‘Assembled in the USA,’ but made in China

Walmart is selling TV sets with the label, “Assembled in the USA,” but the Association for American Manufacturing has complained to the Federal Trade Commission that the TV sets are actually made in China.

FTC rules say that a product can’t be labeled as assembled in the USA unless the principal assembly takes part in the USA, and the assembly work is substantial.  Walmart’s supplier, Element Electronics, doesn’t do enough assembly to qualify, the complaint says.

One reason American manufacturers have shifted production overseas is to meet Walmart’s demand for low prices.  Walmart is the USA’s largest importer.  That’s something for American Christman shoppers to think about.

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How Walmart Destroyed U.S. Manufacturing by Molly McGrath and Brad Markell for the Walmart 1 Percent.

Walmart Workers Ramp Up Protests for Black Friday by Diane Krauthamer for Labor Notes.

The passing scene: Links & comments 9/16/14

Ukraine Offers Amnesty to Rebels by Mike Shedlock on Mish’s Global Trend Analysis (via Naked Capitalism).

President Petro Poroshenko of Ukraine made a peace offer to separatist rebels in Donetsk and Luhansk, consisting of amnesty to helps, help in rebuilding, free local elections Nov. 9, limited self-rule for at least three years and the right to use Russian in official documents.

To me, an outsider ignorant of internal Ukrainian politics, this looks like a reasonable offer.   But it is opposed by Prime Minister Arseny Yatseniuk, who came to power with the backing of neo-conservatives in the U.S. State Department.

Steve Jobs Was a Low-Tech Parent by Nick Bilton for The New York Times.  (Via Mike the Mad Biologist)

Most CEOs of Silicon Valley companies set strict limits on how much time their children can spend in front of computer screens or use social media.  Instead they encourage their children to read printed books and engage in face-to-face conversation.   Consumers of their products should follow their example.

Foreign Powers Buy Influence at Think Tanks by Eric Lipton, Brooke Williams and Nicholas Confessore for The New York Times. (Via Avedon’s Sideshow)

Non-profit research organizations such as the Brookings Institution, the Center for Strategic and International Studies and the Atlantic Council are supposed to provide expert and objective advice.  But how objective can they be if they take money from foreign governments?

John Crawford Shooting: Open Carry for Whites, Open Season on Blacks by Albert L. Butler for The Root.

Doubts cast on witness’s account of black man killed by police in Walmart by Jon Swaine for The Guardian.

Police in Ohio shot and killed a black man in a Walmart store in Ohio because they thought the toy gun he was holding was real.  But Ohio is an “open carry” state.  If he had been carrying a real gun, it would have been perfectly legal under state law.

Free enterprise and the failure of feedback

The advantage of a free market economy over a centrally planned one is the feedback provided by the law of supply and demand.  If the supply of something decreases, the price increases and demand (at the increased price) decreases until the increased price brings forth an increased supply.  This admittedly is a crude system, but it is superior to central planning because it is impersonal.  It does not require a genius to make it work.

Ian Welsh, in a recent post, pointed out that one of the main reasons for the collapse of the Soviet economy was lack of feedback.  In a command economy, the planners need correct information.  I question whether any relatively small group of people could assimilate the information needed to direct a large and complicated economy.  Welsh, on the contrary, said the Soviet economy actually was successful for a time, but broke down when the feedback system failed.  Too many people within the system found it to their advantage to manipulate information for their own advantage.

The present-day U.S. economy is not all that different.  Our big corporations and financial institutions have become little miniature Soviet Unions, in which feedback does not work, either internally or externally

The advantage of capitalism v. central planning, is that information is sent through prices, supply and demand.  This information feedback, however, is still game-able by power blocs.  The exact strategies are different than in a command economy, but the end result is the same.  The West and America are currently undergoing this exact problem.

The entire financial crisis was about inaccurate feedback, and broken feedback loops: it was about the financial and housing industries deliberately damaging the feedback system.   Then, when it finally went off a cliff, they destroyed the capitalistic feedback system, which when properly operating, makes companies go bankrupt, by obtaining bailouts due to owning western governments.

