It’s not altruism

How plutocrats relieve moral tension:

Chrystia Freeland is editor of Thomson Reuters Digital and author of “The Plutocrats: The Rise of the New Global Super Rich and the Fall of Everyone Else.” We spoke Tuesday about how the plutocrats she reported on for the book were handling Mitt Romney’s loss. A lightly edited transcript of our conversation follows.
Ezra Klein: You’ve written about the revolt of the very rich against President Obama, and all the money they spent and time they dedicated to defeating him. So what’s the mood in those circles now that they’ve lost?
Chrystia Freeland: There’s a great joke on Wall Street which is that the bet on Romney is Wall Street’s worst bet since the bet on subprime. But I found the hostility towards Obama astonishing. I found the commitment to getting him out astonishing. I found the absolute confidence that it would work astonishing. On that Tuesday, the big Romney backers I was talking to were sure he was going to win. They were all flying into Logan Airport for the victory party. There’s this stunned feeling of how could we be so wrong, and a feeling of alienation.
The Romney comments to his donors, for which he was roundly pounced on by Republican politicians, I think they accurately reflected the view of a lot of these money guys. It’s the continuation of this 47 percent idea. They believe that Obama has been shoring up the entitlement society, and if you give enough entitlements to enough people, they’ll vote for you.
EK: Here’s my question about those comments. Romney was promising the very rich either a huge tax cut or, if you believe he would’ve paid for every dime and dollar of his cut, protection from any tax increases. He was promising financiers that he would roll back Dodd-Frank and Sarbanex-Oxley. He was promising current seniors that he wouldn’t touch their benefit. How are these not “gifts”?
CF: Let me be clear that I’m not defending any of them. But I think the way it works — and I think Romney’s comments were very telling in this regard — there are two differences in the mind of this class. First, they’re absolutely convinced that they’re not asking for special privileges for themselves. They’re convinced that it just so happens that their self-interest coincides perfectly with the collective interest. That’s where you get this idea of the “job creators”. The view is that to seek a low tax environment or less regulation, that’s not special pleading for yourself, it’s not transactional politics. It’s that this set of rules is the most conducive to economic growth for everybody. It will grow the pie. Now, it also happens to be an incredibly convenient way of thinking. If you’ve developed an ideology that what’s good for you personally also happens to be good for everyone else, that’s quite wonderful because there’s no moral tension.

Hmmm. I don’t know, though. Is this the approach of people who are genuinely considering what’s “good for everyone else”?

JIM SINEGAL, the chief executive of Costco Wholesale, the nation’s fifth-largest retailer, had all the enthusiasm of an 8-year-old in a candy store as he tore open the container of one of his favorite new products: granola snack mix. “You got to try this; it’s delicious,” he said. “And just $9.99 for 38 ounces.”
But not everyone is happy with Costco’s business strategy. Some Wall Street analysts assert that Mr. Sinegal is overly generous not only to Costco’s customers but to its workers as well.
Costco’s average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam’s Club. And Costco’s health plan makes those at many other retailers look Scroogish. One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco “it’s better to be an employee or a customer than a shareholder.”

Mr. Sinegal begs to differ. He rejects Wall Street’s assumption that to succeed in discount retailing, companies must pay poorly and skimp on benefits, or must ratchet up prices to meet Wall Street’s profit demands.
“This is not altruistic,” he said. “This is good business.”
IF shareholders mind Mr. Sinegal’s philosophy, it is not obvious: Costco’s stock price has risen more than 10 percent in the last 12 months, while Wal-Mart’s has slipped 5 percent. Costco shares sell for almost 23 times expected earnings; at Wal-Mart the multiple is about 19.Mr. Dreher said Costco’s share price was so high because so many people love the company. “It’s a cult stock,” he said.
Emme Kozloff, an analyst at Sanford C. Bernstein & Company, faulted Mr. Sinegal as being too generous to employees, noting that when analysts complained that Costco’s workers were paying just 4 percent toward their health costs, he raised that percentage only to 8 percent, when the retail average is 25 percent.

I don’t have a Costco where I live but I’d rather have a Costco than a Walmart because Costco employees are paid better than slave wages. That money directly benefits my whole community. They’ll be living here, working here and buying here with those higher wages and I live and work here too, so that matters to me. It doesn’t do me a whole lot of good to save 25 dollars a month on grocery items if I’m surrounded by people who have to rely on food stamps and Medicaid to supplement rock-bottom wages. That isn’t a good deal for me. Weird how Wall Street simply doesn’t see this, isn’t it, when it’s so blatantly obvious to the rest of us? Who benefits when they pressure employers to drive down wages and benefits? Costco employees? Me? My community? How?

202 replies
  1. 1
    MaximusNYC says:

    I read that Costco article just the other day. Very interesting… but it’s from 2005. Anyone know if Costco is still run along the same lines today? I have a bad feeling that if Sinegal were to leave, things might change. Has he left? Have they changed already?

  2. 2
    gwangung says:

    And, folks, Jim Sinegal and the rest of Costco execs aren’t exactly hurting when it comes to wealth.

    They could possibly do better for their workers, but they’ve shown that you can be a successful modern American company AND NOT SCREW YOUR OWN EMPLOYEES OVER while doing it.

  3. 3
    Kay says:

    @MaximusNYC:

    Here’s 2012:

    In another sign of changing times at Costco, co-founder Jim Sinegal stepped down from the CEO spot in January, handing over the reins to Craig Jelinek, who had been serving as president and COO and has been working at the company since 1984. Sinegal remains as an advisor and board member.

  4. 4
    Eric U. says:

    this is why they haven’t convinced me to move any of my brokerage account out of cash for a while. I need to study the market to see how I can profit from their stupidity. The problem is that the market is one place where the morons actually can create their own reality.

  5. 5
    MikeJake says:

    It’d be nice if we could get ahold of Emme Kozloff’s phone number, so that Costco’s generously paid workers can let her know what they think of her spreadsheet assessment of their worth.

  6. 6
    Gin & Tonic says:

    Friend of mine runs a technical company with about 40 employees, and makes a point of paying slightly above market wages and providing an excellent benefit plan, also saying altruism has nothing to do with it. It’s simply good business. Employees who aren’t worrying about paying the bills or going bankrupt if they have an accident are happier and more productive. It’s not complicated.

  7. 7
    PeakVT says:

    One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco “it’s better to be an employee or a customer than a shareholder.”

    The only thing that makes me happier than a seeing Wall Street creep with a sad is when well-paid workers cause it.

  8. 8
    c u n d gulag says:

    GOP POV:
    Oh, if only we could go back in time, and assassinate Henry Ford for paying his workers enough so they could buy his cars!

    Who knew that the price for liking his anti-Semitism, would be workers who could afford to eat, let alone buy cars?

    DAMN YOU, HENRY FORD!

  9. 9
    BGinCHI says:

    Privatize the benefits, socialize the costs. That’s fatcat American corporate capitalism. Period.

    The convenient way of thinking she describes is exactly right:

    If you’ve developed an ideology that what’s good for you personally also happens to be good for everyone else, that’s quite wonderful because there’s no moral tension.

    This is what privilege and entitlement look like in 2012. Which is not far from what it looked like in 1892, except that most of the rich have been rich for a few generations.

    There are no straps on these guys’ boots.

  10. 10
    WereBear says:

    But they make even more money by screwing over the workers; so that must be what God wants.

  11. 11
    BGinCHI says:

    @WereBear: Jesus loves a tidy prophet.

  12. 12
    redshirt says:

    Jobs trickle off me like crumbs from my turkey chin. Enjoy it, peons.

  13. 13
    General Stuck says:

    It’s more along the Japanese theory of a corp being like a single human entity, and nothing is ruled out to achieve the best product possible. With the obvious benefit in a competitive market, that better products sell better when made by satisfied workers, and people will usually spend a little more to get those products, and be able to afford them from better wages.

    I think it is a fundamental flaw in our national character, that is not only morally bankrupt on a personal level, but tends to corrupt the basic econ laws of supply and demand as required for a healthy capitalist system.

    This bifurcation of socioeconomic status is pervasive throughout our culture, and it is destroying us. I’m not sure it can be fixed at this point, without a complete economic collapse, if the plutocrat keep on their current glide slope of greed that is starving the system for demand.

  14. 14
    kindness says:

    What kills me about these Galtians is that if you compare their own health plans and wages to the people they criticize for being overly generous, their own plans far outstrip the plans they feel are inappropriate for others.

    What happened to good for the goose, good for the gander? Is their Moral View so myopic they can’t see what assholes they are? Yes. They don’t see it at all.

  15. 15
    rikyrah says:

    I do have a Costco near me.

    NEVER EVER would belong to Sam’s Club.

    Cotsco has a low employee turnover.

    still giggling at the thought of all those fat cats flying into Boston.

    one of the best things about the President winning is….

    the backed Willard. they didn’t even straddle the fence…they backed Willard all the way…and came up with nothing.

    BWA HA HA HA AH HA

  16. 16
    Beauzeaux says:

    “Who benefits when they pressure employers to drive down wages and benefits”

    I assume that’s a rhetorical question. Who benefits? The shareholders. The shareholders (mostly other rich people)are the important factor.

  17. 17
    jibeaux says:

    Another thing I love about Costco is that it’s just flat awesome. If you do have one near you, best prices per pound around on mixed greens, nuts, dried fruit, cheese, batteries, shade grown fair trade coffee. Kim Crawford sauvignon blanc, which I find to be a completely foolproof wine that almost anyone likes, is $13 there and $18 just about everywhere else. Costco and Trader Joe’s — fortunately for me they’re very close together in my town — will get you all the food & drink you need for the holidays, they’ll pay their employees decently, and their employees won’t seem like they’d just as soon be hanging themselves as working there.

  18. 18
    red dog says:

    I always notice how helpful and friendly Costco workers are compared to their Walmart counterparts with phony smiles and looking over their shoulder.

  19. 19
    WereBear says:

    Yes, we appreciate the single mother next door giving her children enough food, and even being able to spend some time with them, and teach them not to pick their nose at the table and all; yes, such a society benefits us peons.

    But those folks in their mansions? It doesn’t matter to them what unwashed hell we wade through, does it? In fact, it could make their life better as they chuckle over the depravity we Hunger Gamers go through.

    Oh, it makes perfect sense.

  20. 20
    kindness says:

    @jibeaux: I do shop at Costco but I don’t buy everything there. I don’t really like having commercial quantities of rolls of paper towels so I don’t buy them. And I find their meat prices to be higher than my local grocery store so I buy that from the locals.

  21. 21
    BGinCHI says:

    @jibeaux: True this. Even with all the great shopping in the city, we still use both places, though also small butcher shops, fruit/veg places, bakeries, and so on.

    At TJs, try the sauvignon blanc from Sauvignon Republic (from NZ, with an orange triangle label: $7.99). Delicious.

  22. 22
    Kay says:

    @Beauzeaux:

    Oh, I know, but there’s this:

    Mr. Sinegal, whose father was a coal miner and steelworker, gave a simple explanation. “On Wall Street, they’re in the business of making money between now and next Thursday,” he said. “I don’t say that with any bitterness, but we can’t take that view. We want to build a company that will still be here 50 and 60 years from now.”

    Aren’t they always screeching about their grandchildren and FEDERAL DEBT? Where do they think their grandchildren are going to live? On the moon?

  23. 23
    Cassidy says:

    To truly save money while grocery shopping, you have to make three trips: wholesale, a Walmart or similiar store, and a grocery store. Hard to do in one day.

