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"I think an economy should be based on thrift, on taking care of things, not on theft, usury, seduction, waste, and ruin."
Quoted from the great "Agrarian Philosopher" Wendell Berry on NPR today.
When I hear the stock market has fallen,
I say, "Long live gravity! Long live
stupidity, error and greed in the palaces
of fantasy capitalism!" I think
an economy should be based on thrift,
on taking care of things, not on theft,
usury, seduction, waste, and ruin.
My purpose is a language that can make us whole,
Though mortal, ignorant, and small.
The world is whole beyond human knowing.
Enjoy Spring everyone. I can't wait to head out of the city in April to go hiking and get away from this economy!
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Historically those who actually produce (farmers, craftsmen, servants) have ranked below those who exchange the products (merchants, traders, shippers). In turn, the latter rank below those who trade exclusively in money or representations of money (banker, financiers).
In the past, the money traders ranked below the clergy and the nobility, but that is no longer the case. The clergy lost their primacy in the Wars of the Reformation and the Thirty Years War. The nobility lost theirs in the French Revolution/Napoleonic Wars and World Wars I&II. So the bourgeoisie are ascendant.
March 28, 2009 6:51 PM | Reply | Permalink
Merrill: Great points... I'm liking the fact that people are beginning to be more suspicious of those with a ton of money again. For the past 30 years (i.e. in the TV world: Dallas, 90210, The Hills, etc...) we've glorified the rich & powerful.
They've always made me vomit.
March 28, 2009 8:17 PM | Reply | Permalink
Here is part of why, in very round numbers:
$1 widget mfg. price (or food product), net $.25*
$2 distributor price, net $1
$4 retail price, net $2
Notice where the bulk of the $4 goes. Notice that it does NOT go to the mfg. process but to sales, marketing, advertising, and inventory costs. That's the bulk of the retail economy in general (direct sales cuts this down). Of course the numbers are nominal, but they are based on my actual if minimal experience in product development.
* Now note that the $1 mfg price consists of something like
.25 labor
.25 materials
.25 overhead
.25 profit
The worker (farm or factory) costs the process $.25 so it takes at least 16 workers' wages to purchase the widget at retail. A worker who produces 16 widgets grosses just enough to buy one at the store. Obviously not all workers can buy widgets in a closed economy; 100 workers would have to make 1600 widgets to be able to buy even one each, but there are only 100 purchasers! If retail and distribution are taken out, then it's 4 widgets built to gross one widget to take home.
This was our economy for a long time. It seems hardly economical in strict producer/consumer terms!
March 29, 2009 3:27 AM | Reply | Permalink
Support your local farmer's market and artisans.
March 29, 2009 3:34 AM | Reply | Permalink
If you pay the same price at the farmer's market as you pay at the regular food store, for the same quality of goods, you're still in the same cycle, just feeling good about supporting different people.
If you can get great carrots at the FM for $.49 while they cost $.79 at the store, then you're cutting out the middleman to some extent.
You do realize that doing so causes the economy to contract further thus leading to a deflationary spiral situation, right?
March 29, 2009 4:45 AM | Reply | Permalink
What I realize is that if I buy carrots at the farmers market for the same price or even slightly less, less I've provided that worker, (the farmer), with more purchasing power for widgets, than if he had wholesaled his carrots to a carrot broker. Now if you'll excuse me, I've got to get these wascally widgets to Witchita by Wednesday, unless I want to worry my wholesaler. Jiminy Christmas, my farmer buds are gonna be bummed, when I tell them I can't afford to pay them what I'd pay for, (inferior), carrots at the super market, cuz doing so causes the economy to contract further thus leading to a deflationary spiral situation. Perhaps I'm missing something by not analyzing my actions as part of a 'closed' economic system, but I'm sure you will enlighten me. Eds, you may be a better macro/micro economist than I, but do you realize how much you sound like an android? Not meant as a personal attack, just thought you might want to reprogram your writing protocols.
March 29, 2009 5:37 AM | Reply | Permalink
DITTO. WHAT THIS MIGUEL SAID.
