02.02.11

MSNBC’s Ed Show entertains idea that US business threatens national security

Posted in Imminent Catastrophe, Satan's Bank, Stumble and Fail at 10:03 am by George Smith

Last night’s Ed Show on MSNBC featured an extended riff on Wall Street speculators and the price of food worldwide. It linked this — using financial giants Goldman Sachs and Merrill Lynch — repeatedly. (Follow the link, click on the tab for “Speculation wreaks global havoc” — if interested.)

Host Ed Schultz linked it all to riots, which start out as protests over food pricing, in the Middle East, specifically in Tunisia and Egypt.

The upshot, which was posed as a question for viewers to answer at the bottom of the screen was this: Does US business represent a threat to national or world security?

For the thrust of the segment, the implicit answer was yes.

Schultz brought in Dylan Ratigan to discuss this and the latter wasn’t ready to go along with the supposition. Ratigan averred, however, that it was a complicated story, one in which Wall Street speculation played a part.

DD isn’t going to embrace the idea but it does again bring up the question I’ve discussed over the past year. (See here, in my last posting for 2010.) And Paul Krugman has devoted a bit of time lately to discussing commodity prices and worldwide fluctuation in the same without mentioning speculators.

But that this idea has now shown itself at a mainstream media outlet, albeit one that’s increasingly hitched its fortunes to viewers from the center left, is still quite startling.

In any case, I’ve made posts over the past couple of years where, demonstrably, US businesses have threatened US security. Most notably, from large agribusiness, via the examples of mass food poisonings written off as an acceptable cost to the industry. For example, it’s just a fact now that US agribusinessmen have proven to be better at distributing disease than bioterrorists.

And in a much broader sense, the worldwide economic collapse brought on by Wall Street has had grave implications, causing instability and suffering, and consequent problems for security, worldwide.

Schultz’s segment, reprinted and cleaned up a little from here, approaches the same conspiratorial tone the mainstrean usually likes to laughingly dismiss as the property of cranks and crackpots:

Yemen and Tunisia have also had mass protests. They’re all autocratic, majority Muslim nations, but they’re not all oil states. Tunisia is mostly secular.

So what else do these countries have in common?

One thing is high food prices, a factor in how all the riots really started and how all of it started. And it’s not a coincidence that all of them have high food prices right now.

Food prices have skyrocketed around the world and a big reason for that is Wall Street.

It started in 1991 with surprise, surprise Goldman Sachs.

Before then, wall street speculators played only a minor role in food prices. The way it worked food companies and their suppliers, america’s farmers, wanted to keep their business stable. Even if prices spiked for wheat, corn, or other agricultural commodities.

So they’d hedge their bets, signing contracts, futures, to lock in prices for some point in the future.

Speculators helped, putting enough money in the system to keep things liquid.

After the depression, FDR saw that speculators could drive up the price of wheat, corn, whatever, by betting on commodity futures the way Wall Street later bet on dot coms.

Distorting food prices like that could destroy the very stability future contracts were created to provide so FDR signed into law what are called position limits — limits on how much of the total betting could be done by wall street.
And what do you know it worked.

For decades the price of wheat was driven by fundamentals like the weather and Wall Street couldn’t stand it.

In 1991, Goldman Sachs asked the commodity futures trading commission, the CFTC, to give them a waiver on those position limits, so they could bet as much as they wanted.

A CFTC appointee for the first president bush said sure.

More than a dozen other firms followed suit.

Goldman Sachs even created commodities indexes. To simplify the betting and goose casual investors into the casino. Again, Wall Street followed suit.

Remember the real estate bubble?

Wall Street wanted to hedge all of those bets it made on mortgages.
So they ramped up their bets on commodities.

And when Wall Street started losing money on sub primes, they bet it on commodities instead.

By 2008, Wall Street had five times more futures contracts in commodities than it did in 2002.

Commodity indexes held about $13 billion in 2003.

By 2008 it was over a quarter trillion.

That’s how we got the oil bubble.

And record high gas prices added to the cost of shipping food plus speculators looking for another bubble, and you get a food bubble.

Estimates speculators held 65% of corn futures’ contracts, 68% Of soybean, 80% of wheat. By mid 2008, the IMF food price index jumped more than 80% in just a year and a half before.

It was the first time in history the proportion of people going hungry worldwide went up.

