Left Voice on the Economic Crisis

Graph of a crisis happening somewhere (Source)

Kudos to Left Voice author Jason Koslowski for a serious attempt to understand the modern economy, in an article entitled The Economics of Lesser Evilism. But Mr. Koslowski (who self-identifies as "a contingent college teacher and union organizer who lives in Philadelphia") suffers from two serious handicaps in his efforts: 1) he's a Marxist, which means he doesn't understand economics; and 2) he thinks everything is always and everywhere in a crisis.

For all that, Mr. Koslowski writes this paragraph:

Marx writes in Capital that in capitalism, the rate of profit — the rate of return on capitalist investment — tends to fall. That’s because profit only comes from human labor. Capitalists, though — in their endless competition with each other — try to ramp up the productivity of labor. That makes it cheaper to produce a commodity, and can temporarily ramp up profits too, while also reducing the amount of labor needed for production. That’s the problem: capitalism tends to rely more and more on labor-saving techniques and technology, but relatively less on human labor. But as competition drives other firms to adopt that same approach, the rate of profit tends to take a hit; the amount of profit-producing human labor relatively decreases.

This is a model of clarity and concision that is rare in Leftist writing, and which shows that our friend has some talent as a journalist.

Despite that, it's wrong--but let's blame Karl Marx rather than Mr. Koslowski. It's worth taking the paragraph apart.

The first sentence does represent confusion on the part of Mr. Koslowski. He confuses the rate of profit with the rate of return on investment. These are two different things. The "rate of profit" stands for operating profit--aka earnings. That is the percent of total sales revenue that can be counted as profit, which is what Marx meant by the word. Walmart, for example, famously sets this number to 3%. If operating profits rise above that then they lower prices. If they irredeemably fall below that, then they close the store. Thus Walmart--almost definitionally--can never experience a declining rate of profit. It's always 3%.

The rate of return on investment is something completely different: that depends on the stock price. It is calculated by the price/earnings (PE) ratio, namely the price of a share of Walmart stock divided by the (recent or projected) earnings (or profit) per share. Again, using Walmart as an example, the current price of the stock is about $73/share, while the earnings per share for the past year was $1.92. This yields a PE ratio of about 38--roughly typical for an S&P 500 company.

The rate of return on investment (the PE ratio) depends on many things: the marginal rate of return (aka profit), the stock price, current interest rates, and investors' assessment of the company's future. That number can never systematically decline--since if operating margins go down then the stock price will also go down. (Marx has a completely weird way of calculating capital that had nothing to do with the stock price. Nobody today knows how to do the Marxist calculation--not even Michael Roberts.)

The next sentence is also wrong. Profit does NOT come only from human labor, though that is certainly part of it. It's the consumer who sets the value of goods and services--not labor or any other cost of production.

For example, in my old age I prefer to fly business class, which means I'm paying 3x or 4x more than those in basic economy. Most people aren't willing to spend that much money on a plane ticket--and I can do it only because I don't fly all that often. Let's use my most recent trip as an example: RT from Newark to Chicago, my ticket cost $734. By comparison a basic economy seat costs $150 (though the real cost is higher coz they nickel and dime you for everything).

The following statements are true:

• The airline earns a profit on the basic economy seat--probably the margin is similar to Walmart's. Basic economy travel is a commodity, and prices go down as airlines become more efficient. Say the profit margin is 5%.
• My business class seat takes up about twice the space of a basic economy seat. So the business class cabin (which had 16 seats) could have fit 32 people if sold as economy seats. So effectively it costs the airline twice as much to fly me to Chicago than it does the economy passenger.
• More, the airline has to hire an additional flight attendant to take care of us business class folks. And we got "free" drinks. For a longer flight we would've gotten "free" and higher quality meals, but my flight was too short for meal service.
• I don't have to pay any baggage fees.
• All sixteen seats in the business cabin were occupied. That's 16 people who paid something like $700 for a RT ticket.