March 29, 2009 7:36 AM | Reply | Permalink
I'm not even an armchair economist, maybe I'm a student. I attempt to speak truth to power, and often uneconomically!! But I do try to keep one virtual foot in each pit of quicksand, micro and macro, when I think and write about this stuff. Somehow it gives me the impression, or illusion, that I'm not sinking into either kind of mindless abyss, and thus having a larger point of view. Maybe I don't express it well enough.
Preferring to pay your friendly farmers' market seller the same price as you'd pay Megastore, Inc. is precisely "just feeling good about supporting different people". There are valid reasons to fight Walmart expansions (my sister successfully did so in her area, with lots of help). But if we're talking about "the economy", that's a macro kinda thing.
I hope that's dry enough for your taste!
March 29, 2009 2:53 PM | Reply | Permalink
Dry??? Don't get that at all amigo. I merely think that you're gonna have to explain how paying a retail price to a vendor in a farmer's market "causes the economy to contract further thus leading to a deflationary spiral situation" so that it makes sense. Perhaps your 'speaking truth to power' is in fact too economical and would bear further elaboration, at least if you want to make your case with those of us who aren't following your 'intuitive' leaps.
March 29, 2009 3:15 PM | Reply | Permalink
You're mixing up two things I said.
"causes the economy to contract further thus leading to a deflationary spiral situation"
Shifting from paying $.79 to paying $.49 for the same quality of product is a good thing for the individual buyer who has scare money. But it's a bad thing for the economy in recession in this little view, because now the people who were living on the $.30 difference are going hungry (or not lining their pockets quite so much, as the case may be). Sure, buying low lines your pockets with $.30, but what about those people who dependend on you for their food etc? Now they cannot afford to buy even the $.49 offering! And that's part of the "deflationary spiral" people talk about as though it were the Apocalypse.
I think you know that my position is that the economy is not a sacred cow. Maybe you thought I was defending what I've elsewhere called "churning"? I'm not.
Enuf?
March 29, 2009 5:34 PM | Reply | Permalink
I guess... Ok, I see where you're coming from. One last point though. Here in Nm, the cost of fresh food at a farmer's market is not significantly different than what you would pay in a supermercado. Most of my friends with small farms, ( I do have a few who fit this description), and sell their wares at farmer's markets, spend just about every penny they make, so that extra 30 cents just helps a different group of consumers/earners than the 30% vig of the Wal-Marts et al, (and I'm sure those outlets garner some of that as well). I would also argue that a larger percentage of the supermercado vig ends up being 'removed' in a sense from the economy, in the form of luxury, non-disposables, than the scrapper farmers who plow their earnings back into the economy on subsistance items. Like I said I'm not an economist, and am speaking here in a more empirical manner of things that seem true to me. Other than that... sure... Enuf! ;)
March 29, 2009 7:04 PM | Reply | Permalink
Sorry if my phrasing led you astray earlier...
I don't have a problem with buying local (micro) as long as we also think global (macro) about the effects and consequences as long as there are large players in the "game".
March 29, 2009 11:21 PM | Reply | Permalink
btw, I think what I'm saying might be a restatement or instantiation of the Paradox of Thrift.
-- wikipediaThus the "stimulus package" is supposed to spend money as individuals might tighten their belts, thus keeping overall activity from spiraling down (as fast or as far).
March 29, 2009 11:48 PM | Reply | Permalink
This is a joke, right Eds?!
March 29, 2009 9:55 AM | Reply | Permalink
Which part, Obey?
There is not "this" there!
But I do take M's point that my comments are often humorless to some readers, and will attempt to reprogram my expression circuits accordingly.
March 29, 2009 2:44 PM | Reply | Permalink
(sigh) I think you need to spend a week or two, poor.
March 29, 2009 3:38 AM | Reply | Permalink
Why don't you try saying something meaningful for a change?
As it happens I live a very frugal lifestyle, whatever "poor" means to you.
March 29, 2009 4:41 AM | Reply | Permalink
Oh.
Obviously, because I am intellectually impaired.
I'm sure your frugal lifestyle doesn't include constant worry about money, keeping all three of your (artificially low wage) jobs, wondering if you are going to be able to eat tomorrow, how you'll pay the doctor if a loved one gets sick, or if you really need to turn the heat on when it is 46 degrees outside.
