Darron CharlesworthWal-Mart Not Wall Street Caused The Financial Crisis
April 27th 2010 10:07
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The collapse of financial markets around the world and debates over the causes, effects and long term solutions are still to be finalised. The reasons and blame for the crisis have been aimed mostly at the US. This is not unreasonable as those responsible are US based companies. What is interesting is that no-one is really any closer to the real problem or offering real solutions. You see, the problem wasn’t in the financial markets; the problem was in the employment market. This is something that the US has hardly even mentioned and remains untouched as a fix it for financial worries. What makes this such a concern is that the problem is circular; it will come back around again and again if the mentality of US Corporate greed is not restrained. This will require some explanation in more detail.
Take a look at the way that employment has changed in the US. Hundreds of thousands of workers have been retrenched as global corporations move their production bases offshore. This is carried out to reduce one of the most expensive components of manufacturing: labour. By reducing their margins corporations are able to increase their profits and therefore increase their value. This is perfectly logical and makes business sense – to a point. Beyond a certain point this ceases to make good business sense and this is the point that the US reached bringing the markets crashing down.
Markets are not never-ending sources of wealth and neither are the American people. This was recognised in ‘Deer Hunting With Jesus’ (Bageant, J. 2007). His work predicted the collapse of US markets with accuracy and such simple logic that it seems to have escaped the corporate geniuses so intent on making more and more money. Bageant’s example of Wal-Mart is as good as any but could be shifted to similar situations outlined by proletariat heroes such as Michael Moore and echoed in his documentary ‘Roger and Me’ (1989).
The Wal-Mart story. Wal-Mart has been a successful retail chain employing many Americans and, initially using American workers to provide the goods which it sold. Over time the management decided that it could reduce its labour costs and the price paid for goods by moving the majority of its manufacturing to countries where there were few compliance costs, no Unionism and low labour costs. These reductions allowed Wal-Mart to produce cheap goods for American Workers, increase their profit margins and increase their market value. There is however a fatal flaw in the plan.
While the goods produced were now cheaper the shift of manufacturing displaced thousands and thousands of American jobs. Without the manufacturing many workers were left without any means of generating an income. Some found work within retail but at reduced wages and often at less than the hours required to maintain a living income. Some work several jobs which also reduces the number of people who can work. The reduction in income has the side-effect of removing the ability to pay the bills – this includes the mortgage on the family home. Repossessions increased rapidly as the working poor are unable to meet their commitments. The glut of available housing sinks the housing market to new lows. Many properties cannot be sold as there is no work in the towns with vacant housing because the manufacturing is no longer there, so no-one wants to buy. Let the whole situation simmer unaddressed for several years and you have a financial crisis caused by the inability of the workers to repay their debt.
From the position of the US there is no return to prosperity until the corporations realise that they need to protect the jobs of their own workers or, before too long, there will not be enough people to buy the goods they rely on to generate their luxurious profits. While the bourgeoisie like to think they are immune from the problems of the proletariat they are not. Both need each other and this dependant relationship is stressed in its present form. Change needs to occur and the corporations need to re-invest in their local industry before the entire system collapses or next time the damage will be exponentially worse.
Markets are not never-ending sources of wealth and neither are the American people. This was recognised in ‘Deer Hunting With Jesus’ (Bageant, J. 2007). His work predicted the collapse of US markets with accuracy and such simple logic that it seems to have escaped the corporate geniuses so intent on making more and more money. Bageant’s example of Wal-Mart is as good as any but could be shifted to similar situations outlined by proletariat heroes such as Michael Moore and echoed in his documentary ‘Roger and Me’ (1989).
While the goods produced were now cheaper the shift of manufacturing displaced thousands and thousands of American jobs. Without the manufacturing many workers were left without any means of generating an income. Some found work within retail but at reduced wages and often at less than the hours required to maintain a living income. Some work several jobs which also reduces the number of people who can work. The reduction in income has the side-effect of removing the ability to pay the bills – this includes the mortgage on the family home. Repossessions increased rapidly as the working poor are unable to meet their commitments. The glut of available housing sinks the housing market to new lows. Many properties cannot be sold as there is no work in the towns with vacant housing because the manufacturing is no longer there, so no-one wants to buy. Let the whole situation simmer unaddressed for several years and you have a financial crisis caused by the inability of the workers to repay their debt.
From the position of the US there is no return to prosperity until the corporations realise that they need to protect the jobs of their own workers or, before too long, there will not be enough people to buy the goods they rely on to generate their luxurious profits. While the bourgeoisie like to think they are immune from the problems of the proletariat they are not. Both need each other and this dependant relationship is stressed in its present form. Change needs to occur and the corporations need to re-invest in their local industry before the entire system collapses or next time the damage will be exponentially worse.
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