:dubious:
Damn Bricker, that was just about the best explanation of an economic concept I’ve read on the boards. Well done.
Beating people with axe handles is somewhere between assault and murder, I’d expect anyone to understand that such an argument automatically turns on the fool that makes it.
Quite so! I mean, if everybody starts crossing pickets and such, there goes county’s job, and we can’t have that, can we?
As far as the grocery strike is concerned:
I went to Stater Brothers this morning, as they had no picket lines to cross. I also drove by near empty parking lots at Ralphs and Vons. Stater Bro’s was full to the brim. I talked with a lot of people there. Many of us were only there because we did not want to cross a picket line.
And many of us agreed never to return once the strike was over.
I don’t agree with either side here. I think both should offer something to come to a comprimise. But until that happens, I’m shopping at a shitty store.
Nope. I was in charge of all the tools in our maintenance department. When we found out just what we were paying for some things such as drill bits, saw blades and screws/fasteners, we started purchasing them on the local economy.
This actually went on until our Brigade commander found out and put a stop to it.
If YOU can explain the reasoning behind $10 drill bits and saw blades and standard sizednuts and bolts at $5 a pop, I’d like to hear it.
I will admit though that after enough complaints, the prices of our tools and expendables DID drop considerably. This happened AFTER Bush the first was elected so who knows what happened…
Maybe they didn’t meet the tough military spec’s for bits and blades??
d&r
Yes, it does. It’s a complicated and expensive way of buying things from firms when you aren’t willing or able to commit to what you need. I understand that the government may need to use such techniques from time to time, but the disadvantages compared to straightforward ordering are obvious. I mean, if yuou guaranteed your vendor a purchase for 1,000 hammers, they wouldn’t need to jack up the price so much. Au contraire.
Exactly.
If the government would lock down minium quantities, they could avail themselves of far more price-effective contracts. That’s exactly true.
So why don’t they?
Sometimes they do. Sometimes they will commit to minimum (low-balled still, but at least minimums) on common items like drill bits and hammers and toilet seats. There is reluctance to do that for a reason that has nothing to do with operational readiness or procurement rules: bad publicity. If they end up not needing that number, they are going to be faced with a news story about how the government bought 500 hammers with your tax dollars and they’re just sitting in a shed at the Army Guard air support facility in Iowa. This gets worse if the reporter finds out that the Army Guard in Sacramento, California, is planning to go buy hammers.
You may read such a story and think, “Hey, those goobers could just send their hammers to California!” But that’s a solution that works fine if you’re talking about Uncle Pete in Iowa, Aunt Jo in California, and a one-time surplus and deficit of hammers. If you want to be able to apply it as a solution to supply in general, then the Army Guard in each state would need to stand up a wholesale warehouse for parts, an accounting system to buy and distribute parts within the state, and a system to transfer money between the separate organizations that are the other state guards.
It’s precisely to avoid that sort of organization, and the costs of paying the people to run it, that the Army Guard turned to civilian contractors in the first place. When people talked about “cutting military spending,” these are the sorts of things that were cut, along with bombs and tanks and fighter pilots. The BRAC (Base Re-Alignment and Closure) process also made inroads into the military’s ability to stand up an internal distribution organization.
And they were right to do so. As inefficient as the current process is, every study I’ve been told of suggests that the cost for the government to own the warehouses, pay the salaries, do the accounting, etc., is more than turning it over to the civilian world. There are a number of reasons for this. Many have to do with the necessity to follow government procurement regulations. As a civilian supply company, I can take a loss on my stock if I realize it’s just not going to do. I stock up on batteries thinking a hurricance is going to hit - and it misses. Now I have valuable space taken up by batteries that will move slowly. So I offer a buy-two-get-one-free deal and clear them out. The government requires extensive documentation before disposing of anything at a loss, or at no cost.
There’s another reason that the government is reluctant to commit to more than minimum quantities. Its funding comes on a year-by-year basis. How can you sign a contract promising to buy 5,000 of my security systems over a year when you can’t count on Congress having a budget in place telling you what you may spend? Even if Congress does its job, your outlook goes only from 1 October to 30 September. If you commit to those security systems, and then end up with a slashed budget - what are you going to do?
Again and again, the problems above point back to one rather large target – which, coincidentally, is exactly what you first responded:
What forces this process to happen are the massive number of regulations that burden the government procurement process.
We started this conversation because you suggested that these sorts of government contracts represented corporate welfare. I’m making the case that they arise simply due to government inefficiency. The corporations that enter into these contracts are responding to the government’s “complicated and expensive way of buying things” because that’s what the government demands.
Are you with me so far? (There’s more, believe it or not!)
- Rick
It’s worth pointing out that Milspec equipment often has to meet a much stricter specification than ordinary stuff. That drill bit may have to be guaranteed to work at -40, for instance.