The number of chronically malnourished people rose by 75 million in 2007.

40 Million in 2008.

That’s why Egypt had riots back in 2008.

Along with 30 other countries, Italian moms marched against the price of pasta. Wall street speculators admitted they were doing it.

In 2006 Merrill Lynch said speculation accounted for 50% of the price of commodities. Half the price.

In 2008 a Goldman Sachs research paper said, quote, without question, increased fund flow into commodities has boosted prices.

2009 — even Republican senator Tom Coburn admits the speculation, quote, helped to inflate futures prices and there by disconnect futures from cash prices impairing farmers’ and grain elevators’ ability to hedge price risk.

Even Coburn said there was so much Wall Street money distorting prices that farmers and other guys who actually need commodity futures couldn’t use them to keep their companies stable anymore.

We don’t notice price hikes so much because most of our food prices come from marketing and packaging.

But in the developing world, the price of food is everything.

And what country imports more wheat than any other?
Egypt.

Where the price of wheat rose 70% last year.

Last summer Goldman called a report on the role of speculation in food prices, quote, misleading and blamed other factors.

A lot of reports mentioned that Russia cut off its wheat supply last year. What they don’t tell you is why. Because futures traders asked them to.

And, of course, there’s always a reason to promote Let’s Lynch Lloyd Blankfein.

01.30.11

Let’s Lynch Lloyd Blankfein

Posted in Phlogiston, Rock 'n' Roll, Stumble and Fail at 10:55 am by George Smith


Good news, lads! Good news! Uh… never mind.

From the Guardian:

Top executives at Goldman Sachs collected a bumper increase in pay and bonuses last year in defiance of public opinion, and despite a 38% slump in the bank’s profits …

Regulatory filings also reveal the bank’s chief executive Lloyd Blankfein is in line for an astonishing 233% increase in his basic pay in 2011, which rises from $600,000 to $2m.

Blankfein last year was paid free shares worth nearly $13m, up from $9m in 2009, indicating that City and Wall Street remuneration is rising despite pleas by international regulators and politicians for financiers to show restraint.

From my apartment, in honor of such achievement, the tune Let’s Lynch Lloyd Blankfein.

Intro hacked and chopped from Charlie Rose interview with Mr. Blankfein.

He’s doing God’s work. And how to rhyme “He is so great, he works late on money and capitalism …”

01.27.11

For the amusement of federal government workers everywhere

Posted in Cyberterrorism, Stumble and Fail at 12:00 pm by George Smith

An opinion piece that was solicited by Federal Computer Week back in December:

They’re everywhere — employed by government, the military and corporate America. And because we have come to the point that the United States is considered by some to be a bad global actor — whether you share that point of view or not — the government is faced with a problem it cannot solve. Its exposure is thought by many to be deserved.

In this new reality, as in nature, a vacuum is abhorred. The mainstream media no longer fulfills the role of speaking truth to power. It opened the door for [Julian Assange] and WikiLeaks.

The rest in “Get Used to the WikiLeaks mindset” is here. Including an amusing pic of yours truly.

01.26.11

Made in USA: Do the Wrong Thing

Posted in Made in China, Stumble and Fail at 12:06 pm by George Smith

The idea that American big business can relied upon as some manner of trusted partner in setting the nation right now seems laughable. And it’s why it’s annoying to see the president’s continued attempts to assuage corporate ire, as if it will make a difference.

Note this story on CEO whining in the Wall Street Journal. US regulations are onerous. The environment is uncertain. Et cetera.

In continuation of the coverage of various US shortfalls, most recently in production of strategic materials, it is illuminating to look at the recent history of the Mountain Pass rare earth mining operation, once owned by Chevron, the energy giant with the new slogan — human energy.

By 2002, rare earth mining in the US was finished. Chevron owned Mountain Pass and had stopped operation.

However, by 2007 the company was making a big noise about starting it up.

“[Chevron wants] to be part of the rare earth mining industry once again … ” reads the press release.

In review, this appears to have been gold-plated bullshit, an attempt to feather-bed the operation for a future sale.

A local newspaper continues from 2007:

[A Chevron rep] said the mine, which has one of the world’s largest deposits of the element Neodynium, was last used in 2002. Neodynium is needed to create powerful magnets used in miniature electronics such as MP3 players and hybrid-vehicle engines, demand for which is rapidly growing, Knoepfle-Thorne said.

