Patrick Watson of Mauldin Economics argues if American capitalism gives people the basic things they want, the socialist threat will go away

Patrick Watson of Mauldin Economics argues if American capitalism gives people the basic things they want, the socialist threat will go away
Photo: Flickr.

By Patrick Watson*

“A specter is haunting American capitalists—the specter of Bernie Sanders.”

That’s my (slightly edited) version of the Communist Manifesto’s opening sentence. And it’s getting more correct by the day.

Democratic Socialist Bernie Sanders now seems likely to get the Democratic Party’s presidential nomination, and to challenge Donald Trump in November.

A lot can happen by then, but the mere possibility of a Sanders presidency terrifies some business leaders.

John Mauldin—who is certainly no Sanders fan—wrote “Why Americans Want Socialism” last weekend. He described how the supposedly booming economy still leaves millions in perilous situations, willing to embrace any solution. That’s opened the door for Sanders. And as John says,

There is a way to close that door, and it’s pretty simple: solve the problems that are making socialism seem attractive and capitalism seem evil. Unfortunately, I don’t see much interest from the people who would need to do it.

I think he understated the problem. Wealthy, powerful American business leaders aren’t just disinterested in helping. They’re actively aggravating the problems that make people turn to someone like Bernie Sanders.

Today, we’ll look at just one example… happening right now in a store near you.

Photo: Wikimedia.

Pins and needles

Walmart (WMT), which made the Walton family the country’s wealthiest, is rolling out a staff restructuring plan called “Great Workplace.” Media reports suggest it is not being well received.

Walmart, the nation’s largest private employer, is telling employees that it is doing away with certain positions — including hourly supervisors and assistant store managers — and replacing them with a smaller set of roles that carry more responsibilities, often for the same pay, according to interviews with current and former store employees, and internal documents obtained by The Washington Post.

Workers say they are being asked to apply, interview and test for new positions, essentially pitting them against their colleagues for a shrinking number of jobs. Some are terrified they will lose their job and insurance.

“Everyone’s on pins and needles right now,” said a customer service manager at a Neighborhood Market in South Carolina who has been working for Walmart for 14 years. Like other workers, she spoke on the condition of anonymity because she feared retaliation.

The store where she works, she said, is replacing six customer service managers with four newly created positions. Employees who don’t make the cut will either be terminated or asked to apply for lower-paying positions, according to two store employees briefed on the transition.

“People are worried they’re going to lose their jobs, their homes, their cars,” she said. “It’s very tense.”

Walmart has challenges, for sure. It competes with online retailers like Amazon. The company must adapt, which might mean reducing the workforce. 

But if that’s necessary, there are still good and bad ways to go about it. Walmart’s plan seems designed to demonstrate the worst caricatures of capitalism.

Orwell would have loved this.

The transition to Great Workplace is outlined in a 31-week blueprint distributed to store managers. The document, obtained by The Post, directs managers to identify and meet with affected workers and provides “talking points” on what to say to employees who are not selected for their preferred positions.

On Week 25, the document says, store managers should “follow standard termination procedures for any active associate who has not been selected for another position in the company.”

Walmart employs 1.5 million people in the US. The company could reduce headcount through attrition or quick layoffs. Instead, management created an agonizing months-long endurance test, after which those not “selected” will be given talking points and shown out the door.

Those who remain in the Great Workplace? They’ll have more responsibility for the same pay—a disguised pay cut.

This, and similar practices at other companies, is an excellent way to make socialism look good and thus makes socialism more likely.

The people it affects are mostly young, not highly educated, and financially stressed. They will be looking for answers…. and Bernie Sanders has some to offer.

Photo: Flickr.

Two choices

If the fabulously wealthy Walton family [of Walmart fame] wants to avoid a wealth tax and other socialist plans, making its workers fight like Survivor contestants for a place on the island is a bad idea.

Ditto for other large employers. They are digging their own graves.

