As I've posted, Tuesday's voting results repudiate the idea that government of the rich for the rich will benefit everyone. Thursday's retail sales reports indicate that this concept fails just as badly when the economy is doing "well" as when it collapses.
How so? Despite Sarah Palin's $150,000 plus shopping spree, the ultimate luxury store Neiman Marcus saw its sales drop 28% in October compared with the same month last year. What is happening is that trickle down economics, which never worked when the government reported economic growth -- thanks to declining median incomes and rising costs --, is now failing even more catastrophically during the collapse. Simply put, the rich are getting poorer and the middle class are barely able to keep a roof over their heads.
Not surprisingly, this is working out well for Wal-Mart Stores (NYSE: WMT) whose sales are rising as more and more as people who aspired to shop at Neiman Marcus take advantage of Wal-Mart's low prices. How disappointed Wal-Mart must be with the election result; it encouraged its managers and employees to oppose Obama. And despite that misguided effort, Wal-Mart is now benefiting handily from the economic collapse.
When economic disaster strikes, it hurts the rich, the middle income and the poor. But if you have cash, you can take advantage of the lower prices. That's a twist on trickle down economics that the outgoing political party never anticipated.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter
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Reader Comments (Page 1 of 1)
11-07-2008 @ 11:41AM
Barry said...
If the retail stores and grocery stores priced their items appropiately in the first place there wouldn't be such a downturn from people buying products. Exa. Grocery store-buy one box of 12oz cheerios for 4.99 get a box for free. Who would buy a box of 12 oz. cheerios for 4.99? That's the grocery stores way of gradually increasing their regular prices. J.C.Penney-Buy one t-shirt for $9.99 and get the second for half price! How stupid do these companies think we are? If we as a buying public would for the next year or two buy just the essentials, whether we could afford these items or not, the stores would bring their prices to a realistic level. 3lbs. of apples $4.99! Come on America You voted for change lets really get and stick together and quit buying so freely. Let these companies know we are tired of their raising their prices so high that some folks can't even buy the essentials that their families need!!!!!
11-07-2008 @ 12:20PM
mark said...
Greed is the real trickle down problem, not the trickle down policies of former adminstrations. Why don't you focus on the Greed on wall street or are you part of the problem?
11-07-2008 @ 3:15PM
Kent said...
I agree with Peter again. Cash is king and if you have it, you're in the driver's seat during the course of this economic melt-down. Even if you have it doesn't necessarily mean you are going to spend it either. That's the whole crux of the matter: when does our consumer oriented economy get back on track again? Our return to Keynesian economic policies from the government may temporarily do the trick, but I foresee interests rates heading for double digits again if government spending increases to support the economy. Otherwise, staflation takes over when growth shrinks in spite of lower interest rates and prices.
11-07-2008 @ 3:57PM
Chris Hotz said...
Did the author consider the fact that many "rich" are simply sitting on their cash, waiting to see what the financial consequences of a new liberal government might be? Everyone I know with any amount of money is very concerned about new taxes and programs, and their related costs and impact to big and small business.
Business owners I know are holding off large expenditures, and not hiring or expanding until the new "rules of the game" are established.