Contemplating Wal-Mart

I thought a bit about Wal-Mart’s Chinese imports. I have really strong feelings about the importance not only of local commerce but also of maintaining our production capacity within our own country. When we have greater imports than exports, it diminishes the quality of life and prosperity of everyone who lives in our country. WalMart is cited as the ultimate realization of the American dream of entrepreneurship. It is a company that is so large it has affected the American economy for the past quarter century. In my opinion, the effects have been overwhelmingly negative and here are my thoughts.

  The company employs over 1.5 million desperate people who are held to wages at or below the poverty level. More than that, they import 100 trillion dollars worth of goods per year from China.

  If we assume that 50% of the value of the imports is labour, then we can project that Wal-Mart has exported that 50% of labour to China by virtue of their imports. Assuming that they are low paying jobs, generously paid $25,000 per year, that would amount to (if I have my decimal place right), 2,000,000 jobs lost to Chinese labour. That would amount to over 10% of the US labour market.

  In other words, WalMart may well be responsible for the high unemployment and recession of the United States.

  You realize, of course, that all of our major merchants are buying Chinese imports in order to compete with Wal-Mart. The fundamental consideration is that we as a society have exported our basic production capability (and our carbon footprint) to Asia. It becomes really obvious when the Chinese purchase a closed factory here and take the factory and key personnel to China to help set up the new plant. A reasonable metaphor would be to consider (say) a cabinet maker who hires a helper and teaches him the trade. The helper learns quickly, and then sells his cabinets at a lower price than his benefactor. The benefactor will go out of business unless he stops making cabinets altogether and becomes a dealer, selling cabinets made by his previous helper.

  We have closed down our factories and become salesmen for Chinese goods. All of our previous factory workers are now unemployed. When we run a negative balance of payments in international trade, the deficit has to be covered either by indebtedness to another country or by selling assets or resources. Add the complication that international currencies can fluctuate more or less independently and the model gets a bit more complicated. That’s why Japan was able to buy half of California in the 1960’s and why the US would like China to let their currency to respond to market demand.