  24. 24
    schrodinger's cat says:

    Maximizing shareholder value is the holy grail, everything else is fair game. Finance is the life blood of the economy, right now however the economy is suffering from leukemia, where the financial sector has taken over the economy. This trend cannot continue forever. The cancer is going to kill the host, if we are not able to get it back under control.

    This is a consumer driven economy, if the consumer cannot buy the goods, the economy doesn’t work, the housing bubble pumped cash into the economy. In the mid aughts the economy was fueled by debt, something that could not be sustained long term. We haven’t yet found a way out of this morass yet. If anything Obama has been too soft on the financial sector.

  25. 25
    Mnemosyne says:

    One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco “it’s better to be an employee or a customer than a shareholder.”

    And the problem with that is … ?

    We’ve got a seriously fucked-up economic system when banks in a consumer-based marketplace are complaining that businesses are catering more to their customers than to the shareholders. They really have absolutely no clue that, without Costco’s customers, there wouldn’t be a Costco, do they? Apparently the Free Market Fairy magically brings customers to you, so you never have to worry about alienating them or having them choose to shop elsewhere because of bad service.

  26. 26
    BGinCHI says:

    @Kay: The moon is not for those people, Kay, unless it’s too far away for them to vote.

  27. 27
    J.D. Rhoades says:

    One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco “it’s better to be an employee or a customer than a shareholder.”

    And this is a problem….how?

  28. 28
    Tone in DC says:

    @jibeaux:

    they’ll pay their employees decently, and their employees won’t seem like they’d just as soon be hanging themselves as working there.

    Amen.
    I work for a small company that pays its workers well. I also used to work for a staffing agency where I may have seemed to others as if I wanted to find a convenient shower curtain rod (the agency’s name rhymes vaguely with No Remorse). The difference in my work outlook is just short of amazing.

  29. 29
    comrade scott's agenda of rage says:

    The other part of this is a commentary on the so-called financial “analysts” in this piece, ie., the ones who need their heads put on the end of pikes. Bill Dreher and Emme Kozloff try to explain away the bare-faced reality of Cosco’s business model with excuses that have no basis in anything other than shit. I mean wtf does “it’s a cult stock” mean?

    It means the “analysts” have their head so far up their collective asses they’ll look for any reason to justify the last 30 years of Reagonomics.

  30. 30
    Mojotron says:

    Maybe “welcome to Costco, I love you” is closer to the truth than we think.

  31. 31
    BGinCHI says:

    @Mnemosyne: Also it’s as if they don’t believe in work. Work is somehow tainted with negativity.

    The model is to get workers to produce an excess that can be skimmed off and taken out of the loop of productivity. An entire class of people profiting off the labor of others.

    There must be a parasite analogy here somewhere….

  32. 32
    japa21 says:

    @rikyrah:

    Cotsco has a low employee turnover.

    And this is one of the keys. Training new employees is expensive, not only in the direct training costs but also in having other employees use their time to mentor the new employee, answer questions, etc.

    I have belonged to Costco and spend more than I should there (enough so that I haven’t had to pay for renewal for most of those years). When I look around, a lot of the employees there now were there when I started shopping there.

    I used to make fun of people buying uper large amounts of toilet paper and kleenex and stuff. Not anymore. And Costco’s produce is a cut above most places, it’s meat department is awesome, as is, as pointed out above, its wine selection.

    Some prices are not great but those are things I don’t buy there and get elsewhere. Clothing prices are respectable and the quality is fine. Even their own brandname goods are high quality.

  33. 33
    gVOR08 says:

    Face it, most of them would steal the pennies off your dead father’s eyes and expect you to admire their chutzpah while they did it.

  34. 34
    TenguPhule says:

    If you do have one near you, best prices per pound around

    It helps that they never mark up more then 15% over costs. If I could go to work for them, I would in a heartbeat. But their low turnover also means every job opening is immediately pounced on by hundreds who want to get in.

  35. 35
    D. Mason says:

    It’s because some bean counter can’t quantify the losses caused by employees who would just as soon see their boss set on fire. Like the recent video of employees tossing Ipads across the stock room. In a company that offers good jobs that’s unthinkable because it puts ones ability to keep that good job in danger. I’ve had people talk to me about where the work ethic has gone and I tell them it’s on a road trip with fair compensation for labor.

  36. 36
    MCA1 says:

    Freeland has it exactly right. The central goal of modern day Republicanism for the wealthy is finding a way to allow people to believe that their basically self-serving desire for lower marginal income and capital gains tax rates is not actually purely self-serving. That way they’re not forced to confront the moral shortcomings in their team affiliation and policy positions.

    47% and “entitlement society” and dependency talk is one branch of that. It opens the door for the paternalistic argument about “I’m happy to pay taxes, but they’re just going to people who don’t deserve my money” and all the redistributionism/soshulizm talk. There’s a psychological need to set up the internal monologue of “I work harder, I’m smarter and I’m more deserving” because there’s an underlying understanding of the basic tilting of the field in their favor and the ability to believe others don’t deserve things helps tamp down the shame.

    But the primary plank in this is the job creator and the lower taxes lead to job growth myth. They really believe it, and (understandably) really want to believe it enough that they don’t challenge that particular piece of false dogma, because it would force them to consider the basic amorality of personal, material desires driving their political preferences.

  37. 37
    Kay says:

    @Mnemosyne:

    That’s what sort of amazed me about the financial crisis. Lenders treated their customers like absolute garbage. They were basically belligerently telling them to FUCK OFF. I was naive at the start of it, and I was thinking, “well, they have to accomodate these people because they are their customers“. God, was that a joke. Apparently there is just an endless stream of borrowers and one can completely ignore them.

  38. 38
    Steve Finlay says:

    “It doesn’t do me a whole lot of good to save 25 dollars a month on grocery items if I’m surrounded by people who have to rely on food stamps and Medicaid to supplement rock-bottom wages.”

    Exactly. Poverty in the people around me does not do me any good at all. Companies which outsource their work to the Philippines, India or privatized prisons have to be counting on other companies to NOT do it, so that someone is left behind to buy their products. This isn’t sustainable.

  39. 39
    TenguPhule says:

    I mean wtf does “it’s a cult stock” mean?

    It translates from Wallstreet Greed as “I can’t understand how they can consistantly make so much money despite not listening to a single reccommendation of mine that I desperately want them to pay me for!”

  40. 40
    Comrade Jake says:

    Heh. Probably you all missed this gem from McMegan explaining why Walmart can’t be like Costco. You see, it’s because they have a different business model. Try to read it and not laugh hysterically over an incredibly poorly formed argument.

  41. 41
    Betty Cracker says:

    I drive 20 miles out of my way to shop at CostCo rather than Sam’s Club. Fuck a bunch of Walmart bastards.

  42. 42
    jibeaux says:

    @BGinCHI: I have seen that one. Will do!

  43. 43
    BGinCHI says:

    @MCA1: Nicely put. That ideology is more firmly in place now than I’ve ever seen it. Especially among lower income (white) people.

    Is it Fox, you think?

  44. 44
    Cassidy says:

    McMegan…poorly formed argument

    Does today end in “y”? How time flies…

  45. 45
    Anoniminous says:

    One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco “it’s better to be an employee or a customer than a shareholder.”

    Deutsche Bank is not a major holder of CostCo so who gives a shit what Billy says?

  46. 46
    nanute says:

    @MaximusNYC: Costco has a well known corporate history of treating its workers and customers very fair. Investors, aside from vulture analysts, seem to like the stock too. A year ago November the stock was trading at just above 67.00. Today it is trading at just above 102.00 and pays a slight dividend. You’d be up about 34% over last years price. I’m not giving any investment advice, but I’d say it is ripe for a split at the current price level.

  47. 47

    Now, it also happens to be an incredibly convenient way of thinking. If you’ve developed an ideology that what’s good for you personally also happens to be good for everyone else, that’s quite wonderful because there’s no moral tension.

    That’s it right there. I don’t mean to get all (literally) preachy, but this is precisely why in the Bible Jesus says it’s easier for a camel to pass through the eye of a needle than for a rich man to get into heaven.

    Fascinating.

  48. 48
    MCA1 says:

    @BGinCHI: Is Paulina Meat Market still the greatest place on Earth, or has Gene’s (which I haven’t visited since it opened after we moved to the ‘burbs) taken over that title?

  49. 49
    BGinCHI says:

    @jibeaux: Also try a bottle of Torrontes (white wine varietal from Argentina). Any producer, should be easily under 10 bucks.

    Thank me later.

  50. 50
    sherparick says:

    About the only thing one can do is vote with your money. I shop at COSTCO, Safeway, and Giant, as they are union shops in a right to work state. My wife and I would not be caught dead in a a Walmart.

    These guys were all telling their clients to buy AIG, Countrywide, CITEBANK, and Bank of America in 2004-06. Further, most brokers are interested in keeping you trading and churning your account as it is in their fees that they make their dough. You have start off a bit bent to even want to go into that business.

  51. 51
    aimai says:

    My father has a slight sideline in venture capital–he described his partners as “snivelling” over the “carried interest” deduction. Cracked me up. He and my mother were big Obama supporters.

    aimai

  52. 52
    BGinCHI says:

    @MCA1: Hey, didn’t know you were from around these parts.

    Yes, Gene’s is really a strong competitor. I prefer it. Much more European versions of things, like smoked meats. Also just great, great sausages. Their hanger steak is the best.

    Also now upstairs patio.

    My grill loves Gene’s. What ‘burb?

  53. 53
    Mister Harvest says:

    “He has been too benevolent,” she said. “He’s right that a happy employee is a productive long-term employee, but he could force employees to pick up a little more of the burden.”

    Equity analysts, however, are priced to perfection, always.

  54. 54
    Kay says:

    @Comrade Jake:

    Ask her about her meal/rest breaks. Is cutting meal breaks really a “business model”?

    A Pennsylvania appeals court has upheld a $187.6 million Wal-Mart verdict. The suit was filed by employees, who claimed that if you worked for retail giant Wal-Mart, meal breaks and rest breaks were regularly cut.
    The appeals court affirmed the lower court’s finding that Wal-Mart’s actions violated state wage and hour laws, Bloomberg reports.
    The class action represented about 187,000 current and former Wal-Mart employees who worked in Pennsylvania between 1998 and 2006, according to Reuters.
    Named plaintiffs Dolores Hummel and Michele Braun alleged that Wal-Mart store managers routinely pressured them to entirely skip their required breaks or cut them short, according to Bloomberg. The women’s attorneys argued that the company had forced workers to skip about 33 million rest breaks between 1998 and 2001 in an effort to cut costs and increase productivity.

    How often does she wander into the pretentious round table break room and get a snack?

  55. 55
    schrodinger's cat says:

    @Kay:According modern financial theories, making profits for your owners (shareholders) is the reason for the existence of any business, everything else is secondary. Its Randian philosophy with academic clothing.

  56. 56

    Also, as I commented over at the WaPo link: this interview gets to the heart of what I’ve been saying since the election. They were wrong! The elites have been wrong! Over and over again they’ve been wrong. With sometimes disastrous results.

    They were wrong on the Iraq War/WMD thing.

    They were wrong on the housing bubble.

    They were wrong on subprime and the economy.

    They were wrong on climate change.

    They were wrong on the temperature of the American voter.

    They are wrong wrong wrong wrong wrong. So would someone please explain to me why the news media keeps telling us to listen to them? WHY? Why are these assholes on every panel show and op-ed page? THEY. ARE. WRONG.

    End of rant.