Financial theory is nice, eds. People are hurting. Real people. Not an abstract. The "net 25¢" is far too low and the "net $2" is far too high.
I'd think you are smart enough to see that, but what in the hell do I know? Now if you'll excuse me, I'll go elsewhere, and try and do something meaningful.
March 29, 2009 2:49 PM | Reply | Permalink
"Philosophy cannot compete with concrete reality." Someone important said that. Not really, it was me.
Bwak, your spirit alone tells me, THE CHICKEN WILL SURVIVE.
March 29, 2009 2:59 PM | Reply | Permalink
By all means keep meaning alive in your life. But your responses to my posts and comments seem both rude and thoughtless too often, so I thought I'd venture a counter-comment on your appearance. When you propose a challenge and I respond ... and you leave my response in silence, that's just unfriendly at best, esp. when I remind you that I still have some interest. Tease me if you like, but I'd prefer honest thoughtful if sometimes humorous discussion of topics relating to real-world economics and politics.
I'm sure there is suffering in the world. So what? There will continue to be suffering in the world. Understanding the suffering and its causes is part of what discussion can offer, whether in "abstract" or "concrete" terms, or both.
"(sigh) I think you need to spend a week or two, poor."
What is that supposed to mean if it's not a rude ad hominem attack? That you're fed up with your own suffering? Or that of your imaginary friends who are real to you? Or what?
March 29, 2009 3:26 PM | Reply | Permalink
Dear Lord, i don't know what happened here, but maybe tone it down a bit, eds...
March 29, 2009 3:03 PM | Reply | Permalink
"(sigh) I think you need to spend a week or two, poor."
Who should tone what down, again? What tone are you hearing, Obey?
You don't seem to be teasing, but you seem to be chiding the wrong person.
March 29, 2009 4:13 PM | Reply | Permalink
Ok Eds, point taken. But when I see two good people start flaming each other, I look to the first who takes offence. Because when a good person takes offence, I believe it must have some merit. Like I said, I don't know what's happened, but it shouldn't have. As far as i can see, Bwak misunderstood you, (which, you have to admit, can happen with your shorthand arguments and points), and you could have perhaps tried to clarify your point rather than inflame things. That's all I meant. I'm not taking sides...
(maybe I've misconstrued things, and everything is howdydoody, in which case please ignore me.)
March 29, 2009 7:11 PM | Reply | Permalink
Let's all go take a walk outside in the woods and enjoy Spring. It's what Wendell Berry would want... =D
"I come into the peace of wild things who do not tax their lives with forethought of grief... For a time I rest in the grace of the world, and am free." --Wendell Berry
March 29, 2009 7:20 PM | Reply | Permalink
March 29, 2009 11:39 PM | Reply | Permalink
May I suggest that you be careful about judging who "takes offense"? That judgment is itself risky unless done wisely (in other words if not actualized only noted as a possibility).
My peeve is that Bwak makes cryptic comments in re my more verbose attempts, and then leaves me hanging (so you might consider who makes shorthand arguments!). I might write a bit provocatively, more than warranted at times, but generally it comes from a larger point of view than taking or offering offense even if I could take offense (again, not actualizing the judgment of offense immediately) or there is a possibility of offense offered by my words. Being only human I may often err on the fine points...
I think Bwak and I have a decent online relationship for the most part.
Over and out?
March 29, 2009 11:34 PM | Reply | Permalink
ok, I understand. and glad to hear it.
March 30, 2009 3:37 AM | Reply | Permalink
I basically agree with your numbers. In an earlier occupation involving electronic capital goods manufacture, we used a multiplier of 8 to get a preliminary estimate of the installed cost from the cost of parts prior to assembly and test.
It is not uncommon to have general administrative expenses (management, HR, marketing, sales, unallocated R&D, etc) to be half the cost of goods FOB the factory.
The high costs of merchandising, distribution, and support are what give companies like WalMart and Amazon the opportunity to break through with new models for doing business more efficiently.
March 29, 2009 12:20 PM | Reply | Permalink
So the larger question is -- what kind of models can be successful over the next decade or so, and how do we position ourselves for that/them?