The price of the product was (once) very, very low. It just wasn’t economical to mine, she said.

Currently the company is extracting the rare elements out of a supply of previously stored ore at the site. Mining operations of new deposits of the elements could begin in the coming months and years, Knoepfle-Thorne said.

The military is also a major user of the elements for everything from jet engines to Patriot missiles, she said.

All bathwater. By 2008 Chevron had sold the mine to a consortium which included — surprise — Goldman Sachs. The consortium was renamed Molycorp.

A notice reads:

Chevron Mining Inc. today announced that it has entered into an agreement to sell its Mountain Pass rare earth mining operations to Rare Earth Acquisitions LLC. The transaction is expected to close in late September, 2008.

REA is a special purpose company owned by Resource Capital Funds, Pegasus Partners IV, LP, The Goldman Sachs Group, Inc., Traxys North America LLC and Carint Group LLC. Included in the acquisition is the Molycorp name and upon closing, the company will be renamed Molycorp Minerals LLC.

If readers can see any visible corporate interests dovetailing with US national interest in clean energy innovation and/or restoring an American position in materials mining vis-a-vis the rest of the world, they’re better than I am.

However, if you’re only interested in short term profits based on cannibalization, offshoring, sales to Wall St. speculators and everything-must-go strategies …

Here’s a statement from the company’s page on its mining operations in the US:

Chevron also operates a molybdenum mine in Questa, N.M. Molybdenum is primarily used as an alloying agent in steel. We have scaled back development and production plans at Questa due to the dramatic price drop in the molybdenum market.

We continue to build on our record of safety. The Questa Mine was honored with the 2009 Underground Metal/Nonmetal Safe Operator of the Year Award and the 2009 Safety Innovator of the Year Award from the New Mexico Mining Association in cooperation with the New Mexico Bureau of Mine Safety.

Scaled back. Not profitable enough.

“Molybdenum production is concentrated in a relatively few countries, with China, the USA and Chile accounting for 80 percent of total world production in 2009,” reads this informative report.

“US production historically dominated world molybdenum production but as it declined Chilean output increased. Chinese molybdenum production was the largest in the world from 2002 to 2004 but declined in 2005 due to government-enforced mine closure. It then more than doubled between 2005 and 2008, to again become the largest in the world. US production, the second largest, rose steeply in 2004 and 2005, but is estimated to have fallen sharply in 2009.”

Mentafacturing vs Manufacturing

Posted in Made in China, Stumble and Fail at 9:08 am by George Smith

mentafacturing: A pompous term for bullshitting, especially the variety associated with flacking for your offshored business, the innovative quality of cellphone applications, Facebook and/or American exceptionalism.

Usage: Mentafacturing replaced manufacturing as the primary export of American business resulting in a startling trade deficit disaster as well as mass unemployment.
— updated from the Joseph K Guide to US Tech Terminology

On SOTU — we got our Sputnik moment.

When Sputnik went up Bethlehem Steel still existed in Pennsylvania. There was a garment industry in Schuylkill County, where DD was born. And my father worked at the biggest aluminum extrusion facility in the world at the time, located in Cressona, PA.

Almost all of that is gone.

The United States was uniquely poised to take on the Soviet Union in 1957.

It is not in the same condition now. For one, the threat facing the country, as described so nebulously in the SOTU speech, is not an external one. The threat is of our own making.

The President did not address such challenges — the dilemma presented by American big business with no interest in American labor. Or the fact that US corporate goals no longer coincide with the goals of national renewal or providing security and a fruitful environment for the middle class.

Obama talked about investment in the future while announcing a freeze on domestic spending.

He talked about producing more science and math teachers without mentioning who would pay for them. Or what we would do with them given the fact that, even with science and math teachers, the subjects just can’t be taught in any realistic sense in US schools, as they stand now. And that a high school education that includes science is currently of no interest to the US job market.

One does not need any science education to assist in warehousing retirees, clean up unsanitary conditions, or be a cashier in retail selling goods all made in China. There is no demand for science and math in these growth “professions.”

Seriously. Science and math education in high school presumes there is serious desire and capability to move students into a college education career track that will build upon it, an educational trajectory that takes a long time and a lot of money. Unless I’ve gone completely out of my mind, that’s not the US in 2011.

Obama spoke of NASA and the space program, which was underwritten by the taxpayer — government spending (!) — without mentioning any idea of similar application for the present.

