Sunday, March 29, 2009
Sherman's Fade...
The news all the time now really has been all economy all the time. You barely hear about war or flag burning or stem cells...all the issues that were the wedge issues from the past what 30 years or so seem to have been buried. But as I have watched the coverage of the financial crisis over and over again a nagging question keeps coming back to me about capitalism and the system we all live under and it is simply this : For the companies that exist within a capitalist society...what happens when you win?
Do you understand what I am asking? What happens when you are the only one left?
I discussed this with someone in work because they had gone and visited a Circuit City before they closed their doors. Because we have been paying attention to our own finances and not the bigger picture what happens when a company wins and is all that remains? Is that still capitalism? What happens to your choices and options for access to goods within the system? How is innovation not stifled?
You take any industry right now and before you would be able to name maybe three competitors who were the giants in each industry or sector. Now even those giants are dying before us. Think about any industry. Pick one and try to make a list for yourself.
Retailers for Books who are the top three?
I can name:
1. Barnes and Noble
2. Borders
3. ?
That's it. I can't name a third. Can you?
How about Credit Card companies:
1. Citigroup
2. Bank of America
3. Wells Fargo?
Electronics retailers...
1. Best Buy
2. Fry's
3. ?
How about phone companies?
1. Verizon
2. AT&T
3. Sprint ?
Online Retailers...
1. Amazon
2. ?
3. ?
Toy Retailers...
1. Toys R ' Us
2. FAO Schwartz ?
3. ?
See what I mean? We used to be able to pick the three biggest in industries. Now for some all there is left is one. Constantly over and over I hear that companies have to be bailed out because they are 'too big to fail'. What happens when all those companies become one. Just become 'the company'. What happens to Capitalism then?
I was fascinated by a story told to me by a woman whose husband is a senior VP for one of the toy manufacturers. This guy was in Hong Kong when he was called into a meeting. And the meeting's agenda surrounded a decision that the toy company had on its hands. You see the toy company produced toys for America. But Walmart was playing hardball. They wanted the toys given to them at below market cost...meaning the manufacturer would have taken a loss just to sell Walmart the toys it had created. The Toy Company would eventually make money because of Walmart's sales volume but they would still be selling the toys at a loss.
Now Toys R' Us because they were fighting with Walmart over toys wanted to give the toy company more space in its stores...more shelf room. And they would do it if the manufacturer specifically gave Toys R' Us a subsidy so they could reduce their prices close to Walmart's and narrow their losses. Well you can pay a company to give you more shelf space but sell less or you can go with the company that gives you the volume. They went with Walmart because they had to for the health of the company.
Now you as a consumer because you never saw the rest of the selection the toy company had missed out on maybe what could have made your child happy. But unless you were behind the scenes you would never know that. How many devices that could be the next step up for the ipod, the better TV, the better car stereo get shut out because the manufacturer can't get access to the shelf? Well if there is only one retailer how would you ever really know? Is that capitalism?
Matt Taibbi had one of the best articles about the Wall Street mess in Rolling Stone called 'The Big Takeover'...
http://www.rollingstone.com/politics/story/26793903/the_big_takeover
But again this theme of companies being too big to fail to me is critical. And this has also become the problem for the companies that we are supporting with your tax dollars. I had no idea that AIG as a group is not one company but how many? 47.
47 different units and that does not even count the smaller competitors that they gobbled up and added to their business. To put AIG in perspective we have given AIG more money and funding then every single department in the Federal Government except Veterans Affairs and Defense. So we spent more on AIG then we did Homeland Security. We have spent more on AIG then in the Departments of Education, Health and Commerce combined.
GM has this issue too. GM got to big to fail because they had several different brands and they could not integrate them all with their contracts and legacy costs. As they are submitting plans for survival that is why you are seeing brands left and right being tossed aside...Saturn, Jeep (which they sold), Saab (which will go bankrupt) and about 10 other brands will just die. But if they were smaller they could have adjusted.
And the strange part to me is that in the law we have a mechanism in place to deal with these companies being 'Too big to fail', but we don't use it. That could be because it was a law written by a guy nicknamed 'The Ohio Icicle'.
This man Senator John Sherman...
http://en.wikipedia.org/wiki/John_Sherman_(politician)
Who in 1890 wrote the backbone for Antitrust law. The Sherman Antitrust Act...
http://en.wikipedia.org/wiki/Sherman_Antitrust_Act
That was specifically written to break up the power of monopolies. In particular it tries to prevent monopolies or attempts to create monopolies. Now the law is controversial. Who is to judge when a company is too big to fail? Well our politicians are making those pronouncements now why aren't they using the legal authority they have to actually break these monopolies and make a difference? I heard a committee chair actually say that these big companies were holding us 'hostage'. Now he's right. Why aren't we using the tools we have to address that?
Because if they did that would effect things like political campaign contributions. And its strange to me that all across the political spectrum no matter what political party you see people espouse the power of small business. They should because small business employs over 75% of the workers in this country. But small business can't keep creating those jobs if they are trying to compete with global monopolies. What happens when only one company remains? Is it still capitalism then? How democratic will your buying choices be when there is only one place left to buy something?
