Charles R. SmithMonday, Aug. 28, 2006
The Israeli war against Hezbollah (round one) brought with it the realization at the highest levels that dangerous weapons were floating around in dangerous hands. The successful attacks against a cargo vessel by Hezbollah, using Chinese-made C-802 cruise missiles, raised alarm bells all over the globe.
Immediately after the attack, the first alarm bell rang at CIA headquarters, where an intensified global intelligence operation to track weapons deliveries was started. The CIA began to track Iranian efforts to resupply Hezbollah with more Chinese-made C-802 missiles.
According to reports, the CIA discovered that an Iranian Il-76 cargo plane, loaded with another Chinese-made missile launcher and up to eight C-802 missiles, was being prepared to fly to Syria. The weapons on board were for Hezbollah. Officially, the Iranian cargo plane was carrying medical and other non-military aid to help innocent victims of war inside Lebanon.
A quick phone call to Baghdad convinced Iraqi officials to refuse overflight permission for the Iranian jet. Other nations were also warned about the Iranian ploy. Despite the refusal from Baghdad, the plane took off from Iran and sought overflight permission from Turkey. Turkey agreed, but only if the aircraft landed at a Turkish airbase where it and its cargo would be inspected.
Of course, the cargo jet returned to Iran and unloaded its deadly payload. The Iranian efforts did not go unnoticed, and the alert is out to keep a close watch on further flights and shipments to Lebanon.
Chinese Denials
The original source of the C-802 cruise missiles, China, has also come under fire. China has done little to inhibit Iran from supplying these deadly cruise missiles to Hezbollah.
Despite the confirmed attack using the C-802, a Chinese official stated that regulations made it "impossible" for a missile China sold to Iran to be passed on to Hezbollah.
"According to our regulations, it is impossible to have that kind of situation," stated Sun Bigan, China's special envoy to the Middle East. Yet, when asked if Beijing was investigating the allegation, Sun said, "As far as I know, no."
Israel, long known for its close military relationship with China, should not take the Chinese at their word. Israel has exported weaponry to China in the form of advanced air-to-air missiles, jet fighter technology, air-to-surface missiles and radars, and even wanted to provide an airborne radar control plane to the People's Liberation Army Air Force.
It was only after loud complaints from Washington, D.C., in particular from Virginia Republican Senator John Warner, that Israel decided to halt arms transfers to Beijing.
The C-802 has one damaged warship and one sunk Cambodian freighter to its credit. Clearly, advanced Chinese missile technology is aimed to kill. The additional proof that more missiles were on the way to Hezbollah should be more than enough evidence to make Tel Aviv pause before entering into any more advanced-weapons deals with Beijing.
U.S. Exports to China
The problem of advanced Chinese missiles in Hezbollah hands is also quietly changing the political-election tone here in the U.S. The feeling inside the U.S. government is that strict sanctions and export controls should be instituted to prevent U.S. military technology from falling into the hands of the Chinese.
The politics of missiles have a direct effect on the U.S. aerospace industry. Many of the leading aerospace execs feel that export regulations are already too strict and have cost them export sales of advanced U.S. technology.
For example, the Bush administration recently announced tough new regulations to improve the oversight of advanced-technology sales to China. In response, the National Foreign Trade Council (NFTC) stated that it opposed the new regulations. The National Foreign Trade Council includes major multinational corporations such as Boeing Co., Caterpillar Inc., Chevron Corp., Exxon Mobil Corp., Microsoft Corp., Ford Motor Co., General Motors Corp. and DaimlerChrysler AG.
"We are writing to express our concern over the 'conventional arms catch-all' regulation for China that was proposed on July 6. As representatives of U.S. manufacturers, we support an effective export control system to protect U.S. national security. We also recognize the risks and opportunities that trade with China presents, but we believe this regulation is not clearly integrated into our China policy and will seriously hinder U.S. competitiveness," states a letter issued by the NFTC on Aug. 2, 2006.