Here’s one.

Given the posts in this blog on the loss of capability in production and mining of strategic materials in this country. And their role in the development of clean energy futures globally, the President might have said the US will get back into the business of rare earth materials mining in a big way.

The President might have said he was setting up a government agency to take over the Mountain Pass mine from the private sector and to move ahead immediately in opening others like it.

The government would remain in the business, as with the developing space program after Sputnik, in order to guarantee use, demand and market for these strategic materials.

It would behave like China in this matter, aiming to eventually compete directly with that country, even to the point of subsidizing the production of the materials, knowing that in the very long term, the resulting jobs, technology and — ahem — innovation, might indeed have a big payoff.

That’s one example. But nothing like it was heard.

01.24.11

The Bullshit Manufacturer, part 4

Posted in Made in China, Stumble and Fail at 12:49 pm by George Smith

Krugman today:

Still, you might say that talk of competitiveness helps Mr. Obama quiet claims that he’s anti-business. That’s fine, as long as he realizes that the interests of nominally “American” corporations and the
interests of the nation, which were never the same, are now less aligned than ever before.

Take the case of General Electric, whose chief executive, Jeffrey Immelt, has just been appointed to head that renamed advisory board. I have nothing against either G.E. or Mr. Immelt. But with fewer than half its workers based in the United States and less than half its revenues coming from U.S. operations, G.E.’s fortunes have very little to do with U.S. prosperity.

By the way, some have praised Mr. Immelt’s appointment on the grounds that at least he represents a company that actually makes things, rather than being yet another financial wheeler-dealer. Sorry to burst this bubble, but these days G.E. derives more revenue from its financial operations than it does from manufacturing — indeed, GE Capital, which received a government guarantee for its debt, was a major beneficiary of the Wall Street bailout.

More graphical data taken from the US Department of Energy’s Critical Materials Strategy, which DD wrote of here:

US production of critical materials, which in many cases is effectively zero, the market left to China and, to a lesser extent, Chile.


The DoE report graphs potential supply and demand trajectories for strategic materials used in clean energy manufacturing and production, using current trends. This one, for neodymium oxide, used in magnets, is a standard example from the document. It shows that under current conditions, the US is showing virtually no interest in clean energy applications compared to what the rest of the world will be by 2025. This is shown in the pie chart at right. US clean energy rare earth demand is dark blue. The rest of the world’s clean energy neodymium oxide demand is green. Global non-clean energy demand is light blue.

The DoE report on critical materials contains much information to digest. What it does show is that US corporations have virtually no interest in US labor and domestic production, only in putting stuff together bought from somebody else. In this case, China.

Which is what has landed the country in a strategic predicament. What is good for multi-nationals is — here — demonstrably not at all good for the country.

This problem, one of many, will not be easily solved by a SOTU pep talk on innovation and competitiveness.


More drone rib-ticklers

Quote from USAF pitch on accelerating drone procurement:


Continental US estimated drone base expansion, 2008-2013.

Drones and base expansion, yes! Strategic materials use in domestic production of green technologies and energy, no!

What’s the difference?

Drones and base expansion, materials and labor underwritten by taxpayer.

Mining of strategic materials, US labor and overhead too expensive, easier to pay off China.

The USAF presentation on drones, from 2009, is here — at Cryptome.

01.22.11

The Bullshit Manufacturer, part 3

Posted in Made in China, Stumble and Fail at 10:44 am by George Smith

Jeffrey Immelt, Obama’s new advisor, in the Washington Post:

In the past two years, GE has created about 6,000 manufacturing jobs in the States, many resulting from investments in innovations such as advanced batteries, which we will make at our 100-year-old plant in Schenectady, N.Y.

Wow. Six thousand whole jobs. About ten times the extras used the in the latest GE commercials.

Paul Krugman, dismissing Immelt’s op-ed as “vacuous.”

So for when we get to all the talk about Sputnik moments and renewed competitiveness on the 25th, more edifying charts:


Top line = China. Checkmark = US. Source: Dept. of Commerce.


Cratering of US strategic materials/rare earth mining, ceding market to China because US production and labor ‘too expensive.’


Growth of US budget for unmanned killer drones. Expense and labor costs no object.


Growth in homeland security workers versus all other government regulatory jobs.

