24.2.13

HITTING BOTTOM?

Three articles suggest there are limits to a business model based on cheap goods offered at low prices made possible by cheap and contingent labor.  The straight news angle is that retail stores require consumers to have disposable income out of which to consume.
American consumers might be preparing to downshift again, if only slightly, with low-income consumers hit the hardest. Sensing consumer trepidation, retailers are scrambling to adjust.

Retailers, restaurants, and consumer goods companies like Wal-Mart are lowering sales forecasts and adjusting marketing campaigns ahead of expectations that consumers will slash spending, the Wall Street Journal reports.
Peggy Noonan sees one Deeper Lesson in the aisles of Wal-Mart.
It was Sunday afternoon on a holiday weekend but even accounting for that the mood and look of the place was different from what it was two and five years ago. Then, things seemed dynamic—what buys, what an array of products, what bustle in the aisles. This time it seemed tired, frayed, with fewer families and scarcer employees. It looked like a diorama of the Great Recession.

What effect do all the successive fiscal cliffs, ceilings and sequesters, have on public confidence? On the public's spirit? They only add to the sense that Washington is dysfunctional and cannot possibly help us out of the mire.

It shows the world we lurch from crisis to crisis by habit now. This makes us look incapable and beset.
The entropy isn't in Washington, suggests James Howard Kunstler.
WalMart managed to install itself in the pantheon of American Dream icons, along with apple pie, motherhood, and Coca Cola. In most of the country there is no other place to buy goods (and no other place to get a paycheck, scant and demeaning as it may be). America made itself hostage to bargain shopping and then committed suicide. Here we find another axiom of human affairs at work: People get what they deserve, not what they expect. Life is tragic.

The older generations responsible for all that may be done for, but the momentum has now turned in the opposite direction. Though the public hasn't groked it yet, WalMart and its kindred malignant organisms have entered their own yeast-overgrowth death spiral. In a now permanently contracting economy the big box model fails spectacularly. Every element of economic reality is now poised to squash them.
The economic reality that cost-conscious managers missed is that, yes, a worker's wages are a capitalist's cost.  But there's another part of the circular-flow model that will bite the managers every time.  A capitalist's sales are a worker's purchases.

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