The tyranny of “low prices” is a characteristic of a plantation economy which strip-mines local economies and replaces employment-rich economic ecologies with a single integrated exploitative cartel of global predation.
By Charles Hugh Smith
I am probably one of the few Americans who has worked on an honest-to-goodness plantation: I picked “pine” on the Dole Pineapple plantation on the Hawaiian island of Lanai in 1970. (The plantation was subsequently closed and production moved to the Philippines to take advantage of lower labor costs.) Thus my understanding of the plantation economy that I describe in Survival+ is not merely academic.
Wal-Mart is the quintessential plantation in the U.S. and global economies. Like a classic agricultural-commodity plantation, Wal-Mart enters a region and market with a diverse, employment-rich ecology of small businesses and networked supply chains of local and regional manufacturers and distributors, and it bulldozes the entire “forest” of businesses, suppliers and distributors with the irresistable blade of global supply chains and “lower prices, always.”
The original sugar king, Claus Spreckels, pioneered the integrated global plantation economy of scale: he owned the plantations which grew the sugar cane, the ships used to export the cane and the refineries which processed it for distribution to global markets.
He also imported uncomplaining, cheap (i.e. desperately poor) labor to provide the heavy work required.
Wal-Mart doesn’t have to own the suppliers or distributors or the ships–it’s great size gives it supreme pricing power and the ability to offer suppliers a simple yet stark choice: either lower your price to our price-point or we pull your contract, and you implode. You may survive as a much smaller business, but probably not.
Like a plantation, Wal-Mart extracts wealth via mono-cultures and an integrated structure and supply chain. Wal-Mart’s model calls for selected global suppliers — the monocultures who make millions of specific items — to provide massive quantities of goods at Wal-Mart prices, meaning that small suppliers get squeezed out by their inability to scale up to meet Wal-Mart’s demands for product.
Profitable suppliers are squeezed to the break-even point (or below) by Wal-Mart’s continuous demands for ever-lower costs. In effect, Wal-Mart expropriates the profits of all its suppliers and distributors in the entire chain.
A Wal-Mart store quickly bulldozes the complex economic ecology of local businesses. Small business is both the engine of job creation and a highly employment-rich ecology. Wal-Mart crushes this ecology and replaces it with a low-job, low-pay, highly efficient plantation economy in which the townpeople’s only choice is to work for Wal-Mart or scrape out a living feeding the Wal-Mart workers, doing their laundry, etc. — exactly as on a classic plantation.
On a classic plantation, the wages are low and the “company store” offers easy credit, binding the workers to the corporation not just for wages but for credit and goods.
Those few who manage to save up enough capital to start small service businesses — laundry, cafes, etc. — must do so in the shadow of the Company, which can always drive them out of business should they irritate their corporate overlords.
A once-diverse landscape is reduced to a monoculture wasteland dependent on subsidies, either implicit or explicit. Wal-Mart’s low wages leave many of its workers’ families on state aid or food stamps to survive, and so it prospers on the backs of taxpayers who subsidize its low wages.
A relative handful of local workers run the plantation, while the economy the plantation bulldozed offered more jobs and a wider range of jobs.
Farmer’s markets and local economy
Here is an example from real life. We shop for groceries in Chinatown or “Mexican” markets (in quotes because we do not know the national origins of the workers or owners) because we find the produce to be fresher and cheaper than supermarket chain stores.
A typical full-service market in Chinatown (not the tourist Chinatown, the real one) is small by U.S. standards —perhaps 4,000 square feet compared to 40,000 square feet for an old supermarket and 120,000 square feet for a “superstore.”
In this small space one finds a full meat, poultry and fish counter with three butchers on hand, a full panoply of vegetables and fruit (usually placed on the sidewalk every morning) and aisles of canned goods, beverages, dried fruits, etc.
Each small store has over a dozen employees.
If you stop to examine the boxes of fruit, vegetables and meat which are being carted in by hand, you will see a wide range of local produce from family farms and local suppliers. Next door, the bakery has several salespeople at the counter and several bakers in the back. The deli next door to the bakery has four clerks and four or five cooks/staff preparing food in the small kitchen. Thus this modest bit of square footage supports dozens of jobs, pays rent to several landlords (further distributing the revenues) and multiple owners/managers. In addition, dozens of small suppliers and farms receive a share of the revenues.
This is the ecology of classical capitalism, in which competition yields a rich variety of goods, services, prices — and wages. Not everyone is capable of learning high-wage skills in a world of global wage arbitrage, and the wages in small-scale markets are modest. But this ecology offers plentiful opportunities for career changes and entrepreneurship — something the global plantation only offers within its corporate mono-culture.
The plantation-economy is one of concentrated financial and political power, global scale, exported jobs, integrated supply chains which exclude small local enterprises and a predatory monopoly which vacuums up all the profits of the entire supply chain for itself.
The alternative is not some fantasy of “old-time America” — this model still exists where citizens refuse to submit to the mono-tyranny of “low prices.” Long-time readers know that my experiences with Wal-Mart are limited to attempting to buy something of utility with a store credit issued for a gift we could not use.
When my wife attempted to return an item of unusably poor quality, the clerk just shrugged and said, “It’s Wal-Mart.” In other words, poor quality is to be expected along with “low” prices.
Mono-culture plantations like Wal-Mart are ugly and soul-draining. There is nothing charming or life-affirming in the cavernous stores or wide aisles. People are enervated by the deadening atmosphere; they shuffle forward in line like zombies, and the pall of mono-culture “low prices” offers zero opportunity for amusement or fun.
Street markets (indoor and outdoor) offer plentiful, free opportunities for amusement and diversion, and ones like Porte de Clignancourt in Paris and Chatuchak Market in Bangkok are famous precisely because they are fun and hugely diverse — and offer plenty of bargains to shoppers.
The communities which support local economic ecologies do so not because they dislike low prices, but because the mono-culture plantation of Wal-Mart doesn’t offer everything they want, nor is it convenient or enjoyable.
The nation does not exist to benefit corporations — the corporations exist to benefit the nation and its citizenry — and not just with cartels and plantations. Isn’t it odd how this statement — the nation does not exist to benefit corporations — the corporations exist to benefit the nation and its citizenry — sounds breathtakingly revolutionary in today’s plantation politics of experience?
Thus not shopping at big-box plantation stores is as revolutionary an act as preparing your own food, growing your own garden and eating a household meal together.
Used by permission. Read also Charles Hugh Smith’s new book Get a Job, Build a Real Career and Defy a Bewildering Economy. The Kindle edition is $9.95. The print edition is $20. You can read the introduction and first section of the book here. Mr. Smith is the author of the oftwominds.com blog, No. 7 in CNBC’s top alternative financial sites, and seven books on our economy and society, including Why Things Are Falling Apart and What We Can Do About It and The Nearly Free University and the Emerging Economy: The Revolution in Higher Education. His work is published on a number of popular financial websites including Zero Hedge, Financial Sense, and David Stockman’s Contra Corner. Here is our review of Resistance, Revolution, Liberation: A Model for Positive Change.