The Most Disturbing Economic News I've Heard of This Decade.

[amadeus]

If savings generally come at the cost of bigger cuts to wages, or result in great barriers to entry, or less long-term competition, then, yes, it's wrong.

I don't think we've reached that point. If the situation is that wealth is concentrated at the top levels, can we not assume this means there is a lot of available capital? Should there be an opportunity to set up a new retail distribution system that beats Walmart's, why wouldn't capitalists jump at the chance?

It may very well be that general goods are best handled by Mega Lo Mart, but what you asked is far from a rhetorical question. You might put some effort into answering it yourself.

In the case of daily use items and food, I think the market has pretty much decided that the hypermarket is the way to go. How much capital you need to get in the business and stay competitive, I don't know.

For regulations and stuff being a crippling burden, it seems like every year there's more added on and those could be a big barrier to entry. I don't know, I don't have enough time to do the research (for the U.S.) myself. Since I'm here in Japan now, I'm more interested in the way business is done here.

 

[Tarquelne]

In the case of daily use items and food, I think the market has pretty much decided that the hypermarket is the way to go.

I agree that the market favors hypermarts. And for good reason. The market often favors the lowest prices to the exclusion of everything else. But that doesn't come close to answering "Is it wrong?" Especially in the long term.

At least if you make any distinction between what the market favors and a social good. Which is where, I believe, I disagreed with your post, in that I detected an implicit assumption - which seems to be operating in your second post, too - that the "market" favoring one thing or the other answers your question.

"I don't think we've reached that point." seems to be your answer to that question. Fine. I agree ... there are major, real, economies of scale hypermarts can leverage. Erm... including increased coercive power over their workforce. IMO your statement begs for a "yet."

Where the "yet" would really kick in is a hypermart using it's lock on a part of the market where it has a natural advantage to gain advantage in other areas. The market will favor that, too. Even if the price-breaks are strictly temporary and end up with consumers saving nothing on lower-quality goods or services.

Personally, I think Walmart bashing is generally overdone. Except when it's specific. OTOH, "Is it wrong?" seems very much an open question to me. Just one that's hard to answer.

Anyway...
I expect the actual best solution, both economically and socially/long term, is the internet taking the place of the hypermart, and smaller local business handling whatever isn't best served by online purchasing. If I had more faith in people choosing their own long-term happiness over short-term savings and even-shorter-term convenience, I'd be quite confident that's exactly what we'll get most places in the US in less than 20 years.

Regulation: I'm suspicious of claims that the regulation is "crippling." OTOH, I think it's likely often a noob trap.

Anecdote: I had some relatives move up here (Midwest) from Oklahoma. At first they were appalled by all the red tape. After a couple of years, though, they realized they could put a lot more confidence in people they hired actually doing what they were hired to do, and that they could spend less time checking out real-estate purchases.

 

[Azale]

But is it wrong?

Of course it is. Labor agitation in this country hasn't had a real impact on rate of profit since the '50s iirc. Labor agitation in general has not had much of a significant impact on rate of profit since WW2 (taking this from Robert Brennan's stuff). EDIT: I think I repeated myself there

Welfare spending has been reformed, "ended as we know it", and slashed since 1980. That safety net might have been nice in convincing people to become entrepreneurs.

You're gonna have to convince me the US has particularly onerous taxation when all evidence points to the contrary. Maybe I could be convinced that small businesses shoulder the burden of regressive taxation regimes that favor the very wealthy and large corporations, but I'm definitely not convinced it is the thing causing the crisis outlined in the OP.

Glad to see you back amadeus

 

[Hygro]

But is it wrong?

Yeah, it is. In part because it can't be blamed on both taxing and spending Gotta pick one or the other.

 

[Tarquelne]

Oops. I applied the "But is it wrong?" only to the Walmart-issue.

To answer the question: Yeah, I'd say that's wrong. We all know those are right-wing bêtes noires. (Look, French! Another right-wing bête noire!) What do you have demonstrating their actual influence?

 

[amadeus]

I agree that the market favors hypermarts. And for good reason. The market often favors the lowest prices to the exclusion of everything else. But that doesn't come close to answering "Is it wrong?" Especially in the long term.

I certainly don't think it's wrong.

At least if you make any distinction between what the market favors and a social good. Which is where, I believe, I disagreed with your post, in that I detected an implicit assumption - which seems to be operating in your second post, too - that the "market" favoring one thing or the other answers your question.

It more or less does. I don't think mom-and-pop general merchandise stores really serve the social good. We had fewer choices and paid more for stuff. As long as we're going on anecdotes, I compare the regional supermarket chain I used to sometimes go to to the corner store that was on my old university campus; other than being out of walking distance, the supermarket beat out the small corner store by price, quantity, and even pay to its staff (the mom-and-pop shop paid its employees minimum wage with no benefits; I can't imagine the chain store being any worse.) In addition, the supermarket never stocked products that were out of their expiry date. I bought some soda at the corner store once and they refused to give me a refund or even a discount when I found out it had expired more than a month prior. I can't imagine something like that happening at a supermarket.

