deal with citizens whose natural intelligence and skills place them on the left side of the Bell Curve.

Like it or not, the manufacturing sector of our economy played a major role in dealing with them for a large part of our history. Working in manufacturing allowed those with fewer inherent skills to live productive lives, helped expand the middle class, and offered opportunities for upward mobility. With the decline in our manufacturing sector in number of jobs, those opportunities have evaporated, which has led to the decline in average real wages.

The question is what do we do with them now? Or do we do nothing? Proposing solutions much less addressing this issue may or may not fit with your economic dogma, but it is the real world.

I dare say that the present solutions of setting up shop in third-world countries (thus finding their comparative advantages for them), the importation of more poor illegals to increase the labor supply and thus lowering wages, or expanding the menial service sector which may or may not have any upward mobility benefits, is not even a short-term solution to this problem much less than a long-term one.

That in a nutshell is what my bringing up manufacturing is all about. I will have more to say later.

newson January 18, 2008 at 8:41 pm

to patrick:

given international competitors’ mercantilistic trade policies (tariffs, quotas, subsidies, undervalued currency etc.) the only wealth-producing retaliation is to alleviate the domestic tax and (especially) the regulatory burden that us companies face.

mercantilism is an impoverishing economic strategy for the country that pursues it, and china wastes vast amounts of its citizens resources on its trade policies.

i do believe that the erosion of the manufacturing base is a worry, but there is no solution when the real cause of these trade imbalances are monetary. just take the currency moves in the short history of the euro, the value of which has gone from us$0.80 to $1.50 in less than a decade. this massive volatility makes sensible business planning almost impossible. hedging only covers short-run adjustments.

most of the presidential candidates seem to be in favour of stemming illegal immigration, but aside from ron paul, none seem to understand the global financial architecture must be changed before any prospect of a brighter future can be imagined.

“walmart rage” is misdirected, it should be levelled at the policies that shape the business landscape.

Patrick January 18, 2008 at 9:17 pm

most of the presidential candidates seem to be in favour of stemming illegal immigration, but aside from ron paul, none seem to understand the global financial architecture must be changed before any prospect of a brighter future can be imagined.

From my perspective, absolutely none of the candidates left, with the exception of Paul, is serious about enforcing our borders or stemming the flow of illegals. It was McCain, after all, who co-sponsored the Amnesty bill with Ted Kennedy. Because Paul has no chance, I would expect whoever wins to be at the bidding of the cheap labor lobby for his (or her) entire term.

Patrick January 18, 2008 at 9:18 pm

most of the presidential candidates seem to be in favour of stemming illegal immigration, but aside from ron paul, none seem to understand the global financial architecture must be changed before any prospect of a brighter future can be imagined.

From my perspective, absolutely none of the candidates left, with the exception of Paul, is serious about enforcing our borders or stemming the flow of illegals. It was McCain, after all, who co-sponsored the Amnesty bill with Ted Kennedy. Because Paul has no chance, I would expect whoever wins to be at the bidding of the cheap labor lobby for his (or her) entire term.

newson January 18, 2008 at 10:13 pm

to patrick:

the amnesty bill is directed at addressing the problem of illegals already on us soil. my comment regarded “stemming illegal immigration”, that is halting the flow of new entrants (said differently, i know of no candidate advocating open borders).
but i think you’re right in the sense that only ron paul is looking at deportation of those already in the us. i agree that paul’s chances are zip, and so also agree with your pessimistic outlook.

as an aside, i don’t think that the immigration problem would be so vexing if the us were in a phase of massive capital investment (think dubai). all roads lead back to the curse of high taxation and regulation that afflict the country.

Francisco Torres January 18, 2008 at 11:59 pm

Sure, low prices are great, but so is a self-reliance on making our own things (i.e. having a manufacturing base), and having jobs that allow many of our citizens to move into the middle class or beyond

Patrick, you start from a wrong premise: economic progress does not come only from manufacturing jobs or from “self reliance”. The fact that manufacturing jobs migrate to other countries is nothing more than a natural consequence of the law of comparative advantage. Most of the manufacturing that leaves the country is better suited for low skill workers anyway, leaving more resources (more people) to other jobs that are in more demand in the U.S., like services. Also, the argument that a country must manufacture all goods possible for its population does not make economic sense, because if taken to its logical conclusion, then you must say that a person should manufacture all of his or her goods in order to have economic progress.

plus making things that are of high quality, which I don’t think is a high priority with corporations who do most of their producing in the third world and then re-sell it at Wal-Mart and other places

Patrick, quality is in the eye of the beholder: a person that is willing to pay for a high quality item will do so. It does not make sense, however, to make purely high-quality goods if these cannot be purchased by many customers. The triumph of the Industrial Revolution was precisely the availability of goods that, a few decades before were only accessible to royalty, to a greater population. This was achieved by capital investment and division of labor.

Economics aside, what obligation do we have to the people of China and elsewhere to provide them with jobs and a rising standard of living?

The question does not make sense, Patrick. Americans are not providing the Chinese with jobs and a higher standard of living, Americans simply buy the goods that Chinese companies sell. THIS rises the standard of living of AMERICANS, who can afford more goods than even before. The jobs and rise of standard of living is a result of TRADE, and not of good will of Americans.

Patrick January 19, 2008 at 10:20 am

The fact that manufacturing jobs migrate to other countries is nothing more than a natural consequence of the law of comparative advantage.

In decades and centuries past, countries have been forced to find their OWN comparative advantages. In the more recent past, American-based firms and manufacturers have gone overseas to set up shop. This economic development can hardly be described as natural. So we have more or less helped a lot of the third-world develop their own comparative advantages vis a vis the USA. That hurts third-world nations in the long run because it stifles the creativity of their native born as they just become cheap labor for American-based multinationals.

Most of the manufacturing that leaves the country is better suited for low skill workers anyway, leaving more resources (more people) to other jobs that are in more demand in the U.S., like services.

If manufacturing is better suited for low skill workers, we have millions of people available to fill such positions. Apparently those service jobs aren’t that good as companies have willingly flaunted the law to hire millions of illegal aliens to fill them.

Also, the argument that a country must manufacture all goods possible for its population does not make economic sense, because if taken to its logical conclusion, then you must say that a person should manufacture all of his or her goods in order to have economic progress.

What you describe is mercantilism, and I’ve already dismissed that economic policy in my other posts. Please read them.

The question does not make sense, Patrick. Americans are not providing the Chinese with jobs and a higher standard of living, Americans simply buy the goods that Chinese companies sell. THIS rises the standard of living of AMERICANS, who can afford more goods than even before. The jobs and rise of standard of living is a result of TRADE, and not of good will of Americans.

You’re not being realistic when you suggest that everything made in China (or any other second or third world nation) is locally owned and developed. News accounts of American relocations to other countries have been quite prominent in the last decade or two.

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