Sunday, November 27, 2005
Thanksgiving and Thanksgetting
by Tom Bozzo
Paul Krugman has an apt description of the U.S. economy of the early Zilches as dependent on our ability to sell each other houses with money borrowed from China.
Another sizeable chunk of the picture, which encompasses much of the retail sector, is the part of the economy that makes money selling us Cheap Stuff made in China — or other developing countries with the combination of low prevailing wages and weak or weakly enforced labor laws — also with money borowed from China. (I should note that it's the persistent trade imbalances rather than trade per se that's my main concern.)
The basic sales pitch for this arrangement has, as readers of Thomas Frank will know, three main prongs. The carrot is that it's supposedly good for us consumers: Sending production of Cheap Stuff to China holds down measured inflation and allows us to have more Cheap Stuff for a given amount of income. A related point is that we asked for it by voting with our dollars, and by the way only suckers don't want more Cheap Stuff and only 'elitists' would keep you from getting Cheap Stuff. Failing that, there's the stick: It's the inevitable consequence of market logic; adapt or be crushed.
I think this can be seen as a couple of problems that, nastily, stand a good chance of reaching critical points before they are even generally recognized as problems.
The corporate assault on wages (and, more broadly, rank-and-file employees) has depended on the ability to use somewhat cheaper Cheap Stuff to convince people that they shouldn't worry so much about manufacturing workers whose jobs are disappearing never to return, that low or nonexistent wage growth is good for us, and so on. The trick is that this process can only make so many people insolvent at once. We're arguably close to a tipping point for that, if the "management's dream, labor's nightmare" end-game of the Delphi auto-parts bankruptcy — basically, extending Wal-Mart wages throughout the manufacturing sector — comes to pass. The catch here is that the time to have done something about this was five years ago (or more). Will it be enough to save our bacon that "only" a few million payroll jobs would be directly affected? Will the Cheap Stuff be a consolation either way?
The related problem is the potential crisis of the trade and government budget deficits. The perverse behavior, as Krugman noted to Times Selecters on Friday, is that we're dismantling domestic production capacity and saving less (alarmingly so, as these graphs accompanying Gretchen Morgenson's column suggests) when we'll eventually need some combination of more domestic saving and more exported (or import-substituting) production to remedy the imbalance. Indeed, on the face of it, we may be hastening the arrival of the day of reckoning through increasing dependence on imported Cheap Stuff. The hope is that the incremental imbalance from each manufacturer making a small decision to follow the pseudo-inexorable offshore pull will keep the imbalances "small" enough that the markets continue to treat them as "small." If this sounds like it's an unstable situation highly susceptible to a crisis of faith in the U.S. economy, I think that's about right.
Maybe all the pie is making me blind, paradoxically, to the Great American Pig-Out. Maybe my brain simply refused to register ads from the handful (this year) of retailers who decided that it would be a great idea to kick off "Black Friday" on Thursday, possibly opening a new era in retail labor relations. Maybe I just went out on the town for a bit of Christmas shopping a little too far into the relatively civilized tail of the day after Thanksgiving. Maybe I want to tweak such conservatarian reader(s) as I might have. But scenes like this from the national obsession with bargain-shopping just make me think the country is just totally screwed, even if the precise manner is TBD. (For the fifteen-word version of the following, see Oscar's reaction to the same thing over at The Columnist Manifesto.)
Paul Krugman has an apt description of the U.S. economy of the early Zilches as dependent on our ability to sell each other houses with money borrowed from China.
Another sizeable chunk of the picture, which encompasses much of the retail sector, is the part of the economy that makes money selling us Cheap Stuff made in China — or other developing countries with the combination of low prevailing wages and weak or weakly enforced labor laws — also with money borowed from China. (I should note that it's the persistent trade imbalances rather than trade per se that's my main concern.)
The basic sales pitch for this arrangement has, as readers of Thomas Frank will know, three main prongs. The carrot is that it's supposedly good for us consumers: Sending production of Cheap Stuff to China holds down measured inflation and allows us to have more Cheap Stuff for a given amount of income. A related point is that we asked for it by voting with our dollars, and by the way only suckers don't want more Cheap Stuff and only 'elitists' would keep you from getting Cheap Stuff. Failing that, there's the stick: It's the inevitable consequence of market logic; adapt or be crushed.
I think this can be seen as a couple of problems that, nastily, stand a good chance of reaching critical points before they are even generally recognized as problems.
The corporate assault on wages (and, more broadly, rank-and-file employees) has depended on the ability to use somewhat cheaper Cheap Stuff to convince people that they shouldn't worry so much about manufacturing workers whose jobs are disappearing never to return, that low or nonexistent wage growth is good for us, and so on. The trick is that this process can only make so many people insolvent at once. We're arguably close to a tipping point for that, if the "management's dream, labor's nightmare" end-game of the Delphi auto-parts bankruptcy — basically, extending Wal-Mart wages throughout the manufacturing sector — comes to pass. The catch here is that the time to have done something about this was five years ago (or more). Will it be enough to save our bacon that "only" a few million payroll jobs would be directly affected? Will the Cheap Stuff be a consolation either way?
