The Wal-martization of America Redux

Friday, December 16, 2011 by CommonDreams.org

How the Relentless Drive for Cheap Stuff Undermines Our Economy, Bankrupts Our Soul, and Pillages the Planet

by John Atcheson

 

If you want to know why the middle class disappeared and where they went, look no further than your local Wal-mart.  People walked in for the low prices, and walked out with a pile of cheap stuff, but in a figurative sense, they left their wages, jobs, and dignity on the cutting room floor of the House of Cheap.

Welcome to the logical end point of Reagonomics.  Welcome to Ayan Rand’s nightmare vision of morality, where we know the price of everything but the value of nothing; where predatory behavior is celebrated and the notion of community is blasphemy. 

In his excellent documentary, Wal-mart: The High Cost of Low Price, Robert Greenwald carefully documents how Wal-mart’s giant box stores lower wages across the entire retail sector, impose high social and economic costs on the states and communities in which they operate, and destroy local businesses.

Yet the low prices – which come at such a high cost – are irresistible to American consumers.  Wal-mart has virtually cornered the retail market and amassed astounding wealth in the process.

But it’s not just Wal-mart.  Big box stores now rule across the board in the US retail economy in everything from electronics to pet supplies. And it’s not just retail. The entire US economy is now organized around the notion that getting us cheap stuff – the more the better – is the sine qua non of economic policy.

There was a time when corporations understood that paying their employees a living wage had economic and societal benefits.  Henry Ford famously said he wanted his employees to be able to afford to buy the cars they made and launched six decades of prosperity.

The labor movement helped create a social and economic compact in which workers shared the wealth they generated.  When workers had enough money to consume, they stimulated economic growth.  When production was as important as consumption, the economy flourished, the common worker had dignity, and the means of production were valued.

But that compact has been sacrificed at the Alter of the Cheap, and we no longer produce, we merely consume.

Our main economic activity has become the ceaseless churning and manipulating of the vast capital the old system produced.  No value is added, some is skimmed off by the uber rich with each churning.  It’s a colossal, self-limiting, Ponzi scheme.

The rich and the corporations have no allegiance to the US or its workers, and so they take the fruits of their skimming and either sit on it, or invest it overseas, where the cheapest goods can be made.

Job creators?  Sure.  But not good jobs, and not here.

When they’ve skimmed all they can from the US consumer, they’ll focus on the emerging middle class in China, India and elsewhere, leaving us to sit among the decaying detritus of cheap stuff we can no longer afford, searching in vain for the happiness we thought we were buying.

It’s a sprint to the bottom.  Lower wages; dangerous working conditions; more pollution; greater liquidation of natural capital; more global warming; less happiness.

Globalization – the handmaiden of Cheap at All Costs – is celebrated as a solution, when it is the problem.  And even astute economists seem unable to realize that when another country’s comparative advantage is based on environmental crimes, low pay, and inhuman conditions, then comparative advantage doesn’t operate the way it’s presented in textbooks and abstract econometric models.

Globalization has enabled corporations to leave the old economic compact based on equitably shared wealth behind. For example, in the US, CEO pay is once again soaring, while the average wage earner hasn't kept up with inflation.

Just as Wal-mart has driven down wages throughout the retail sector, the Doctrine of Cheap has driven down wages for the developed nations, and it will cap them at unjust levels in the developing world.

And the dirty little secret hiding behind the globalization façade is the devastating affect it is having on the environment.

For example, this week, Bejing suffered from air pollution so severe, that the airport was shut down.  It’s easy to ignore this kind of environmental insult when it’s “over there.” But the carbon and soot and filth generated in China ultimately reaches us.

At the scale of human economic activity we’ve reached, we suffer the environmental consequences of our purchases no matter how cheaply or how far away they are made.  In a world were humans have become a global force of nature, “there” is “here.”  Climate change is exhibit A in how insults to our commons affect us all.

But the dirtiest little secret of all, is that we – the 99% -- enable this race to the bottom.  Our addiction to cheap stuff and our desire for more, more, more is the fuel that feeds this destructive Ponzi scheme.

But there is good news here, too.  If we are the enablers of the Wal-martization of America, we have the power to change course.

How?

We are the marketplace, and we decide who wins and who loses by where we park our money, what we invest in, what we choose to buy and who we choose to buy it from.
Think about it.  We purchase about $80 billion dollars worth of stuff a day, not including what we spend on our homes, cars and normal household bills.