So an educated guess is that it costs the airline 3x more to fly me to Chicago than a basic economy passenger. Yet the price is 5x higher, or if you account for the nickels and dimes, perhaps only 4x higher. But that's an extra $150 that the airline can book as pure profit--in addition to the 5% they get from all the other seats.

That extra profit comes only because I'm willing to pay for it! And apparently 15 other people made the same choice. When considering my alternatives in making the reservation, I didn't take the cost of labor into account at all. All I considered was the relative value I got from spending an extra $500. What else would I have rather spent $500 on? Nothing, apparently, because I spent it on business class airfare.

The airline priced business class at a level that maximized their revenue. If they charged more, they wouldn't have filled all 16 seats. If they charged less they would have just left money sitting on the table. The cost of labor doesn't enter into their calculation either.

So the labor theory of value is wrong--except for commodities. And on this Mr. Koslowski is correct. The cost of labor (or, more accurately, the total cost of production) does determine the price of a commodity--that's the very definition of a commodity. An alternative definition is that commodities compete only on price--nothing else. Basic economy airfares are a commodity, which is why they cost almost the same independently of airline. Business class airfares are not commodities, which is why they vary widely in price depending on the airline. (Business class travel to East Asia varies from about $3500 to almost $10,000. You choose your comfort level accordingly.)

Mr. Koslowski's last few sentences are mostly correct. To increase their profits companies automate their processes (substituting capital for labor) and thereby lower their costs. But competition forces them to lower their prices, and so there is a declining rate of profit. (Again, this holds true only for commodity products.) But this is a good thing--because it lowers prices. Consumers are better off, and our standard of living improves. Indeed, the major beneficiary of capitalism is and always has been the consumer, which is why our standard of living has risen dramatically since the dawn of the industrial revolution.

Mr. Koslowski thinks the current economy is in a "crisis."

Both campaigns are pitched to win support, and money, from the ruling class. They are offering competing visions of how to return the economy to “normal” after the emergency of the pandemic crisis.

But “normal” is a crisis. The campaigns are funded by a ruling class trapped inside a global economy that’s struggled to grow and return profits for decades. That class’s hunt for profits, amid deep, decades-old contradictions of capitalism, keeps on fueling the danger of financial crisis — the recent market plunge is a sign of that danger — and ever-sharper imperialist conflicts. ... That’s the “order” Trump and Harris want to preserve.

Of course there always is a danger of a financial crisis--that's been true since ancient times. Even socialist heaven-states like Cuba, Venezuela and North Korea experience financial crises. So there is nothing capitalists or socialists or anybody can do about that. Other words here--imperialist, contradictions--are just meaningless Trotsky-talk, aka gobbledygook.

But the fact is We are not in a crisis! The long-predicted recession has still not happened. The financial markets have their ups and downs--Mr. Koslowski's article was written on a down day--but there don't seem to be too many bubbles there. Of course there are problems--inflation, housing--but that's all within the normal warp and woof of everyday events.

I will posit (and what follows is not original to me) that we're in stagnation--the complete opposite of crisis. Few people are getting laid off. Few people are hiring. Few people are quitting. The job market is pretty much frozen solid. That wasn't true last year--then there was a serious labor shortage. But in the interim we've admitted millions of new immigrants--quasi-Americans--who have eliminated the shortage (apart from some skilled labor categories).

It's because of quasi-Americans that inflation has gone down. It's because of quasi-Americans that unemployment has begun to tick upwards. Whatever new jobs have been created over the past year, it's quasi-Americans that have filled them. (Most of those new jobs have been in healthcare--disproportionately as home healthcare aides.)

There is no crisis--at least not today. There is no economic crisis. There is no climate crisis. There is no education crisis. There is no democracy crisis. There just isn't any crisis. I know that's a deep disappointment to our Trotskyist friends who are always and everywhere predicting a crisis here and a crisis there and a crisis everywhere.

But they're wrong. At least for now.