The related problem is the potential crisis of the trade and government budget deficits. The perverse behavior, as Krugman noted to Times Selecters on Friday, is that we're dismantling domestic production capacity and saving less (alarmingly so, as these graphs accompanying Gretchen Morgenson's column suggests) when we'll eventually need some combination of more domestic saving and more exported (or import-substituting) production to remedy the imbalance. Indeed, on the face of it, we may be hastening the arrival of the day of reckoning through increasing dependence on imported Cheap Stuff. The hope is that the incremental imbalance from each manufacturer making a small decision to follow the pseudo-inexorable offshore pull will keep the imbalances "small" enough that the markets continue to treat them as "small." If this sounds like it's an unstable situation highly susceptible to a crisis of faith in the U.S. economy, I think that's about right.
Comments:
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Some people like to shop. Some (er..., most) people like Wal-Mart. Some people enjoy the rush of running into a store to get the cheap stuff before it sells out. Some people are idiots. Combine all of the above and something bad might happen. But extending these events to something that actually matters seems like quite a stretch. You and Oscar appear to be in full drama queen mode.
# posted by 
: Tue Nov 29, 10:10:00 AM
: Tue Nov 29, 10:10:00 AM
Most people like Wal-Mart? Dude, those commercials are part of a crude but systematic attempt at corporate image surgery.
I won't belabor the point that shopping is joining (or has long since joined) religion among the opiates of the masses. I'll just reiterate that my beefs aren't with consumption per se but with the sustainability of the consumption growth that's kept the economy animated for the last few years, and of the substitution of imports for formerly domestic production in the face of massive trade deficits.
I won't belabor the point that shopping is joining (or has long since joined) religion among the opiates of the masses. I'll just reiterate that my beefs aren't with consumption per se but with the sustainability of the consumption growth that's kept the economy animated for the last few years, and of the substitution of imports for formerly domestic production in the face of massive trade deficits.
I haven't seen any wal-mart commercials as of late, but from what i have read, a vast majority of people in the US have shopped there. In Madison, the mood is obviously different, though I will note that I drove by the West side Wal-Mart the other day, and the line to exit the parking lot stretched all the way to the front doors from Watts road. They seem to be quite popular even here.
As far as wages go, I think that propping up wages to points that the market will not support is much more likely to lead to economic disaster than what you mention.
As far as wages go, I think that propping up wages to points that the market will not support is much more likely to lead to economic disaster than what you mention.
# posted by : Tue Nov 29, 04:29:00 PM
: Tue Nov 29, 04:29:00 PM
The fallacy of imputing assent to spending should be pretty obvious. Or what am I to make from the fact that you were willing to spend a low six figure sum to buy property in our fair city?
As for 'propping up wages,' remember that wages have been stagnant while labor productivity has been increasing -- labor is not getting its typical share of the pie. Hmm, why could that be?
As for 'propping up wages,' remember that wages have been stagnant while labor productivity has been increasing -- labor is not getting its typical share of the pie. Hmm, why could that be?
In my case, note that if the situation arose in the future where I was living somewhere else and had the option of moving to Madison, I would not.
Could you explain a case (that is common enough to make a dent) where someone who disliked Wal-Mart would shop there more than once? And if so, can they be considered to really dislike Wal-Mart?
Labor has not been getting its typical share of the pie, because it apparently has been getting too much of it in the past! Why is the status quo somehow the 1950s-1980s? That era was the aberrant blip, when unions pushed for and received ever escalating wages and benefits. Industry accepted these increases because they believed they could pass the cost onto consumers. Those wages and benefits are now unsustainable, because the costs can't be passed onto consumers, when cheaper, better cars, etc. are available from other sources. The free market is dynamic - some jobs die out and new ones are created. Manufcaturing apparently isn't valued too highly right now. Whether that's right or wrong is irrelevant, IMO. You obviously think it is wrong, so what is your solution? Isolationism? Tariffs? Gov't subsidies? Banninations? Education and training may be a viable option for the future, but for the next 10-20 years or so, what's the plan?
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Could you explain a case (that is common enough to make a dent) where someone who disliked Wal-Mart would shop there more than once? And if so, can they be considered to really dislike Wal-Mart?
Labor has not been getting its typical share of the pie, because it apparently has been getting too much of it in the past! Why is the status quo somehow the 1950s-1980s? That era was the aberrant blip, when unions pushed for and received ever escalating wages and benefits. Industry accepted these increases because they believed they could pass the cost onto consumers. Those wages and benefits are now unsustainable, because the costs can't be passed onto consumers, when cheaper, better cars, etc. are available from other sources. The free market is dynamic - some jobs die out and new ones are created. Manufcaturing apparently isn't valued too highly right now. Whether that's right or wrong is irrelevant, IMO. You obviously think it is wrong, so what is your solution? Isolationism? Tariffs? Gov't subsidies? Banninations? Education and training may be a viable option for the future, but for the next 10-20 years or so, what's the plan?
# posted by : Tue Nov 29, 07:45:00 PM
: Tue Nov 29, 07:45:00 PM << Home
