Walmart and Food Safety

A recent missive to a friend–

 I want to draw your attention to a small segment of a recent podcast on EconTalk, dealing with WalMart.  You have been critical of Walmart in the past, for not paying workers well enough and for selling goods not made in the US.  

 While this extract is in a greater context of the state of food in modern times, it’s instructive to me of how successful Walmart has been in bringing high quality food to the poor, and how the importance of its reputation causes them to implement standards that far exceed those of the US Govt.

Now I wouldn’t be silly enough to think I would change your mind about Walmart; I’m simply introducing some positive things that Walmart does in order to balance your thinking.

Econtalk does weekly podcasts on economics, covering everyday issues, not just theoretical ones, and the guests are varied in their viewpoints.

 This excerpt below comes from the podcast you can find here: http://www.econtalk.org/archives/2016/03/jayson_lusk_on.html

The bold type emphasizes key points–

 Russ: I want to turn for a minute, and I want to leave a little time at the end for policy issues that we haven’t talked about yet. But I want to do something briefly about Wal-Mart. Because Wal-Mart’s entry into the grocery business and the food business is such an enormous–it has such an enormous impact. And I just want you to tell the story about–two things, really. I’m thinking of the interview we did with Roger Berkowitz and Legal Sea Foods and the care he has to take–purely self-interested or altruistic doesn’t matter–to make sure that the food is relatively safe. Because his brand name is very at risk, every day. And that’s true of Wal-Mart as well. And what they are doing with their rotisserie chickens, which we’ve talked about in passing in a different context recently, I think with Robert Frank–I think the chicken world came up. But talk about what they are doing with rotisserie chickens to make sure they are safe. Guest: Yeah, well first just on the scale of Walmart, I think their data suggest that one third of all Americans enter a Walmart every week. Absolutely crazy. Russ: Mind boggling. Guest: Something like that. One quarter of all the food dollars spent in grocery outlets are spent at a Walmart. So, whatever they do is big stuff. And, you’re right. As you say, we may get a little bit to policy issues: we want stricter food standards and what have you. But companies like Walmart, and a good example recently is Chipotle. The biggest deal for them is their brand name. They’ve spent millions, probably even billions of dollars in the case of somebody like Walmart, developing a brand name and a brand reputation and that’s what lets them earn a little bit of a premium over generics, or gets those 1/3rd of Americans going in there every week: it’s because they have a little bit of brand equity. So they want to protect that. And it’s worth it to them. And as the VP (Vice President) for Food Safety for Walmart told me, he said, ‘You know, the government regulations, that’s like the baseline. We go way above that.’ Because they’ve got something much larger at stake. So, one of the things he talked about was the technologies they are using to make sure the rotisserie chickens are safe. So, the old system was that the government would send around inspectors to test the temperatures on their chickens, make sure they were cooking them at a high enough temperature to kill all the bacteria. And at least over one reporting period they found out that across 4000 stores in the United States, they had 10 government inspectors stop by to see if they were doing what they were supposed to do. Walmart, because they are concerned about their reputation, also paid some third-party auditors to go by; in that same time period, the people they paid to check up on them stopped by about 100 times. They’re selling millions of chickens, so there’s still a good chance that the chicken you or I might have bought in the checkout line was not, somebody wasn’t following up to make sure it was cooked to the temperature it was supposed to. So, what they did is they implemented some wireless thermometers they give their employees. And now every single chicken, temperature is checked before it is put out on the line. And moreover, that data is immediately sent to Wal-Mart’s offices where they can monitor and record every one. So they went essentially from testing 10 chickens every month to millions.Russ: They didn’t check only 10 chickens, but the amount that 10 people could check. Whatever that is. Guest:Yeah. Exactly. Russ: Hundreds, probably. Guest: To millions. Exactly. So, as the head of food safety for Walmart told me, their sample size is all. So, n equals all.Russ: Hard to believe. It’s amazing. Guest: So they can check on certain stores–do they have a manager at a store who is not being as careful as he should be, or maybe there are certain times of year, even certain suppliers, maybe, who, you know, I guess suppliers wouldn’t have anything to do with the temperature, but certainly in terms of testing for bacteria. That’s the other thing Walmart did–one thing about their size, interesting, is when they make a change, it has a big impact not just on the people shopping at Walmart but across the whole industry. So, a few years ago they implemented new standards for testing for e-coli and salmonella. And there’s some good evidence to suggest that when Walmart enforced these higher standards, it improved the safety of all the meat throughout the whole supply chain. Russ: Because? Guest: Because Walmart is such a big buyer that a lot of these food processing plants, say a beef processing plant, they are not just selling to Walmart. They are selling to everybody else, too. So, if they are going to adopt new safety standards to meet Walmart, as long as they’ve got the standards in place, it’s still going to impact the meat they are selling elsewhere.

