[lbo-talk] The Economic Crisis: A Wal-Mart Economy Dimension

Michael Perelman michael at ecst.csuchico.edu
Fri Oct 17 11:46:27 PDT 2008


Wal-Mart offers a valuable window into the current economic crisis. Before addressing the current crisis, let's put Wal-Mart in perspective.

Wal-Mart is, at least in part, both a cause and a symptom of what went wrong in the economy, as well as a hint of what might be done to correct the problem.

Wal-Mart represented a logical business strategy to an economy in which real hourly wages have been stagnant for more than three decades. Wal-Mart presented the face of low prices (which were not in reality always lower than elsewhere). At the same time, Wal-Mart contributed to the low wage environment that made it such a successful business. Besides paying low wages to its own workers (and sometimes not even paying all the wages that it owed), Wal-Mart helped to lower wages elsewhere. For example, grocery stores have put enormous pressure on their unionized workers because of competition from Wal-Mart's nonunion operation. Admittedly, Wal-Mart displaced some small retailers that may have paid lower wages.

As is well known, part of Wal-Mart's strategy was to rely on imports from countries that paid low wages. Competition from these imports both destroy jobs and limited wages from jobs that remained in the U.S. According to a somewhat dated report, if Wal-Mart were a country, it would rank as China's fifth-largest export market, ahead of Germany and Britain.

More at http://michaelperelman.wordpress.com/2008/10/17/the-economic-crisis-the-wal-mart-economy-dimension/

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Michael Perelman Economics Department California State University michael at ecst.csuchico.edu Chico, CA 95929 530-898-5321 fax 530-898-5901 www.michaelperelman.wordpress.com



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