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Monday, November 26, 2012

Walmart's Phony Low Prices

Walmart Storefront
It's pretty clear by now that Republican economic policies can be boiled down to "penny wise, but pound foolish." The idea is that it's possible to save your way to prosperity. This ignores simple math: if you don't make enough to be wealthy, no amount of saving will make you wealthy. It's a question of incomes, not savings. Rich people are rich because they make a lot of money. And you make a lot of money by spending wisely.

Of course, Republican economic policies make no sense because they're rationalizations for the transfer of wealth from the bottom to the top. Some really do believe this math-challenged mumbo-jumbo -- perhaps even most Republicans. But those few who understand don't expect it to actually help everyone. It's just a con to help those few at the top. Tell the chumps the wealth will trickle down and, if the question of when actually ever seeps into their sheepish brains, tell them it'll happen any minute now, just you wait. Because Reagan.

But what's the penny wise and pound foolish thinking look like in the wild? Pretty the opposite of this:

Mother Jones:

Chances are you missed this particular bargain on Black Friday: Agree to spend 15 cents more on every shopping trip, and Walmart, Target, and other large retailers will agree to pay their workers at least $25,000 a year.

Big box retailers aren't actually offering that deal, but a new study by the liberal think tank Demos argues that it would be a great bargain for us all if they did. Increasing the average wage at large retailers from $21,000 to $25,000 would probably cost you less than $20 a year at the register yet lift some 1.5 million people out of poverty (including your cashier), create 100,000 new jobs, and boost GDP by some $13.5 billion.

Demos argues that retailers would benefit, despite higher labor costs, because their low-wage employees could suddenly afford to buy more of the basic necessities that they scan and load into plastic bags every day.

If you're like me, this is the part where you release a loud and resounding, "Duh!"


This is Henry Ford's argument -- that the worker ought to make enough to afford the product -- and that argument made Ford a rich man. If you can convince your workers to give you some of your money back (and make a tidy profit in the process), why wouldn't you?

Because you're penny wise and pound foolish. There are maybe five people on Earth who would argue that Walmart's success is because of their commitment to quality. Walmart makes money by saving money -- except they don't. Not really, anyway.

The problem with Walmart's business model is that it's a welfare queen business model. Their low prices are propped up by low wages, which in turn are subsidized by government largesse.

Daily Kos:

Wal-Mart's poverty wages force employees to rely on $2.66 billion in government help every year, or about $420,000 per store. In state after state, Wal-Mart employees are the top recipients of Medicaid. As many as 80 percent of workers in Wal-Mart stores use food stamps.

And that government money? That comes out of your pocket. Walmart's low prices are a con. It's not any cheaper than any place else -- they just do a better job of hiding and shifting the costs. You've heard of "creative accounting?" This is creative commerce; the cost on the price tag isn't actually what you're paying. Worse, if you don't shop at Walmart, you're still paying for their stuff. They've found a way to suck money out of your wallet without even selling you anything.

And Walmart's not going to be very interested in changing. Their wage slavery is making them a tidy profit. It may be a welfare queen business model, but it's a successful model. The company makes $15 billion a year. Off food stamps and Medicaid.

From a legal standpoint, you can't blame Walmart -- this is all completely above board. From a moral standpoint, they don't get off so easy. But there is no way in the world that you can argue that Walmart's government-subsidized prices represent any close to free market economics.

And it also represents the failure of trickle-down economics. Walmart is fabulously successful, yet the workers get paid crap. And they'll always get paid crap. It's a dead-end job.

If we force Walmart to change, expect Republicans to scream bloody murder. Penny wise, pound foolish.


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