Further Reading:

• Cheapskate Consumers in China
  
• The Professors' Congress: The International Situation
  
• Three Militant Articles on the Economy
  

Cozzarelli on Chicago's Mayor Race

Chicago Mayor-elect Brandon Johnson
(source)

Tatiana Cozzarelli, one of Left Voice's better and more interesting columnists, writes about the city of Chicago. I moved to Chicago back in 1972 to help build the Socialist Workers Party (SWP) branch there. In subsequent years I drove a cab for five years, and eventually graduated from the University of Chicago. In total I spent 13 years living in or near the City of Chicago, and it is the town to which I am most sentimentally attached. While there, I cast the worst vote I ever cast in my entire life--I voted for Jane Byrne for mayor in 1979!

To atone for my sins, were I still a Chicagoan I would have voted for Paul Vallas, who Ms. Cozzarelli describes as (links omitted)

Vallas was a “law and order” candidate funded by big business and conservative donors, and he was strongly supported by the Chicago police union. He received over $1 million from Trump voters and even spoke at a fundraiser for anti-queer far-right group Awake Illinois. He is the former CEO of Chicago public schools and supports a program of pro-charter privatization, attacking the Chicago public school district and the Chicago Teachers’ Union [CTU--ed].

Among the biggest issues in the election were crime (aka "law and order"), the city's imminent bankruptcy (the chief concern of "big business and conservative donors"), and the total failure of the Chicago Public Schools (CPS). Mr. Vallas, to his credit, at least addressed those concerns. His opponent ignored them.

His opponent and ultimate victor in the race was Brandon Johnson, a very progressive Democrat who Ms. Cozzarelli describes this way:

Johnson is a former public school social studies teacher. He left teaching to become a staff organizer with the CTU and was in that position during the 2012 teachers’ strike. He spoke out against police brutality and anti-Black racism, making speeches in the Black Lives Matter movement. He ran on a progressive platform, promising to invest in affordable housing, public schools, and public transportation — paid for by taxing big corporations.

Police brutality is a problem, but a relatively minor one. Anti-Black racism is mostly not a problem--at least not in the way Ms. Cozzarelli imagines it. Black Lives Matter (BLM) is a fascist organization which never had the depth of support that our friendly journalist supposes. But worst of all, Mr. Johnson wants to tax productive businesses to fund things that don't need to be funded: e.g., housing, schools and transportation.

Nevertheless, Ms. Cozzarelli agrees with Mr. Johnson in every particular. She's against police brutality (who isn't?), she's against anti-Black racism (again, who isn't?), and she's in favor of good things paid for by magic unicorns and the tooth fairy. Put more generally, Ms. Cozzarelli supports the progressive Democrat platform down the line, on everything from excessive Wokery to antisemitism.

So why isn't she a Democrat?

Unlike an elected legislator, the mayor is directly responsible for running the city, including the police and the budget. Winning and taking this position is qualitatively different from taking a legislative position, where a socialist could run on an independent ticket and primarily use the position for protest votes and to advance class struggle.

This is a very profound paragraph! Apparently it's OK for a socialist to be in a legislative body, (e.g., Kshama Sawant in Seattle) who, like Ms. Cozzarelli, is allied with the Democrats 99% of the time. But the minute a Democrat actually wins executive office, then, like Mr. Johnson, they run headlong into reality and discover that compromises have to be made. In other words--unlike a city councilwoman or kibitzing journalist--they can no longer count on the magic unicorns to come through in a pinch.

Ms. Cozzarelli will claim she doesn't believe in magic unicorns. But she uses different verbiage that mean the same things. Here's an excerpt where I have italicized places where words like "unicorn" and "tooth fairy" could be freely substituted.

Refusing to support Democrats does not signify relegating ourselves to the sidelines of class struggle.  We should participate side by side  in every struggle of the working class and oppressed, discussing the need for our own party, for our own program and highlighting the need to fight to end this oppressive system.

