The gyrations of stock markets, the Euro crisis and the conflicting predictions about the direction of the economy are related to one basic point: average people are tapped out. Wal-Mart tells us the story in pretty simple terms. And it is the story of poverty and class warfare.
Turns out, who knew, but a paycheck isn’t what is used to be (Wall Street Journal subscription required):
The Bentonville, Ark, retailer has rebounded from an earlier domestic slump, and reported that sales at U.S. stores open at least a year rose 2.2%, growing for a fourth consecutive quarter.
Still, customers living paycheck-to-paycheck “remains pronounced” in the U.S, said Chief Executive Mike Duke. There are “continuing economic pressures.”
Wal-Mart has been challenged recently as its core lower-income customers in the U.S. contend with high gasoline prices and persistently high unemployment levels. The company also expects inflation to rise in the back half of the year, particularly on food and drought-related items like corn and soybeans.
Wal-Mart cautioned that it is now seeing in international markets the same “paycheck cycle” it saw in the U.S., where customers buy immediately after payday and then make smaller purchases as money runs out. The trend has become particularly pronounced in the U.K., where customers at Wal-Mart’s Asda grocery stores are “clearly stretched,” Chief Financial Officer Charles Holley said during a conference call with reporters Thursday morning. [emphasis added]
For anyone but the elites who want to pay attention, this should come as no shock. Decade after decade, we see the same story: corporations demand wages cuts from workers partly to underwrite huge pay packages for CEOs: financiers try to game a system that ends up collapsing, leaving average people to pay the bill; and political leaders spend too much time trying to appease bond holders, and, rather than spend more money to create decent-paying jobs, they get obsessed with a non existent debt and deficit crisis.
And, by the way, Wal-Mart whines but, in fact, thrives and grows based on a model of poverty. It pays its workers wages that don’t allow a decent standard of living—and is virulently anti-union to boot. Those obscenely low wages force Wal-Mart workers to shop at Wal-Mart, where prices are low, low, low…for the people who can’t make it from paycheck to paycheck. At the same time, the Wal-Mart heirs are collectively worth about $80 billion—but it never occurs to them to, for example, give their workers even decent health care benefits to ward off poverty.
The logical person would pause and wonder: isn’t the Wal-Mart model self-defeating. The answer is of course, “yes”—but only if you believe in a world of equity, fairness and a decent standard of living for all.