Black Friday, Chicago

Once again, we return to the issue of errors in economics — home of incredibly insight arguments and utterly inane contributions. For the latter category, Professor Mark J. Perry takes today’s award for his contribution of stating Wal-Mart should be given the 2013 Nobel Peace Prize “for improving the lives of millions of low-income consumers globally.

I’ll let that sink in.

It seems awfully difficult to grasp Wal-Mart has improved millions of lives, let alone getting the Nobel Peace Prize . It is as if Perry didn’t stop and ponder what he was writing, though he is deluded enough to believe a corporation, a metaphor for our country in terms of inequality, should be given a prize for peace. I am too afraid to even read other pieces by him if he strongly believes in such an idea.

Perry flat-out ignores most of an op-ed by Princeton University Professor Rebekah Peeples Massengill in the Washington Post, which he cites. For instance, he wrote:

Any neutral observer who looks at the significant economic benefits generated by Wal-Mart in terms of everyday low retail prices for groceries, prescription drugs, clothing, and household items that generate billions of dollars in cost savings for low-income Americans, along with millions of job opportunities in cities across America for low-income Americans with above-market compensation and significant advancement opportunities, could only come to one conclusion: Wal-Mart is truly great for low-income Americans.

With anyone in economics, readers should be extremely suspicious of a neo-classical or neo-liberal believer since they build up their case not by facts, but by rhetoric. In the Economics Anti-Textbook, economists Rod Hills and Tonny Myatt discuss the problem of rhetoric in economics:

Of course, in engaging in this gentle art of persuasion, economists use the full range of rhetorical devices. They use analogies (or metaphors), thought experiments, natural experiments, historical precedents and appeal to authority. Moreover [economist Deirdre] McCloskey argues that the official methodology — predictive power and hypothesis testing — is also rhetorical. Such tests are ornamental, designed to give an argument more authority.

Economist Robert Heilboner, also cited in the book, references McCloskey’s work, which talks about rhetoric and economics, and gives his input over it:

What McCloskey wants economists to understand is that the language of formalism and mathematics is still a language, and therefore inescapably ‘rhetorical.’ Moreover, it is a dangerous language in that it conceals the elements of judgment and moral valuations that are an intrinsic part of economics.

This comes back to two concepts — positive economics and normative economics. The former refers to ideas with facts related to them, while the latter refers to how the world ought to be. This must be noted as Perry uses rhetoric to display his version of positive economics, despite rhetoric having root in normative economics.

Yet, why does Perry ignore Massengill when she offers statistical evidence of who really shops at Wal-Mart? She wrote:

However, wealthier people are among the more than 60 percent of Americans who shop at Wal-Mart each month. A 2005 Pew Research Center survey found that more than three-quarters of respondents from households earning more than $75,000 a year thought Wal-Mart was a good place to shop, and nearly 80 percent of them had shopped at Wal-Mart in the previous year.

Massengill offers numbers, but Perry offers typical right-wing garbage expected out of an institute called the “American Enterprise Institute.” If we seriously can find this neutral observer (perhaps in the magical world of Perry’s imagination), they would side with Massengill as she provides insight of who the shoppers are and who are directed to Wal-Mart.

Furthermore, he gives four comments in defense of Wal-Mart. His first one is:

According to Wal-Mart, its wages are “at or above the retail industry average. In addition to competitive pay, our benefits include a 401K plan with a company match, education assistance, merchandise discounts, and health care. Health care plans are available to eligible hourly associates starting at $17 per pay period. All employees — full and part time — receive quarterly bonus opportunities based on store performance. Last year, these bonuses earned by hourly associates totaled more than $770 million.” Sounds like a pretty good deal for millions of low-income Americans who work for Wal-Mart.

In what amounts to a defense of robbery, Perry shows why it’s a good idea to work at Wal-Mart. However, we must provide context on the institution of Wal-Mart if we are to understand his argument.

According to Business Insider, in 2010, Wal-Mart gained $421 billion in revenue. If they were a country, they would be the 25th largest economy based on their GDP. They have more than 2 million employees, yet their income is dwarfed by the salary of the CEO and even the Waltons (the family that owns Wal-Mart).

The Waltons, despite their beloved gift of giving wages “at or above the retail industry average,” donate less than two percent of their income to charity and oversees a company that burns around 120 million gallons of oil a year. Their six heirs, according to this infographic, own a net worth “equal to the bottom 30 percent of this country.”

Let’s not forget the obvious problem with his logic. Wal-Mart costs $1.5 billion to taxpayers since employees can’t afford their own basic needs., which indicates there is a problem with his argument that there are numerous benefits to working at Wal-Mart. The retail pay is bad as it is as the Department of Labor reported median wage for retail workers is $9.53, barely passing for an adequete “retail industry average.”