"As we have seen with night vision equipment, a unilateral approach inevitably undermines both U.S. competitiveness and security, encouraging other countries to design U.S. technology out of their products," noted the letter.
Clinton Chinagate Scandal
It should come as no surprise that the NFTC is headed by Clinton-era former Under Secretary for Export Administration, William Reinsch. Reinsch claims, in his NFTC bio, that he "administered and enforced the export control policies and anti-boycott laws of the U.S. government and monitored the condition of the nation's defense industrial base."
Reinsch may claim to have "administered and enforced," but his record from the Clinton years shows that little of either was in place at his office. During his term at the Department of Commerce, Reinsch oversaw the greatest military technology transfer to the Chinese army in U.S. history.
The Chinese army managed to obtain, steal, or buy supercomputers for nuclear weapons research, missile warhead guidance systems, missile nose-cone software, radiation-hardened chip technology, encrypted satellite communications, and Synthetic Aperture Radar systems.
The list of advanced military technology that passed through Reinsch on its way to Beijing is too long for this article. It would not surprise me to find that Bill Reinsch has several awards waiting for him if he should ever visit PLA headquarters.
Suffice to say that the NFTC could not have selected a more qualified individual if it is their intent to transfer whatever technology – military or otherwise – to China for hard, cold cash.
I once confronted Reinsch after a congressional hearing on secure communications. During that meeting, he denied that he had anything to do with the export of advanced encryption satellite technology to the Chinese military. At that point, I presented him with copies of documents showing that he was not only a major player; he also authorized the sale of precisely that technology directly to Chinese military-owned companies.
Reinsch turned very pale and literally ran from the room. Since then he has refused to answer any of my questions and failed to return any calls.
Genocide Is Good for Business
The story does not end here. Today, Reinsch opposes a new law on the books in the state of Illinois. The law, which went into effect in January, bars state pension funds from investing in companies and financial institutions whose depositors, borrowers, or other business associates have any dealings in war-torn Sudan.
Responding to the obvious crisis in Sudan, where genocide with Chinese weaponry is a way of life, the NFTC filed a lawsuit in federal court to block Illinois from specifying where its money should go.
"NFTC supports the efforts of the Bush administration to bring peace to Sudan and to end the brutality that has been occurring in Darfur," stated Reinsch.
"However, state sanctions, like those enacted by the state of Illinois, work at cross purposes with federal policy," noted Reinsch.
It is ironic indeed that other states, including very liberal California, enacted similar laws to keep state pension funds from investing in apartheid South Africa. To my knowledge, Bill Reinsch and the NFTC did not oppose those laws. After all, racial genocide is a crime against humanity by any definition.
For some reason, I don't think the NFTC has thought this lawsuit through – just as hiring Bill Reinsch may have been a big mistake. It does not look good for the council to be linked with supporting racial genocide . . . but the money is certainly good.
The NFTC seems to like to be associated with someone who helped Chinese weapons engineers design, build, and field missiles that sometimes fall into the hands of folks like Hezbollah. Call me old-fashioned, but helping weapons designers in China and providing a free hand to murderous gangs in Sudan doesn't fall under the heading of good business sense.