What should we do with companies that are 'Too big to fail'?
Do you understand what I am asking? What happens when you are the only one left?
I discussed this with someone in work because they had gone and visited a Circuit City before they closed their doors. Because we have been paying attention to our own finances and not the bigger picture what happens when a company wins and is all that remains? Is that still capitalism? What happens to your choices and options for access to goods within the system? How is innovation not stifled?
You take any industry right now and before you would be able to name maybe three competitors who were the giants in each industry or sector. Now even those giants are dying before us. Think about any industry. Pick one and try to make a list for yourself.
Retailers for Books who are the top three?
I can name:
1. Barnes and Noble
2. Borders
3. ?
That's it. I can't name a third. Can you?
How about Credit Card companies:
1. Citigroup
2. Bank of America
3. Wells Fargo?
Electronics retailers...
1. Best Buy
2. Fry's
3. ?
How about phone companies?
1. Verizon
2. AT&T
3. Sprint ?
Online Retailers...
1. Amazon
2. ?
3. ?
Toy Retailers...
1. Toys R ' Us
2. FAO Schwartz ?
3. ?
See what I mean? We used to be able to pick the three biggest in industries. Now for some all there is left is one. Constantly over and over I hear that companies have to be bailed out because they are 'too big to fail'. What happens when all those companies become one. Just become 'the company'. What happens to Capitalism then?
I was fascinated by a story told to me by a woman whose husband is a senior VP for one of the toy manufacturers. This guy was in Hong Kong when he was called into a meeting. And the meeting's agenda surrounded a decision that the toy company had on its hands. You see the toy company produced toys for America. But Walmart was playing hardball. They wanted the toys given to them at below market cost...meaning the manufacturer would have taken a loss just to sell Walmart the toys it had created. The Toy Company would eventually make money because of Walmart's sales volume but they would still be selling the toys at a loss.
Now Toys R' Us because they were fighting with Walmart over toys wanted to give the toy company more space in its stores...more shelf room. And they would do it if the manufacturer specifically gave Toys R' Us a subsidy so they could reduce their prices close to Walmart's and narrow their losses. Well you can pay a company to give you more shelf space but sell less or you can go with the company that gives you the volume. They went with Walmart because they had to for the health of the company.
Now you as a consumer because you never saw the rest of the selection the toy company had missed out on maybe what could have made your child happy. But unless you were behind the scenes you would never know that. How many devices that could be the next step up for the ipod, the better TV, the better car stereo get shut out because the manufacturer can't get access to the shelf? Well if there is only one retailer how would you ever really know? Is that capitalism?
Matt Taibbi had one of the best articles about the Wall Street mess in Rolling Stone called 'The Big Takeover'...
http://www.rollingstone.com/politics/story/26793903/the_big_takeover
But again this theme of companies being too big to fail to me is critical. And this has also become the problem for the companies that we are supporting with your tax dollars. I had no idea that AIG as a group is not one company but how many? 47.
47 different units and that does not even count the smaller competitors that they gobbled up and added to their business. To put AIG in perspective we have given AIG more money and funding then every single department in the Federal Government except Veterans Affairs and Defense. So we spent more on AIG then we did Homeland Security. We have spent more on AIG then in the Departments of Education, Health and Commerce combined.
GM has this issue too. GM got to big to fail because they had several different brands and they could not integrate them all with their contracts and legacy costs. As they are submitting plans for survival that is why you are seeing brands left and right being tossed aside...Saturn, Jeep (which they sold), Saab (which will go bankrupt) and about 10 other brands will just die. But if they were smaller they could have adjusted.
And the strange part to me is that in the law we have a mechanism in place to deal with these companies being 'Too big to fail', but we don't use it. That could be because it was a law written by a guy nicknamed 'The Ohio Icicle'.
This man Senator John Sherman...
http://en.wikipedia.org/wiki/John_Sherman_(politician)
Who in 1890 wrote the backbone for Antitrust law. The Sherman Antitrust Act...
http://en.wikipedia.org/wiki/Sherman_Antitrust_Act
That was specifically written to break up the power of monopolies. In particular it tries to prevent monopolies or attempts to create monopolies. Now the law is controversial. Who is to judge when a company is too big to fail? Well our politicians are making those pronouncements now why aren't they using the legal authority they have to actually break these monopolies and make a difference? I heard a committee chair actually say that these big companies were holding us 'hostage'. Now he's right. Why aren't we using the tools we have to address that?
Because if they did that would effect things like political campaign contributions. And its strange to me that all across the political spectrum no matter what political party you see people espouse the power of small business. They should because small business employs over 75% of the workers in this country. But small business can't keep creating those jobs if they are trying to compete with global monopolies. What happens when only one company remains? Is it still capitalism then? How democratic will your buying choices be when there is only one place left to buy something?
What should we do with companies that are 'Too big to fail'?
