Published Jul 17 2009 by Energy Bulletin
Archived Jul 17 2009

Economics - July 17

by Staff

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IKEA is as bad as Wal-Mart

Stephanie Zacharek, Salon

My mother still owns, and uses, the same vacuum cleaner she bought early in her marriage, just after World War II. She still lives in the house my father -- not a carpenter by trade, but an electrician -- built in the early 1950s with the help of his brothers, a small but sturdy Cape Cod-style dwelling with hardwood floors and solid wood doors that close with a hearty, satisfying clunk (as opposed to the echoey click of hollow-core doors). Today the idea of anything -- a household appliance, a piece of furniture, a house -- being built to last is almost laughable. When your vacuum cleaner stops sucking, you most likely haul it out to the curb and trek to Target or a big-box home-goods store to replace it. Even if you could readily find someone to repair it, the trouble and the cost would be prohibitive. If you need a bookcase, there's always IKEA: Sure, you'd prefer to buy a sturdily built hardwood version that doesn't buckle under the weight of actual books, but who has extra dough to spend on stuff like that? The IKEA bookcase is good enough, for now if not forever.

That cycle of consumption seems harmless enough, particularly since we live in a country where there are plenty of cheap goods to go around. But in her lively and terrifying book "Cheap: The High Cost of Discount Culture," Ellen Ruppel Shell pulls back the shimmery, seductive curtain of low-priced goods to reveal their insidious hidden costs. Those all-you-can-eat Red Lobster shrimps may very well have come from massive shrimp-farming spreads in Thailand, where they've been plumped up with antibiotics and possibly tended by maltreated migrant workers from Burma, Cambodia and Vietnam. The made-in-China toy train you bought your kid a few Christmases ago may have been sprayed with lead paint -- and the spraying itself may have been done by a child laborer, without the benefit of a protective mask.

"Cheap" is hardly a finger-waggling book. This isn't a screed designed to make us feel guilty for unknowingly benefiting from the hardships of workers in other parts of the world. And Shell -- who writes regularly for the Atlantic -- isn't talking about the shallowness of consumerism here; she makes it clear that she, like most of us, enjoys the hunt for a good deal. "Cheap" really is about us, meaning not just Americans, but citizens of the world, and about what we stand to lose in a global economic environment that threatens the very nature of meaningful work, work we can take pride in and build a career on -- or even at which we can just make a living.

But Shell asserts that even outlet malls and seemingly benign, friendly, progressive stores like IKEA are part of the problem; along with more obvious bad guys like Wal-Mart, they perpetuate a cycle that, far from nurturing creativity and innovation in the marketplace, ultimately benefits a relative few at the very top of the economic chain. Shell notes that before retiring in February 2009, "Wal-Mart CEO Lee Scott Jr. took home in his biweekly paycheck what his average employee earned in a lifetime." You might say that, for Scott, the good news is that everybody can afford to shop at Wal-Mart; the better news is that he himself doesn't have to.

...Shell begins by outlining the history of mass production in America (perhaps not surprisingly, firearms were among the first items to be mass-produced) and the rise of the discount chain. In the late 1800s a sickly farmer's son named Frank W. Woolworth opened the first "five-and-dime"; later, foreshadowing a future that workers around the world now seem doomed to live out, he quipped, "We must have cheap labor or we cannot sell cheap goods. When a clerk gets so good she can earn better wages elsewhere, let her go." The understanding is that she'll have somewhere else to go, where her skills and talents are wanted or needed, considered something worth paying for. But increasingly in our current work climate, more skills only make a worker more expensive and possibly more demanding, not more desirable. With meticulousness and daring, Shell approaches this problem and the myriad thorny issues twined around it, incorporating the research and views of an assortment of economists, political scientists and law professors to build her case. At the core of her argument is the idea that the wealth of cheap goods available to us doesn't make our lives better; instead, it fosters an environment that endangers not just the jobs of American workers but the idea of human labor, period.
(12 July 2009)



When will the recovery begin? Never

Robert Reich, Salon
The so-called green shoots of recovery are turning brown in the scorching summer sun. In fact, the whole debate about when and how a recovery will begin is wrongly framed. On one side are the V-shapers who look back at prior recessions and conclude that the faster an economy drops, the faster it gets back on track. And because this economy fell off a cliff late last fall, they expect it to roar to life early next year. Hence the V shape.

Unfortunately, V-shapers are looking back at the wrong recessions. Focus on those that started with the bursting of a giant speculative bubble and you see slow recoveries. The reason is asset values at bottom are so low that investor confidence returns only gradually.

That's where the more sober U-shapers come in. They predict a more gradual recovery, as investors slowly tiptoe back into the market.

Personally, I don't buy into either camp...
(13 July 2009)
Robert Reich was the US Secretary of Labor and is a professor at the University of California at Berkeley. His latest book is "Supercapitalism."



Goldman Sachs and The Great Unbalancing

James Howard Kunster, Pacific Free Press
The cat coming out of the bag this week -- a frazzled, flaming, rabid, death-dealing cat -- is the news that Goldman Sachs will announce impressive second-quarter profits, and set aside $18 billion or so for employee bonuses averaging $600,000 per head (though, of course, not evenly distributed among them). There probably are not fifty-three people in the USA who can explain how this development figures in with last fall's bailout gift from the US treasury, or the $13 billion GS received on the backside of US gift payments to the failed AIG insurance company, plus the reams of necrotic securitized debt paper rotting in the back of the GS vaults. This is a company playing with the fire of world history.

It brings back the question, which has loomed dimly at the margins of America's collective consciousness, as to whether we can get through the long emergency ahead without going through a wringer of domestic political convulsion. At this rate, sooner or later, anything identified with wealth could become a target for the wrath of the unemployed and foreclosed. The first rock that flies through an East Hampton window, or the first firebomb tossed into the lobby of Goldman Sachs Manhattan headquarters could ignite a chain of events that shoves all economic policy out of the political arena and quickly divides everyone at the center of power into armies out for blood.

What the nation -- including President Obama -- can't seem to get through its head is that the USA has entered a period of epochal economic contraction. Instead of growth, as measured in conventional econometrics, we can only expect (in the best case) transformation to a different economy within the limits of real contraction. The president has got to stop promising renewed growth. While this would affect the perceived "standard-of-living" as measured in things like shopping mall sales and vehicle miles driven, it would not necessarily mean diminished "quality-of-life." It would mean different ways-of-life for a lot of people -- for instance, young adults who had expected lifetime employment as corporate executives but who, instead, find themselves ten years from now working at farming. We have an awful lot to get real about...
(15 July 2009)
Also posted on Kunstler's blog under the title Wobble Time'