So let's consider a serious problem Chicago has: crime. According to Wikipedia, Chicago had 796 murders in 2021. Of those, 398 (50%) were cleared by the police--that is, the police arrested and charged somebody with murder. That means that 50% of all murderers in Chicago got away scot-free! No wonder Mr. Johnson wants to hire more detectives--Ms. Cozzarelli disagrees with that because she's worried about the poor criminals and apparently cares not a whit for the parents whose children were killed. Of course that's a position she can hold only as long as she has no responsibility for anything.

On the day Ms. Cozzarelli's article was posted, Walmart issued a press release announcing the closure of four stores in Chicago, most notably including the one in Chatham at 83rd and Stewart. This is an all-Black neighborhood--the last time I drove through there about 15 years ago it was a tidy, working-class community. The Walmart store likely served 100,000 or more people in that part of town.

While Walmart was too polite to say so, a major reason for the store losing money was shoplifting. The police never arrested the culprits, and if they did the DA wouldn't have charged them. I'm sure Ms. Cozzarelli thinks the shoplifters are all single moms desperately trying to feed their children--but she'd be mistaken in that belief.

To the contrary, shoplifting in Chicago is a criminal enterprise, probably much like this report from New York:

Nearly a third of all shoplifting arrests in New York City last year involved just 327 people, the police said. Collectively, they were arrested and rearrested more than 6,000 times, Police Commissioner Keechant Sewell said. Some engage in shoplifting as a trade, while others are driven by addiction or mental illness; the police did not identify the 327 people in the analysis.

Of course professional shoplifters likely minimize the number of times they're arrested, and they also steal the most valuable items, so despite being only a third of arrests, they probably account for a majority of the expense. So by putting 327 people in jail, more than half of all shoplifting in New York would stop. 

The stats are likely very similar in Chicago. Jailing relatively few individuals would make the difference between a profitable store and an unprofitable, closed store.

Who pays for the shoplifting? It's certainly not the Walton family! Does Ms. Cozzarelli really believe that shareholders will pay for her friends' stealing? No, the people who pay are the minimum wage employees and their comparably poor customers. Whole neighborhoods will now not have a convenient grocery store because Ms. Cozzarelli and her BLM comrades defend wholesale theft.

It's worth noting that the Chatham store was comprehensively looted during the George Floyd/BLM riots. I'm pretty sure that Ms. Cozzarelli didn't participate in the looting, and I doubt she does any shoplifting, either. Somewhere in her character is basic human decency and common sense, which unfortunately she hides behind an army of unicorns and tooth fairies.

Further Reading:

• 63rd & Halsted
• Chicago: Ilona Gersh Runs for Mayor
• Left Voice and the SWP

 

If You Really Care About The Poor

I'm not much of a stock picker. Indeed, my ability to predict the future is not very good -- though probably better than Jeff Mackler's or Christine Frank's ability to forecast the weather 100 years from now. Still, if you want a get rich quick scheme you're reading the wrong blog.

Nevertheless, I do have a stock pick for you. It comes more under the socially responsible investing label than a road to riches. If I ever do take my own advice it's because I'm a sucker for a sob story.

Much has been said about how the economic bottom half of Americans are doing poorly. Trump ran his election campaign precisely on that premise, promising that he'd improve their lives. I doubt he'll be able to deliver.

I, for one, don't believe that the pain is as bad as Mr. Trump makes it sound -- I think most Americans are getting richer. And for those who really are falling deeper into poverty, it is to some extent their own "fault"--that last word in scare quotes because I certainly don't mean it too literally. But the fact is that among poor people, household size has been getting smaller due to divorce and/or never getting married in the first place. And some personal habits (drug addiction, sugary diet) are leading to poor health. All of these work against the larger trend of increasing wealth for most Americans.

Still, whatever the cause, there is no question some considerable number of our fellow citizens are not doing very well. Somebody needs to help them out.

