There’s been a minor scandal recently as some leaked Walmart executive e-mails talking about how atrocious the sales so far this year have been, historically bad.
I was reading up about it a bit and came across “A Scary Reality About Wal-Mart’s Customers: They’re Broke”
Now I don’t know much about economics beyond the basics. So my layman’s understanding may be naive and simply wrong, and I welcome people to correct me.
But what seems to have happened to me, is this:
A few decades ago, Walmart leads the charge in a new radical price above all else strategy. They cut their prices by buying the cheapest possible crap, from the cheapest possible source, using their muscle to force destructive cuts on their suppliers which forces them to cut their expenses, quality, and worker treatment as hard as possible just to stay competitive. Walmart saves money themselves by treating their workers badly, forcing unpaid overtime, cutting people’s hours just enough to avoid benefits, etc.
Walmart flourishes. The average US worker is still has a lot of money by global standards because they’ve probably got some decent jobs and decent pay. Combine their economic power with Walmart’s cut throat business practices that lead to low prices, which caters perfectly to the US consumer’s “price above all else” buying habits, and you get a hugely successful company that flourishes.
Other companies see the success Walmart has been having by screwing their workers as hard as possible, putting the vice on their suppliers, and exploiting the cheapest possible labor in the world, and so they follow suit.
Companies across the economy do this. Workers at thousands of companies are given fewer hours to get them below legal minimum number of hours to avoid paying them certain benefits as full time workers. People get fired and re-hired, or hired as independent contractors to avoid paying certain benefits to the workers. Businesses are gutted with no concern for long term health of the company, just enough to continuously try to boost quarterly reports and stock prices. Work is outsourced to cheaper countries at an incredible rate.
For a while, this works. People get screwed in little bits here and there, but our American attitude towards such people is that they must’ve done something to deserve it. We simply repeat the “the only obligation of a company is to turn a profit” mantra and happily watch as our economy cuts itself to death.
Eventually, the obvious happens. If you impoverish the average worker in a country by making sure his work is compensated as little as possible, they will grow poor enough that you can no longer sell your products to them. When this was just Walmart, and most people still had good jobs, it wasn’t something that could crush an economy. But when most companies are looking at any angle they can to increase their quarterly bottom line as much as possible, the entire workforce as a whole gets screwed. And an impoverished workforce can no longer be the consumers you need to drive your economy.
The interesting thing in all of this is that the US has not become poor. The US in terms of GDP is still fabulously rich. It’s just that the average person has it worse than they’ve had it in decades. The money is still all here - for now - but it’s sitting in the hands of a few people, and in idle corporate cash reserves.
The ultimate irony is that Walmart is in trouble because of the practices they pioneered.
So do we acknowledge at some point that this is a bad way to run an economy?
Ah, yes. The American worker getting screwed for decades isn’t the reason that they don’t have enough money to consume and drive the economy, it’s the $15 extra a week they pay in taxes.
As always, the answer is tax cuts.