Most people really don’t want much: A job that pays a living wage, affordable healthcare, education that doesn’t put them in debt, reliable childcare, inexpensive housing and transportation. Make them available and the socialist threat will go away.

So American capitalism must choose one of two paths.

Path 1: Find ways to give Americans a fair shot so they don’t perceive the system as rigged against them.

Doing this will probably mean lower profit margins, and maybe lower stock prices. But Bernie Sanders will lose his appeal and likely lose the election.

Path 2: Keep insisting tax cuts, deregulation, and GDP growth will solve every problem, and tell struggling people to pull themselves up by the bootstraps they don’t have.  

That’s the path wealthy business executives, like those at Walmart, have been following and seem intent on continuing.

I’m pretty sure they won’t like where it leads.


*Patrick Watson is senior economic analyst at Mauldin Economics. This article is from a regular Mauldin Economics series called Connecting the DotsIt first appeared here and is used by interest.co.nz with permission.

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17 Comments

The problem with that “Not much” that they want is that they want it relative to everyone else in the country as opposed to relative to every one else in the world. This makes their “not much” essentially impossible to achieve.
Healthcare is, always has been and always be a bottomless hole for money (you can never spend enough on it), housing and transport are VERY cheap, it is just that everyone gravitates towards places where it is not cheap. In a New Zealand context there is available state housing in Hamilton, and Hamilton is a centre of employment, but people still gravitate towards Auckland despite not being able to find a job there and finding housing / transport there expensive. if you Rural it is possible to buy property for about 2x the median wage!

A lesson I learned 40 years ago was that we were (and still are) pretty well positioned, globally speaking. Sure, we're isolated at the bottom of the planet but that has its upsides as well. NZ Inc is a great place to work. If you work, then it becomes a great place to live. Nowhere is a great place to live if you don't work. Working helps to define us as a society & individuals. And capitalism creates ten opportunities for every one that socialism claims. That's the key to life: Good people, good employment, good culture, good families. And apart from the media crazies that set a terrible example of how to live your life to the rest of us, what more do we want.

The Republicans are relishing the idea of Bernie as the Democratic nomination. It’s going to go down exactly the same path as Labour did in the UK. Contrary to MSM assertions, Americans cannot abide socialism and a full blown commie as President is untenable to most voting Americans. The GOP will soon control the White House, Congress and Senate. And we’ll be stuck with Donald Duck, for another four years.

Not necessarily.....socialism as a concept isn't favoured by older Americans, but Sanders has significant support amongst younger voters. And it's been four years since he would've took the Democratic nomination, but some cynical measures by the party machine during the primaries. But if America was interested in true reform, it needs to ditch the electoral college and implement a new method of voting.

Not necessarily aimed at lasteredact, but I have asked before; if a politician, any politician tries to bring existing right wing (read capitalist) policies back to the centre, will they be seen as anything other than socialist? Can people even tell the difference now? i suggest the comments to this article demonstrate that the resounding answer is NO!

But this article demonstrates the desperate need for that swing back to a centre position.

I had a conversation with a cousin of mine (an American) about NZ's socialised health care system versus the US's private health care system. His biggest problem with socialised medicine was the Government having access to everyone's medical records. And this is a person who is a prolific Facebook poster/user :-).

Kate, I think one of the issues is Bernie wants to do away with private healthcare altogether. Americans are terrified of this. It is just too ‘communist’ for them.

Having your medical data in the private sector doesn't make it private. Firstly, your insurer demands the right to use it against you. Then there are the leaks....

https://www.blacklistednews.com/article/76248/data-leaks-in-the-medical-...

That was my understanding too. One of the drawbacks to the US private medicine insurance is when/if you change job the new insurance company gets your details and can then refuse to take you (or charge you so much as to be the same thing). This does not apply to current insurance policies where they have a strong business incentive to maintain your insurance despite the medical issues you develop over the years. So US medical insurance is reducing labour mobility and therefore is bad for their economy. [For a NZ or UK equivalent try changing car insurer after you are 70.]

