I love Wal-Mart. I think it's not just a great store, great company and great American success story, it was a shining symbol of all the things Adam Smith wrote about in his seminal work, "The Wealth of Nations." Embodied in that work was one idea that completely changed the world. The idea was that the real wealth of a nation was not in its gold or silver, but in the availability and abundance of its consumables and that two nations could trade with each other and both could gain from it.
Prior to Adam Smith the world existed pretty much in a constant state of war, where wealth was "acquired" by taking it (the gold or silver) from someone else who had it.
For over two hundred years--since the writings of Adam Smith--nations that followed his ideas, saw a steady, upward rise in the incomes, prosperity and standard of living of its people.
That may be ending now.
A new belief system has taken over, one that says if someone else gains, it is our loss. We view the products sold at Wal-Mart as things that are bad because they were imported and, thus, produce a merchandise trade deficit. We view China a somehow having pulled a fast one on us.
All that is changing. Our belief system is such that we are going to see policy put in place that will make us the exporters--at a significant loss to our standard of living. It has to be that way by definition. To compete with the Chinese in the production of electronics, toys, machine parts, you name it, we will have to have a labor cost advantage. That's where we are going: stagnant to declining wages and living standards, while China rises up. This is what our policymakers want for us. NO!! THIS IS WHAT WE WANT FOR OURSELVES!!! (That's right. If you don't believe me just listen to the most popular talking heads on radio and television.)
As we transform our economy from one of domestic investment and consumption to export-driven, Wal-Mart will see a steady erosion in its business. There will be no more cheap imported goods. Goods from abroad will become expensive for Americans. And the stuff we produce here, while cheap relative to the rest of the world, will be marked for export and sent abroad for foreigners to enjoy. But we'll get something in return: non-convertible renminbi!
Good bye Wal-Mart. It was a pleasure knowing ye!
Protect yourself and your family from a dangerous belief system: Go short Wal-Mart!
I really like this blog. I concur that people put way too much emphasis on Federal government deficits seeming to equate their own debt to income situation with the government's - apples and oranges.
ReplyDeleteTo the point: I don't hate WalMart like some, once in a great while I even shop there. But the WalMart/China connection makes me cringe. So many jobs lost in this country - for sound economic reasons, I know - but for what? So we can buy cheap Chinese junk that is increasingly demonstrated to be unsafe and even poisonous. Entire American towns have been destroyed by the flight of manufacturers running to China on the "urging" of WalMart. Something is just not right with this alliance. China needs to mature in so many ways before we completely crawl under covers with them ...