Steel, strategic materials — stuff for making things, destroyed almost beyond repair.

Alleged ‘innovation: General Atomics and killer drones.

Job creation: Anything having to do with national security.

01.21.11

The Bullshit Manufacturer, second part

Posted in Stumble and Fail at 1:41 pm by George Smith

On the Sputnik moment — that point where your brain has stopped working, you can no longer tell the truth, and you’ve turned it all over to being a pleasing sounding hack, alleged to be coming in the State of the Union address:

“The great majority of the speech,” says press secretary Robert Gibbs, “will be on the steps … that we need to take in the short term that relate to jobs, and steps that we need to take in the medium and the long term to put our fiscal house in order, and to increase our competitiveness and our innovation that allows us to create the jobs of tomorrow.”

The president has been testing themes for his State of the Union speech for months. In December in North Carolina, he compared today’s economic challenge to 1957, when the Soviet Union sent a satellite called Sputnik into orbit, causing the United States to wake up and boost its investments in science and technology.

He has the opportunity in this speech to continue to be the president of all the people, which has been at the heart of his political appeal since he burst on the scene in 2004.

– Bill Galston, former Clinton White House aide

“So, 50 years later, our generation’s Sputnik moment is back …”

Or, from Howard Fineman, reprinted everywhere:

Expect the president on Tuesday to hearken back to that time, and to say we face another “Sputnik moment” — an economic one. The Soviet Union and the Cold War are gone. In its place are China and a more benign but still as crucial struggle for primacy.

Instead of threatening to blow each other to kingdom come, the United States and China are striving to out-produce and out-consume each other.

And the U.S. is falling behind.

In December:

Without detailing specific new proposals, the president told community college teachers and students it was time for an American “Sputnik moment” — referring to the 1957 Soviet satellite launch that jolted the U.S. into jump-starting its own space and science programs.

“We need a commitment to innovation we haven’t seen since President Kennedy challenged us to go to the moon,” Obama said.

The speech was a preview of Obama’s State of the Union address early next year and his 2011 agenda as he grapples with a divided Congress over the next two years, aides said.

“Right now the hard truth is this,” Obama said. “In the race for the future, America is in danger of falling behind. That’s just the truth. And if you hear a politician say it’s not, they’re just not paying attention.”

When Sputnik went up the US was poised to make a big muscle and move forward.

Now, the evidence is everywhere that a deadly atrophy is deeply rooted in the land.

Preparing to cheer us all on with a zinc-plated cliche which stupid people can smile and clap their hands to seems to be just more evidence of it.

Sputnik moment and DD’s law:

The appearance of the word Sputnik or any reference to a Sputnik kind of moment in any argument signals the person who dropped it needs a pie in the face.

Related rubbish: Invocation of the need for a new Manhattan Project or ‘if we can put a man on the moon’ …

Any suggestions? “We will build a new Hoover Dam of job creation, innovation and renewal …

The Bullshit Manufacturer

Posted in Made in China, Stumble and Fail at 1:18 pm by George Smith

He appears onstage, makes his statement:

Our job is to do everything we can to ensure that businesses can take root, and folks can find good jobs,” the president said.

“We’re going to build stuff, and invent stuff,” said Obama, emphasizing the need to boost American exports to countries around the world, an issue that was a focus during the visit of Chinese President Hu Jintao to the White House this week.

“That’s where the customers are. It’s that simple,” Obama said.

His choice of Immelt to head the competitiveness panel won applause from the Chamber of Commerce, which called it a “promising step” toward creating jobs and enhancing U.S. competitiveness. But the Alliance for American Manufacturing condemned the choice, dismissing Immelt as “an outsourcing CEO” whose appointment would “alienate working class voters.”

On GE and outsourcing, from various places over the last few years:

US industrial giant General Electric (GE) plans to outsource jobs to Bangladesh for the first time, presenting a huge opportunity in the outsourcing business.

GE, which employs around 40,000 people in India alone — mainly in the outsourcing sector — will initially provide jobs to a company founded by Bangladeshi expatriates in the US.

Mi3 Inc, based in the US, will invest around $300 million in Bangladesh initially to set up facilities to receive work orders from GE, said company officials at a function in Dhaka on Wednesday. — 2009, here.