Thursday, August 31, 2006
Moral Relativism and Historical Revision
By Michael BaroneAugust 22, 2006
In our war against Islamo-fascist terrorism, we face enemies both overt and covert. The overt enemies are, of course, the terrorists. Their motives are clear: They hate our society because of its freedoms and liberties, and want to force our submission to their totalitarian form of Islam. They are busy trying to wreak harm on us any way they can. Against them we can fight back, as we did when British authorities arrested the men and women who plotted to blow up a dozen airliners over the Atlantic. Our covert enemies are harder to identify, for they live in large numbers within our midst. And in terms of intentions, they are not enemies in the sense that they consciously wish to destroy our society. On the contrary, they enjoy our freedoms and often call for their expansion. But they have also been working, over many years, to undermine faith in our society and confidence in its goodness. These covert enemies are those among our elites who have promoted the ideas labeled as multiculturalism, moral relativism and (the term is Professor Samuel Huntington's) transnationalism. At the center of their thinking is a notion of moral relativism. No idea is morally superior to another. Adolf Hitler had his way, we have ours -- who is to say who is right? No ideas should be "privileged," especially those that have been the guiding forces in the development and improvement of Western civilization. Rich white men have imposed their ideas through their wealth and use of force. Rich white nations imposed their rule on benighted people of color around the world. For this sin of imperialism, they must forever be regarded as morally stained and presumptively wrong. Our covert enemies go quickly from the notion all societies are morally equal to the notion all societies are morally equal except ours, which is worse. These are the ideas that have been transmitted over a long generation by the elites who run our universities and our schools, and who dominate our mainstream media. They teach an American history with the good parts left out and the bad parts emphasized. We are taught that some of the Founding Fathers were slaveholders -- and are left ignorant of their proclamations of universal liberties and human rights. We are taught that Japanese-Americans were interned in World War II -- and not that U.S. military forces liberated millions from tyranny. To be sure, the great mass of Americans tend to resist these teachings. By the millions they buy and read serious biographies of the Founders and accounts of the Greatest Generation. But the teachings of our covert enemies have their effect. Of course, this distorts history. We are taught American slavery was the most evil institution in human history. But every society in history has had slavery. Only one society set out to and did abolish it. The movement to abolish first the slave trade and then slavery was not started by the reason-guided philosophies of 18th century France. It was started, as Adam Hochschild documents in his admirable book "Bury the Chains," by Quakers and Evangelical Christians in Britain, followed in time by similar men and women in America. The slave trade was ended not by Africans, but by the Royal Navy, with aid from the U.S. Navy even before the Civil War. Nevertheless, the default assumption of our covert enemies is that in any conflict between the West and the Rest, the West is wrong. That assumption can be rebutted by overwhelming fact: Few argued for the Taliban after September 11, 2001. But in our continuing struggles, our covert enemies portray our work in Iraq through the lens of Abu Ghraib and consider Israel's self-defense against Hezbollah as the oppression of virtuous victims by evil men. In World War II, our elites understood we were the forces of good and victory was essential. Today, many of our elites subject our military and intelligence actions to finetooth-comb analysis and find them morally repugnant. We have always had our covert enemies, but their numbers were few until the 1960s. But then the elite young men who declined to serve in the military during the Vietnam War set out to write a narrative in which they, rather than those who obeyed the call to duty, were the heroes. They have propagated their ideas through the universities, the schools and mainstream media to the point that they are the default assumptions of millions. Our covert enemies don't want the Islamo-fascists to win. But in some corner of their hearts, they would like us to lose. Michael Barone is a nationally syndicated columnist.
In our war against Islamo-fascist terrorism, we face enemies both overt and covert. The overt enemies are, of course, the terrorists. Their motives are clear: They hate our society because of its freedoms and liberties, and want to force our submission to their totalitarian form of Islam. They are busy trying to wreak harm on us any way they can. Against them we can fight back, as we did when British authorities arrested the men and women who plotted to blow up a dozen airliners over the Atlantic. Our covert enemies are harder to identify, for they live in large numbers within our midst. And in terms of intentions, they are not enemies in the sense that they consciously wish to destroy our society. On the contrary, they enjoy our freedoms and often call for their expansion. But they have also been working, over many years, to undermine faith in our society and confidence in its goodness. These covert enemies are those among our elites who have promoted the ideas labeled as multiculturalism, moral relativism and (the term is Professor Samuel Huntington's) transnationalism. At