Try this. Buy a 1/8" drill bit and Fed-Ex it to someone in Baghdad, or Alaska, or anywhere remote. Tell me how much it costs.
I don’t know why an official Army hammer costs $400 but I’m sure there are a few contributing factors:
-Government can afford to waste money
-It’s a little more involved than sendind some provate to the local hardware store
-Funky accounting practices
-Outdating an inefficient sourcing systems (I doubt the hammer costs $400. I think it’s more likely when you add up all the costs associated with acquisition, shipping, tracking and so on, it adds up).
I can train a monkey to turn on a PC. Judging from some of the posts regarding government, business, corporations and economics I’ve read so far, someone beat me to it. I realize that to most of the ignorant masses, corporations and government looks like one big monolithic entity consisting of nothing but money. I assure you that is not the case. Sometimes the government is your friend. Sometimes it isn’t. But it isn’t as if all the heads of government and corporations meet each weak in a secret meeting to plot how to control the masses.
Government officials care about one thing - getting reelected. Corporate exectutives care about something else - making money. Sometimes these goals are in synch. Sometimes they aren’t.
Why do you people think there is “corporate welfare”? Because some senator wants his lacross buddy from high school to get rich? It’s because if you have a quarter million steelworkers in your state who are lossing their jobs because of foreign imports, they don’t care about basic economics. They want someone to protect their jobs or they won’t vote for you next year.
While in theory, I agree with you, how would you achieve this in practice? The market encourages people to seek employement in the fields where they are most needed. I may want to continue a career in IT but at some point, if I am unable to find a job, I’m going to have to switch careers. It’s too bad if that’s what I had my heart set on, but what’s the alternative? Massive subsidies to companies so they can continue to employ workers who aren’t producing? And who pays for the subsidies?
You sir are my new hero. This screams to be sig material. May I?
And yet, in a time when Safeway’s profits are going into the toilet, CEO Steven Burd made $12,226,122 last year, including $10,968,122 in stock option exercises. That comes to a cool $5,878 an hour for a 40-hour week. And that doesn’t count the $76,752,557 in unexercised stock options he holds. I can think of a number of individuals, including myself, who could run Safeway into the ground for a lot less than they’re paying Mr. Burd to. Shodan, it would appear that Steven Burd has indeed been able to escape the law of supply and demand! A cynic might conclude that Mr. Burd has some sort of unfair political advantage, but we can’t have that kind of negativity in the U.S. of A., can we?
Is anyone really entitled to $12,226,122 a year for running a grocery store chain? Or doing anything short of curing cancer or inventing a perpetual motion machine? But, you say, who are we to judge another person’s worth? Well, several posters in this thread have weighed in on the worth of the cashiers who are on strike, saying that they have no right to $20 an hour and benefits, being uneducated and all. What do you think about Steven Burd? Is he earning that $12 mil a year, or do the principles of fairness not apply to him? Perhaps Safeway might look someplace other than its cashiers’ health insurance when it needs to cut costs.
You free marketers seem keen to apply the inexorable logic of the market, but only when it screws over the workers. How many hours a day do you people work? 16? 18? No, 8 you say! Why is that? Do you think it’s because corporations suddenly had a fit of generosity? Study your history. You can thank unions for your 8-hour day and 5-day week, and regrettably, the aforementioned axe handles were involved at various junctures. If things keep going the way they are, with these corporations playing hardball every chance they get to squeeze a little more blood, the axe handles are going to come out again. And whose fault will it be?
I won’t be crossing this picket line, and will not return to any Safeway store unless the cashiers get what they want. even sven, come on over and we’ll split an Alka-Seltzer.
Hyperelastic, I have no information but your cite, but the numbers there are clear: the reason for the 40% drop in profits wasn’t from decreased sales (they were close to identical for the two years cited), but rather increased costs. Wanna take a guess what the big cost is in a low-margin business like Safeway is in? Labor!
Also, your cite says
That isn’t Safeway making excuses, it’s your cite claiming “industry analysts”. And what they’re saying is that Safeway is getting it’s butt kicked by Wal-Mart. Now, what exactly is different between Safeway and Wal-Mart? Union Labor!
Man, I wish wish wish Safeway would throw the bums out and go non-union, and perhaps give Walmart a run for their money. Doubtful though. The thugs are just too far in, like a cancer. We can always hope.