  57. 57
    TenguPhule says:

    It’s because some bean counter can’t quantify the losses caused by employees who would just as soon see their boss set on fire.

    To be fair, us bean counters would just as soon chip in kindling and a match, our jobs may still be here but the pay has actually gone down, not up.

  58. 58
    MCA1 says:

    @BGinCHI: Probably. I was thinking mostly of the appeal of the GOP to those making 6 figures, and especially those in the upper 1% who happen to make up the majority of their donor base, but the same general thought process applies lower down the scale, too. And clearly it’s propogated by Fox to a large degree. Some of it’s just human nature, too – we’ve all seen the polls and studies showing how many people think they’re in the wealthiest 5, 10, 20% of the country when they’re nowhere close to that, and adjust their policy preferences accordingly, to their own detriment. Even those who know they’re in the middle class, being aspirational Americans, have bought the stop picking on the wealthy, class warfare line because they just assume they or their children will eventually be in that 1% and don’t want the nation to turn into Soviet Russia before that can happen.

  59. 59
    👽 Martin says:

    @MaximusNYC: Costco is run the same way. The other management there believes in the philosophy. Doesn’t mean the board won’t put some plutocrat asshole in as CEO in the future, but for the moment, they seem to be pretty well invested in the model.

    Costco really just is a better store – but it’s also an entirely different animal than Walmart. If you go in needing mayonnaise, you’re either going to walk out with a gallon of it, in one brand, or nothing at all. Costco is where you go to buy specific things, with some general categories (meat) thrown in. Mine carries one kind of gin – Bombay Sapphire. And it’s a great price on Sapphire, but I don’t like Sapphire, so the store doesn’t help me in that area. OTOH, I buy all of my spare ribs there because it’s always fresh due to their insane turnover of product, and my grill holds 3 racks, and we’ll eat on leftovers for a week. But Costco is remarkably clean and organized (if absurdly crowded) while every Walmart I’ve heard about (I refuse to go in one) is a complete shithole with products scattered everywhere, shit on the floor, etc.

    But while Costco is good for it’s workers, it’s not particularly good for the economy. 25% of US workers used to be in retail. That’s down to 15% now. If you want to know where our jobs went, Amazon and Costco wiped them out. Costco at least pays well, but it employs very few workers relative to sales. Better than Amazon, but far worse than almost any other retail outlet.

    Walmart revenue per employee is $200K. So, at a gross profit margin of 25% (retail – wholesale cost) each employee brings in $50K to cover their own salary plus the cost of keeping the lights on, advertising, warehousing, rent, and so on. With those numbers, you can see why they pay so little. But with such huge sales, it also suggests that they employ a fucking army of workers – and they do. 1% of the US workforce is Walmart. That’s a lot of (shitty) jobs. But most grocery stores tend to be around $250K. Lots and lots of mass retail looks like this – usually a bit better than Walmart though, and they tend to pay a bit better as well.

    Amazon revenue per employee is about $1M. Their gross profit margin is also 25%. So Amazon has $250K per employee to play with. They can pay better wages (which they don’t do in their warehousing operations, but do in their IT operations) but obviously they don’t employ many workers.

    Costco is around $550K per employee. They’re splitting the difference. Their gross margin is only 13% though (as noted in the article) so Costco has about $70K per worker. So, basically they’re running Walmart stores, with lower prices and enough extra operating margin to pay the workers better but half as many workers.

    That’s the big tradeoff. If Walmart operated like Costco, workers would earn more, but there’d be half a million more unemployed. If those are our only choices, we’re not going to get very far – we need Costco’s with more employees just as much as we need Walmarts with better paid employees. Not trying to vilify Costco here, but I think it’s easier to change Costco’s culture to expand jobs than it is to change Walmart’s culture to pay better.

    Ultimately, we need to deal with that gross margin number. Most mid-range department stores (Macys, etc.) run gross margins of 40%-50%. That gives them plenty of revenue to expand and pay good wages and benefits. Most mid- to high end specialized retail runs in the same range or higher. Lululumon is something of a poster child for successful specialized retail and they run 60% gross margins. When you get down to 25% (or 13%) you just don’t have the money to both have many employees and well paid employees. Grocery and home improvement stores have to rely on shadow labor (self check out) to make it work. The consumer comes out ahead in these models, but the economy really doesn’t if we recognize that the economy is driven by employment.

  60. 60
    NonyNony says:

    @TenguPhule: To also be fair – deflecting anger towards the people who count the beans is an old upper management tactic. Upper management doesn’t need to take an responsibility for their actions – they’re just doing what the “bean counter” tell them is best for the business!

  61. 61
    Forum Transmitted Disease says:

    The first stock I ever purchased was Costco. It has paid me very well. Investors who are anti-Costco are imbeciles.

  62. 62
    hoodie says:

    @schrodinger’s cat:

    Maximizing shareholder value share price is the holy grail, everything else is fair game.

    Share price is an evanescent quantity. The past thirty years are littered with the carcasses of once-productive enterprises that have been destroyed in the name of “creating shareholder value.”

  63. 63
    Ash Can says:

    The analysts quoted in that Costco article are IdIots and a dIsgrace to theIr professIon. They’re nothing more than glorified bean counters who can’t see past the papers on their desks. The entire purpose of their jobs is to provide rigorous evaluation of stocks so that their firms’ clients can make informed investment decisions. The article itself says that Costco’s stock price is doing well. These asses are steering their clients away from a good investment because the Costco model doesn’t happen to fit their crunched-number models. If I were a client of their firms, I’d be looking elsewhere for investment advice, maybe somewhere whose so-called professionals could do something more than read a financial statement and feel like they’d earned their paycheck because they knew what all the big words meant.

  64. 64
    Mudge says:

    Fascinating post. A number of plutocrat comments, including:

    One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco “it’s better to be an employee or a customer than a shareholder.”

    illustrate the focus of all plutocrats on finance, not business. A dollar spent in a Costco town by a Costco employee helps the economy directly, there is a multiplier. A dollar earned by a stockholder sits in an account or goes to buy Walmart stock. Such people are not job creators in any sense because investing (finance, making money from money, not from labor) does not create jobs, and finance is their focus.

    Consider what would happen to Costco if Bain Capital took it over.

    And have I mentioned they are all sociopaths.

  65. 65
    MCA1 says:

    @BGinCHI: I’m a North Shore guy now, in what I like to call Wilmetkaworth. Trying to keep it real up there, though. Used to live at Southport and Grace and could almost get by bringing a baby monitor to Tango Sur, but not quite. I miss the specialty shops like Paulina the most about not being in the city. And good coffee – I was an extremely early big booster of Asado Coffee Roaster on Irving Park, and still like to stop by if I can find a reason to.

  66. 66
    WereBear says:

    I haven’t set foot in a Walmart for years, and yes, it’s partly because of their awful treatment of workers. But the corollary is that if they treat their workers that badly, they will also treat their customers that badly. Remember the flood of pics on the web of the Walmart product nightmares?

    The sweatpants that dissolved in the first wash, leaving a blob with elastic in it?

    The coffee maker that caught on fire the first week?

    The flip flops that burned a y shaped scar into a woman’s foot?

    Enjoy those low prices, people.

  67. 67
    ruemara says:

    As a city government worker, I wish this attitude was prevalent amoungst the people. Because it’s not just Wall Street that thinks workers are shit who don’t deserve pay and benefits. It’s an American mindset, even when they work too.

  68. 68
    BGinCHI says:

    @Kay: Snacks are for closers, Kay.

  69. 69
    TenguPhule says:

    They’re nothing more than glorified bean counters who can’t see past the papers on their desks.

    Objection! They don’t even count beans. These “analysts” are snake oil salesmen. They sell ‘gut feelings’, not numbers.

  70. 70
    Kristine says:

    @Southern Beale:

    I don’t mean to get all (literally) preachy, but this is precisely why in the Bible Jesus says it’s easier for a camel to pass through the eye of a needle than for a rich man to get into heaven.

    Funny, with all the Bible verses the right wing has tossed around over the last 30 years, this is one I have never, ever heard them utter.

    Can’t think why….

  71. 71
    Mnemosyne says:

    @D. Mason:

    I’ve had people talk to me about where the work ethic has gone and I tell them it’s on a road trip with fair compensation for labor.

    The companies that treat their employees the worst always seem to whine the loudest about disloyal employees, don’t they?

    Here’s the funny thing, employers — if you treat your employees with contempt and act as though they’re stealing from you by asking to be paid what you agreed to pay them, the good workers will leave to work someplace else and you’ll be left with a bunch of jerkasses who will happily steal from you to supplement their low pay.

  72. 72
    BGinCHI says:

    @MCA1: I just think Fox gives them the ideological package with which to wrap up their lazy magical thinking.

  73. 73
    Kay says:

    @👽 Martin:

    It’s not just Costco and Walmart though. I can shop for food at Walmart or I can shop for food at Chief, which is a local chain. I can also drive 30-60-90 miles and shop elsewhere, but I won’t because I hate shopping. Chief is a union shop. They pay much better. How are they pulling that off?

  74. 74
    Carl Nyberg says:

    @Ash Can:

    The analysts quoted in that Costco article are IdIots and a dIsgrace to theIr professIon. They’re nothing more than glorified bean counters who can’t see past the papers on their desks. The entire purpose of their jobs is to provide rigorous evaluation of stocks so that their firms’ clients can make informed investment decisions.

    As one of the front pagers noted about Bain, the people who handle the money are expected to be the system’s enforcers.

    These people aren’t getting paid b/c they give good investment advice. They are getting paid to propagandize their clients with the information that manipulates the client to believing what the capital class want the suckers, err, “investors”, to believe.

    We exist in an immoral, corrupt economic system.

  75. 75
    Belafon (formerly anonevent) says:

    There is an Aldi’s opening up in my home town here in Texas. (They’re some European supermarket spreading through the US.) The sign out front said starting salary was at $10.75 – $20. That will probably become the place I go to when I don’t need CostCo size packaging.

  76. 76
    Steve LaBonne says:

    There are loads of lampposts in the country, and any carpenter can build a workable guillotine. Time to get to work.

  77. 77
    BGinCHI says:

    @MCA1: I’m a serious cyclist and you’ve probably driven right by me. We are through there all the time, as I’m sure you know. Plus lots of friends and colleagues up that way.

    I have a great single source coffee connection if you’re interested. A woman who does all the sourcing and roasting and will mail you beans, all for a great price. Let me know if you’re interested and I’ll hook you up.

    I love that little ‘hood where you used to live, though Southport generally has gotten too mobbed. We’re in Edgewater near the Berwyn red line stop.

  78. 78
    Carl Nyberg says:

    @MCA1: In 1999-2000 I was watching a friend’s place above the Music Box while she was being an election monitor in East Timor and then shacking up with an Australian drummer.

  79. 79
    jeffreyw says:

    @kindness: I remember an occasion when Mrs J and I were pushing a cart, loaded with about a cubic yard of toilet paper, to the checkout – where a small boy tugged on his Momma’s skirt, pointed to us, and said, “Those people must poop a lot!”

  80. 80
    Mike E says:

    My Costco membership pays for itself on gasoline, brita filters and on their lunch counter polish sausages. Miss E gets her contact lenses there, and we score on socks which is no small feat (ha!) if’n you know my daughter. We are poor so we only shop selectively there and it really is a bargain; the local supermarket chain gets the bulk of our business when we hunt their occasional specials.

