Saturday, 10 August 2013

Wal-Mart as a Job Destroyer

This comes via -

The article itself does the talking, especially with regards to what Wal-Mart does with its workers, and I do have a few comments to make on it -

1. The fact that productivity has gone up 80 percent between 1973 and 2011 but median wages went up only by 11 percent is nothing short of atrocious. Wal-Mart has smacked both basic Microeconomics and hogged profit fot itself. This makes excellent sense for Wal-Mart as a corporation (what corporation tries not to profit?) but it just demolishes society. Private gain and public misery. Absolutely unacceptable. In contrast to the miserable Wal-Mart workers, all the American automobile company workers post-Second World War were able to own their own homes, raise a family and educate their children and retire quite comfortably under Reuther's Treaty (Also cited in the article - and something that I wish I'd known about)

2. This label of productivity-generating "creative destruction" is probably one of the most insidious things ever devised. Everyone's taken poor old Joseph Schumpeter out of context and taken his words very literally - destroying things in the most creative ways and creating next to nothing to replace what is destroyed.

3. Have these people never heard of the Mulitplier effect? Pay ten thousand workers with all the excess profit that you would otherwise send to the CEO and senior management, and you will be able to stimulate far greater economic production without the creation of any inequalities. In theory it is possible for conspicuous consumption by a handful of super-rich to increase the GDP, but said theory completely ignores the social costs of massive inequality and deprivation. Not only does it show GDP as a benchmark, it also implies that social costs are routinely ignored - not because they're subjective and impossible to calculate precisely (and therefore, anathema to a legion of mathematics-crazy economists) but also because nobody is ever going to take a look at the appoximate causes (To quote Keynes, "It is better to be appoximately right than precisely wrong.") Even if social costs follow a paretian, power-law, 80-20 distribution and swing wildly, the fact remains that they can be largely dealt with simply by paying workers more and paying CEOs less. That which cannot be precisely calculated in the realm of human affairs can nevertheless be dealt with, as it has been dealt with before.

If the Wal-Mart model is going to be exported to other countries, the results are likely to be catastrophic. Although given how Wal-Mart relies on existing infrastructure and focuses on making its workers dependent on government benefits, there at least is a substantial lot going against the Wal-Mart in India -

1. The lack of infrastructure, private transportation and so on by a huge number of Indians. Even with the enormous Indian middle class and the large number of cars they own, the fact remains that going all the way out of the city to an enormous Wal-Mart superstore located in the middle of nowhere and coming all the way back is an alien shopping experience. Not many Indians would really want that.

2. "Everyday low prices" - that ain't gonna work here. They'd certainly have to do what they did in China, positioning themselves as a more upmarket brand.

3. Infrastructure is a gargantuan problem in most Indian cities. Indian politicians are not as likely as the Chinese to provide Wal-Mart with enough infrastructure. India doesn't have the same extent of roadways as China or the United States for Wal-Mart to carry out its long-range transportation. The list of issues goes on and on. It's hard to imagine these being sorted out very soon.  Wal-Mart will have to make a lot of its own investments in this field.

4. The local Kirana stores, which are routinely condemned by supermarket sympathizers as 'inefficient' and 'exploitative' but which in reality provide substantial local employment and serve to pull down transportation costs, are likely to at least stay in business due to matters of convenience. Indian major retailers haven't done that much damage to these stores - the real reason these stores are going down is because the sons of the owners (who traditionally run these stores) are finding jobs elsewhere and aren't interested in running the business. The Kirana store is here to stay, maybe in smaller numbers, just because it's convenient for most Indian customers. The factor of convenience has been very conveniently forgotten - and I think it's a good thing. 

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