Walmart's Off to a Terrible 2013: Is Ravage-Capitalism Reaching a Point of Diminishing Returns?
In a consumer-driven economy, you can only squeeze ordinary working people so far before they're no longer able to buy the goods and services required to keep the ship afloat.
Walmart may be learning that simple truth the hard way. On Friday, Bloomberg reported a series of emails between company executives freaking out over the super-store's dismal start to the new year. “Well, we just had one of those weeks here at Walmart U.S.,” wrote Cameron Geiger, senior vice president of Walmart U.S. Replenishment. “Where are all the customers? And where’s their money?” Another exec, Jerry Murray, Walmart’s vice president of finance and logistics, described the latest sales figures as, “the worst start to a month I have seen in my ~7 years with the company.”
Due to its size – Walmart sales accounted for almost 3 percent of America's overall economic activity in 2011 -- not only is the company able to dictate the business practices of its vendors, it also serves as a bellwether for the larger economy. As Matt Stoller noted last year, “because of its scale and remarkable amount of data, the company actually has more granular data about the economy than most macro-economic forecasters. As Fed Board Governor Randall Kroszner said in a June 2006 meeting, Walmart officials 'effectively know what retail sales are before the numbers are reported because their sales are so highly correlated with overall retail sales.'”
So where is Walmart's customers' money? A chunk of it is in the pockets of the wealthiest 1 percent of American households, according to research by economist Emanuel Saez. He found that during the first three years of the “recovery,” as weak as it has been for most of us, those at the top of the pile grabbed 121 percent of all income gains and got 11 percent richer ( PDF). And the rest of us became 0.4 percent poorer, after accounting for inflation.
Another big chunk is going to Uncle Sam in the form of a significant tax hike on the middle class and the poor that resulted from the “fiscal cliff" deal struck in the beginning of the year. And the killer is that it's paying part of the tab of keeping most of the Bush tax cuts for those same top earners in place.
While some liberals lauded it as a win, I disagreed, noting that “for the middle class and working poor, their modest share of the Bush tax cuts are now permanent as well, but because the Dems' payroll tax cut was allowed to expire, their taxes will nonetheless go up. And not by a little -- it'll 'cost a typical worker about $1,000 a year, and two-earner family with six-figure incomes as much as $4,500,' according to the Associated Press.”
That's a big blow to families reeling not only from the “great recession” itself, but getting beaten further in the subsequent recovery. Apparently big enough that Walmart's shoppers can no longer afford their famous “low prices.”
In part, that's because they were in poor shape before the crash. Middle-class incomes have stagnated since the 1970s, and according to Saez, the top 1 percent of American households grabbed fully 62 percent of all the economy's gains between 1993 and 2011. He notes that in 2011, the share of our economic output captured by those in the top 10 percent is the highest its been since 1917, when his data series begins.
That longer-term trend highlights what is arguably the biggest issue facing American democracy today: the fatal link between rising economic inequality and the diminishing political voice of the vast majority of Americans. "The more pernicious effect of economic inequality comes indirectly through its impact on political inequality," says MIT economist Daron Acemoglu, co-author of Why Nations Fail. In an interview with Pat Garofalo of Think Progress, Acemoglu explained what he called, "a general pattern throughout history":