    Downside: I am still going thru my mega Costco granulated garlic container some two years later. Upside: they also sell Reddenbacher popcorn there by the 40 ct case, so I’ve been making a dent in said garlic due to the election and subsequent GOP whining-induced popcorn binge eating.

  81. 81
    Mj_Oregon says:

    Costco is giving shareholders a $7/share special dividend in anticipation of higher taxes being levied on dividends after January 1st. Looking out for their shareholders is #5 on the company’s code of ethics. The first four are:

    1. Obey the law
    2. Take care of our members
    3. Take care of our employees
    4. Respect our suppliers

    By doing those four things, the company believes (and has proven) that they will be able to “reward their shareholders.” This code of ethics apply to ALL of their employees from the CEO to the night stocking crew member. Here the link to the mission statement – if only more companies followed this model! http://media.corporate-ir.net/.....ission.pdf

    I’ve shopped at Costco for almost 30 years beginning with one of their first branch warehouses in Tacoma, WA. I’ll never set foot in a Walmart for any reason – except to rescue workers if the building was on fire.

  82. 82
    👽 Martin says:

    @Kay: But you’re making a value judgement on something that most people never will. How are Chiefs prices compared to WalMart or Costco? They’re probably at least slightly higher.

    Much of the problem here is the vicious circle we’ve created. By underpaying workers, we all wind up discount shopping. Those discounts come out of operating margins, which means they come out of wages in one form or another. The only way out of this is to either force higher pay (through collective bargaining or straight-up legislation) or convince consumers to stop bargain shopping. We didn’t used to have this culture of best possible price (above all else) when shopping, but it’s become endemic. Just look at Black Friday. We’ve turned into a nation of economic cannibals.

  83. 83
    gene108 says:

    @Kay:

    The “customer” of a large publicly traded firms often is the shareholder/large institutional investor, because the return on your stock options is what has been set up to drive executive decision making on down the line to management.

    Keep the investors happy and you will be compensated, if the customers or employees benefit as an off shoot of this thinking it is all well and good.

    If they do not benefit, tough cookies because the free market demands sacrifice.

  84. 84
    Cathy W says:

    Kay highlighted one of the things that ticks me off about Walmart’s business model. If they have employees who make so little that they still qualify for food stamps, I’m essentially subsidizing Walmart with my tax money. I guess I’d rather do it by feeding the employees than by putting money in the corporate coffers, but the actual ideal situation would be for Walmart to pay the employees enough to eat.

    I know there was somewhere – possibly Massachusetts? – that was looking at passing the food stamp costs of people who had jobs on to the employers in some cases. Did that go anywhere?

  85. 85
    piratedan says:

    @MikeJake: or even what percentage of Emme’s benefits are currently paid by her employer….

    kind of strange, what do you look for in a company or a business? I look for well made products that give me value for the cost of the item(s) purchased…

    These guys seem to believe that what comprises a good business is how much profit they make versus having any understanding of the goods or services that they provide.

  86. 86
    Carl Nyberg says:

    While we’re doing a North Side love fest, I invite you to the next Northside DFA meeting.

    Northside DFA exists to elect socially progressive, fiscally responsible and ethically committed Democrats to all levels of government.

    Northside DFA meets on the second Tuesday of the month at the Lincoln Restaurant (free parking and near Irving Park Brown Line), 4008 N. Lincoln. Formal meeting starts at 7 PM. Social hour starts at 6 PM.

    Northside DFA gets people to volunteer on campaigns.

  87. 87
    gene108 says:

    @Steve Finlay:

    Companies which outsource their work to the Philippines, India

    Globalization has been one of the best anti-poverty programs around, since people started to care about Third World poverty to any degree.

    I’m not sure how you can reconcile a desire to alleviate extreme poverty throughout the world, with the IGMFY mentality of not wanting businesses to invest capital into Third World countries.

  88. 88
    Kristine says:

    @ruemara: A friend who worked in Canadian civil service told me that she made it a rule to not tell new acquaintances that she worked for the govt. The feedback she received when she did was a mix of you should work for less/do more/help me fix this problem that has absolutely nothing to do with your job/field because it’s all GOVERNMENT/listen to me bitch when you explain that you can’t help me.

  89. 89
    schrodinger's cat says:

    @gene108: A shareholder is not a customer, a share holder is a part owner of the corporation.

  90. 90
    Xenos says:

    @PeakVT: One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco “it’s better to be an employee or a customer than a shareholder.”

    There is a reason why this firm, to those who have had to deal with it, is known as “Douche Bank”.

  91. 91
    ericblair says:

    @Mnemosyne:

    Here’s the funny thing, employers—if you treat your employees with contempt and act as though they’re stealing from you by asking to be paid what you agreed to pay them, the good workers will leave to work someplace else and you’ll be left with a bunch of jerkasses who will happily steal from you to supplement their low pay.

    That, and believing your employees are a bunch of disloyal slackers is very convenient. Your basic Walmart-type job has people on their feet all shift, with the legal minimum of unpaid breaks, and God forbid the supervisor see anybody sitting down. It’s hard fucking work. Then you’re paying minimum wage, demanding unpaid labor, and giving people ridiculous schedules. So a lot of people either won’t, or more likely can’t, work for them.

    Now management has to think about why turnover is so high and they’re getting marginal people for the job. There are two things they could do: treat employees better and pay them more, or blame their labor pool for being lazy shiftless moochers who’d rather sit around all day and watch TV. Guess they went with door number 2.

    To address Martin’s points: Walmart does have less of a ceiling to work with, but they’re dominant enough there’s a vicious circle that they’ve created that’s biting them in the ass. Most Walmart workers are paid so poorly that they can’t afford much of the stuff sold at Walmart. When you’ve created a huge number of Walmart monocultures in towns across the country, where a pretty significant number of consumers depend on Walmart wages, you’re shitting where you eat. Pay Walmart workers more, and a lot of that money is going to go right back into Walmart. The company’s not going to lose much of that money at all.

  92. 92
    erlking says:

    @MaximusNYC: My mom is a Costco employee–80 years old, spent a lot of last year dealing with ovarian cancer and treatment. Costco kept her on as an employee, let her keep her health plan and when she was ready to come back (she and the old man, 84, can’t NOT work, not in them), they found her a job where she could sit down, work a flexible schedule and not be under stress.

    So, yeah, I’m a fan of Costco.

  93. 93
    Kane says:

    But where is the joy of owning a company if you don’t screw your employees? j/k

  94. 94
    Kay says:

    @👽 Martin:

    Chief’s really not higher on groceries, actual food. Wal Mart meat and produce is just awful here. I am not at all picky about food, I don’t care that much, and, really, it’s bad.

    I have a lot people who work in both places as clients and it’s not just low wages, for Wal Mart. It’s just a complete and utter lack of respect, treating people as human beings. Are you familiar with just in time scheduling? I mean, Jesus. It’s impossible for them to plan anything. Even if they WANT to get out of Wal Mart, “retrain”, they can’t, because Wal Mart schedules according to some insane program where they work all kinds of shifting hours. Try fitting daycare, or, you know, a life or a family, around that.

  95. 95
    schrodinger's cat says:

    You can’t run an economy indefinitely based on selling each other stuff, you have to also make the stuff, or soon we all will find ourselves in the same boat that the Walmart workers do.

  96. 96
    Svensker says:

    It doesn’t do me a whole lot of good to save 25 dollars a month on grocery items if I’m surrounded by people who have to rely on food stamps and Medicaid to supplement rock-bottom wages

    Yes, but the Makers and Job Creators DON’T live around Walmart shoppers or employees. Wouldn’t even dream of it. So what do they care if Those People live crappy lives? They should have planned on being born to better parents, gone to better schools and got in to prestigious universities where they could get a real job after college.

    It’s not even that they don’t CARE about Walmart employees (and such like)…they don’t even know about them. Non-people, lowest caste, of no importance.

  97. 97
    Kay says:

    @gene108:

    Keep the investors happy and you will be compensated, if the customers or employees benefit as an off shoot of this thinking it is all well and good.

    It took me a while to figure that out, during the crisis. We had people telling us they were trying to work with their lenders well prior to foreclosure actions and they couldn’t get anyone to return a phone call. They were getting nothing but threatening letters.

    I was thinking “what kind of business is this where you can just completely blow off your customers?”

  98. 98
    trollhattan says:

    Costco and REI are the only big-box retailers I frequent that are run by familiar faces–folks working there more than a decade. It’s not merely fiscal desperation keeping them there (and I’ll add, the joints are always mobbed, regardless of how the economy’s doing).

  99. 99
    schrodinger's cat says:

    @gene108: You mean like those Bangladeshi factory workers who died in the fire? I guess sure, if you die, you are no longer poor.

  100. 100
    Calouste says:

    @Belafon (formerly anonevent):

    Aldi is the owner of Trader Joe’s. (Or at least one of them is because there are two Aldi’s. The brothers that founded the company had a falling out and split it in half, but both companies are trading under the same name.)

    Not sure what they are like in the US, but from what I remember in Europe they were cheap, no frills supermarkets. No produce and the merchandise is stocked on the shelves in the boxes it comes in.

  101. 101
    Hungry Joe says:

    I remember that Costco’s Sinegal once said (in the same article?) that his responsibilities were to his customers, his employees, and his shareholders — and that the shareholders did not come first. And I have to second (more like eighth or ninth) what others have said: Costco employees seem content, relaxed, and reasonably happy. All while working hard, mind you; they’re into their work, and liking it.

    Writer Anne Patchett recently opened an independent bookstore in Nashville. She acknowledges that people can get books cheaper on Amazon, but points out that local businesses provide local jobs, contribute to the local tax base, and help create a community. The best price, she says, isn’t necessarily the best deal.

  102. 102
    Redshift says:

    @Kristine: That’s one advantage of living in the DC area. Nobody but the occasional raving wingnut would do that, because in any gathering a majority of people (or at least the largest portion) are likely to be government workers.

  103. 103
    gene108 says:

    @schrodinger’s cat:

    According modern financial theories, making profits for your owners (shareholders) is the reason for the existence

    There are valid reasons to look at shareholder value as the major metric to measure a company’s success/performance.

    1. It is quantifiable. How do you quantify the value of having a generous and flexible leave policy? Sure employee moral is better, but how can you stick an objective measure to it.*

    2. Aligning the interests of ownership and management isn’t inherently bad.
    2a. The problems have arisen because stock options do not have to be expensed like wages, so they are a way for companies to shift compensation, without showing the related costs, therefore giving management an incentive to only look to maximizing the stock price.
    2b. Performance measures by large investors seem to be based on short term results, therefore not giving management a reason to decide long-term strategy.

    In short, we’ve corrupted perfectly reasonable ideas with regards to measuring a company’s performance and aligning management and ownership goals.

    *There’s a certain fudge factor in determining profits and valuations of firms, so it isn’t all black-and-white, but you can at least assign a numerical value to it, since the input and output are also numerical.

  104. 104
    celticdragonchick says:

    Aldi pays their associates an average of 14 dollars an hour and manages to acuaully beat Wal Mart on grocery prices. They have othe problems (like forcing “managers” to basically be the stockboy, cashier and janitor at times without having fire/hire ability over other employees, then abusing overtime vs salary laws)

    In any event, they are preferable to Wally World if you have one around in your town. Just be sure to bring your own bags.

  105. 105
    Mnemosyne says:

    @Belafon (formerly anonevent):

    There is an Aldi’s opening up in my home town here in Texas. (They’re some European supermarket spreading through the US.)

    IIRC, the Trader Joe’s chain is now owned by Aldi.