=======

There is a buzz at the ground-floor cafeteria of Gecis, the back-office operation of General Electric just outside Delhi. About a dozen people are gathered round a corner, and more are forming a queue. “Have you got your free drink?” a woman in a green sari asks a colleague, lifting a can of Red Bull in her hand. The energy-drink maker is giving free samples of a new flavor. It’s nearly 4 p.m. in India, the beginning of the workday for many at Gecis, and they can use the energy boost. By the time their U.S. colleagues clock in, they will have done a fair amount of tasks for GE worldwide, from underwriting insurance and collecting delinquent accounts for its finance businesses, to performing cost analysis and tracking inventory for its industrial operations.

This is the world of offshore business-process outsourcing (BPO), where corporations farm out routine office functions to developing countries to take advantage of lower labor costs and higher productivity. — here.

======

In the past, I have made blog entries on this issue of mainstay American corporations — like General Electric (GE) — benefiting from U.S. tax subsidies and the loyalty of American consumers who buy their products generation after generation to the tune of billions upon billions of profitability. BUT now these companies, solely in the name of corporate profitability, reciprocate neither their loyalty, nor duty to Americans to be good corporate citizens. Here we have a case in point about GE methodically shipping their entire energy efficient lighting manufacturing operation out of Ohio to China with the primary reason being given as lower labor costs. — from here.

=======

The road to Calcutta… Jack Welch scoffed at outsourcing as the culprit behind America’s anemic jobs growth. General Electric (nyse: GE – news – people ) garrulous ex-chief executive proclaimed the notion merely political, noting snidely that “it is election time.” He declared to a confab of the World Business Forum in New York that “It is the dumbest argument ever put out.” The legendary CEO warned leaders that to “stop two jobs from going abroad” would “kill 20 here.” Welch–once nicknamed “Neutron Jack” for his stance on vast layoffs–saw GE lead the vanguard in outsourcing to low-wage nations, such as ever-teeming India. — from here.

Go to the CEO of the company that made outsourcing to India a major business model on how to rebuild American jobs.

Genius. Would have never thought of that, really.

01.20.11

Wal-Mart sets sights on destroying US grocery business

Posted in Made in China, Stumble and Fail at 1:47 pm by George Smith

A quick note on comments: If you don’t see it at once it hasn’t been moderated, it’s probably in the spam folder. When I see false positives, and I see false postives with frequency, I send them through.


From AP, today:

Wal-Mart, the nation’s largest grocer, says it will reformulate thousands of products to make them healthier and push its suppliers to do the same, joining first lady Michelle Obama’s effort to combat childhood obesity.

The first lady accompanied Wal-Mart executives Thursday as they announced the effort in Washington. The company plans to reduce sodium and added sugars in some items, build stores in poor areas that don’t already have grocery stores, reduce prices on produce and develop a logo for healthier items.

“No family should have to choose between food that is healthier for them and food they can afford,” said Bill Simon, president and CEO of Wal-Mart’s U.S. division.

At a time of hardship, with use of food stamps at an all-time high, this is a laudable goal.

However, when one is dealing with Wal-Mart, everyone knows the company stands for merciless price-cutting by shoving everything it can into production in China.

Which has a disastrous contribution to the American business of making things.

A PBS Frontline special explained it in this manner:

Even as Wal-Mart was pushing its U.S. suppliers to be more efficient and promoting its “Buy American” program through the ’80s, the company bought more and more from Asia, according to Jay Moates, a former accountant with Wal-Mart’s overseas buying operation.

But to please American consumers concerned about the Asian threat, the retailer played down its buying operations in Hong Kong, Taiwan, Korea, and the rest of Asia. Following the brutal suppression of Chinese students in Tiananmen Square in 1989 by the Chinese Communist leadership, Walton feared a consumer backlash if Wal-Mart were seen as operating in China. He was also disturbed by charges of human rights abuses in his Asian suppliers’ factories.

To continue growing in Asia, Wal-Mart needed a buffer — a middleman or a buying agency that would purchase Asian products without showing Wal-Mart’s hand. According to the retired Hong Kong senior executive, Walton told Bill Fields, Wal-Mart’s head buyer, that he wanted to “get out” of direct involvement in Asia. “The decision was to go to an exclusive buying agency,” the buyer said. “The main reason for going into [the deal] was not to be exposed as going into Communist China.”