Furthermore, however, Perry is lying as previous studies have found Wal-Mart actually pays less than the average and even Wal-Mart themselves, when they showed their presentation for Goldman Sachs, admits over 475,000 associated employees make over $25,000 a year.

Health care? Wal-Mart, as The Walmart 1% shows, doesn’t give such benefits in what we expect:

In many of the states across the country that release such information, Walmart is the employer with the largest number of employees and dependents using taxpayer-funded health insurance programs.

They’ve even cut health benefits for employees, so it does not sound like a “pretty good deal.” It sounds like a terrible deal as their suffering is brushed aside by Perry. His second comment is as followed:

When Wal-Mart opens a new store, it’s not uncommon for the retailer to receive 10,000 to 25,000 applications for 300-400 openings, which is a ratio of 25 or more applications per job opening, and an acceptance rate of 1.5% to 4%. If Wal-Mart was such a horrible place to work, why are so many low-income Americans so apparently desperate to work there?

In the classic example of “apples and oranges,” he compares such applications to Princeton University. Again, such inane comparisons make an argument like this difficult to follow and it is almost as if he makes a subtle jab against Massengill for being right. It gets worse:

Wal-Marts get about twice as many applications per job opening as Princeton gets per opening in its freshman class, and is therefore in a position to be more selective when selecting employees than Princeton when it selects its first-year class! So given their alternatives, thousands of low-skilled, low-income workers must find the job and career opportunities at Wal-Mart extremely attractive since they apply in such large numbers whenever a new Wal-Mart store opens.

I’m sure when low-income workers are given the option of Princeton University and Wal-Mart, they would go with the latter since, well, it’s better than Princeton by a long-shot! When they launch protests on Black Friday, it isn’t to demand a better life, but a sort of quasi-pep rally to cheer for the football team and the good-looking quarterback-CEO whose parents are proud and has the respect of all his teammates, especially the tough-minded coach.  But I’m getting ahead of myself.

Let’s not forget, since Wal-Mart is “extremely attractive,” it’s alright if they cause environmental damage as Massengill points out:

The Environmental Protection Agency has repeatedly sued Wal-Mart for faulty stormwater management and illegally dumping hazardous chemicals and pesticides at its retail sites, among other offenses. As recently as May, for instance, Wal-Mart agreed to pay nearly $82 million in fines for violating environmental regulations in California and Missouri.

However, we must return to his argument of numerous applications to work at Wal-Mart. It is true there are increasing applications, yet that is what the current state of the economy desires. As Stephanie Luce of the Guardian wrote:

Over 15 million people work in the retail sector, and that number is expected to grow, as retail sales worker occupations make-up the second largest job growth projections in the country, after food preparation occupations. More than 1 out of every 10 jobs in the country is in retail trade, which makes it a major part of our economy. It is unlikely that most retail workers will leave the sector for other work.

We can see they are desperate to work there because it is the norm in our society for it to occur. If one out of ten jobs in this country is in retail, why is it so simple to blame the worker in this instance? They are forced to work or else starve themselves and their family members (if they take care of them of course).

But, as we continue, we can see Perry is losing his rationality (this proves neo-classical economics doesn’t work) and his argument:

Why do so many low-income (and middle-income) Americans really, really want to work at Wal-Mart in entry-level jobs? In addition to the generous above-market compensation at Wal-Mart (as demonstrated by the fact that it gets 25 applications per opening), low-income Americans want to work there for the lucrative career opportunities for advancement at the giant retailer.

The term “ask a stupid question, get a stupid answer” can be correctly applied to this question. Yes, why do more low-income Americans want to work at Wal-Mart while there is a, don’t quote me on this, RECESSION (bold and capitalized so Perry can take note of the word and look it up in a dictionary) going on and we are not getting a recovery anytime soon.

It was just proven that it is the norm is retail is here to stay and will grow in the future. Where else will Americans work if they are low-income? For every two jobs Wal-Mart creates, nearly three jobs are lost as a result.

But, what if all the workers, if they have such anger with Wal-Mart, just quit their jobs? “Frictions,” which prove the employee-employer relationship is symmetric, restrict the ability of workers to even do that. As economist Alan Manning writes:

The existence of frictions gives employers potential market power over their workers. The assumption that firms set wages means that they actually exercise this power.

It’s not that Americans go to Wal-Mart because their power is attracted, rather the power Wal-Mart holds forces them to take a job with them or else they will be struggling without an income.

Finally, he gives his fourth reason to an example of social mobility with Wal-Mart, showing all workers can one day become an executive vice president:

As an example of the career opportunities at Wal-Mart, consider the case of 50-year old Patricia Curran, until recently Wal-Mart’s executive vice president of people, and listed by Fortune Magazine in 2006 as one of the 50 most powerful women in the US. She was also listed by the Wall Street Journal as one of the “The Top 50 Women to Watch 2006.”