  106. 106
    Forum Transmitted Disease says:

    Enjoy those low prices, people.

    @WereBear: The problem is that because of the existence of such places as WalMart, we now have a substantial number of workers who can’t afford to shop anyplace else.

    I was “WalMart poor” back in the very early 2000s, got acquainted with the stores very well, mostly for clothing. Most of their stores are shitholes; both the stores and employees are so filthy and horrid I can’t stand going in them – exactly what you’d expect when you’re “WalMart poor”. Two in our local area are at least clean, which is good, because I still need to go there twice a year for one thing: they sell MinWax spray lacquer. Can’t get it anyplace else locally and since it’s a hazardous material I can’t get it shipped.

    Going in twice a year over the years has been educational: the quality of the merchandise, which was never great, has gotten far worse since about 2010. Not sure what happened then, but it was quite noticeable.

    My personal goal is never to be “WalMart poor” again; my wish for our society is that everyone can do well enough as to see WalMart go out of business.

  107. 107
    Jay in Oregon says:

    @WereBear:

    But those folks in their mansions? It doesn’t matter to them what unwashed hell we wade through, does it? In fact, it could make their life better as they chuckle over the depravity we Hunger Gamers go through.

    It reminds me of this classic from the Occupy protests.

    Wall Street protests: Video of champagne drinkers makes rounds on Web

    http://is.gd/1fNnFr

  108. 108
    Villago Delenda Est says:

    Weird how Wall Street simply doesn’t see this, isn’t it, when it’s so blatantly obvious to the rest of us?

    Not really. When you realize that these guys are like Visigoths…all they can think of is all that loot out there that is theirs for the taking. Our financial culture was, at one time, about building things. Now it’s about pillage. The MBA mentality is to squeeze every penny out of something, then high tail it to a Caribbean island. Mitt Romney is basically Attila the Hun for the late 20th and 21st centuries…robbing people of everything their forefathers provided for them.

    Death is frankly too good for these swine. Apologies to pigs in advance for the poor choice of metaphor.

  109. 109
    Ruckus says:

    @Kay:
    They pull that off by charging you a little more and you pay it because the goods are a little(in the case of wally a lot) better. The owners probably work in the stores and for sure take home a smaller percentage. That’s all it takes. Someone focusing on providing a better product at a fair price with costs not controlled on the backs of the employees.
    Wall st doesn’t do this nor does it give a shit because it’s product is money and it’s customers value money above all else. Things are what you buy with money, money is what impresses them and their friends, not the things. The more money one has, the more one makes, that is how they measure everything. The word is shallow. That’s not the only word of course but the other words usually have swear words in their vicinity. Fucking greedy, selfish bastards, flaming assholes. These work as well, just not as tv friendly.

  110. 110
    MikeJake says:

    @piratedan: That’s because these finance pricks don’t see companies as organizations of workers and capital, brought together to provide products and services that people want. They see them as generic bundles of assets and liabilites, black boxes of variables that spit out net profits. All they’re interested in is how they can tweak the variables such that more money comes out.

  111. 111
    Kay says:

    @gene108:

    But why didn’t they want to work with borrowers rather than foreclosing? That never made sense to me. They wanted a whole giant inventory of (politely) “starter houses” that are worth maybe 40K in an Ohio rural area with no population growth and (at the time) 17% unemployment? In some cases it would have made more sense to GIVE them the house. At least then someone is cutting the grass and keeping the pipes from freezing.

  112. 112
    slag says:

    Who benefits when they pressure employers to drive down wages and benefits? Costco employees? Me? My community? How?

    Mr. McSuderman was on UP a couple of weeks ago trying to pitch the old line that WalMart benefits your community by growing the US economy as a whole. Then, Chris Hayes pointed out, correctly, that such an approach has proven to benefit only capital and not workers. Of course, the discussion didn’t get very far.

    Tim O’Reilly gave an excellent talk at OSCON 2012 about this very topic and (almost tangentially really) how it relates to open source software: http://www.youtube.com/watch?v=Kbcgmf6eDKU. He says that there is something deeply wrong with our economy in that businesses are failing to create more value than they capture and that CEOs are sucking the value out of companies via excessive compensation. Nothing we don’t know, but it puts a lie to the stock “maximizing shareholder value” trope that companies try to employ when they’re really just stealing food from their mouths of their workers.

  113. 113
    schrodinger's cat says:

    @Villago Delenda Est: Don’t blame the MBAs alone, also blame the Finance and Econ professors who came up with these theories that are taught in business schools across the country and the world.

  114. 114
    Ken T says:

    Maybe the reason they have no “moral tension” is that they’re all a bunch of sociopaths? They literally could not care less about what is good or bad for general society.

  115. 115
    the Conster says:

    @👽 Martin:

    I was listening to a story yesterday about Energizer closing three plants because the demand for disposable batteries is way down because of rechargeable batteries. One of the plants is in St. Albans, Vermont, which is actually nowhere and will have good paying jobs disappearing, but the hazardous waste and mining for metals will be lessened. What’s a good liberal to think?

  116. 116
    Carl Nyberg says:

    @schrodinger’s cat:

    Don’t blame the MBAs alone, also blame the Finance and Econ professors who came up with these theories that are taught in business schools across the country and the world.

    The Neoliberal economic system is the modern equivalent of the Divine Right of Kings. It justifies the social order and especially the further concentration of wealth and power.

    The disciplines of finance and economics are the priest class for the system of social control.

  117. 117
    Chris says:

    Now, it also happens to be an incredibly convenient way of thinking. If you’ve developed an ideology that what’s good for you personally also happens to be good for everyone else, that’s quite wonderful because there’s no moral tension.

    This, right here, is the definition of conservatism. Not just 21st century American GOP style conservatism, but in every age and every country: “The people at the top are absolutely indispensable, and if you don’t give them each and every last little thing they want, the world will fucking end.”

    It was said about the nobility in Old Europe, the Party in the communist world, the clergy in Iran, Taliban Afghanistan and elsewhere, and of course our robber barons here in America. Different elites, different ideologies, but the same elitist shit underneath.

  118. 118
    schrodinger's cat says:

    @gene108:

    It is quantifiable. How do you quantify the value of having a generous and flexible leave policy? Sure employee moral is better, but how can you stick an objective measure to it.

    Are you speaking of the book value of the stock or the market value? What is an objective measure?

    Aligning the interests of ownership and management isn’t inherently bad.

    Agency theory which posits that aligning the interests of owners with the management (stock options) has had such disastrous results in practice, with soaring executive compensation and the fixation on short term earnings that it is hard for me to accept this assumption of yours.

  119. 119
    NonyNony says:

    @Kay:

    Chief’s really not higher on groceries, actual food.

    I wish I could find the links now, but they’ve disappeared down the Internet memory hold and my google-fu isn’t finding them.

    There were a number of stories a few years back where someone (Consumer Reports? Local TV news people? I can’t remember who and that’s why I can’t find the links) actually went to a number of stores to compare prices. And what they found was that Wal*Mart’s prices were not overall actually cheaper than anyone else in town. Wal*Mart had some things that were cheaper, but the other stores had things that were substantially cheaper than Wal*Mart too.

  120. 120
    What Have The Romans Ever Done for Us? (formerly MarkJ) says:

    @BGinCHI: Actually they sound a lot like 1392 also – what’s good for the royal “we” meaning me, as a member of the nobility, is good for us all. The serfs exist to glorify us and keep us comfortable, therefore any suffering they do to that great end is good for them.

  121. 121
    MattR says:

    @Hungry Joe:

    Writer Anne Patchett recently opened an independent bookstore in Nashville. She acknowledges that people can get books cheaper on Amazon, but points out that local businesses provide local jobs, contribute to the local tax base, and help create a community. The best price, she says, isn’t necessarily the best deal.

    One thing I would add to that is that local businesses provide variety in the products they offer. The local bookstore will have things for sale you can’t find at a Barnes & Noble or Borders. Similarly, the local hardware store will stock non-standard sizes because they want to serve the entire community whereas Home Depot does not care about the two people who might need that size. Surprisingly, Opie and Anthony had a pretty good conversation on this topic when Louis CK was the guest.

  122. 122
    Roger Moore says:

    @Steve Finlay:

    Poverty in the people around me does not do me any good at all.

    Unless you’re rich enough to be in the market for servants. In that case, poverty is great because it gives you a dominant position in negotiations. You can hire people for rock bottom wages and fuck them (often literally), secure in the knowledge that they’ll be too cowed by the threat of firing to stand up to you. That’s the world the plutocrats want.

  123. 123
    Carl Nyberg says:

    @Kay:

    But why didn’t they want to work with borrowers rather than foreclosing? That never made sense to me.

    When I was going door-to-door in suburban Chicago, maybe Palatine, I got this question from a woman who had always been employed by lost her house to foreclosure after a divorce.

    There are two ways to look at what society should be doing.

    On the one hand, institutions (government and other) can be working to uplift everyone. Often this is challenging.

    On the other hand, institutions (government and other) can be increasing the stratification. People on the top get more. And people on the low end are exposed to more punitive consequences.

    When people lose confidence in governments ability to deliver improvement or people have as much as they feel they want/need and they are opposed to government helping others… then people turn to option two: more stratification, more for the 1% and more harassment for the bottom 30%.

  124. 124
  125. 125

    […] Kay at Balloon Juice flags an interview with a financial journalist following the shocked wealthy people who supported Romney: First, they’re absolutely convinced that they’re not asking for special privileges for themselves. They’re convinced that it just so happens that their self-interest coincides perfectly with the collective interest. That’s where you get this idea of the “job creators”. The view is that to seek a low tax environment or less regulation, that’s not special pleading for yourself, it’s not transactional politics. It’s that this set of rules is the most conducive to economic growth for everybody. It will grow the pie. Now, it also happens to be an incredibly convenient way of thinking. If you’ve developed an ideology that what’s good for you personally also happens to be good for everyone else, that’s quite wonderful because there’s no moral tension. […]

  126. 126
    gene108 says:

    @schrodinger’s cat:

    You mean like those Bangladeshi factory workers who died in the fire?

    I’m not referring to one specific incident.

    Singapore and South Korea were Third World countries, at the end of WW2. They now are basically First World countries.

    In general, the embrace of globalization, low trade barriers, etc. has helped increase the wealth of otherwise poor nations.

    Has all the wealth generation been symmetrical? No.

    I just think globalization has done a better job of improving the economic prospects of Third World countries than anything else before it.

    Where you had economic stagnation, you now have economic growth, without which you can’t begin to even think about moving people out of poverty.

  127. 127
    Carl Nyberg says:

    @Roger Moore:
    You are right to emphasize that an anti-egalitarian society provides opportunities to pressure young people for sex.

    When the U.S. military goes overseas, it does intentionally or unintentionally market the idea of having sex with women for amounts of money that amount to pocket change.

    And I do think your analysis needs more emphasis on why the middle class is susceptible to imposing harsher economic realities on the people a notch or two below them on the economic ladder.

  128. 128
    Ruckus says:

    @NonyNony:
    If you shop carefully you see this all the time. But it takes time and effort and now costly fuel to run all over the place. At some point it is not worth the time effort and fuel. For example wholepaycheck is actually cheaper on a number of things that I routinely eat over major food chains. But the closest store is several miles in the other direction so the fuel cost more than eats up the savings.

  129. 129
    slag says:

    @👽 Martin: Nicely stated!

    If Walmart operated like Costco, workers would earn more, but there’d be half a million more unemployed. If those are our only choices, we’re not going to get very far – we need Costco’s with more employees just as much as we need Walmarts with better paid employees.