"I don't think we've reached that point." seems to be your answer to that question. Fine. I agree ... there are major, real, economies of scale hypermarts can leverage. Erm... including increased coercive power over their workforce. IMO your statement begs for a "yet."

Where the "yet" would really kick in is a hypermart using it's lock on a part of the market where it has a natural advantage to gain advantage in other areas. The market will favor that, too. Even if the price-breaks are strictly temporary and end up with consumers saving nothing on lower-quality goods or services.

I don't think the retail business really allows for someone to come in and dominate forever; where are Woolworths, Ben Franklins and K-marts? Even when they seemed invincible, they got beat.

I expect the actual best solution, both economically and socially/long term, is the internet taking the place of the hypermart, and smaller local business handling whatever isn't best served by online purchasing. If I had more faith in people choosing their own long-term happiness over short-term savings and even-shorter-term convenience, I'd be quite confident that's exactly what we'll get most places in the US in less than 20 years.

I don't think things like groceries and toiletries are ever going to be big enough online sellers to put the supermarket out of business.

Of course it is. Labor agitation in this country hasn't had a real impact on rate of profit since the '50s iirc. Labor agitation in general has not had much of a significant impact on rate of profit since WW2 (taking this from Robert Brennan's stuff).

I didn't think so. I was thinking more the taxing/spending/regulatory side.

Welfare spending has been reformed, "ended as we know it", and slashed since 1980. That safety net might have been nice in convincing people to become entrepreneurs.

Slashed? I don't know how you break down welfare spending, but I don't think it's been slashed or even reduced.

You're gonna have to convince me the US has particularly onerous taxation when all evidence points to the contrary. Maybe I could be convinced that small businesses shoulder the burden of regressive taxation regimes that favor the very wealthy and large corporations, but I'm definitely not convinced it is the thing causing the crisis outlined in the OP.

I think it could be a cause. Obviously the miserable economy of the last few years would, I think, also be responsible for people being more risk-averse.

 

[Cutlass]

Well, if a company like Walmart is killing off entrepreneurs by delivering more goods at lower prices, so what? I'm not sure why general merchandise should be done by (really) small business anyway.


But is it wrong?

If a company is using it's position to block the entry of others into the market, then in the long run customers won't be getting a lower price.

I don't think we've reached that point. If the situation is that wealth is concentrated at the top levels, can we not assume this means there is a lot of available capital? Should there be an opportunity to set up a new retail distribution system that beats Walmart's, why wouldn't capitalists jump at the chance?

Because they are profit maximizers. What you are suggesting is profit minimization.

 

[really]

I'll read up on this later but I wonder what part debt plays in this: student, personal, mortgage.

It would be difficult to take a risk and start out if you had all those hanging over you.

 

[Cutlass]

I'll read up on this later but I wonder what part debt plays in this: student, personal, mortgage.

It would be difficult to take a risk and start out if you had all those hanging over you.

That probably factors. But the start date of the diminishing of business startups came before the start of high debt burdens. Though it came after the date of the stagnation in wages.

 

[Hygro]

That probably factors. But the start date of the diminishing of business startups came before the start of high debt burdens. Though it came after the date of the stagnation in wages.

Which is when household debt started to really increase..

 

[Cutlass]

It looks pretty constant from about the early-middle 50s to the early-middle 80s. And then the real sharp increases didn't come to around 2000 or so. Wages stagnated by the middle 70s.

 

[Hygro]

And consumer credit didn't change. Interesting.

 

[Tahuti]

And consumer credit didn't change. Interesting.

Zoning laws, mortgage interest rate deduction, anything?

 

[amadeus]

How much of the change can be attributed to (a.) changing household demographics and (b.) the pushes for people to buy instead of rent?

 

[Cutlass]

How much of the change can be attributed to (a.) changing household demographics and (b.) the pushes for people to buy instead of rent?

http://angrybearblog.com/2011/09/housing-vs-household-formation.html

The rate of new household formation and the rate of new house building seem to go pretty well hand in hand.

That would seem to indicate that the portion of the population is houses compared to the portion in apartments is fairly constant in the long haul. There was a surge in home ownership rates from the middle 90s through the middle 00s. But the timing of that trend also doesn't fit the business startup trend. Though it does fit the trend in household debt.

 

[Tarquelne]

It more or less does.

The "less" part is where it's problematical.

I don't think mom-and-pop general merchandise stores really serve the social good. We had fewer choices and paid more for stuff.