The hero of the day is an unlikely fellow by the name of Todd Vasos. He's hardly self-sacrificing--his paycheck is over $925,000 annually, on top of which he gets stock options bringing his "total calculated compensation" for 2015 to just shy of $9 million.

Or, put another way, if his salary was divided among the 120,000 people who work for him, they'd each get a $75 bonus for Christmas. So it's not as though everybody else is poor because he's so rich.

Mr. Vasos is the CEO of Dollar General (DG), a company that sells about $20 billion worth of product annually, or about 2,200 times Mr. Vasos' compensation. The company's operating profit was about $2 billion last year.

Unless you live in the Pacific Northwest you are probably familiar with Dollar General. It's one of those "deep discount" stores that competes with Walmart for the very low-end consumer. I currently live within a mile of a Dollar General store, and drive by two others on my way to work in the morning. This indicates that I don't live in a very wealthy neighborhood. The company's strategy is to sell relatively few, fast-selling, off-brand items at very low prices. I shop there for things like toiletries, cooking supplies, cleaning supplies, and gift cards. They also carry popular food items--mostly packaged goods, but also milk, juices, and ice cream.

Last August the stock price of DG dropped dramatically, along with their competitors, Dollar Tree and Belo Five. ZeroHedge explains why:

Discount retailer Dollar General said it was cutting prices on its most popular items such as bread, eggs and milk, intensifying a price war among already commoditized products with retail giant Wal-Mart Stores to win back falling market share. It shares fell the most on record, plunging by 18% after the company missed on revenue, blaming aggressive competition, lower food prices and reduction in SNAP, or food stamp, coverage in 20 key states.

Perhaps increased competition from a resurgent Walmart is a culprit, but that's not the whole story.

But the biggest factor by far impacting the performance of both dollar stores was the sharp, adverse turn in the purchasing power of the lower half of US consumers. 

Both Dollar General and Dollar Tree said pressures on their core lower-income shoppers contributed to the same-store sales misses that both retailers reported. On today's conference call, Dollar General CEO Todd Vasos said that he was surprised to admit that while on the surface things are supposed to be getting better, the reality is vastly different for low-income US consumers: 

"I know that when we look at globally the overall U.S. population, it seems like things are getting better. But when you really start breaking it down and you look at that core consumer that we serve on the lower economic scale that's out there, that demographic, things have not gotten any better for her, and arguably, they're worse. And they're worse, because rents are accelerating, healthcare is accelerating on her at a very, very rapid clip" (boldface in original).

Let's consider these in turn:

• Walmart--has hardly been resurging. It's sales are mostly flat, and for the same reasons reported by DG.
• Higher rents--are happening largely because of local government restrictions on building, especially in states like California and New York. It has become increasingly difficult to build entry-level housing anymore. The cheapest new houses in my region cost north of $400K. Reducing or eliminating zoning laws (as happens in places like Houston) keeps housing prices low.
• Expensive health care--is mostly because it is way over-regulated. It costs a billion dollars to bring a drug to market these days. Similar restraints exist for medical devices. I understand there's a tradeoff between cost and safety, but we've gone way too far on the way to safety.
• SNAP & food stamps--are being reduced for all sorts of reasons, including limited state tax revenues, and increased pension costs for state employees.

Note that these problems arise mostly because of government mismanagement. If we had competent civil servants many of these problems could be mitigated. So much for socialism.

So what did DG do about this? "Dollar General, whose product selection prices are already among the lowest in the country, cut prices by 10% on average on about 450 of its best-selling items across 2,200 stores during the quarter, CEO Todd Vasos said on a conference call."

In response to a question from a journalist, Mr. Vasos explained:

Q. I understood the issues with SNAP and deflation, but is there a piece of this that's just related to the consumer job – labor market getting better, so that consumers spending a little bit better and they're trading up? Is that not possible?

Vasos: I am not going to say, it's not possible, but we have not seen that in our data. Once again, remember that over 60% to 65% of our sales and consumer base is on that lower demographic area that – of the economic scale. And when you keep that in mind, her life hasn't gotten any better. And that's really that customer that we're serving the most, and that we're intent on making sure has enough money and enough products inside her house to be able to feed her families.