There are myriad other problems with feedback in the developed world right now, from massive subsidies of corn and oil, to oligopolistic practices rife through telecom and insurance, to the runaway printing of money by banks, to the concealment of losses by mark to fantasy on bank books, to the complete inability and unwillingness to price in the effects of pollution and climate change.

via Ian Welsh on The Fall of the USSR.

Here is how lack of feedback plays out in an individual firm.

This company is being managed by the quarter. We have executives who have no vested interest in Walmart. All they care about is their salary and bonus. So when they make poor decisions, for example this Christmas when they had a One Hour Guarantee for multiple items. This was a complete [financial] disaster but yet the executive praise what a big success it was. […]

You know what direction us managers were given to do in January? Remember Walmart’s fiscal year ends January 31st. You guess it, cut hours. For the poor decision made by executives at Walmart who could care less where the company is at in 10 or 20 years, we had to cut hours. 

Not only that we had to cut all expenses. Home office put a hold on all our ordering of supplies and try explaining to customers you don’t have toilet paper for the rest rooms. We had to cut all our part-time associates from 32 hours to 25.5 hours. All our full-time associates had their hours cut too. […]

Do you know how hard it is to go to someone that make $8.85 an hour and tell him, sorry but I have to cut you down to 25.5 hours. These people can barely pay their rent as it is and with no notice we cut their hours.

via Decades of Greed: Behind the Scenes With An Angry Walmart Manager.

I don’t have a good answer to this.  It is a moral problem as much as or more than it is a structural problem.  I don’t see how any complicated economic or political structure can function unless there is a critical mass of people who care about the truth, and care about the common good, especially but not only at the top.

The passing scene: Links & notes 12/1/13

The latest health issue for the elderly: ‘observation purgatory’ in hospitals by June McCoy for The Guardian.  Hat tip to naked capitalism.

Medicare’s payment structure gives hospitals an incentive to designate elderly patients as “observations” rather than “admissions.”  This means less care for the patient and higher bills for their families.

23andMe is Terrifying But Not for the Reason the FDA Thinks by Charles Seife for Scientific American.  Hat tip to naked capitalism.

The U.S. Food and Drug Administration has ordered a genetics testing company to stop selling its products until it can prove its tests are accurate.  But the writer says the real danger is creating a genetics database on millions of Americans that could be tapped by Big Brother.

Activist Malpractice by Michael Donnelly for Counterpunch.  Hat tip to Mike Connelly.

The writer slams Democrats, liberals and fake environmentalists who facilitate the Alberta tar sands mining, mining by mountaintop removal in Appalachia and clear-cutting of forests in Oregon.

Canada to file Arctic seafloor claim this week by the Canadian Press.

As the Arctic icecap melts, Canada, Russia and Denmark (which owns Greenland) are mapping their northern continental shelves and staking claims to the floor of the sea.  Canada’s claim will be the size of the provinces of Saskatchewan, Alberta and Manitoba combined.

Nicaragua canal boosts China power by Arnie Seiki for Asia Times.

China and Nicaragua have signed an agreement that would give China the right to build a canal across Nicaragua rivaling the Panama Canal.  While it’s long way from signing an agreement to actually building a canal, it is a sign of China’s emergence as a global power, and not merely an east Asian power.

Wal-Mart arrests could fuel “a new political movement of the disenfranchised,” Grayson tells Salon.

Wal-mart as a Third World nation

In its size and structure, Wal-mart is like certain Third World nations—a tiny group of privileged people on top, supported by a pyramid of hard-working low-paid workers below.

Hat tip to Mike Connelly for the chart below.  It’s from two years ago, but still basically true.

Walmart store asks food for its own employees

A Wal-mart store in the Canton, Ohio, area conducted a food drive on behalf of its own employees so they can afford a Christmas dinner.