We hold a total of $17.5 trillion in retirement funds – the single biggest source of money the big banks, Wall Street, fat cats, and assorted other speculators use to play their very own version of hi-risk Texas hold ‘em.

The real power in our economic and political system resides with us, the 99%, if we have but the wit, wisdom and courage to seize it.

Let’s occupy the whole damn marketplace.  Let’s vote with our dollars and our values.  That’s an election they can’t buy.

Next Low-Wage Haven: USA

Saturday, August 6, 2011 by Labor Notes
by Jane Slaughter

Jokes about the U.S. becoming “Europe’s Mexico” are commonplace, but now high-priced consultants are pushing the notion in all seriousness.

They’re predicting that within five years certain Southern U.S. states will be among the cheapest manufacturing locations in the developed world—and competitive with China.

For years advisers like the Boston Consulting Group got paid big bucks to tell their clients to produce in China. Now, they say, rising wages there, fueled by worker unrest, and low wages in Mississippi, Alabama, and South Carolina mean that soon it won’t be worth the hassle of locating overseas.

Wages for China’s factory workers certainly aren’t going to rise to U.S. levels soon. BCG estimates they will be 17 percent of the projected U.S. manufacturing average—$26 an hour for wages and benefits—by 2015.

But because American workers have higher productivity, and since rising fuel prices are making it even more expensive to ship goods half way around the world, costs in the two countries are converging fast.

Dan Luria, research director of the Michigan Manufacturing Technology Center, says many of the big-name consultancies, which until a year ago were advising their clients to “Asiafy their footprints,” are now telling companies to think twice.

BCG bluntly praises Mississippi’s “flexible unions/workers, minimal wage growth, and high worker productivity,” estimating that in four years, workers in China’s fast-growing Yangtze River Delta will cost only 31 percent less than Mississippi workers.

That’s before you figure in shipping, duties, and possible quality issues. Add it all up, says BCG, and “China will no longer be the default low-cost manufacturing location.”

ALREADY COMPETITIVE

Actually, employers deciding where to produce the next generation of widgets may not need to look to the South. Plenty of factory jobs in Northern states—even in the former high-wage stronghold of auto—are already “competitive.”

Ford’s flagship Dearborn Truck plant outside Detroit, for example, contracts non-union workers to do inspection and repairs—long the coveted jobs, that workers could get only with many years’ seniority—at $10 an hour with no benefits.

That’s more than the Chinese average now, but less than what’s projected for 2015.

Brad Duncan, who worked at the plant last year, said it seemed like dozens of small companies were involved. Many pay people as “independent contractors,” he said, and are essentially fly-by-night operations.

“I worked for 10 bucks an hour with no overtime for around 66 hours a week,” Duncan said. “Then I’d get laid off for a week or more at a time with no notice.”

At a GM plant in Lake Orion, Michigan, north of Detroit, contractors hire young third-tier workers at $10 an hour or less to gather parts for assemblers, work done very recently by GM employees.

These kids are union members, though they don’t have a contract yet. The United Auto Workers convinced the contractors to let them organize the workforce through card check.

“There are more people there handling parts than building cars,” said Dan Theisen, a plant electrician.

Many of the union assemblers are themselves second-tier workers paid less than the U.S. manufacturing average, with wages of $14.60 and no pensions.

“It makes it hard to do anything for the second tier when the third tier is so bad,” said Theisen, a dissident who’s spoken against lowering GM wages.

ALREADY A TREND?

Among the U.S. companies rethinking their production locations are Ford, Caterpillar, an ATM company building a plant in Georgia, and Wham-O Inc., which returned Frisbee production to California and Michigan.

Master Lock is bringing work back to Milwaukee from China. GE, enticed by federal stimulus money, will be making green refrigerators in Indiana with Electrical Workers (IBEW) members instead of in Mexico.

And Suarez Manufacturing Industries has been lauded for relocating production of a space heater from China to North Canton, Ohio.

After experiencing lengthy transit times from Asia, CEO and North Canton native Ben Suarez painstakingly put together a chain of suppliers from within the U.S. In a former IBEW Hoover vacuum factory, abandoned in 2007 in favor of Mexico, he’s now contracted with two companies to supply the plant with labor.

Wages will run from $7.50 an hour (general labor) to $10 (assemblers) to $16 (programmers). Federal minimum wage is $7.25.