And Hyperelastic, let’s talk about your little AFLCIO cite, shall we? It is a typical example of why it’s so clear unions should be shut down.
a) The message from the AFLCIO is obvious: The CEO is not on your side. He exists to suck the food from your children’s mouth. He is not your friend, not your co-worker, not even human. He is a vampire. The truth of course, is that the CEO is responsible for your job existing. Your CEO is responsible for the health of your company. Any CEO wants his workers happy and inspired, because they will as a result be more productive. A CEO wants everyone to be on the same page going forward as a team. And your cite does the exact opposite. It’s not about teamwork; it’s about “us vs. them”.
b) The numbers imply a falsehood. Saying that Burd made $1,258,000 in 2002 implies that this money should have gone to employees. Well, let’s do the math, shall we? Say Burd worked for free, and that money was divided evenly amongst Safeway’s 176,000 employees. That means each employee would make an extra $7.14 per year. The fact is that Mr. Burd does far more for each Safeway employee for $7.14/year then their union does for them for far far more.
and now the most interesting and important point:
c) the cite is flat out lying! Mr. Burd ended 2002 with approximately $56 Million dollars LESS than he started 2002 with, as a direct result of his employment with Safeway! Yes, you heard me right. The AFL/CIO bastards say Mr. Burd made $1.3m in salary, and they say he cashed out on $10m in options, but they don’t bother to tell you that his options (i.e. his REAL pay) went down in value by $56 million dollars for that year.
The math is simple: Your cite says he had $76,752,557 in unexercised options at the end of the year. At the end of the year, the stock price was $23.36/share. At the beginning of the year, it was $40.45. Add it up.
If that is what they were offered, or negotiated for, then yes. Perhaps the Safeway Board should reconsider their policy for hiring a CEO, but that’s their business.
That seems a long way from the $12,226,122 a year fiqure, doesn’t it??
But…but…EVIL HEARTLESS CEO!!
Sure. We can negotiate the royalty fees later.
So only CEOs who work for Johnson & Johnson or Phizor are entitled to big cash money? Is not providing affordable food to thousands of people at least as important as curing cancer or moving perpentually?
“The Market” is not some mystical force. It is the expression of the wants and needs of millions of consumers. It is the “invisible hand” that guides society in determining how much steel or DVD players or ball bearing lubricant to produce.
Could you run a billion dollar company? Could you create a multi-billion dollar company out of thin air like Gates or the Waltons? How many people do you know who can?
I work whatever I am required to. Usually around 40 hrs a week but often much longer. Quite often, I have to travel, for weeks at a time, something the average grocery clerk never does. I get paid a lot more than a grocery clerk because as an MBA, I can do his job, but he lacks the business knowledge to do mine. I would not accept a grocery clerk job because it does not pay enough to make going to business school worth the time and money. If a grocery clerk job did pay as much as an MBA level job, maybe I wouldn’t even bother going to college. That would be a waste of resouces since instead of using my knowledge to makes companies run better, I would just be stacking cans.
Welcome to 2003. You have a fairy-tale notion of a CEO’s priorities. The fact is, the system is set up so that if a company does well, the CEO makes a truckload of money; if the company does mediocre, the CEO makes a truckload of money, and if the company tanks, the CEO makes a truckload of money. Oh, and if the CEO gets fired, he walks away with (guess what) a truckload of money. Again, you (and the crony-filled boards of directors of these clueless corporations) seem to have an inability or reluctance to apply the rules of the market to top management.
I did not imply, you inferred. The point is that if the employees have to take their lumps, so should management. I’m sure the Safeway employees are grateful to Burd for cutting their pay in exhange for $7.14.
**
I don’t need a math lesson, but you need a finance lesson. The $76 mil in stock Burd had at the beginning of the year was given to him by Safeway. The $56 mil you cite was a paper loss on stock that he didn’t have to pay for in the first place. I’ll take that kind of loss any day if it means I get to keep $76 mil. Your defense seem to consist in that the $76 mil was actually $132 mil at the beginning of the year. Boo fuckin’ hoo. He’s filthy rich and his employees are getting the shaft.
msmith537, your interpretation of my comment about only people who cure cancer or invent perpetual motion deserving big money shows your bias and confusion. I said that the people who do the work deserve the money, not that the CEOs of the corporations who employ the people who do the work deserve the money. You seem to have difficulty grasping that it’s actually the workers who create the wealth, whereas the fatcats at the top just skim the profits. Of course, those CEOs really earn their millions, though. Anyone who can go into a quarterly telecon with fund managers telling how they’re going to boost the stock price by laying off loyal employees, ruining their families, and horse-fucking the employees who are left over certainly speaks of a rare ability.
The replies to my first post make my point for me. You pro-business types are full of excuses for why the CEO can’t manage his company: unfair competition from Wal-Mart, poor general economy, increased costs, blah blah blah. But when a worker can’t manage his family on what he earns, it’s all his fault, probably drinks too much, let him pay the price, etc.
It is my understanding that at two of the three supermarket chains it is management locking out the union labor (to damage the union’s ability to last) rather than sympathetic strikes. Does this alter the moral calculus any? Two noble, virtuous chains are willing to risk temporarily losing business in order to nobly crush the evil union members underfoot.