the center of their thinking is a notion of moral relativism. No idea is morally superior to another. Adolf Hitler had his way, we have ours -- who is to say who is right? No ideas should be "privileged," especially those that have been the guiding forces in the development and improvement of Western civilization. Rich white men have imposed their ideas through their wealth and use of force. Rich white nations imposed their rule on benighted people of color around the world. For this sin of imperialism, they must forever be regarded as morally stained and presumptively wrong. Our covert enemies go quickly from the notion all societies are morally equal to the notion all societies are morally equal except ours, which is worse. These are the ideas that have been transmitted over a long generation by the elites who run our universities and our schools, and who dominate our mainstream media. They teach an American history with the good parts left out and the bad parts emphasized. We are taught that some of the Founding Fathers were slaveholders -- and are left ignorant of their proclamations of universal liberties and human rights. We are taught that Japanese-Americans were interned in World War II -- and not that U.S. military forces liberated millions from tyranny. To be sure, the great mass of Americans tend to resist these teachings. By the millions they buy and read serious biographies of the Founders and accounts of the Greatest Generation. But the teachings of our covert enemies have their effect. Of course, this distorts history. We are taught American slavery was the most evil institution in human history. But every society in history has had slavery. Only one society set out to and did abolish it. The movement to abolish first the slave trade and then slavery was not started by the reason-guided philosophies of 18th century France. It was started, as Adam Hochschild documents in his admirable book "Bury the Chains," by Quakers and Evangelical Christians in Britain, followed in time by similar men and women in America. The slave trade was ended not by Africans, but by the Royal Navy, with aid from the U.S. Navy even before the Civil War. Nevertheless, the default assumption of our covert enemies is that in any conflict between the West and the Rest, the West is wrong. That assumption can be rebutted by overwhelming fact: Few argued for the Taliban after September 11, 2001. But in our continuing struggles, our covert enemies portray our work in Iraq through the lens of Abu Ghraib and consider Israel's self-defense against Hezbollah as the oppression of virtuous victims by evil men. In World War II, our elites understood we were the forces of good and victory was essential. Today, many of our elites subject our military and intelligence actions to finetooth-comb analysis and find them morally repugnant. We have always had our covert enemies, but their numbers were few until the 1960s. But then the elite young men who declined to serve in the military during the Vietnam War set out to write a narrative in which they, rather than those who obeyed the call to duty, were the heroes. They have propagated their ideas through the universities, the schools and mainstream media to the point that they are the default assumptions of millions. Our covert enemies don't want the Islamo-fascists to win. But in some corner of their hearts, they would like us to lose. Michael Barone is a nationally syndicated columnist.
A North American United Nations?
August 28, 2006 by Sen. Ron Paul (TX-R)
Globalists and one-world promoters never seem to tire of coming up with ways to undermine the sovereignty of the United States. The most recent attempt comes in the form of the misnamed "Security and Prosperity Partnership Of North America (SPP)." In reality, this new "partnership" will likely make us far less secure and certainly less prosperous.
According to the US government website dedicated to the project, the SPP is neither a treaty nor a formal agreement. Rather, it is a "dialogue" launched by the heads of state of Canada, Mexico, and the United States at a summit in Waco, Texas in March, 2005.
What is a "dialogue"? We don't know. What we do know, however, is that Congressional oversight of what might be one of the most significant developments in recent history is non-existent. Congress has had no role at all in a "dialogue" that many see as a plan for a North American union.
According to the SPP website, this "dialogue" will create new supra-national organizations to "coordinate" border security, health policy, economic and trade policy, and energy policy between the governments of Mexico, Canada, and the United States. As such, it is but an extension of NAFTA- and CAFTA-like agreements that have far less to do with the free movement of goods and services than they do with government coordination and management of international trade.
Critics of NAFTA and CAFTA warned at the time that the agreements were actually a move toward more government control over international trade and an eventual merging of North America into a border-free area. Proponents of these agreements dismissed this as preposterous and conspiratorial. Now we see that the criticisms appear to be justified.
Let's examine just a couple of the many troubling statements on the SPP's US government website:
"We affirm our commitment to strengthen regulatory cooperation...and to have our central regulatory agencies complete a trilateral regulatory cooperation framework by 2007"
Though the US administration insists that the SPP does not undermine US sovereignty, how else can one take statements like this? How can establishing a "trilateral regulatory cooperation" not undermine our national sovereignty?