If Megastore is owned and operated in the USA, then by this analysis on the order of 25% of retail goes to China, of which 25% of that 25% is listed as profit and 25% is wages which are low by our standards but reasonable by China standards.
March 29, 2009 2:58 PM | Reply | Permalink
The WalMart model works, not so much because Chinese manufacturing is cheap, but because WalMart can dictate the design, packaging, and volume of production to match its ability to sell the product. It is having made what it can sell, rather than selling what someone else has decided to make.
The Amazon model works because it takes out the cost of the retail store and replaces it with boxing individual orders at the warehouse and shipping direct to the customer. The key here is making sure that returns and support costs don't eat up the margin and that customer satisfaction stays high.
Both of these are good models.
March 29, 2009 10:32 PM | Reply | Permalink
They are "good" models for the specific businesses because they are competitive and generate higher profit margins by getting rid of some fixed and variable costs of selling stuff. But Amazon relies on highly inefficient shipping in the sense that it probably costs a lot more to ship 100 widgets to 100 people than it does to ship 50 to each of two retailers. So we pay UPS and FedEx and the dying USPS a premium because even with the premium the cost-conscious retail customer sees a net lower cost. But in a recession this is a differential problem if people shift out of brick and mortar to online, ala the Paradox of Thrift (mentioned in a very recent comment above).
That doesn't necessarily make them good in the larger sense. I would also point out that if China can mfg. a widget for $1, probably an American factory will not be able to meet that even after shipping across an ocean. So Walmart has more than one advantage over a purely domestic old-style operation/system.
March 29, 2009 11:58 PM | Reply | Permalink
Compared with a book wholesaler, Amazon has a lot of other expenses such as running its web site, Internet order taking, processing individual payments, packaging the individual items for shipment, paying the individual item shipment costs, handling complaints and returns.
I'm not sure how big a factor individual packaging and shipping are in the scheme of things. And sometimes the customer pays part of the cost, just as the customer pays for driving to the local store and carrying the purchase home.
In exchange, Amazon is cutting out the retail store expenses for management, staffing, and real estate, and it may also be cutting out another layer of distributors. For example, the flow is probably from publisher to wholesaler to distributor to local bookstore for small bookstores. Barnes and Noble or Borders, not so much.
So the Internet retailer shifts economic activity and reduces total economic activity by some amount. But this always happens when business changes due to innovation in technologies or in business methods. The usual result is that either more of the now cheaper goods and services are demanded, or the displaced resources are absorbed by the creation of new businesses in an economic system which becomes progressively more complex.
March 30, 2009 12:41 PM | Reply | Permalink
Shipping is high these days, tho' some sellers offer free shipping etc. in desperation.
I just ordered something mail order. $5.51 UPS ground shipping for 3 ounces shipped. Some goes to UPS some goes to cardboard etc.
March 31, 2009 1:41 AM | Reply | Permalink
Consider a book that left the publisher at $10, and has a MSRP of $40. Stocked at Amazon's distribution center it costs $20 or less.
Amazon can advertise it on the web at $30. So with regular shipping the customer pays about $35. Amazon has at least $10 to cover web site, payment processing, pick and pack, and customer support/returns plus general and administrative expense.
March 31, 2009 10:06 AM | Reply | Permalink
The point was "inefficient shipping" as part of the Amazon method.
March 31, 2009 6:35 PM | Reply | Permalink
"Long live gravity!" indeed. It's the source of all power in the universe. Maybe the source of the universe itself.
The bigger they are the harder they fall. All that "wealth" that evaporated was just fantasy. The only thing that was there were numbers somebody typed into a terminal. How many stock brokers can dance on the head of a pin?
Thanks for posting Red.
March 29, 2009 1:39 PM | Reply | Permalink
fpie: My pleasure... Being reminded of the Wendell Berry's of the world makes me want to get off my a$$, out of my cubicle, and into the woods! Where the only economy I care about is calories in, steps traveled, and mountain tops scaled.
I'm tired of sittin' on my biscuit, never havin' to risk it!
March 29, 2009 5:27 PM | Reply | Permalink