 

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Tamny: Middle Class Tax Cuts Will Not Help the Middle Class

In Tamny’s March 3rd piece in Real Clear Markets, he takes issue with Hudson Institute fellow Jeffrey Anderson and his belief in middle class tax relief as the source of better economic times.

Key Tamny points,

  • all government spending is debt. Governments can only spend to the extent that they extract resources from the real economy first
  • debt amounts to an accounting abstraction. A focus on debt misses the real barrier to economic growth, which is government spending itself.
  • Government spending is the true tax signaling resource consumption by politicians lacking market discipline.
  • The unseen…that is never pursued by market-driven entrepreneurs (cancer cures, transportation innovations, technology advances that would render the internet dated) thanks to government existing as a size consumer of always limited resources.
  • economy-boosting advances…spring from abundant failure.
  • Anderson’s “Main Street Tax Plan” focused “on the well-being of typical Americans” would do very little to boost the economic chances of same…simply because the typical American doesn’t have much money to lose.
  • the simple truth is that job-creating innovation springs from more dynamic investing that by virtue of being dynamic is highly risky. This is where the rich come in.
  • The rich, for being rich, have money to lose… because the rich are flush with funds, they can take risks on the dynamic companies of tomorrow that are tautologically necessary for the prosperity that Anderson would like.
  • Since the rich have money to lose, they alone can pursue the intrepid investments that make the typical American much better off.
  • Success in the U.S. of the wealthy variety shouldn’t bring with it a tax penalty; rather it should gift the ambitious with a tax reward.
  • intrepid investment is the path to the kind of prosperity that we all want, and that will lift all boats.

Tamny’s point has consistently been, lower the tax rates for all.  But if you are going to lower the tax rates only selectively, do it for the rich!  These are the individuals whose money is the surplus capital which when invested drives innovation and growth, resulting in an improved standard of living for all of us.

 

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Let Jordan Speith Keep His Money!

Tamny in RealClearMarkets, Key points:

  • If wealth redistribution is truly the goal, then the ideal scenario would be one in which Spieth holds on to as much of his Masters paycheck as possible.
  • Assuming what seems observably untrue, that Spieth is a wasteful, prodigal spender, wealth redistributors should seemingly rejoice such a scenario. Spieth could quickly spend the portion of the winnings he keeps on private jets, hotels, cars, and booze, and per the alleged Keynesian multiplier, expand the economy through aggressive consumption. Even better, the money wouldn’t have to sit in Washington in wait of politicians to vote on its final destination.
  • …it’s important to remember that there’s no such thing as idle wealth. Applied to Spieth, unless he intends to stuff his Masters winnings under a mattress, the $1.8 million he earned will quickly migrate to the hands of many people not named Jordan Spieth, and who are not nearly as rich as he is.
  • Parsimony in no way subtracts from demand…As opposed to reducing demand, savings merely amount to a shift of consumptive ability from the saver to the borrower. If Spieth chooses to put his Masters windfall in the bank, his deposit will soon enough represent loans to individuals who need money to buy a car, to pay the college tuition of a son or daughter, who need a home loan, or who perhaps need credit in order to start a small business.
  • As opposed to reducing demand, savings merely amount to a shift of consumptive ability from the saver to the borrower. If Spieth chooses to put his Masters windfall in the bank, his deposit will soon enough represent loans to individuals who need money to buy a car, to pay the college tuition of a son or daughter, who need a home loan, or who perhaps need credit in order to start a small business….What this tells us fairly explicitly is that the single best way to redistribute the wealth of the rich is to let them hold onto it.

 

 

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‘The Wrecking Crew’ and Lessons about Economics

Love this article on economic lessons from the music industry of the 50s and 60s.  As illustrated in Tamny’s book, Popular Economics, far from a dismal science, the lessons of economics surround us.

http://www.forbes.com/sites/johntamny/2015/04/19/the-economic-story-behind-the-wrecking-crew-beach-boys-and-beatles/

 

 

 

 

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Government Is A Lousy Investor

John Tamny makes the point in his Forbes article, Oct 29, 2014, that even the savviest investors in the world would become blithering idiots when it comes their investments if they were in Government service, whether as politicians or bureaucrats.

Key points:

An economy grows based on information, good and bad, reaching investors and entrepreneurs. Silicon Valley thrives today not because all of its companies and start-ups succeed, but precisely because most of them fail. It’s through this constant experimentation with new ideas, good and bad, successful and unsuccessful, that entrepreneurs, businesses and investors attain essential information about what people desire, what businesses need in order to grow, what business practices need to be encouraged, and which ones need to be banished.

The reality once again is that the vast majority of start-ups in Silicon Valley fail. This is fact. What’s also fact is that when businesses there implode they don’t have an unlimited line of credit to continue committing the same capital-destroying errors. Eventually investors run out of patience, the business is shut down, and the assets sold off to individuals possessing a stated objective to manage them more profitably.