The website also states SPP's goal to "[i]mprove the health of our indigenous people through targeted bilateral and/or trilateral activities, including in health promotion, health education, disease prevention, and research." Who can read this and not see massive foreign aid transferred from the US taxpayer to foreign governments and well-connected private companies?
Also alarming are SPP pledges to "work towards the identification and adoption of best practices relating to the registration of medicinal products." That sounds like the much-criticized Codex Alimentarius, which seeks to radically limit Americans' health freedom.
Even more troubling are reports that under this new "partnership," a massive highway is being planned to stretch from Canada into Mexico, through the state of Texas. This is likely to cost the US taxpayer untold billions of dollars, will require eminent domain takings on an almost unimaginable scale, and will make the US more vulnerable to those who seek to enter our country to do us harm.
This all adds up to not only more and bigger government, but to the establishment of an unelected mega-government. As the SPP website itself admits, "The Security and Prosperity Partnership of North America represents a broad and ambitious agenda." I hope my colleagues in Congress and American citizens will join me in opposing any "broad and ambitious" effort to undermine the security and sovereignty of the United States.
Globalists and one-world promoters never seem to tire of coming up with ways to undermine the sovereignty of the United States. The most recent attempt comes in the form of the misnamed "Security and Prosperity Partnership Of North America (SPP)." In reality, this new "partnership" will likely make us far less secure and certainly less prosperous.
According to the US government website dedicated to the project, the SPP is neither a treaty nor a formal agreement. Rather, it is a "dialogue" launched by the heads of state of Canada, Mexico, and the United States at a summit in Waco, Texas in March, 2005.
What is a "dialogue"? We don't know. What we do know, however, is that Congressional oversight of what might be one of the most significant developments in recent history is non-existent. Congress has had no role at all in a "dialogue" that many see as a plan for a North American union.
According to the SPP website, this "dialogue" will create new supra-national organizations to "coordinate" border security, health policy, economic and trade policy, and energy policy between the governments of Mexico, Canada, and the United States. As such, it is but an extension of NAFTA- and CAFTA-like agreements that have far less to do with the free movement of goods and services than they do with government coordination and management of international trade.
Critics of NAFTA and CAFTA warned at the time that the agreements were actually a move toward more government control over international trade and an eventual merging of North America into a border-free area. Proponents of these agreements dismissed this as preposterous and conspiratorial. Now we see that the criticisms appear to be justified.
Let's examine just a couple of the many troubling statements on the SPP's US government website:
"We affirm our commitment to strengthen regulatory cooperation...and to have our central regulatory agencies complete a trilateral regulatory cooperation framework by 2007"
Though the US administration insists that the SPP does not undermine US sovereignty, how else can one take statements like this? How can establishing a "trilateral regulatory cooperation" not undermine our national sovereignty?
The website also states SPP's goal to "[i]mprove the health of our indigenous people through targeted bilateral and/or trilateral activities, including in health promotion, health education, disease prevention, and research." Who can read this and not see massive foreign aid transferred from the US taxpayer to foreign governments and well-connected private companies?
Also alarming are SPP pledges to "work towards the identification and adoption of best practices relating to the registration of medicinal products." That sounds like the much-criticized Codex Alimentarius, which seeks to radically limit Americans' health freedom.
Even more troubling are reports that under this new "partnership," a massive highway is being planned to stretch from Canada into Mexico, through the state of Texas. This is likely to cost the US taxpayer untold billions of dollars, will require eminent domain takings on an almost unimaginable scale, and will make the US more vulnerable to those who seek to enter our country to do us harm.
This all adds up to not only more and bigger government, but to the establishment of an unelected mega-government. As the SPP website itself admits, "The Security and Prosperity Partnership of North America represents a broad and ambitious agenda." I hope my colleagues in Congress and American citizens will join me in opposing any "broad and ambitious" effort to undermine the security and sovereignty of the United States.
