“Wal-Mart and China are a Joint Venture”

I wrote the following after watching the Frontline documentary “Is Wal-Mart Good for America?” on-line. Link.

Wal-Mart is to American capitalism what the corrupted ruling Communist party was to the Soviet economic system, it will subvert its very nature in order to pursue short-term gains for itself and perpetuate its own power. Stalin and crew exploited the big gaping hole in the system, which was that human rights were disposable, and that measures of progress were artificial. (building a huge factory made a party official look good regardless of whether it then stood empty or not).

Wal-Mart exploits the gaping hole in American Capitalism, which is that the consumer's self-interest will lead him or her to act against the interest of the society as a whole. The consumer might understand on some level the idea that one should buy locally as much as possible, but has been conditioned to think that self-interest is moral in a capitalist economy. (Meanwhile he's being robbed by the invisible hand that is taking away the jobs of half the other people in town because they couldn't make televisions as cheaply as a plant in China that pays $0.20 / hr to its workers)

Meanwhile, since China doesn't let its currency float on the world market, allowing its citizens to benefit from their country's economic success, the balancing effect of currency valuations doesn't come into play, and the gap never narrows between costs of Chinese goods and the costs of domestically-produced goods.

China is a communist nation in name only, but thanks to their tight control over their domestic markets they aren't exactly a free market economy, either.

What they are doing is exploiting the big holes in both communism and capitalism all at once. The totalitarian structure of the society allows it to control workers, suppress labour rights and democracy movements. Where labour movements and the rise of unions created the Western middle classes, this force is being put down by the Chinese government, who would rather go for the short term benefit of grabbing as much of the world's manufacturing as it can at the lowest prices.

Which is where China exploits the gaping hole in the American free market, which is that it's no longer a closed system. The United States allowed the normalization of trade relations with China without requiring them to live up to the same worker protection standards it had. (but are working to dismantle themselves) Therefore they were playing by different rules, outside of the supply and demand loop that gave Henry Ford the idea to pay his workers enough money so that they could all afford to buy a Ford car themselves.

So by propping itself into the holes in both the Chinese economic system and the American one Wal-Mart and now the rest of the stores playing catch-up are facilitating the US's massive trade deficit, and skimming off the top as money flows directly from the US and to a lesser extent the rest of the Western developed nations to China, and taking their share as it goes.

I'll write more about how China controls their currency later, but it's a fairly easy thing to get away with if you have a self-sufficient economy which they do (they don't need to import any raw materials for their own consumptions).

This will be carried out to its logical conclusion as long as capitalism is a slave to greed and totalitarianism disregards human rights.

Update: Steve Gilliard's latest post is also about Wal-Mart, specifically their employment practices and how they treat female employees. Link.