Readers should compare this to government, and when they do it’s important to stress that this is true no matter the ideology of the politicians allocating the money. When politicians spend or invest, they quite simply do not labor under the same market-driven disciplines as private investors do. As the failure rate in Silicon Valley reveals rather plainly, private investors are quite fallible, and yes, they are all-too-capable of funding egregious Solyndra equivalents.

But here’s the major difference: when theglobe.com falters, investors quickly starve it of capital so that it can destroy no more. When politicians spend, they have an unlimited source of funds – you, me, Michael Dell, and Larry Ellison – to tap such that they can continue supporting that which doesn’t work. Businesses disappear on a daily basis, while government programs are generally forever.

While Silicon Valley ruthlessly kills off its capital destroying losers so that better ideas can be funded, government – no matter the Party in power – continues to support its duds.

Too often in modern times the debate about government spending has focused on the breathtakingly dumb programs, and wasteful subsidies. This misses the point. Of course many of them are dumb, just as many private sector creations are laughable. The difference is that in the private sector Berkshire Hathaway’s Warren Buffett must eventually sunset his bad ideas, while a Senator Buffett would face no such constraints.

For investors to be successful, they must have losers. Politicians generally can’t lose thanks to nearly unlimited funding from a coerced electorate that is powerless when it comes to forcing them to shut down their many Webvans.

Unsaid, but certainly implied, it’s the pursuit of profit and avoidance of loss that drives entrepreneurs.  Remove the potential for loss, add a political motivation and a budget that grows annually regardless of performance, and you get the rank stew of statism and cronyism.

Implicit as well, is that electing businessmen to political office may have zero impact on good governance, for the reasons cited.  Making better business decisions is impossible without economic consequences.

The discipline coming from the necessity to make a profit is what makes investments “green” and “sustainable.”  I could support this type of green environmentalism.

 

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Democracy is the Worst Form of Government…

One of the most famous quotes on democracy is attributed to Winston Churchill:

Democracy is the worst form of government, except for all those other forms that have been tried from time to time.” (from a House of Commons speech on Nov. 11, 1947)

It is almost taken to mean, “Oh well, it’s terrible, but there is nothing better.”

It’s exasperating, because there is one better, and it has been tried: a republic.

Another famous quote, this time attributed to Ben Franklin:

A Mrs. Powel of Philadelphia asked Benjamin Franklin, “Well, Doctor, what have we got, a republic or a monarchy?” With no hesitation whatsoever, Franklin responded, “A republic, if you can keep it.”

As the generations have passed in the 200+ years of our republic, it has become diluted into a democracy.  The signposts are legion:  direct election of senators, the elevation of federal over states, regular attacks on the Electoral College system, etc.

We need to get the word out–a republic is better than a democracy.  We had one in the past, and we should get back to it, tout de suite!

 

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Piketty

Jonah Goldberg, Commentary Magazine, July 1, 2014 Edition, entitled “Mr. Piketty’s Big Book of Marxiness.”

 

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The Law, by Frederic Bastiat

“The Law” a classic libertarian statement is provided courtesy of FEE (Foundation for Economic Education).

 

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What Would Happen If CEOs Slashed Their Salaries To Zero?

Dan Fastenberg, August 15, 2013, aol.com blogsite,

This article links to the website of the Employment Policies Institute (EPI) providing more detail of the study.

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GDP

from Café Hayek, November 25, 2013, Don Boudreaux letter to the New Yorker…

James Surowiecki correctly argues that GDP – a statistic based on the premise that “the more stuff we’re producing for sale, the better off we are” – underestimates today’s economic growth.  The reason highlighted by Mr. Surowiecki is that “a huge chunk of the time we spend online is spent consuming stuff that we don’t pay for” (“Gross Domestic Freebie,” Nov. 25).

Yet it’s not only the rich array of free-to-the-consumer digital offerings that is missed by GDP measures.  Also missed are the many small improvements in the quality of more traditional consumer goods - improvements that are the equivalent in the physical economy of free online content.

Two examples: First, celery sold at my neighborhood Safeway now comes in plastic bags that are re-sealable.  The celery producer, though, doesn’t charge extra for this useful feature.  Second, an automobile today can be driven for 100,000 miles before needing a tune-up.  This improved automobile quality means that a good deal of routine automobile maintenance that drivers once paid for is now effectively supplied free of charge.  GDP captures the value of neither of these improvements.

As we grow wealthier, our demands are less and less for greater quantities of existing products and more and more for improved product quality – economic outputs that, like free online content, are inherently difficult to capture in GDP statistics.

 

Don Henderson, November 24, 2013, “GDP: A Bad Measure of Well-Being”

 

 

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