Wal-Mart and Toddler Economics
By Tim Worstall : BIO 29 Aug 2006
Further to hackney a hackneyed word of the blogosphere, there seems to be something of a 'kerfluffle' over WalMart whirling through the commentariat -- a minor storm making the waves a little choppier than they normally are.
Sebastian Mallaby in the Washington Post and a more academic piece in the Washington Times wonder just what it is that progressives (or as I prefer to call Democrats: reactionaries) have against a company that reduces costs for, and thus boosts the real incomes of, 149 million shoppers, predominantly from the poor and middle classes.
National Review's Jonah Goldberg notes how cross The American Prospect's Ezra Klein was with his recent Los Angeles Times piece and, as is his right, makes fun of him. However, I do so hate to be contrary but I think Ezra is actually correct in this matter. As he says:
"I'm of the opinion that how to handle WalMart is among the two or three most important issues facing the country."
He's right you know. Whether we handle WalMart and the attendant issues as intelligent adults, capable of reasoning, or we do so as whining three-year-olds with all the attendant knowledge of incentives, utopian wishes and economic consequences such a three-year-old might possess is, indeed, one of the important questions facing the country.
At the heart of Klein's cluster of concerns is an entirely valid, even admirable, concern. He wishes the low paid to be paid more and to have better benefits to go with that higher pay. However, like a three-year-old, he's not quite capable of seeing what the consequences of such a wish would actually be. As he says:
"But in case you are interested, it goes something like this: Wal-Mart pays wages barely above the minimum and significantly below the average large retailer. Compared to Costco, or Target, Wal-Mart's salaries, benefits, and worker relations are atrocious. The question is not "Wal-Mart, yes or no?" but whether Wal-Mart can do better on all these metrics. Obviously, they can."
I'll give him an easy pass on Target as they don't in fact pay much better than WalMart. But let's look at Costco shall we? They do indeed pay much better ($17 an hour on average if memory serves me right, as against $9.60 at WalMart) and do indeed provide better ancillary benefits. So on Planet Liberal all we have to do is force (whether by fiat or shaming) WalMart into paying the higher wages because: look, see, we can see from the example of Costco that it's possible!
Indeed, it is possible. But what's getting missed is that little something that we in the real reality-based community have been trying to point out to the minimum and living wage fanatics for decades. When the price of something is raised people use or buy less of it. Now, we've been told endlessly that this isn't true, that raising the minimum wage won't mean job losses, or reductions in hours on offer, that companies will simply use their labor force "more efficiently". Which is exactly what we've been saying. Increased efficiency means using less labor to reach a certain goal. As the price of labor rises, companies will use less of it, as, again, we've all been trying to beat into the dulled synapses of the progressives like Klein.
The proof of this contention? The difference between WalMart and Costco in how much they pay their workers and how many workers they use. Costco does pay more; it also uses about one quarter of the number of employees.
Worth having a look at the two annual reports, don't you think? WalMart and Costco -- there you go -- audited 2005 accounts. Now, I'm playing a few minor games with these numbers: I'm not adjusting for certain subsidaries, minority interests and so on, I'm rounding numbers etc, but these only make minor differences to the overall picture:
Costco has sales of $51 billion, 110,000 employees (45% part time, similar to WalMart isn't it?) and WalMart has sales (in North America) of $191 billion and 1.3 million associates. So Costco has sales of some $465,000 per employee and WalMart $147,000 per employee. That sounds about right to me, it's been a number of years since I lived in the US but Costco is the place where you drag that 50lb bag of rice to the door yourself, right? WalMart is the one where cheery souls are employed solely to bid you good day as you enter? So, in theory, we could in fact get WalMart to pay the same as Costco by making similarly efficient use of labor: that is, firing between two thirds and three quarters of their staff.