The plant will soon employ 100-150 workers in full-time jobs. As production ramps up, others will be guaranteed seasonal work, October through March. The plant received 3,000 applications, according to the company’s Lauren Capo.

NOT YET

The Steelworkers union has long agitated for a manufacturing renaissance in the United States, arguing that an economy that doesn’t make things is weak and unsustainable. In 2007 the union initiated the Alliance for American Manufacturing, a partnership with employers.

AAM Executive Director Scott Paul says there’s no hard evidence yet that manufacturers are actually returning from China in enough numbers to constitute a trend.

Rather, various consultants are now telling their clients to consider the U.S. They’re the same consulting class that “popped up around the time of NAFTA with ‘yes you can in Yucatan,’” he said.

Paul cites the factors that could converge to bring more work to these shores:

• Costs of labor and commodities are rising on the Chinese coasts, as workers demand higher pay. If companies move further inland to poorer areas, they hike their logistics costs.

• In most of the world, the dollar is worth 25 percent less than three years ago, and in China 5 percent less.

• Shipping costs are increasing because of rising energy costs.

• Companies fear that in China they’ll lose their intellectual property to spin-off competitors.

• Some consumers prefer an American-made product.

• The U.S. has an abundance of skilled but unemployed workers.

• And U.S. wages are stagnant or even falling.

But, Paul notes, if companies choose to build in the lowest-cost states—as Japanese automakers have done for nearly 30 years—“it quickly becomes a state vs. state competition, a race to the bottom. If South Carolina can offer lower wages, so can Mexico.”

WHAT KIND OF JOBS?

Will factory jobs flood into Michigan and Mississippi at just above minimum wage? Or is that still not cheap enough? The fact remains that the decisions are all made by corporations seeking the greatest profit in a dog-eat-dog world.

As Michael Zinser, one of the co-authors of the BCG report, told Labor Notes, “Location is agnostic. It’s a question of what the market will bear.”

Luria predicts that some manufacturers will indeed leave China, but sees the moves mainly benefiting Mexico and Eastern Europe.

Paul, from the manufacturing alliance, wants to see the government step in and influence those location decisions through government policy, as it did with the domestic content requirements in the 2009 Recovery Act and the high-speed rail bill. The German multinational Siemens located a train factory in Sacramento, California, as a result, he said.

Likewise, clean energy loans, grants, and tax credits led to 18 new advanced battery factories in Michigan (though not at high wages). “None of this would be possible without public investment,” Paul said.

HANDS-OFF

Mostly, of course, the Obama administration has taken a hands-off approach to what business should do, instead providing cash on request in the bank and auto bailouts.

UAW dissidents said the auto bailout was a giant missed opportunity to steer their industry toward clean products built in the U.S. at decent wages. Unions and consumer groups protested because the banks were saved but stiff regulations were not attached to their checks.

Paul notes that government policies to promote industry are the norm elsewhere, in old capitalist countries as well as in new ones like China. He fears the absence of such government help leaves U.S. workers with only one bargaining chip—and that’s not a happy one.

“Low wages won’t be the factor that compels companies to locate in the U.S.,” he said.

“But absent a national economic development strategy where there is a focus on manufacturing, that’s what we’re left with.”

The country that started the corporate globalization experiment needs to end it.

America, Land of Paradox: The Country That Launched Corporate Globalization Should Be First to End It
By Joe Costello, Archein
Posted on August 26, 2010

To truly appreciate America, you have to understand its paradoxes. They are great. The first modern republic birthed in the original sin of slavery. A nation of immigrants that destroyed the native population, and time after time worries about the next wave of immigrants. The history of immigrant bashing is old as the republic, always coinciding with economic downturns. The Know-Nothings of the 1850s worried about the first great mass of German and Irish immigration, and of course the protestant nation worrying about papism. There were the Japanese interments of WWII. More recently, in order to get reelected governor of California in 1994, Pete Wilson embraced the anti-immigrant, anti-Mexican Prop 187. He won, but destroyed the Republican party in California. And of course we have the most recent idiocy in Arizona. A nation of immigrants, which every once in awhile tries to close the door, that's paradox.

