A final cost of deep discounting
Many years ago, my dogs provided an example of why I try to avoid shopping at Wal-Mart. Tempted by the low price of a large bag of Ol-Roy dog food, I succumbed to savings’ siren call. They started pooping an awful lot, looked hungry all the time and lost weight. I wondered if the apparently low ratio of nutrition to filler actually allowed them to physically eat enough to survive. I increased the size of my doggy poop bags and developed a new appreciation for quality-quantity issues. A switch back to designer brands and the dogs spent significantly less time eating and pooping, instead pursuing the other essentials of dog life: playing and sleep testing all available pieces of furniture.Low prices do allow us to consume more for less money. Wal-Mart’s low prices save us not only on money spent in their store but in their competitors’ stores, too, as they struggle to match the price. American consumers probably save $100 billion per year, thanks to this. Not bad, especially if we saved it in our retirement funds or less time at work and more time with the kids. If instead we spend it on more stuff we didn’t know we needed to pile in the garage and then the landfill – it’s a little like buying cheap dog food.Low prices come through ruthless and efficient cost cutting, which we can benefit from and pay for. A report by the Education and Workplace Committee of Congress estimated that a hypothetical 200-employee Wal-Mart costs the taxpayers about $420,000 in labor subsidies. Two examples are $125,000 on federal tax credits and deductions for low-income families, and $108,000 in children’s health insurance costs.As I prefer to buy from businesses that share similar social and environmental ethics [recycling, low pollution, living wage] these subsidies are frustrating.Much of the low cost is achieved through China’s large pool of proud and skilled workers and their downward pressure on other countries’ wages. Wal-Mart accounts for 1 percent of China’s GDP. China’s economy and work force are past a critical mass, and they exert a large force in the global economy. More and more businesses have factories in China, not for outsourcing but to sell to the growing wealth of the Chinese consumers. These businesses train local suppliers and very quickly Chinese businesses learn to use the same suppliers and start to compete. Soon enough they are also competing in the U.S., and manufacturers that stay here respond with greater automation and efficiency, which equals fewer workers. It’s good for economic growth (low inflation, increased productivity, etc.), but this may no longer be automatically linked to job creation and a higher standard of living. As a society, it may be fair to ask what’s the point of an endless rise in GDP then?To put China’s economy in perspective, it’s eight times smaller than the US’s and we have the luxury of “a bird in the hand.” There are questions about China’s use of resources, capital and her environment as she is very wasteful with all these when compared to other economically developing countries like India. Economic growth means little if you can’t breathe, and environmental con straints will force changes. Sixteen of the world’s top 20 polluted cities are in China, and by their own weak standards less than one-half of their cities have acceptable air. Half the population drinks contaminated water, and that nation’s seas are being destroyed by industrial waste.China could become an illustration of intractable limits and how industry is a subsidiary of the environment. In future years we’ll realize that a big part of our wealth is that we have this huge economy and due to some luck and incredible people, we haven’t destroyed our air, rivers, woods and wilderness at the altar of economic growth – yet. People are a country’s greatest resource, and people need an environment they can live in.Alan Braunholtz of Vail writes a weekly column for the Daily.
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