You might note that despite having nearly four times more employees WalMart does not pay them one quarter of the amount: this is because a higher portion of turnover is actually devoted to paying said wages. Operating costs are not exactly the same as wages (and the two companies account for them slightly differently, as a note to the WalMart accounts -- too boring even for me to cut and paste -- states) but wages are contained within that number: 10% of turnover for Costco and 17% for WalMart. By this measure WalMart should, in order to be like Costco (as Klein would like), actually be reducing the wages on offer.
We could even look at the profit made per employee: $9,000 at Costco, $7,700 at WalMart. If we were of a Marxist cast of mind, seeing profit as purely and solely the surplus value extracted from the labor of the worker, we would thus say that Costco is even more exploitative than WalMart, would we not?
All of the above is of course most fun but really rather beside the point. We all know that WalMart is an extensive user of labor and that Costco is an intensive one. We really shouldn't be surprised that the pay rates are different in the two models. Indeed, our very basic model, that when a price rises, people use less of something, would predict it. Those who are paying a higher price for labor are indeed using less of it. This simply shouldn't be surprising to anyone.
Which is really rather where we came in, asking whether we were going to deal with WalMart on the basis of an adult intellectualism or the prejudices of a three-year-old. To wish that WalMart move from its current low wage and lots-of-labor model, to Costco's (relatively) high wage and low labor utilization is fine, but an adult view would include the acknowledgement that for WalMart to adopt the second model would require that they fire between 860,000 and 975,000 of their current workforce. The child's view would be that everyone should just be paid more because I want it to be so! -- i.e. that there are no side-effects to such decisions.
As I said up at the top, I think Ezra Klein has indeed identified an extremely important question, quite truthfully, one of the two or three most important issues facing the country. Are we adults or children? If we are to be adults of course we should also apply the same blindingly obvious logic to the minimum and living wage movements. As Costco proves, when companies pay more for the labor they hire, they hire less of it.
As an added extra bonus I look forward to Ezra's speech in which he explains why nearly one million people losing their jobs is going to be good for America. I'd most certainly pay good money to see him deliver it to those he is arguing should get fired.
Tim Worstall is a TCS Daily contributing writer. He recently wrote about why the USA is more like Sweden than you think.
Further to hackney a hackneyed word of the blogosphere, there seems to be something of a 'kerfluffle' over WalMart whirling through the commentariat -- a minor storm making the waves a little choppier than they normally are.
Sebastian Mallaby in the Washington Post and a more academic piece in the Washington Times wonder just what it is that progressives (or as I prefer to call Democrats: reactionaries) have against a company that reduces costs for, and thus boosts the real incomes of, 149 million shoppers, predominantly from the poor and middle classes.
National Review's Jonah Goldberg notes how cross The American Prospect's Ezra Klein was with his recent Los Angeles Times piece and, as is his right, makes fun of him. However, I do so hate to be contrary but I think Ezra is actually correct in this matter. As he says:
"I'm of the opinion that how to handle WalMart is among the two or three most important issues facing the country."
He's right you know. Whether we handle WalMart and the attendant issues as intelligent adults, capable of reasoning, or we do so as whining three-year-olds with all the attendant knowledge of incentives, utopian wishes and economic consequences such a three-year-old might possess is, indeed, one of the important questions facing the country.
At the heart of Klein's cluster of concerns is an entirely valid, even admirable, concern. He wishes the low paid to be paid more and to have better benefits to go with that higher pay. However, like a three-year-old, he's not quite capable of seeing what the consequences of such a wish would actually be. As he says:
"But in case you are interested, it goes something like this: Wal-Mart pays wages barely above the minimum and significantly below the average large retailer. Compared to Costco, or Target, Wal-Mart's salaries, benefits, and worker relations are atrocious. The question is not "Wal-Mart, yes or no?" but whether Wal-Mart can do better on all these metrics. Obviously, they can."
I'll give him an easy pass on Target as they don't in fact pay much better than WalMart. But let's look at Costco shall we? They do indeed pay much better ($17 an hour on average if memory serves me right, as against $9.60 at WalMart) and do indeed provide better ancillary benefits. So on Planet Liberal all we have to do is force (whether by fiat or shaming) WalMart into paying the higher wages because: look, see, we can see from the example of Costco that it's possible!