I agree. I don't think anyone is saying that lower prices and (usually) more choices are the problem. It's the other stuff. Lower prices and # of choices are not the only differences.

As long as we're going on anecdotes, I compare the regional supermarket chain

Yeah, regional supermarkets often do a better job. But it's a fallacy to think that going in the same direction - even bigger - will guarantee further improvements.

With fresh food I think think the natural advantages of the hypermart are of dubious value - except where based on "aggressive" procurement practices. Yet they're increasingly competative with regional supermarkets. As if, perhaps, they've started leveraging natural advantages to expand into areas they won't be able to serve as well.

I don't think the retail business really allows for someone to come in and dominate forever; where are Woolworths, Ben Franklins and K-marts? Even when they seemed invincible, they got beat.

Yes. But, assuming that there *is* a problem, the problem not being "forever" doesn't excuse it.

I don't think things like groceries and toiletries are ever going to be big enough online sellers to put the supermarket out of business.

OTOH, a hypermart may be a big enough competitor to put a regional supermarket out of business.

Maybe that'd be fine. But maybe, surveying their ever-increasing lock on local markets and consumer spending, they'd be tempted to start taking further advantage of their position and the expense of the consumer.

That's a problem if the only competition is made of of investors large/rich enough to do the same thing, but even more profitably.

Look at what happened with the accounting firms: Lowering the number of competitors didn't lead to the same level of competition, just with fewer actors. It diminished competition and encouraged vertical-collusion.

Yes, retail goods aren't financial services. That might make a difference. But the principles of supply and demand, competition and monopoly, apply to both.

 

[Narz]

Well, if a company like Walmart is killing off entrepreneurs by delivering more goods at lower prices, so what? I'm not sure why general merchandise should be done by (really) small business anyway.

There are millions of good answers to that question but one basic one is, small businesses & mom & pop stores make life/communities more interesting. Walmarts are all the same, all have the same products from far away, having nothing to do with the local community & nothing to add to it, except cheap crap from China.

Picture a medeval fair/market with all sorts of cool unique wares, no two fairs ever the same, neighbors out in the streets meeting each other, showcasing their craftsmanship. Now picture a Walmart, a few depressed teenagers skateboarding in its ugly parking lot, filled with unskilled workers & shuffling patrons listening to pop music while buying clothes & merchandise that has no beauty or meaning other than distraction & "low, low prices".

There's more to life than extracting the best possible deal at any price.

 

[KMRblue1027]

It looks pretty constant from about the early-middle 50s to the early-middle 80s. And then the real sharp increases didn't come to around 2000 or so. Wages stagnated by the middle 70s.

When wages stagnated in the 70s people used a number of different coping mechanisms to keep incomes up, debt was simply the last of said options until the 2008 crash, woman entering the workforce kept debt down during the 80s and people extending their hours in the 90s. When both ran out people used their house as a credit card because it seemed easy.

 

[Narz]

I don't think mom-and-pop general merchandise stores really serve the social good. We had fewer choices and paid more for stuff.

This is dead wrong. Mom & pop stores offered far more choices as a whole. Walmarts are all the same. Small businesses are all different.

Besides, who needs 84 types of toothpaste? Variety of consumer products doesn't make people happier/healthier. Look at the ingredients of all the cereals & cookies & frozen stuff, there are all extremely similar, it's the illusion of variety. Mostly it's all just variations of sugar, starch, oil & various animal products. As for clothes, furniture, etc. variety of stuff is nice but certainly not the be-all end of of life. Quality is more important than quantity.

II don't think the retail business really allows for someone to come in and dominate forever; where are Woolworths, Ben Franklins and K-marts? Even when they seemed invincible, they got beat.

For what it's worth, there's a k-mart five blocks from me.

 

[onejayhawk]

This is dead wrong. Mom & pop stores offered far more choices as a whole. Walmarts are all the same. Small businesses are all different.

Besides, who needs 84 types of toothpaste? Variety of consumer products doesn't make people happier/healthier. Look at the ingredients of all the cereals & cookies & frozen stuff, there are all extremely similar, it's the illusion of variety. Mostly it's all just variations of sugar, starch, oil & various animal products. As for clothes, furniture, etc. variety of stuff is nice but certainly not the be-all end of of life. Quality is more important than quantity.


For what it's worth, there's a k-mart five blocks from me.

You are not talking about mom and pop businesses, but boutiques which do have 84 kinds of something. A Super Wal/Kmart is a small grocery, a small pharmacy/sundries, a small paint/hardware store, a small sporting goods store, a small auto parts/service center, and a middle size department store--all under one roof. Any of those stores can survive near a Walmart, provided they do not depend on any of the super stores product line for core sales. This is because the superstore has very limited selection of a wide variety of things.

J