======

By lining its shelves with its own in-house brands, Wal-Mart began competing directly, on its own shelves, with its national, household brand-name suppliers. “It makes them more efficient,” argues Ray Bracy, Wal-Mart’s vice president of international corporate affairs. “I suppose you could suggest that they would like to not have that competition. But it makes them better.”

The development of Wal-Mart’s house brands proved to be a watershed. Consumer surveys had established that Americans cared less and less about buying national brands: Low price trumped brand loyalty. In the period following Sam Walton’s death, when Wal-Mart’s sales slowed and its stock price began to stagnate, this consumer trend freed the company to ramp up the production of its house brands through unbranded suppliers in China, who now had privileged access to Wal-Mart’s 3,500 stores across America. The result was that Wal-Mart became its own de facto manufacturer, developing and designing products according to the taste of its customers, as analyzed by Wal-Mart’s supercomputer. Profits soared.

Privately, long-time U.S. suppliers expressed dismay. “They invaded our core business model,” said one apparel maker, requesting that his name be withheld. “Wal-Mart seems intent on managing the total product life cycle.” If the competitive pressures of Wal-Mart’s store brands continue, he said he would close his American factories, abandon his own brand, and try to solicit Wal-Mart’s private label business in China. “We call it ‘the race to the bottom,'” he asserted. “It’s sad because I see that productivity increases [in America] are still possible through automation. There’s room for improved efficiency. But it’s impossible [to stay here] with retailers going for cheap Chinese labor.”

And that’s exactly what happened. Every other US business in competition with Wal-Mart was forced to go to China, making themselves over as front brand names for goods made there.

For example, DD’s Hanes socks, those which develop holes after a couple washes, bought at Ralphs/Krogers in Pasadena. Made in China.

And although Pasadena does not have a Wal-Mart, it has a Target. Which one might think of as a poor man’s Wal-Mart, virtually indistinguishable. Everything in it made in China.

Which bleeds into this year’s developments.

Faced with a middle class of diminished buying power, even for Chinese made goods, Target diversified into grocery. The obvious logic is that people still absolutely must buy food.

And the problem which follows on from that is the same Wal-Mart-style application of price cutting.

With food stuffs, there is probably a great deal of room for having lots of it made in China.

Or to preferentially select for American businesses that cut costs by ignoring regulations (on the idea that no one will ever catch them or if they do, that the consequences can be dealt with as overhead) or which turn into fronts for pushing Chinese ingredients into the food chain, cheaper to get there than to make or harvest here.

In this way Wal-Mart became a conduit for melamine in pet food in 2007.

It is a short term shake-the-trees for whatever fruit can be persuaded to fall out strategy.

A longer term strategy would be a national leadership look at what has so diminished the buying power of the middle class that one must either lobby for more cheaply made food or increase allotments of food stamps. In terms of a national short term strategy, increasing food stamp allowances and budgets would even be a better solution than a corporate feel-good alliance with Wal-Mart.

News at the end of the year reports Wal-Mart profits off in the US because of the bad economy, and so moving to enlarge its operations in emerging markets.

It’s a vulture business model — loot what’s left and look to potentially greener pastures.

“Wal-Mart said it would reduce prices on fruits and vegetables by $1 billion a year by attempting to cut unnecessary costs from the supply chain,” reported AP.

This is toxic news dressed up in fancy packaging — a healthy and cheaper foods initiative associated with the First Lady.

The recent history of consumables in the US is that big American agribusiness often can’t be trusted with keeping health in mind when the press is on to reduce the price and raise the bottom line. And that the populace only finds this out well after the damage is done by the Dickensian characters who, inevitably, all attest to the great jobs they have created.

If readers get cable TV they’ll have doubtless noticed the current blitz of feel-good Wal-Mart advertising attempting to cast the impression the place is a great place to work. Even though it’s the swirling toilet vortex that sucked all American dry goods into the sewer and spat back made-in-China.


This also raised the question: “How do you make presumably healthy foods like heads of lettuce, carrots, sunflower seeds, various greens — for example, everything on the left side of Ralphs on Lake that’s not in frou-frou plastic bags — cheaper? Force illegals to work for even less? Totally eliminate the minimum wage?

Nicht verstehen.

Maybe I do. Walmart would like to be able to say that they’re offering a ‘healthier’ version of Hormel canned chili, or spam, or slightly less salty Lay’s Potato Chips — perhaps put some different minerals in them, less salt in store brand Worcestershire sauce, and so on.

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