Legitimately, Perry expects Wal-Mart workers all to become executive vice presidents or equivalent positions of power. If he extended the argument to the entire workplace, I wouldn’t find a problem. However, he mentioned only Wal-Mart and this is where he crosses the line.

Patricia Curran is another part of the bourgeoisie who is against the workers for not helping them whatsoever. As protests set for Black Friday, The Nation‘s Lee Fang writes on how a former Wal-Mart executive is launching a “smear campaign” against the workers. One line, he mentions, should be noted:

Corporations fear that the new wave of activism could have a multiplier effect that goes way beyond better pay and benefits for their workers.

Fang’s entire article is recommended to understand the corporate push against activism, but the situation over Wal-Mart and its workers are serious. It is unfair and, perhaps, questionable to praise Wal-Mart for its practices. Workers do leave in the retail industry as Luce pointsout:

In a large national survey, about half of retail respondents said they were not very likely to try to change employers in the next year. Workers do not lack a work ethic or commitment to retail, but are often forced to look for another job that provides more hours or more predictable schedules.

They do not have the luck of being an executive vice president and certainly don’t have the power Curran holds in her position.

Yet, when they do exercise their other power of making change, it is stopped. Isn’t their betterment of living a part of the “career opportunities” Perry speaks about? Why is he so quiet on this issue?

The end of the piece reinforces such skepticism on the alleged mobility:

Inspired by this Vancouver Sun article and to provide some counterbalance to Professor Massengill’s vilification of Wal-Mart, I hereby nominate Wal-Mart for the 2013 Nobel Peace Prize for its significant contributions to society, for improving the US and world economies, for directly creating more than two million jobs worldwide at its retail outlets and helping to support many thousands of jobs indirectly for all of the thousands of suppliers to Wal-Mart, and for its contributions to improving the lives of millions of lower-income consumers by offering “Everyday Low Prices.”

It is a grave error to praise an institution that was found by the National Labor Review Board to illegally threaten workers to join the Black Friday protests. Alana Semuels of the LA Times elaborated further on the charges:

The NLRB’s general counsel said Monday that it had investigated charges against Wal-Mart regarding employee protests last year in 13 states including California. It found that the retailer unlawfully threatened employees with reprisal if they engaged in strikes on Black Friday, unlawfully disciplined workers who did in engage in those strikes and unlawfully treated employees in other stores in anticipation of them participating in strikes or other labor activities.

This is a company that, earlier this year, sued the United Food and Commercial Workers International Union, among others, for “disruptive” rallies around their Florida stores. This is a company that allowed a Maryland judge to bar protesters for this Friday’s rally. This is a company where it bribed for growth overseas and refused to tell the federal government when made aware of it.

Is this our standards for a Nobel Peace Prize? Standards for “Everyday Low Prices” that Americans supposedly take advantage of if they are low-income? Why shouldn’t we just throw in the towel if this is all true.

Just because someone has a different opinion does not mean they are suspicious or should be ignored. But what Perry speaks about is beyond ludicrous and absolutely suspicious of his character as a person. He lied through his argument and proposed an ignorant statement on the state of affairs. We can extent this to “rational ignorance,” as Myatt and Hills write:

It often does not pay the individual member of a large group to know the facts about the issues. In public choice theory, this is called “rational ignorance.”

Perry, difficult to imagine, displays such ignorance as he does not wish to understand those who argue against Wal-Mart’s unfair practices. But we must not fret over his words as there are stories of those illegally fired by Wal-Mart like Dominic Ward’s touching story. One part is interesting:

He began talking to co-workers and explained to them that workers have rights. While a lot of people started to become activated, a lot of his co-workers also were scared. Ware said that’s because of Walmart’s “mind manipulation.” He said, “Workers are made to feel like ‘you need Walmart, Walmart don’t need you.’ … If you want to complain about the hours, it’s ‘Why are you complaining? There’s several other people behind you waiting to come in.’”

Manipulation of people’s mind is by far a disgusting act by one of the leading marketers in the world on how good and positive they are for everyone. They are an embarrassment for the entire human race.

What can we do in support of these individuals? First we can point out the problems with Wal-Mart and all similar entities profiting off their labor while they get rich in their seats.

We can join up strikes today in any location for the workers. We can help sponsor a striker. We can help sign a petition. We can go out and prove people like Mark J. Perry wrong and make a change for the betterment of our society. As the great Victor Serge once wrote:

Behind us lies a victorious revolution gone astray, several abortive attempts at revolution, and massacres in so great a number as to make you dizzy. I have more confidence in mankind and in the future than ever before.

We have the power in our grasp and the time to take down those at the top who own more wealth than we can ever imagine is now.

Photo by chris dilts, used under Creative Commons license