Thursday, February 13, 2014

In Some Positive News

Wal-Mart recently announced a new initiative to invest $250 billion in products that support American jobs. Accompanying the announcement was this video narrated by Mike Rowe.

I know the usual reaction. Oh grrr Wal-mart! They are evil and the cause of all that is wrong with America!

One of the things I like about Mike Rowe is that he doesn't care what people think. He also doesn't think in a "either-or" mentality where you are "conservative" or you are "liberal". That kind of dichotomous political thinking has landed us $17 trillion in debt. Of course he got a lot of hate mail for doing this voice-over but he took the time to respond to a lot of people on his facebook page. His responses are often snarky but they also pull no punches and expose how ill informed or just ignorant a lot of the comments were.

I guarantee that the vast majority of people who complain incessantly about Wal-Mart have homes full of inexpensive goods made in the same factories that Wal-Mart gets their products. It is a big deal when the single most powerful private market buyer of goods makes a commitment to buying more from companies that employ Americans. Compared to the number of jobs shipped overseas this might seem like a drop in the bucket, especially when we are numb to huge numbers like $250,000,000,000 thanks to trillion dollar deficits but $250 billion is nothing to sneeze at.

What is really going on here is the result of a concerted effort by unions to either unionize Wal-Mart or run them out of business. The leadership of these groups seem focused on hurting Wal-Mart (and their employees) for the sake of a political dispute regardless of whether or not it helps their constituents because Wal-Mart has been the single largest private employer for a long time. Those millions of people who have or who are working at Wal-Mart represent a lot of potential political muscle for unions and a lot of potential union dues. Little wonder that unions are obsessed with unionizing the employees of this particular employer, an obsession that leads to a lot of people harping about how terrible Wal-Mart is even when they are doing something that everyone should find praiseworthy.

As someone looking to make a career change into the world of production and manufacturing I am thankful that Wal-Mart is taking this step and I hope other retailers follow suit. I am once again glad for public people like Mike Rowe who are more concerned with reality than partisan political theater.


dle said...

Well, there's more going on here than unions.

First, most people forget that WalMart once advertised religiously that they sold American products. Indeed, Sam Walton was a huge advocate for American-made goods. (Though he was known to be a bear at driving down the cost of making them, and a lot of American companies weren't keen on Walton sticking a gun to their heads.)

Then Sam died, and American-made died with him.

Immediately, the company started offshoring to China. I've heard it said that 8% of China's GDP can be traced directly to WalMart. American manufacturing could not compete, and many famous American companies such as Huffy and Ohio Arts (the Etch-A-Sketch) effectively died because of this shift. One could argue that WalMart's shift killed a good chunk of American manufacturing, particularly the textile and furniture industries.

Meanwhile, China prospered.

Now that America has begun its slow limp to Second World status thanks to everything fleeing to China, guess what? Cost for Chinese manufacturing has gone up, while it has gone down in the U.S. It may actually be as cheap or cheaper to make something in the U.S. as it does in China.

So WalMart's reversal isn't quite as noble as it appears. Fact is, it may again be cheaper to do business in the U.S. than in China, and that's the bottom line.

Aussie John said...


If anything like Australia, your union leaders will have zero understanding of the economics of running a business eventually demanding, and forcing, such high wages that the companies go out of business, or shift their operations.

I'm not saying that this kind of ignorant greed is exclusive to unions, but the workers, themselves will eventually pay the high price of having no work. That is happening in this country right now.

As the wisest man who ever lived said, "Whoever is greedy for unjust gain troubles his own household....(Prov.15:27)

Kevin said...

Having followed a lot of different economists' blogs the last few years, I would venture to say that Wal-Mart recognizes that the US is increasing its comparative advantage in manufacturing. Standards of living in China, Indonesia, Malaysia, India, and other places that have been manufacturing-centric for the last few decades are rising and with it so are labor costs. Meanwhile the decline in union membership, the slow recovery of wage jobs, and the increasing usefulness of machines are bringing down labor costs in the US.

Now what takes 10,000 people in a 20th-century factory in Asia takes about 100 people in a 21st-century factory in the US, so this is not necessarily going to mean millions of new jobs. But, barring political rent-seeking, what's profitable for Wal-Mart, or any business, is profitable for the world. Factory workers in Asia are obviously finding more productive work or their wages wouldn't go up. American manufacturing businesses are finding innovative ways to use highly-productive, technologically astute workers (and are probably benefiting from relatively cheap energy).

This isn't a comprehensive explanation by any means. Manufacturing consumer goods closer to the consumers has many advantages. High-value items that were and are assembled in Asia (such as smart phones, computers, etc.) derived most of their value from the design that originated in the US, Japan, Taiwan, and Europe; the final assembly is a tiny fraction of the overall value. Small shifts in the global production structure are, to me, a sign of economic health and a functioning system of individual choice.

Arthur Sido said...

Dan, I would never expect Wal-Mart to do something that is contrary to their own profitability. That is what a corporation is supposed to do. Ultimately Wal-Mart supplies the goods at the price and selection that the market demands. If consumers demand "made in America" goods and are willing to pay more for them, that is what they will carry. Certainly there is a sense of Wal-Mart driving demand by what it offers.

Arthur Sido said...

John, it is not just the union leaders but many business leaders. For decades, especially in the auto industry, both sides acted like our politicians, lots of huffing and puffing and blustering but at the end of the day they just kept pushing wages and benefits to untenable levels, not aware or not caring that it was unsustainable in the future because they would be retired by then.