This is terrible public relations for Wal-mart, but I actually think that the store manager who allowed this deserves credit for a kind heart.  The manager did not determine the level of Wal-mart wages, and did what could be done to help out.  But I am sure his superiors will blame him and not the company’s low wages for the unfavorable news coverage.

Sam Walton’s original idea of Wal-mart was to create a store chain with prices that working people and even poor people can afford.   It is a real irony, or paradox, or whatever you want to call it, that store employees can’t afford Thanksgiving dinner, even at Walmart’s everyday low prices.

Wal-mart CEO Bill Simon was quoted as saying the average Wal-mart employee earns just under $25,000 a year.  That’s only slightly better than the U.S. government’s poverty line of $23,550 for a family of four.

It’s unlikely the company will change any time soon and, with unemployment as high as it is, it’s unlikely anybody will be in a position any time soon to pressure the company to change.  Wal-mart got 23,000 applications for 600 job openings at stores the company plans to open in Washington, D.C.  That’s 38 applications for every job, making the odds greater than for applicants to Harvard.

Earlier this year the district’s City Council passed a law setting the minimum wage at $12.50 an hour, which is 50 percent higher than the current $8.25, for big-box retailers such as Walmart.  Corporate executives demanded Mayor Vincent Grey veto the law, and he did.

The great economist John Maynard Keynes said it is possible for a nation’s economy to get stuck in high unemployment and no wages, because nobody has enough spending power to create a good market for goods and services.  I think that’s where we Americans are now.  I think the only way to get out of it is to put people to work filling unmet needs for public services and public works.

Why subsidize the job-killer, Wal-mart?

Walmart has been given $4 million in financial incentives by the city of Darien, Conn., to convert its store there into a Super Walmart.

The usual justification for tax abatements and other subisidies for new industry is that they create local jobs.   But, as Kathleen Geier of The Washington Monthly wrote in a recent Salon article, there is no evidence of any net economic benefit to a Walmart moving in.

What Walmart does is to put local mom-and-pop stores out of business.  Some studies indicate that Walmart kills more jobs than it creates; others that it is a standoff.

Sam Walton, the founder of Walmart, was an innovator whose just-in-time system of inventory management reduced costs and enabled his company to reduce prices.   But now the company’s strategy for reducing prices is to use its market power to hold down wages and the prices it pays suppliers.  This does not benefit the areas the stores serve.

It is not just Walmart.   I think it is a mistake for any local government to offer subsidies for a new business to come in and compete with existing businesses.  I say let the businesses compete on a level playing field.

I’ll go further.  If it were up to me, the only business subsidy by American local governments would be free job training.

American businesses complain of lack of skills by new hires, but say they can’t provide training because there’s no way to stop the employees from taking their upgraded skills elsewhere.  Very well.  Let community colleges take over the responsibility for job training.

This is a form of aid that does not discriminate between existing business and new business.   It is not something the business owners can pocket and move elsewhere.  It creates value which benefits the people of the community and stays in the community.

Click on Wal-mart’s big lie: No, it doesn’t create jobs for Kathleen Geier’s complete article in Salon.

A crazy idea from Walmart management

Sam Walton, the founder of Walmart, was a business genius.  But his heirs, to put it as kindly as possible, are not.

Walmart has been foundering of late because it is so understaffed that its employees are not able to keep the shelves of its stores fully stocked.  This is wrongheaded.

Now Walmart management is seriously thinking about giving its customers discounts in return for delivering on-line orders within their ZIP codes.  This is deeply crazy.  No doubt their lawyers and insurance companies will talk them out of actually attempting this.

The Walton heirs are a good argument for keeping estate taxes high enough that important business enterprises do not fall into the hands of the idiot children of great entrepreneurs.  The operation of the free market will catch up with Walmart eventually, but not until a lot of good, hard-working people are hurt.

Click on Walmart faces the cost of cost-cutting: Empty shelves for a report from Bloomberg Business News about the company’s troubles.

Click on Wal-Mart may get customers to deliver packages to online buyers for a report from Reuters about management’s bogus solution.