    You don’t think that, if more workers were getting paid more, they’d be in a better position to open their own businesses and we’d have more diversity in the economy? Is there no inching back at all from the Walmart-Amazon-Costco-Best Buy-Target megaplex model? Because if not, our dense urban neighborhoods aren’t going to recover from this recession anytime soon and the suburbs are going to come back with a vengeance.

  130. 130
    Chris says:

    @ruemara:

    As a city government worker, I wish this attitude was prevalent amoungst the people. Because it’s not just Wall Street that thinks workers are shit who don’t deserve pay and benefits. It’s an American mindset, even when they work too.

    Yep. “Fuck the poor,” and the blue collar workers. As American as apple pie.

    I’ve heard Krugman and others claim that American politics isn’t arrayed along class lines like European ones (e.g. socialist and communist parties and all) because people here think in terms of race more than class. Frankly, I think it’s the opposite. American society is class conscious as hell and it’s actually gotten worse in the last fifty years even as the country gets better on racial or cultural issues.

    (As opposed to the European far right, which is a lot better at recruiting across social classes than ours, but for whom it’s all about race).

  131. 131
    Chris says:

    @Roger Moore:

    Unless you’re rich enough to be in the market for servants. In that case, poverty is great because it gives you a dominant position in negotiations. You can hire people for rock bottom wages and fuck them (often literally), secure in the knowledge that they’ll be too cowed by the threat of firing to stand up to you. That’s the world the plutocrats want.

    This.

    I’ve said before that the endgame for the GOP is a return to the age when everything in your life came from the local robber baron or political boss (or, for those who were really really screwed, the church. Or the mob) who doled out your livelihood on a whim and could end it if you put so much as a toe out of line.

    It’s about power, not money.

  132. 132
    Ruckus says:

    @gene108:
    Many don’t see the economic position that other countries have been or are in. Or care, especially if their country and their own economic situation is getting worse.
    So are we going to go with a rising tide raises all boats or are we going with the zero sum theory that for others to make more I have to make less?

  133. 133
    Carl Nyberg says:

    @gene108:
    My understanding is that with some significant exceptions, the standard of living in the developing world is lower than fifty years ago.

    China and India have a different story because of their size, but internally there are people who are arguably worse off.

    Korea and Taiwan seemed likely to have benefited from the Cold War and factors connected to China and Japan.

    Israel is a U.S. client state with tons of money poured into it.

    After these five countries, which developing world countries have gotten better do to globalization?

    South Africa?
    Vietnam?
    Brazil?

    For every developing world country where one can argue globalization has improved the standard of living there are two or three countries where the standard of living has stagnated or gotten worse.

    Oh, I forgot Singapore. It’s small and has advantageous geography. It has been managed well, but Singapore has the most activist government in the world. It’s hard to site Singapore as an example of free market success when the government is involved in everything.

  134. 134
    Mudge says:

    @Villago Delenda Est: Well, to be correct, the Visigoths settled Spain, they did not simply loot.

  135. 135
    schrodinger's cat says:

    @gene108: The benefits of globalization go to a thin sliver of the population, who are already well off, so making the well off even more comfortable is not exactly an anti-poverty program.

  136. 136
    What Have The Romans Ever Done for Us? (formerly MarkJ) says:

    Shorter Deutche Bank: stop making all these other companies look like such skinflints, while still outcompeting them, or we’ll make sure the market punishes you.

    Seriously, those comments from the Wall Street class are just sour grapes that a company that pays decent wages and benefits is outcompeting a bunch of others who don’t. It points out, glaringly, how incompetent the management is at all those other firms that Wall Street likes to fluff. And they can’t have that – lord knows how offended they get when some nobody like the President of the United States of America fails to worship their greatness sufficiently.

  137. 137
    gene108 says:

    @schrodinger’s cat:

    Agency theory which posits that aligning the interests of owners with the management (stock options) has had such disastrous results in practice, with soaring executive compensation and the fixation on short term earnings that it is hard for me to accept this assumption of yours.

    The breakdown in agency theory is the result of stock options not being treated like other forms of compensation, with regards to how they are shown as expenses.

    In the early 1990’s, when stock options started becoming popular means to compensate executives, the accounting board decided to change the rules and have the stock options shown as expenses, just like other forms of compensation.

    This would’ve hurt the bottom line of big business.

    Big business lobbied the hell out of Congress to step in. Congress stepped in and went to bat for big business.

    Since the accounting board has the ability to create rules by the good grace of Congress, they had to back down and amended the rules to show stock options as a footnote disclosure.

    This is one reason why the way stock options/agency theory has been implemented is so out of whack, with what it should be. The implementation has been based on creating off-the-books compensation for executives, versus actually trying to align executive and ownership interests.

    Are you speaking of the book value of the stock or the market value? What is an objective measure?

    I put a note at the end of the post about the “fudge factor” involved in determining profits and valuations for firms.

    The difference between using book value or market value or deciding a firm will grow at 3x earnings versus 4x earnings or whatever else can be a human decision on the accounting and finance side is the inputs and outputs are numerical.

    For all the judgements involved in coming to a net profit of P/E ratio, you have some basics that are learned as a child, such as “bigger number better than smaller number” that can still be applied to accounting/financial measures.

    How do you measure employee well being? How do you compare this with other firms in the same industry?

    Using shareholder value as a measure of corporate performance is not a perfect system, but I don’t know another way to measure corporate performance that isn’t even more subjective.

  138. 138
    ericblair says:

    @Kay:

    But why didn’t they want to work with borrowers rather than foreclosing? That never made sense to me. They wanted a whole giant inventory of (politely) “starter houses” that are worth maybe 40K in an Ohio rural area with no population growth and (at the time) 17% unemployment?

    Several things going on, I think. First of all, if you have a second mortgage or a Line of Credit on the property, they’re the junior lien on the property so must agree to any deal but will probably get zero cents on the dollar. They have no incentive whatsoever to play ball.

    Second, the big banks have effectively lobotomized their staffs in the last decade or so, by getting rid of the higher-wage higher-skill officers and replacing them with junior lower-paid staff who can’t handle the complexities. So they simply don’t have enough skilled staff to deal with the volume of mods.

    Also, if you don’t actually write anything down, you can fiddle with the valuations to make your books keep looking good. I’m sure they’re conveniently assuming that they can get top dollar for those abandoned cracker boxes in Nowheresville.

  139. 139
    schrodinger's cat says:

    @gene108: The market value is not an objective measure, see for example what Keynes says about stock market prices.

  140. 140
    MGB says:

    @BGinCHI: Right by the Berwyn Red line, my significant other lives a block away from that stop. We’ve probably passed each other on the street. Though I’m one of those West siders, by division and ashland (but on the east side of ashland, NOT in wicker park).

    And comment about Costco, so a large store that pays its workers well, has happy customers and employees. What a concept!

  141. 141
    Carl Nyberg says:

    @Chris:
    Shit, the Right would like to return to feudalism.

    The best way to manage changes to technology and the economy is to put everyone in a social system that has well established hierarchy and stratification.

    And the people who don’t participate? That’s an excuse to give Right Wing assholes jobs as police/military to go out and beat, rape and kill people beyond the manor.

  142. 142
    Kay says:

    @NonyNony:

    This is going sort of far afield for me, because BJ “people” know A LOT more about food than I do, but if I had to guess I would say Wal Mart is cheaper on boxed food. If you want a lot of crackers or cereal and what I classify as “that group of groceries that come in boxes” then Chief would be more expensive. But I’m not preparing for End Times, so I don’t need a big cache of boxed food in my house :)

  143. 143
    Carl Nyberg says:

    @ericblair:

    if you don’t actually write anything down, you can fiddle with the valuations to make your books keep looking good. I’m sure they’re conveniently assuming that they can get top dollar for those abandoned cracker boxes in Nowheresville.

    People in power like to manufacture their own reality.

    And the ability to claim to own something of value–even if it’s obvious to value claimed is disconnected from reality–is important within the bubble these people have created for themselves.

  144. 144
    gene108 says:

    @schrodinger’s cat:

    The benefits of globalization go to a thin sliver of the population, who are already well off

    Using India as a frame of reference, the economic opportunities available to my parents, aunts and uncles was greater than what my grandfather had available to him.

    My generation has more opportunities than the previous generation.

    My cousins’ kids have more opportunities than my generation.

    My family has generally moved up from lower middle class to upper middle class.

    This is the case with a lot of people I know.

    The increase in opportunities for people pre-and-post the 1991 reforms are staggering.

    It’s trickle down at some level, but that’s better than nothing moving at all.

    @Carl Nyberg:

    My understanding is that with some significant exceptions, the standard of living in the developing world is lower than fifty years ago.

    Where did you get this info from?

    Asia is more prosperous.

    South America is more prosperous.

    Maybe Africa is worse off, I don’t know.

    One way to look at India and China is that if they are better off, your looking 1/3 of the world’s population having higher living standards than previous generations.

    That’s still a big improvement in terms of anti-poverty.

  145. 145

    @Eric U.:

    The problem is that the market is one place where the morons actually can create their own reality.

    Late to the thread here, but this.

    Entities like Goldman Sachs and Chase are so large now that they can essentially drive the price of any asset up or down at will as it suits them, simply by exercising their massive buying or selling power.

    Even with the post-2008 restrictions on naked short-selling(*), they have billions in assets to move at will, and a bank of HFT computers literally plugged into Wall Street’s spinal cord to perform transactions in microseconds.

    So if you’re not in the proverbial Club, Wall Street might as well be a badly run casino (and with less oversight) for all the good it will do you.

    (*) Another bullet we dodged: A Romney-appointed SEC chairman would almost certainly have removed these rules.

  146. 146
    Kay says:

    @ericblair:

    Also, if you don’t actually write anything down, you can fiddle with the valuations to make your books keep looking good. I’m sure they’re conveniently assuming that they can get top dollar for those abandoned cracker boxes in Nowheresville.

    That’s what one of my sisters told me when I was whining about this, for years, btwn 2009 and 2011, really.

    “How does throwing them into the street make sense?!” Her assumption was they didn’t want to mark the property as a loss, because then they would have had to deal with the reality of the asset value versus loan um, YAWNING GAP there.

  147. 147
    gene108 says:

    @schrodinger’s cat:

    Do you have a less subjective way to evaluate a firms performance/value/worth?

    I don’t.

  148. 148
    Interrobang says:

    Chrystia Freeland’s summation of the plutocrat position is really not significantly different from the oft-misquoted “What’s good for General Motors is good for America,” which is basically a toxic piece of business conventional wisdom. (The actual quote is “[F]or years I thought what was good for the country was good for General Motors and vice versa,” which is a little different.)

    Not that General Motors was ever good for anywhere, but that’s another story. At least, unlike Walmart, they were unionized and didn’t rely on taxpayers to feed their employees.

  149. 149
    ericblair says:

    @Carl Nyberg:

    People in power like to manufacture their own reality.

    That they do, alright. I was surprised that Our Lords And Masters genuinely believed that Romney was going to win the election based on poll cherrypicking and their Guts of Wisdom. Right after the election, I read about some of them starting to ask the right questions: how could they could have gotten it so wrong, and were they systematically warping the data to fit what they wanted to believe? Then it got buried under a layer of “moochers wanting free stuff” and “vote fraud” and that was that for introspection.