And the reaction?

And when we're out in stores and we drop prices like we do, I can tell you, I've been out in stores in the middle of the aisle and heard customers come up to our store manager in tears and thanking them for being there and thanking them for the prices that we offer in a real convenient nature for her, where she can walk to the store, because she can't afford anything else. When you hear that, that really brings home where this core customer is.

So there you have it. A multi-millionaire does more to prevent starvation than (probably) all the free food-banks in America. He accomplishes this by running an efficient, self-sustaining business that buys the products as cheap as possible and passes the savings on to their customers--along with paying 120,000 employees.

And my Trotskyist friends are going to complain that the guy earns an exorbitant salary? I think they have their priorities screwed up.

If you're against poverty, buy a 100 shares of Dollar General.

Down with poverty!

ZeroHedge includes this picture of one of Mr. Vasos' customers.


Further Reading:

• Book Review: Are They Rich Because They're Smart?
• Oberlin, 2016
• Where Have All The Workers Gone?

Book Review: Walmart

The Retail Revolution: How Wal-Mart Created a Brave New World of Business, by Nelson Lichtenstein, is a marvelous book. Published in 2009, I wish I had read it years ago.

Despite Mr. Lichtenstein's credential as a Leftist college professor unduly critical of Walmart*, this is not a hit piece. Though I have no independent ability to judge the facts, there was little in the book that didn't ring true to me. While Mr. Lichtenstein does not hide his own perspective, he makes a good faith effort to accurately represent the opinions of others, especially the company. Better than that cannot be expected.

The key question, to my mind, is this: Is the world a better place because of Walmart? Mr. Lichtenstein asks that question only indirectly, quoting Hillary Clinton.

"Is Wal-Mart a good thing or bad thing for America?" Hillary Clinton, who had served six years on the Wal-Mart board, answered cautiously. "Well, it's a mixed blessing," she said, noting both the inexpensive goods the company brought to rural America as well as the controversy over the company's health insurance program and its failure to promote women to management ranks.

Well, of course. Nobody can seriously claim that Walmart is an unalloyed good with no demerits. But still, if you add up the balance sheet I think the answer to that question is pretty obvious. The company substantially raised the standard of living for millions of people in rural America by selling quality goods at low prices. It invented a whole new way of doing retail, eliminating wholesalers, middlemen, and jobbers, thereby reducing costs. It provided jobs to hundreds of thousands of low-wage workers in the US. And it started China on a path to becoming the world's second largest economy.

The world is unequivocally better off because of Walmart. I think if you pushed Mr. Lichtenstein to the mat and forced him to answer he'd agree with that.

Mr. Lichtenstein evades the question by taking us on a grand tour of all the demerits--a fascinating and informative read to be sure. But at the end of the day it's something of a red herring. For example, he describes in great detail the unfortunate lives of women workers in Chinese factories. They work very long hours for low pay in tedious jobs under dangerous conditions. Factory fires occasionally kill hundreds. The government imposes apartheid-style rules on them (hukou) preventing them from becoming residents in the cities where they work.

It's terrible, awful, no-good. We should all be happy that circumstances in China are gradually changing for the better. But Mr. Lichtenstein's description, while not inaccurate, is somehow irrelevant.

He misses the mark in two ways. First, he blames almost everything on Walmart. If it weren't for the Bentonville behemoth squeezing suppliers and turning a blind eye toward illegal factories, then none of this would have happened. Instead, Mr. Lichtenstein implies, our Chinese friends would be earning $15/hour working in bright, airy factories, all while smiling and singing songs, just as depicted in those socialist realism posters.

But Walmart is just a link in the chain. Consumers (especially Walmart consumers) can't buy toys unless they're cheap. Walmart operates on very thin margins and has to squeeze its suppliers. Those, in turn, cut corners to maximize the business that comes their way. The subcontractors are under pressure to deliver on time and under budget. The Chinese government--more crooked than most--insists on its cut.