Free Healthcare trumps all these petty concerns. Privacy is now a self liberated bird, it has flown the coop long back.

I’ve worked in/for “Hollywood” since the early ‘90s. The U.S. is changing, largely for the same reasons Kiwi youth feel so economically alienated. It’s not so bad to be treated like a peasant and a serf if you have the chance of being something more, but those days are behind most young people now. They’ve been priced out of almost everything by a smug, self-congratulatory generation that believes itself to be the chosen one. This is why Bernie Sanders and his socialism lite policies appeal to American kids, when earlier generations would have been breaking out the pitchforks and totches, and gibbering about reds under the bed. American kids eye the universal healthcare and (less unaffordable) education opportunities in almost every other western nation and wonder why the richest country on the planet refuses to have it too.

Capitalism is becoming more like economic cannibalism, in my view. If I was more likely to be the meal rather than the diner, I'd be looking for something different as well.

Walmart, the nation’s largest private employer, is telling employees that it is doing away with certain positions — including hourly supervisors and assistant store managers — and replacing them with a smaller set of roles that carry more responsibilities, often for the same pay.

I've noticed this happening here in NZ too. Companies are eliminating minor managerial positions and relying on staff to self manage. They're hoping that staff will rise to the challenge and sort out resourcing issues among themselves. It is extremely optimistic. Those supervisory positions were quite hard roles as they were often the meat in the sandwich hammered from above and below however now the staff have lost their best advocate, someone who knew what the work entails and would stand up for them.

Largely speaking I think thats how our current coalition came to power. Simple desperation. Here in NZ Labour only ever gets voted in when things get really bad. Then they sit in power for a term or two, make some interventions and reverse to some degree the difficult conditions at which point NZ stupidly votes them out and ushers in yet another vindictive conservative government and the cycle continues

I find it very hard to identify anything that this Labour Government has done that meaningfully reverses anything. They are pretty much indistinguishable from National..
In common with many other countries, the so called left leaning political parties have totally abandoned and betrayed their traditional supporters. As the article says people are totally feed up and so desperate that they will try anything to try and get back control of the long departed, so called democratic process. This gives rise to the Trumps and Hitlers of this world. I would not put Sanders in this camp and simply say that he is a natural consequence of a system gone badly wrong. I have just started watching the last Czars and it is hard not to draw parallels. If they keep grinding down the populace then the final explosion may make electing Bernie Sanders seem a very modest reaction.
It is going to be interesting to watch what happens in Europe in the next few years. Compared to the effectively undemocratic powers of the EU governing body, national democratic elections are little more than a fig leaf or a pantomime to make it seem to the populace that they have democratic control. As we can see this is now starting to unravel, however in common with most totalitarian regimes they are refusing to take heed of the public concerns. This could end very badly and I am sure that Putin is rubbing his hands with glee and doing everything he can to push things along. You would think that the western powers that be would have more sense or am I being naive and they all belong to the same Oligarch club as Putin. Certainly Trump appears to or has aspirations to.

I think we've both identified here within that there is NO left wing anymore in the western democracies, just more or less the same thing wearing a different t shirt. I agree this coalition hasn't done much but I think they have done a little more than the previous coalition did. Problem being there has never been a public wide debate about what sort of 'global plan' NZers actually want...a strategic plan if you will. As a consequence we tolerate year after year of highly uncertain outcomes by our elected reps. Perhaps the Maxim Institute might chime in on that one?

It doesn’t take a left wing politician to fix us problems - given they mainly stem from politicians legislating for corporate greed, such as inefficient and expensive health system, and overpriced tertiary education and student loans. Bernie’s socialist fixes won’t get to the heart of those issues. American healthcare providers politicians and courts will run rings round him, as they did with Obama. US capitalism’s better option is a centre right politician who can make the market work in key areas affecting the less advantaged most. A bot like Theodore Roosevelt breaking up the monopolies. Can’t see one yet. Elizabeth Warren could have been, but she tacked left to beat Bernie.