  150. 150
    Ash Can says:

    @BGinCHI et al.: And I’ve probably walked past all of you northsiders at some point on my way to and from the ballpark! :)

    @Carl Nyberg: I love the Lincoln Restaurant. They host all sorts of quirky and community-centric groups. They also have good food, big-ass beers (at least they did the last time I was there for supper), and breakfasts that beat Lou Mitchell’s. (M-80 and I used to live just a block and a half south of there on Damen, and we were married at St. Ben’s. Now we’re in Norwood Park.)

  151. 151
    Woodrowfan says:

    remember that obnioxous email that went around a few years ago gloating about how great the “wealth creators” are? The writer claimed to a “a shark.” Sharks. Now THERE’S a good moral role model.

  152. 152
    Roger Moore says:

    @Kay:

    I was thinking “what kind of business is this where you can just completely blow off your customers?”

    Once you’ve taken out the mortgage, you aren’t a customer anymore; you’re a captive. You’re legally bound to deal with your mortgage servicer until the note is paid off, and they act that way.

  153. 153
    slag says:

    @gene108: Schrodinger’s cat points out that shareholder value isn’t objective and your only response is a request for a “less subjective” measure? Is the subjective-objective scale the only one on which your brain can measure value?

  154. 154
    NorthLeft12 says:

    Regarding the 1%ers hate for Obama and their dedication to removing him from office, I think it was more about the symbol of Obama. Not that he is black per se, but that he represented for the 1% all the “unfair’ criticism they have received since 2008 about their selfishness, greed, and responsibility for the economic decline of the US. It was more about putting all those people [the 47% or 99% if you will] back in their place and make them understand who exactly runs this country.

    Well, they lost the election [sort of] but they still run the country.

  155. 155
    Roger Moore says:

    @Kay:

    But why didn’t they want to work with borrowers rather than foreclosing?

    I assume they’d say “moral hazard”. If they renegotiate with people who are behind on their loans, then people who theoretically could pay would decide to go into default in order to force a renegotiation. They’d rather suffer a bit themselves in order to make it clear that anyone who wants to keep their house will have to make their promised payments.

  156. 156
    Keith says:

    Seems like the analysts they interviewed are not familiar with the economic principal of goodwill, which has a difficult-to-calculate-but-real monetary value. Costco is.

  157. 157
    Origuy says:

    Anyone know about Fresh & Easy? It’s a new supermarket chain that has been opening stores in the West Coast, owned by the UK’s Tesco. They appear to be trying to be between Whole Foods and Trader Joes, with their own line of products and the common brand names. I couldn’t find pay rates, but their website says that the pay benefits after 20 hours a week. I haven’t compared prices either, but I like the house brand products I’ve gotten there.

  158. 158
    ...now I try to be amused says:

    So Wall Street loves Costco’s stock, but it doesn’t love the fact that Costco doesn’t participate in the race to the bottom. The race to the bottom is the lazy manager’s way to a good-looking bottom line. Or maybe other companies’ managers are simply too cowardly to buck conventional wisdom and try treating their employees well.

  159. 159
    dead existentialist says:

    Handsome Joe Biden shops there!

  160. 160
    Forum Transmitted Disease says:

    Maybe Africa is worse off, I don’t know.

    @gene108: Been there recently. Africa is most assuredly not worse off, unless you’re talking about the whites who lived in Zimbabwe and South Africa – most of whom had nothing to do with apartheid and by and large were good people – those people got fucked.

    Most of them have the option and enough assets to leave, at least – and those that can are.

    I’m still not eyeing vacation property on the Somali coast, not yet, anyways, but most of Africa isn’t what it was even 20 years ago.

    The challenge facing Africa today and for the foreseeable future is that of keeping control of their local resources and not to sell off everything to China/India even though it may be the expedient thing to do.

  161. 161
    Kay says:

    @Roger Moore:

    Right, but people go back for more loans or refinance or whatever, don’t they? Eventually, if they ever “find work”? I still use a certain credit union in South Bend Indiana because they once lent us 2,000 dollars on a signature in an emergency, which was, honestly, extremely risky for them. I am their customer for LIFE.

    The assumption is lenders can just write off whole zip codes and move on to greener pastures? It’s a big country, but is it that big?

  162. 162
    schrodinger's cat says:

    Halp my comments are being eated.

  163. 163
    ...now I try to be amused says:

    @NorthLeft12:

    Well, [the one-percenters] lost the election [sort of] but they still run the country.

    Yeah, the election was pretty much win-win for the one-percenters. Hell, they’ll probably do better with Obama in charge. But, as you observed, their support of Romney had everything to do with crushing dissent, only with dollars instead of tanks.

  164. 164
    Forum Transmitted Disease says:

    Anyone know about Fresh & Easy?

    @Origuy: Yep. All part timers, no one gets enough hours to get bennies, and massively anti-union to boot.

  165. 165
    Chris says:

    @ericblair:

    Then it got buried under a layer of “moochers wanting free stuff” and “vote fraud” and that was that for introspection.

    I posted this the other night: I know this is pushing charity to the point of “too-broad minded to take my own side in a quarrel,” but is that really so different from the way liberals reacted to the Nixon and Reagan landslides?

    When civil rights and being tagged as the party of minorities made us unpopular, we didn’t react by saying we were wrong, we reacted by saying that too many Americans were racist. And we were right. And we didn’t say we should change our policies on these issues, we said we should wait until Americans were less racist and came along to our point of view. And we were right.

  166. 166
    The Bobs says:

    @👽 Martin:

    That’s the big tradeoff. If Walmart operated like Costco, workers would earn more, but there’d be half a million more unemployed.

    I don’t think that is at all clear. The better paid employees will spend more and create more opportunities for other businesses to thrive.

  167. 167
    schrodinger's cat says:

    @gene108: @gene108: I don’t know how representative your family is of, all of India. The GDP has gone up but what about the poor, the lower castes? How well have they done. If India is doing so well, why were farmers in the relatively well off state of Maharashtra committing suicides .I don’t know how representative your family is of, all of India. The GDP has gone up but what about the poor, the lower castes? How well have they done. If India is doing so well, why were farmers in the relatively well off state of Maharashtra committing suicides .

  168. 168
    The Bobs says:

    @Belafon (formerly anonevent): I’ve been to an Aldi’s in Switzerland. Very different than an American supermarket. A nice store, but small, relatively.

  169. 169
    Roger Moore says:

    @Chris:

    I posted this the other night: I know this is pushing charity to the point of “too-broad minded to take my own side in a quarrel,” but is that really so different from the way liberals reacted to the Nixon and Reagan landslides?

    Yes. I think you get to the point in your next paragraph: the liberals were actually right that too many Americans were racist but that things would turn around when the racism died down. They may not have fully appreciated that the driving force would be an increase in the number of minorities rather than a decline in white racism, but as you say, they were basically correct. I don’t think the Republicans are correct in their complaints about moochers wanting free stuff and voter fraud, so the future is unlikely to vindicate their beliefs.

  170. 170
    MTiffany says:

    I love it. The only example of supply-side economic theory working is when the supply in question is the wages paid to workers.

  171. 171
    gene108 says:

    @slag:

    I never said shareholder value of purely objective. Even my first post on the topic I noted there are “fudge factors” involved.

    It’s just when you boil things down to numbers, you have a more objective basis to compare things.

    Is the subjective-objective scale the only one on which your brain can measure value?

    My brain can measure value in all sorts of ways. I’m sure yours can too.

    Now how do you convert or compare gene108’s valuation to slag’s valuation?

    I’m sure we all put different emphasis on different things, with regards to our shopping experiences.

  172. 172
    The Very Reverend Battleaxe of Knowledge says:

    I got sent to Fred Meyer for some last-minute crap the day before Thanksgiving. Of course it was packed, but it wasn’t the usual crowd at all.

    When I got home I asked my girlfriend: “Is there a Wal-Mart strike or something?” She didn’t know, but I swear, I never saw so many inbred Yahoos since the once or twice I stuck my head in the first Wal-Mart they opened around here, just to see what it was like. It’s as if they brought their clientele with them from the Ozarks, or like seeing all the people wandering around the stores in Sedro Wooley after Reagan closed all the nuthouses.

    Well, apparently there was a kind of Wal-Mart strike, so my powers of observation haven’t deserted me.

  173. 173
    👽 Martin says:

    @The Bobs:

    The better paid employees will spend more and create more opportunities for other businesses to thrive.

    Will they spend enough more to offset the half a million that are unemployed? That’s the problem I’m trying to illustrate – you need to find a way to force corporations to do both – hire more and pay more. There’s various ways of doing that, but they’re all socialism now.

  174. 174
    Origuy says:

    @Forum Transmitted Disease:

    All part timers, no one gets enough hours to get bennies, and massively anti-union to boot.

    Oh, well. So much for them.

  175. 175
    trollhattan says:

    @The Bobs:
    Right, that’s simply not how it works. That’s what WalMart et al would claim, but it’s not borne out by emperical data.

  176. 176
    Lojasmo says:

    @Belafon (formerly anonevent):

    Aldi’s is owned by the brother of the owner of Trader Joe’s. The brother that owns Aldi’s is akin to Montgomery C. Burns.

  177. 177
    scav says:

    @gene108: I’d say rather that the subjective element is a little more hidden when everything is expressed in numbers. one is able to avoid certain errors of logic by quantifying everything but you’ve certainly not captured everything of interest in the problem. I’m not even sure all decision rules can be expressed mathematically.

  178. 178
    LanceThruster says:

    KFI’s Bill Handel this morning was denouncing dockworkers striking in the Port of Los Angeles. He kept drilling home the point that a company is focused on the shareholders above all else and that the well-being of the employees is not even secondary. He was all over the map other than business profits=good/employee compensation=necessary evil.

    There’s a substantial portion of my morning drive where KFI is all that comes in (and when I’m in the vanpool that’s all they listen to – they don’t even hit the button when a commercial comes on).

    I used to think there were some KFI hosts who were not tools, but I’m of the mind that they all march to a unified agenda.

  179. 179
    Chris says:

    @Roger Moore:

    Fair enough.

    I just see some resemblance there; I don’t sympathize with their stubborn refusal to change their policies in the face of public opposition (because those policies are wrong), but I empathize to some degree, since we’ve been there too.

  180. 180
    BGinCHI says:

    @MGB: Welcome to the neighborhood. You live right in the late-night Mexican good eats corridor.

  181. 181
    BGinCHI says:

    @Ash Can: Stay off my lawn!

    OK, it’s really more of a grassy space. And I doubt you can get over the wrought iron fence.

  182. 182
    MGB says:

    @BGinCHI: as a former southsider, I’m gonna disagree with that one slightly, as my fav Mexican spots are deep south (63 and kildare) and you MUST order in spanish, as the folks working there don’t have the greatest english in the world. But thanks!

  183. 183
    JustAnotherBob says:

    @gene108:

    I’ve been traveling to Asia for the last 30 years. In many of the countries the standard of living has greatly improved.

    India, Thailand, Vietnam, Malaysia, Indonesia – massive improvements. Nepal, Bangladesh, Cambodia and Laos – better but less so than the others.

    Burma/Myanmar not so much.

    The difference, from what I can see, has largely come from initially being low cost labor pools. Poor paying, often crappy working condition jobs have led to some more money floating around their economies and more people getting an education.

    As infrastructure improved and a larger pool of semi-skilled workers developed more advanced manufacturing moved in and further fed the economy. Local economies improved to the point at which the local people became consumers of more than ‘just enough to stay alive’.

    We saw the same thing happen in Japan following WWII and recently in China.

    Most likely we’ll now see low-skilled, low-paid manufacturing move to Africa and over two or three decades their economies will be grown.