And Chinese workers are all to happy to go work in the factory. Especially considering the alternative: walking very slowly behind a water buffalo in some rice paddy somewhere, with no chance of ever having a better life.

Despite his prejudice, Mr. Lichtenstein does tell the truth:

Factory wages are low--about one hundred dollars a month--but far higher than in agriculture, and they are rising fairly quickly because of the labor shortage generated by the export boom in toys, garments shoes, and electronic devices.

Thank you, Walmart!

The second miss stems from Mr. Lichtenstein's misunderstanding about the role of capital. In 2015 Walmart earned about $16 billion on revenue of $486 billion, or approximately a 3% margin. My understanding (Mr. Lichtenstein doesn't tell us) is that the company has kept margins mostly constant over the years. That means as costs go down, then prices also go down instead of margins going up. The Walton family owns roughly 50% of the company. Therefore in round numbers, 1.5 cents on every dollar of sales at Walmart goes to them.**

So contrary to Leftist (and Mr. Lichtenstein's) imagination, the Waltons are not paying for Walmart employee's health insurance. They don't earn nearly enough money to make that possible. Shareholders never pay operational expenses. So who is paying that bill? There are only two other choices: the employees themselves, or the customers. Both of them are poor.

Progressives are simply delusional if they think health insurance is paid for by the shareholders. I think it is odd that Mr. Lichtenstein, along with most of the Left, is so upset about Walmart employees being subsidized by local governments, e.g., Medicaid or Medicaid-like programs. Surely taxpayers on average are richer than Walmart's customers. By saving their customers' money and pushing their employees onto the government's nickel, Walmart is helping poor people in ways that progressives should applaud.

Likewise, Mr. Lichtenstein happily recounts how local governments stick it to evil corporations:

In effect, these California cities were leveraging their zoning authority to recreate a set of mini-New Deals that ensured a more progressive distribution of the wealth generated by private interest ... But Wal-Mart would not play ball.

And good for Walmart! All of these extra costs that sundry civic corruptocrats thought were good ideas had to be paid for somehow. Those all come out of the hide of either customers or employees. Why does Mr. Lichtenstein want to make Walmart's employees poorer? A tax on Walmart isn't a blow to the wealthy--instead it's just ripping off poor people. And all the more so for Walmart since their customers are as poor as their employees.

Mr. Lichtenstein recognizes as much. In the new normal he envisions, Walmart will have to raise prices to cover the expenses of a "living wage," presumably not just for Americans but also for Chinese. He's never heard of market elasticity, i.e., when prices go up sales volumes go down. If Walmart could raise prices without hurting revenue they would certainly do so. The fact that they haven't means that they can't.

Walmart employees are precarious workers, which I defined as workers whose income depends sensitively on the market. That's true not just for the hourly employees, but also for Walmart's managers. Mr. Sam fired his executives with abandon when they no longer served the company. No loyalty there.

But unlike Mr. Lichtenstein, I think that precarious workers are our most productive citizens. They waste nothing! How different they are from government bureaucrats and professors who are immune from market forces. Those people are parasites.

The true road to wealth is not by government mandate or union featherbedding. No. Instead Mr. Sam got it right with his company's first mission statement: To give common folks the opportunity to buy the same things as rich people.

If you want to criticize Walmart, then the extent of their failure to live up to that aspiration is the place to start.

Down With Poverty!


*Mr. Lichtenstein hyphenates the company's name: Wal-Mart. However the firm no longer uses the hyphen. Except in quotes I use the current spelling: Walmart.

**The web, including Wikipedia, claims the Walton family collectively is worth $143 billion. But total Walmart equity is only $81B of which they own only half. And 50% of $80B does not add up to $143B, so something is wrong. I don't believe the $143B figure.

Further Reading:

• Walmart's Wages
• Left Labor's Lost Cause
• Labor's Final Step