If you understand this trait in the American psyche, while it doesn't make it anymore palatable to watch the latest manifestation, it does give you some helpful context. Especially if you keep in mind that over time, America has been as successful, more so than most, using the principles and practices of this republic's founding, to mix the nationalities of Europe and more fitfully other peoples from across the planet into a relatively healthy concoction. After two-hundred years, there is little discrimination based on European nationality. The great black underclass, many still struggling for economic and cultural equality, fifty years ago stood up and claimed their full rights as citizens, a revolution that shook the entire society atop it, even if they have a long way to go. Even Native Americans have finally gained a little retribution with the casino industry. So, today as we struggle to incorporate new immigrants, some from Mexico, an old and continuing struggle, many more recently from Southwest Asia and the Middle East, we can draw some understanding, though not acceptance, from America's great paradoxical history.

However, the recent anti-immigrant wave is developing in a new economic environment, one that is very different from much of the past. The United States from its beginning enjoyed a massive cornucopia of land and natural resources. It developed into the world's foremost industrial power, and after WWII was far and away the planet's strongest economy. But in the last several decades, there has been a great change. The financial system with the assistance of much of the American political class, began dismantling the American industrial sector and shipping it over seas. Now, the relationship of the financial sector to the rest of the America has always had some problems, but over the last three decades, their interests have diverged to the point of outright hostility. It was Wall Street after all who profited on both sides, financing the dismantling of American industry and rebuilding it across the planet. It was also Wall Street who profited most by the resulting stagnation in American wages, replacing good paying jobs with debt.

It's time to end much of the corporate globalization experiment. There's many reasons for this, and I'll throw out that energy and environmental reasons are among the largest. We need to reform our economy from the ground up, and that importantly means reincorporating into the economy the advantages of locality. We need to start raising tariffs. We should start with imported oil, that would be a good signal to rest of the world of the seriousness of our intentions for reforming the American economy. Of course, no attempt at reforming the American economy can be started without first reforming American politics. Finance owns our political class. They have aided and abetted the dismantling of the economy. Remember in 1992 when Ross Perot talked (I can't more highly recommend watching Ross here) about that giant sucking sound from south of the border, he was right in hearing, though wrong in direction. That sucking sound was coming out of DC. If you hear a DC elected official advocate "free trade", immediately vote them out.

Give us your tired, your poor, and your huddled masses yearning to breathe free, but keep your cheap goods. The country that started the corporate globalization experiment needs to end it -- another paradox.

BP offers cheaper gas

By Steve Hargreaves, Senior writer
August 4, 2010

NEW YORK (CNNMoney.com) -- In an effort to help struggling gas stations and appease furious consumers following the Gulf disaster, BP is lowering its gasoline prices.

BP is offering a series of incentives to its distributors that could shave two cents off the price of gasoline at the pump.

Contrary to popular belief, BP does not set prices at the gas station.

Most BP stations are independent businesses, they're not owned by the company. Much like a convenience store selling Coke, the gas stations buy their gas from distributors, which are also independent businesses.

It's the distributors that buy the gas from BP, and they are the ones being offered most of the discounts.

Whether or not the discounts will translate to lower prices for drivers is up to individual station owners.

Here's what BP is offering, according to Tom Kloza, chief oil analyst at the Oil Price Information Service:

• Up to a penny off of the wholesale price of a gallon of gas.
• A rebate if distributors keep their gasoline sales up.
• A discount in the rate it charges service stations for motorists that use credit cards.
• And another "temporary voluntary allowance" worth a penny a gallon.

"Call it an anger management allowance," said Kloza.

All told, the discounts add up to between three and four cents a gallon, he said.

BP confirmed the discounts, although didn't put an exact price on all of them.

"Basically, what we've done is put together a package of assistance for the independent owners and operators of BP stations," said BP spokesman Scott Dean. "Unfortunately, customers have taken out their frustrations on service station owners, who have nothing to do with the events in the Gulf."

It's too early to tell if dealers and service stations are passing along the discount to drivers, but anecdotal evidence suggests they are, at least partly.

At a BP station in McLean, Va. earlier this week, gas prices were three cents a gallon lower than at two competing stations located right next door.

Kloza said he'd expect gas station owners to keep maybe half the discount to make up for lost business, and try to lure customers back by offering lower prices with the other half.

Paul Fiore, executive vice president of the Service Station Dealers of America and Allied Trades, said it would be up to each station or distributor to make that call. He expected some would and some wouldn't, depending on how business has been impacted and what the competition is doing.

As for the spill's impact on BP stations in general, Fiore said customer reaction has been mixed, with stations closer to the Gulf taking more of a hit.

"Some stations are off 10, 20, 30 percent," he said. 'It's not pretty."

Meanwhile in New York City, he said sales have, oddly enough, actually risen.