Dave Pollard's environmental philosophy, creative works, business papers and essays.
In search of a better way to live and make a living, and a better understanding of how the world really works.

	June 12, 2008

The Wal-Mart Dilemma, the Two-Income Trap and the End of Oil I've written before about the Wal-Mart Dilemma: Less disposable real income for workers forces suppliers to lower prices and quality by offshoring production and service and laying off domestic workers, so they have even less disposable income. It's a classic vicious cycle. Its consequences -- unemployment, underemployment, low wages, low product quality, and endemic poverty -- are visible everywhere in North America, and the disease is spreading. The solution -- duties on imported goods and services that can reasonably be produced locally -- is enough to make globalists and 'free' traders foam at the mouth, and they have invested heavily in politicians to make sure it doesn't happen. With the advent of $130/bbl oil and $4/gal gasoline ($5-6/gal in Canada and Australia, $8-9/gal in Europe, $3/gal in China) the Wal-Mart Dilemma is starting to be felt in many products that are made of or dependent on oil, such as: food transportation heating and air conditioning health products clothing road and energy infrastructure What will the average citizen do when these goods become unaffordable? Here's my take on how the Wal-Mart Dilemma will play out: We will eat less healthy foods. The cheapest foods are the processed, canned goods made from leftover food products, the stuff that would never sell if presented in its natural state on the shelves. Sugar, corn and soybeans are still very cheap, despite their appeal as bio-fuels. Because we're mostly (thanks to the Wal-Mart Dilemma and the Two-Income Trap) underpaid, overworked, two-income families, there is no time or energy to prepare healthy meals from scratch, so we'll continue to patronize take-out junk food places, but buy more of the cheaper, less nutritious items on their menus. We will buy very cheap 'second cars'. Two jobs means two cars are needed by most of our suburban sprawl families, but despite the jump in gasoline prices, only 20% of the cost of car ownership is fuel. Rather than going to unaffordable hybrids and diesel vehicles, we will buy new Chinese and Indian-made $2500 'junk cars' as their second vehicles, letting them keep the luxury of one gas-gulping SUV (for the illusion of safety), while keeping the overall cost of car ownership at 1990s levels even with $7/gal gasoline. "Your turn to take the Tata to work, dear!" We will use space heaters and room air conditioners (made guess where?) instead of central ones. With ever-larger homes to heat and cool, there will be no money for re-fits, so we will close off unused rooms and condition smaller areas (as much as possible given the laws of thermodynamics) to the temperature we've become accustomed to. We will use alternative remedies instead of prescription drugs.  We will buy no-name clothing (made guess where?) and put fake brand names on it. The kids will never know. In fact, they'll show us how. We will start simultaneously importing and selling (and leasing back) our infrastructure. The Alberta Tar Sands equipment and labour pool is the latest model for this. Huge amounts of equipment are brought in because it's too expensive to build it here. Cheap labourers build it in China, and other cheap labourers are imported to install and operate it. In return, China gets to own part of the project. US agriculture pioneered this model, and 'seasonal labourers' (many of whom will stay on under the radar, doing other work for under minimum wage in jobs and conditions we wouldn't accept) will become the way in which more and more domestic infrastructure is established and maintained. This is the Wal-Mart Dilemma turned into an entire self-defeating economy, and the vicious cycle of unemployment, underemployment, low wages, low product quality, and endemic poverty will become our way of life. It's a consequence of (a) the structure of our dysfunctional economy and (b) human nature -- to work around 'problems' with the minimum possible change to our lifestyle, rather than making long-term, sensible but difficult fundamental changes -- like buying (and making) only expensive hybrids, revamping public transit, making our homes energy-efficient, buying durable, local, sustainable goods and "eating food, not too much, mostly plants". We will, instead, become third-world nations. There are those that think $7/gal gasoline is just what we need, that it will bring about needed economic reforms and changes in behaviour. They just aren't paying attention. Category: Understanding Economics 8:23:06 PM  trackback []  comment []

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