Short for "GeologicalScienceBlog", subjects will include Geology, Climatology, Environmental Science, NASCAR, Beer, Property Rights, Politics from a Christian Conservative/Libertarian viewpoint, and random thoughts. My background is two degrees in Geology (BS, MS), 8 years of geology/environmental employment and almost 8 years of teaching Geology and Environmental Science on a Junior College level. <68>

Wednesday, January 25, 2006

Looking at Wal-Mart

Not through the typical MSM/Leftist manner, but rather in a more open-minded, rational manner.

Today's Kathleen Parker column on Townhall.com provides a review of Charles Fishman's new book, "The Wal-Mart Effect".

It is not the same as when "Mr. Sam" was alive. No doubt effective practices by Wal-Mart and good management provided to American consumers choices and lower prices, but when Mr. Sam was alive, he made a concerted effort to use American suppliers first, when possible (or at least that is my impression).

Intoxicated by the consumer-driven growth of Wal-Mart over the past decades, the present management wants more (which is human nature), but the question of "at what cost" is addressed in Fishman's book. Ms. Parker uses the issue of Chilean salmon to illustrate the point.

From the column:

"Wal-Mart not only changes the way we buy, but the way we think, Fishman says. If Wal-Mart charges $5 per pound for salmon, then shoppers wonder why a restaurant charges $15. We expect salmon to cost only $5. Or a microwave to cost only $39. The Wal-Mart effect first changes our expectations, then changes the quality of merchandise, which is cheap, because it isn't always well- or ethically made.

Take salmon. Wal-Mart, which buys all its salmon from Chile, sells more than anyone else in the country and undersells all other retailers by at least $2 per pound. That's a lot of market power, which prompts Fishman to ask: "Does it matter that salmon for $4.84 a pound leaves a layer of toxic sludge on the ocean bottoms of the Pacific fjords of southern Chile?"

Salmon in Chile are raised in packed underwater pens - as many as 1 million per farm - and fed prophylactic antibiotics to prevent disease. Here's a fact you'd rather not know: A million salmon produce the same amount of waste as 65,000 people. Combine that waste with unconsumed food and antibiotic residue, and you've got a toxic seabed.

Does it matter?"

My pool cover boss, a fervent Conservative, has spoken about this, though I don't recall his source of info. Wal-Mart has gotten to the point of size and influence that they are now telling small & medium-sized suppliers what wholesale prices Wal-Mart will pay for their goods, and Wal-Mart's intentions of paying less next year, in order to keep their retail prices down. All of this does not take the producer's production and shipping costs into effect.

So the American producers are faced with accepting Wal-Mart's demands (and similar demands from other retailers in competition with Wal-Mart), in order to keep their products in Wal-Mart and other large retailers. If their products are being sold at a loss in Wal-Mart, how can they make up the losses elsewhere? If they seek to make up the losses by charging smaller retailers more, that hurts both the producer and the small retailer. It isn't just Wal-Mart that is engaged in this practice, but they may well be the dominant practitioner.

A personal experience with the Wal-Mart Effect, back in 1998/1999, while doing some geologic mapping in SW Georgia, I needed some new boots, so wanting to patronize an American company, I went to the Red Wing store on I-75, near Vienna, Ga. and paid $100 for a new pair of American-made boots. The next time I went back to my field area, I forgot my new boots and I couldn't do the field work without boots, so I went to a Super Wal-Mart in Americus, Ga. and purchased a pair of Chinese-made boots for $20. They weren't as good as the Red Wing boots, but for $20 per pair,...

Aside from the higher American wages, (some) American producers have to dance to the tune of unions and "their rules" and whims, and all have to dance to the tune of regulations that Chinese (and other foreign) producers would scoff at. American producers also have to deal with the paperwork costs of payroll taxes, corporate taxes,etc., (that get passed on to the consumer, via the present tax system). [With the Fair Tax, that would end, hint, hint.]

Rush Limbaugh has repeatedly made the point that capitalism cannot thrive without a framework of morality. In Wal-Mart's zeal to deliver low prices, it has bypassed and damaged some of America's smaller producers in favor of foreign businesses that lack some of the hindrances of American businesses. And many of us, despite wanting to use American-made products, the price differential a la the boots, are unable to do what we ultimately know is the better thing to do.

The Fair Tax is one way of taking some of the burdens off of American producers and consumers, but responses by informed consumers, not just to retailers and producers, but also to unions, are but one way to retain some of our production base.

A long-term run of the "Wal-Mart Effect" (without internal adjustments) will eventually turn detrimental and tipping points are not often seen until you are past them. Sensible people should not seek to damage Wal-Mart (Re: the fascism of New Jersey), but rather to return to a more sustainable pathway. But the heavy-handed methods of government, at the behest of unions and other activists (via Ted Kennedy, Hillary Clinton, et al) are not the way to do it.

It appears that Mr. Sam's ideas are being forgotten.
Posted by: on-the-rocks / 11:20 AM
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