Indeed, it is possible. But what's getting missed is that little something that we in the real reality-based community have been trying to point out to the minimum and living wage fanatics for decades. When the price of something is raised people use or buy less of it. Now, we've been told endlessly that this isn't true, that raising the minimum wage won't mean job losses, or reductions in hours on offer, that companies will simply use their labor force "more efficiently". Which is exactly what we've been saying. Increased efficiency means using less labor to reach a certain goal. As the price of labor rises, companies will use less of it, as, again, we've all been trying to beat into the dulled synapses of the progressives like Klein.
The proof of this contention? The difference between WalMart and Costco in how much they pay their workers and how many workers they use. Costco does pay more; it also uses about one quarter of the number of employees.
Worth having a look at the two annual reports, don't you think? WalMart and Costco -- there you go -- audited 2005 accounts. Now, I'm playing a few minor games with these numbers: I'm not adjusting for certain subsidaries, minority interests and so on, I'm rounding numbers etc, but these only make minor differences to the overall picture:
Costco has sales of $51 billion, 110,000 employees (45% part time, similar to WalMart isn't it?) and WalMart has sales (in North America) of $191 billion and 1.3 million associates. So Costco has sales of some $465,000 per employee and WalMart $147,000 per employee. That sounds about right to me, it's been a number of years since I lived in the US but Costco is the place where you drag that 50lb bag of rice to the door yourself, right? WalMart is the one where cheery souls are employed solely to bid you good day as you enter? So, in theory, we could in fact get WalMart to pay the same as Costco by making similarly efficient use of labor: that is, firing between two thirds and three quarters of their staff.
You might note that despite having nearly four times more employees WalMart does not pay them one quarter of the amount: this is because a higher portion of turnover is actually devoted to paying said wages. Operating costs are not exactly the same as wages (and the two companies account for them slightly differently, as a note to the WalMart accounts -- too boring even for me to cut and paste -- states) but wages are contained within that number: 10% of turnover for Costco and 17% for WalMart. By this measure WalMart should, in order to be like Costco (as Klein would like), actually be reducing the wages on offer.
We could even look at the profit made per employee: $9,000 at Costco, $7,700 at WalMart. If we were of a Marxist cast of mind, seeing profit as purely and solely the surplus value extracted from the labor of the worker, we would thus say that Costco is even more exploitative than WalMart, would we not?
All of the above is of course most fun but really rather beside the point. We all know that WalMart is an extensive user of labor and that Costco is an intensive one. We really shouldn't be surprised that the pay rates are different in the two models. Indeed, our very basic model, that when a price rises, people use less of something, would predict it. Those who are paying a higher price for labor are indeed using less of it. This simply shouldn't be surprising to anyone.
Which is really rather where we came in, asking whether we were going to deal with WalMart on the basis of an adult intellectualism or the prejudices of a three-year-old. To wish that WalMart move from its current low wage and lots-of-labor model, to Costco's (relatively) high wage and low labor utilization is fine, but an adult view would include the acknowledgement that for WalMart to adopt the second model would require that they fire between 860,000 and 975,000 of their current workforce. The child's view would be that everyone should just be paid more because I want it to be so! -- i.e. that there are no side-effects to such decisions.
As I said up at the top, I think Ezra Klein has indeed identified an extremely important question, quite truthfully, one of the two or three most important issues facing the country. Are we adults or children? If we are to be adults of course we should also apply the same blindingly obvious logic to the minimum and living wage movements. As Costco proves, when companies pay more for the labor they hire, they hire less of it.
As an added extra bonus I look forward to Ezra's speech in which he explains why nearly one million people losing their jobs is going to be good for America. I'd most certainly pay good money to see him deliver it to those he is arguing should get fired.
Tim Worstall is a TCS Daily contributing writer. He recently wrote about why the USA is more like Sweden than you think.
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