“[Our Customers] are running out of money.”
– Wal-Mart CEO, Mike Duke
Well, Mr. Duke, if you’re looking for who killed the consumer, start with your predecessor, Lee Scott, that criminal mastermind of American job genocide. Ruthlessly driving prices down at all costs and demanding “The China Price” rather than “Made in USA”, Mr. Scott chucked the last of Sam Walton’s “Buy American” campaign and brought us “Zombie-Mart.” A nightmare on main street where every time you push a cart of “Always Low Prices” junk out the door, one of your neighbors joins the ranks of the living dead – the underemployed. As a bonus nightmare you also fund the engine of Chinese worker exploitation, environmental degradation, civil repression and military expansion.
That’s how the Win/Win of so our called “free trade”* relationship with China has been running over the last decade. Long after you’ve run out of money and the crap you bought at Wal-Mart is broken, the factory you funded in Chengdu will still be there, though its counter-part in Ohio will be a fenced-off brownfield. And that Jin Class nuclear missile sub you helped the Boys from Beijing buy will be locked and loaded.
Mr. Duke’s moaning also brings to mind McDonald’s big announcement that they were hiring 50,000 workers in one day! Judging for the media photos, most of these weren’t college students or retirees, but prime age workers who should have been getting real jobs actually making something. However, rather than holding down a shift in a factory that enriches our nation and earns them a salary big enough to buy a house and raise a family, these folks are joining the “service economy.” You know, that mythical world where we somehow create increasing standards of living by selling stuff to each other – stuff made somewhere else, of course. We never dirty our hands with actual production; we just keep driving up the consumption component of the GDP equation to greater and greater heights while ignoring that cumulative net-trade leakage. And where has this economic mass delusion gotten us?
Ben Bernanke recently tried to calm inflation worries with the dubiously comforting comment that “wages are not increasing.” Well Mr. Bernanke, I’ve got news for you: Wages ARE increasing – in Shanghai. Prices of finished goods in America will be determined by a supply curve defined elsewhere and commodities will be priced by a demand curve defined elsewhere. What Americans (and Europeans) get to do now is sit back and watch their wages stagnate, prices go up, businesses close, and government tax revenues collapse.
Want to know who stole our market power Ben? Track down Lee Scott. He did more damage than Osama bin Laden, and will be much easier to find. Send in Seal Team Six while we still have a defense budget. I kind of hope he “resists.”
– Greg Autry teaches Macroeconomics at the Merage School of Business, UC Irvine and is co-author (with Peter Navarro) of the new book “Death by China” www.gregautry.us
*We are, by the way, big fans of real free trade. However, unlike a lot of American pundits, we know the difference between engagement and date rape.