    I’m not suggesting that paying people crappy wages for work is a good thing, but it is the route by which a lot of countries build their own economies.

    The interesting times will come when there are no more “cheap labor” countries. Will that mean that manufacturing will move close to markets in order to minimize shipping costs?

    Will we all pay a little more for what we have and own less?

  184. 184
    dantoujours says:

    I was in Africa recently. A few countries have improving living standards – Botswana, Namibia, Congo (Brazzaville), Gabon, Ghana, but Ghana is probably the only non-commodities (oil, diamonds) producer with a healthy economy and society. The rest of the continent has economic growth rates that are (or not) merely keeping up with the population growth rate — meaning people aren’t actually getting wealthier.

    China and India have rising living standards, but both started from very low places to begin with and were burdened with crippling central planning and corruption, which had been reduced in the last generation leading to a bounce-back of pent up economic activity – it will be interesting to see whether that will continue. Foreign affairs magazine recently had an article that poured cold water on the idea that the BRICS nations will reach first world status in this generation. All of them have slowing growth rates, seem to be reaching a new plateau and demographic hurdles (aging populations, ethnic and regional disparities in living standards.)

    I have yet to be convinced that globalization has done much to improve living standards. Transitioning from corrupt plutocracies (South Korea, Taiwan, Ghana) or centrally planned economies (India, China) to more mixed “western” private/public economies certainly has, but not globalization.

  185. 185
    BGinCHI says:

    @MGB: Yeah, the southwest side is better. You got me there.

    Our ‘hood desperately needs a Mexican takeout place. Seriously.

  186. 186
    Villago Delenda Est says:

    Mr. Dreher said Costco’s share price was so high because so many people love the company. “It’s a cult stock,” he said.

    Yeah. Imagine that, these people value something in addition to just money. Please, someone get a fainting couch for Mr. Fuckwad Dreher.

  187. 187
    Irony Abounds says:

    I belong to both, only because the Sam’s Club is within walking distance while the Costco is 15 minute drive, and I apologize if this point has already been made, but one only has to go to both stores and you immediately see the difference paying employees better makes. Costco employees are almost uniformly brighter, faster and better than Sam’s Club employees, and the stores are much more efficient. Perhaps there are procedural differences, but I think there is no doubt that Costco attracts much better and much more motivated people than Sam’s Club.

  188. 188
    Patricia Kayden says:

    @MaximusNYC: He spoke at the Democratic National Convention this year and was still the head of Costco.

    When I heard that Costco pays reasonable wages and provides good benefits for its employees, I decided to go with Costco instead of BJs. The fact that he supported President Obama helped too, of course.

  189. 189
    trollhattan says:

    @Villago Delenda Est:
    Was sagt Herr Dreher re. Apple? Culty enough for him?

    Will confess to having bought (very little, but still) Cisco when it had the world’s highest cap value. Herd mentality, with 50% less mental.

  190. 190
    Greyjoy says:

    When I was considering joining Costco, I did a lap of the store and didn’t see anything I was enthusiastic enough to pay $55 a year for. But I noticed they had a great price on the cat litter brand I buy, and since I go through a lot of that (four cats) then that was appealing. As I walked around the aisles, I did the math and realized that even if I bought NOTHING but cat litter, I would still save $200 a year over the cost of the membership. I joined.

    Yes, not everything is cheaper at Costco, but *enough* is. Produce and deli prices are great. I buy paper products in bulk when they have coupons for them (which they usually do). As a single person that means I go a few months without having to buy TP, but I don’t see the downside there! And their seasonal items are great. I was just in Costco this afternoon and their gift-wrapped Belgian chocolates are back, which are delicious, and twice a year they have the big tall cat towers for about $50 less than Petsmart sells them, and it’s a great place to buy Advil and Zyrtec and anything you need for your party.

    And that was before I found out they were all liberal and high-paying. Now I have even more reason to shop there!

  191. 191
    kay says:

    @The Bobs:

    Aldi here is downscale. They don’t take checks or credit cards and probably one in three people are food stamps. I go occasionally, but I’m not that much of a “shopper”. I wish someone would select my groceries and deliver them to me.
    The produce is a little bizarre. They just stack it in the center of the store, in the shipping boxes. I think they pay people, because they stick around, but they bust ass. They do it all, cashier, stock, sweep.

    You have to put a quarter in to get a cart, which my kids always liked. They bring back the cart, they get the quarter:

  192. 192
    ruemara says:

    I had a little interaction this morning that relates back to the topic. I was picking up some food before work at the nearby supermarket and the gentleman before me was conversing with the checker regarding the loss of Hostess and the checker, with extreme vehemence, intoned that it was all the unions fault. He agreed. They then proceeded to bash unions as causing the downfall of companies and destroying jobs. This is not the rich side of town’s market. This is, frankly, our poor market, 1 step above the Grocery Outlet and the 99cent store. I got incensed and interjected that this was most certainly not the unions fault, the management was taking full salaries, getting millions in bonuses and selling off the best assets. Multiple corporate holding companies have looted it and unions have been making concessions for years. The checker just looked wild eyed and said it’s all the unions fault. The fellow said hey, I’m union and I know they had a cut in something. I said they had a cut of nothing but trying to preserve pay and benefits. And it’s a crying shame to see working people toss other working people out the window to protect executives. He hurried up and got his purchases while she kept insisting that unions were a bad thing and then walked off to compose herself before checking me out.

    I have to say, servile and pathetic. At some point, will American poor and working class people be begging the rich to also start primae noctis in exchange for a few more crumbs? These dumbasses don’t even get that the reason why they have days off, minimum wage limits and reasonably safe work environments are due to unions, they’re also so willing to excuse a select group of people who leech millions out of a failing company, fail to innovate something to improve market share and customer visibility but the guys who actually make the product, they’re to blame. Foul. People hate workers and they don’t get how bad they’ll screw themselves and their children.

  193. 193
    Felonius Monk says:

    In a way we’ve been down this road before — in the 1950s. Some of you might remember “Engine” Charlie Wilson:

    statement has been misquoted endlessly, in the inverted form of “What’s good for General Motors is good for the country” as an example of the self-centered attitude of executives.

    Those who are too young to remember, well, look it up.

  194. 194
    Felonius Monk says:

    @Belafon (formerly anonevent):

    There is an Aldi’s opening up in my home town here in Texas. (They’re some European supermarket spreading through the US.)

    Aldi has actually been in the US for a number of years. Aldi stands for Albrecht Discount and the company is a private company owned by the Albrecht brothers of Germany. One brother is the richest person in Germany and the other brother is the second richest. Last year, according to published reports, Aldi’s profit increased by 200%.

  195. 195
    slag says:

    @ruemara: Kick ass, ruemara. Way to cut through the noise! It is frustrating to see people so clearly out of touch with any semblance of observable reality. They cling to their faith-based attitudes toward the world because that’s all they have. And yes, I’m totally comfortable feeling smug in this regard…they’re unquestionably wrong and yet they persever…that is worthy of at least some derision.

    Josh Barro brings the point home when discussing the Romney-Ryan approach to our economic challenges today:

    The main problem with this position is the lack of evidence to support it: Lower taxes and a smaller government might raise GDP growth, but there’s no particular reason to assume that growth would accrue in a more equal manner than we have experienced recently. The main effect of Ryan-style fiscal policy, which makes taxes both lower and less progressive and while shrinking benefits, would be a rise in after-tax inequality.

    Observable evidence matters. Facts matter. If the people that you meet express zero interest in incorporating those things into their worldviews, then, well…at least we should get to feel smug toward them. Otherwise, they’re just dragging us down.

  196. 196
    Odie Hugh Manatee says:

    My wife works at a Big box store (Kroger subsidiary) and guess where she and some other employees like to shop?

    Costco.

    They have to make plans to travel to it because the closest one is a 270 mile round trip, so they all pile into one vehicle (with lots of room in back) and make a day of it. My wife has worked for this store for almost twenty years now and she makes about $22K a year (and that’s topped out for hourly). The insurance is shit and so are the rest of the benefits.

    One thing she has collected a lot of is a pile of ‘Good Job!’ certificates and faux-gold lapel pins that she throws into a box here at home and forgets about them. She has so many pins that I told her that she should be referred to as Generalissimo. She recently took my advice when the store manager presented her with yet another certificate and pin and asked him “Will this mean a bigger paycheck for me?”, to which he answered (rather puzzled) “No.”

    She responded to that by waving the certificate and said (as she walked away) “Big deal.”

  197. 197
    General Stuck says:

    @The Bobs:

    I have astigmatism and every my eyes cross one of your comments, I see “The Boobs”, and simply must read them.

    You should win a medal for this genius.

  198. 198
    piratedan says:

    @gene108: other methods of valueing a company would be market share and consumer/customer ratings within the industry. This is a measurement against your competition in the marketplace itself rather than just if you can provide crappy service/products cheaply. Yeah, you can make a lot of money doing something cheaply but chances are, you’ll eventually get squeezed out of business thanks to the invisible hand of the marketplace. Then again, there’s always a niche for the low end of the marketplace if you’re alright with that, kind of like the Little Ceasar’s school of profitablity I suppose.

  199. 199
    spaceman_spiff says:

    @Villago Delenda Est:

    Not really. When you realize that these guys are like Visigoths…all they can think of is all that loot out there that is theirs for the taking.

    Inverse analogy, I think. WE are the Visigoths, who just want the same rights and privileges the citizens of the Empire had; then we get shafted by the greedy self-important bastards who run it.

    This whole Roman Empire analogy has been done all wrong…the sack of Rome in 410 was the Romans getting just desserts for being insufferable assholes.

  200. 200
    Mnemosyne says:

    @gene108:

    It’s just when you boil things down to numbers, you have a more objective basis to compare things.

    My brother works in valuation and the funny thing is, they never, ever go by just the numbers. If it’s an actual business that needs to be valued (as opposed to, say, an estate), they always visit the location and take a tour of the business. This is because people who actually value businesses professionally know that the numbers can lie (or can be made to lie) and you need to see how things run for yourself in order to make a judgement.

    Numbers are nice and comforting and seem to give a very objective story, but anyone who relies on numbers to decide the value of a business is a fool, frankly.

    ETA: A fool or a gambler, that is. Guys like the Deutsche Bank guy are really gamblers trying to get a better line on which will be the winning horse by comparing statistics that don’t do much other than give you a general idea of the odds.

  201. 201
    slag says:

    @piratedan: I’d probably measure the value of a company by its median worker salary. It’s a number. (and a fairly objective one at that)

  202. 202
    BruceJ says:

    @japa21: Wearing a pair of Kirkland jeans right now. They’re cheap! Thirteen bucks and they wear like frigging iron. And my costco is the same, apparently, as everyone elses…most of those employees have been there for the same number of decades I’ve been shopping there.

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  1. […] Kay at Balloon Juice flags an interview with a financial journalist following the shocked wealthy people who supported Romney: First, they’re absolutely convinced that they’re not asking for special privileges for themselves. They’re convinced that it just so happens that their self-interest coincides perfectly with the collective interest. That’s where you get this idea of the “job creators”. The view is that to seek a low tax environment or less regulation, that’s not special pleading for yourself, it’s not transactional politics. It’s that this set of rules is the most conducive to economic growth for everybody. It will grow the pie. Now, it also happens to be an incredibly convenient way of thinking. If you’ve developed an ideology that what’s good for you personally also happens to be good for everyone else, that’s quite wonderful because there’s no moral tension. […]

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