Tag Archives: Japan

When the poor stop going to McDonald’s, we’re all in trouble

20 Jun

mcdonalds-meal

Businesses like Wal-Mart and McDonald’s haven’t been doing well.

 

People without a lot of money usually go to these places, but because they now have even less money, they’ve stopped going. When people who work at Wal-Mart and McDonald’s can no longer afford to shop and eat there, it’s a sure sign of a coming, broad-based financial decline.

 

It will affect us all, even the rich, who don’t amount to much if they can’t get the poor to give them money.

 

Reports show that the parade of U.S. customers into Wal-Mart fell 1.4 percent during the first quarter. That followed a decline of 1.8 percent in the prior year.

The discount retailer blamed the bad winter weather but also cited cuts in food stamps, higher payroll taxes and the increased cost of health care.

 

You know things are bad when Wal-Mart relies on the food stamp program to move product.

 

Walm-MartRecent U.S. sales at McDonald’s also have declined, by 1 percent. To lure back low-end customers, the burger behemoth increased its value menu, but that hurt profits even more.

 

What’s happening is the downward pressure on income is leading to downward pressure on sales.

 

Henry Ford used to pay his people well so they could buy cars. If Wal-Mart and McDonald’s have any sense, they and the other minimum-wage shops will copy this strategy. Not doing so will have consequences. It could turn the U.S. into another Japan – the bad one, not the good one.

 

Japan was once the globe’s supreme economic power. It made and sold great products while setting new standards for manufacturing. Flush with cash, Japanese investors bought up billions in prime New York real estate, and nearly everything else. During this period, in the mid-80s, I visited Hawaii, which seemed more like Japan. Japanese tourism and culture were so strong that hippie beach bums peddling sailing lessons had to learn Japanese.

 

Then came the bust, the swoon and massive disinflation. It began around 1990. People in the U.S. don’t understand disinflation. It’s when prices fall and fall and fall and still no one buys anything. The economy becomes comatose. Seems impossible, until you look at Japan, where disinflation has been a cruel fact of life for a couple decades.

 

 

According to Bloomberg Businessweek, one contributor to Japan’s disinflation is falling wages. The recent habit of businesses there, as in the United States, is to avoid hiring full-time workers and instead contract with temporary workers who earn less and have no job security. These temps now make up about 40 percent of the Japanese work force. They are paid about 38 percent less than full-time workers.

 

The financial and social divide between the two kinds of workers has grown and is causing multiple calamities. For example, no one wants to marry a temp. This depresses birthrates and is making Japan a nation of elderly people. Banks won’t give temps mortgages, which doesn’t encourage building. These and other negative trends cascade and the country stagnates.

 

In the current era, U.S. corporations have reaped huge profits from selling to the developing world. But those markets, at least to some degree, are cooling and maturing. The bread-and-butter American markets may have to be revived in order to maintain profits. That could require a higher minimum wage and more opportunity for the middle class. The government and the business community finally are waking up to this.

 

The Great Cure for so much – including crime and falling education standards — is to put money back in the hands of traditional spenders. For a time, greed will blind us to this reality. Then the cash register stops ringing and we see.

 

Wal-Mart and McDonald’s — and all the other places where you can work full-time and not earn a living — now see. Each is probably afraid to take the first big step. Sooner or later someone has to, otherwise that first big step will be involuntary and it will send us over a cliff.

 

Think about the return of the 25-cent McDonald’s hamburger. Think about taking the family out for one on a very special night, maybe once every couple of months. That disinflation, and it will make 15 percent inflation seem like good times.

 

Now, we wait.

 

By Lanny Morgnanesi

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As its old enemy grows weak and it grows strong, China hasn’t forgotten World War II

23 Aug

Almost 11 years have passed and the war in Afghanistan is still a war. It has helped drain the treasury of a nation that doesn’t want to pay taxes.

An even bigger threat to that treasury and to global peace is occurring thousands of miles away in the Pacific. Its roots are deep, dating at least to 1937, when Japan invaded China.

The Chinese of today look at Americans and wonder how we can be friends with the Germans and the Japanese. We’ve forgotten World War II. They haven’t. Their country was occupied. Ours was not.

The hate never dissipated.

Around 1985, Chinese consumers were getting their first chances to buy televisions. Many were imported from Japan. Many didn’t work right. True or not, the perception was that Japan was dumping its faulty products on China. As the TVs failed, anger rose, then raged. Demonstrations were held to criticize the government for allowing this to happen and for being a party to this loss of face.

The protests continue.

E-mail has been circulating all over China calling for the boycott of Japanese products. One complaint in the e-mail is that the bosses of Japanese companies in China treat their Chinese employees like dogs. Beneath that remains the revulsion of doing business with a nation that murdered millions of Chinese and committed vicious, wide-scale atrocities that included massive gang rapes and burying people alive.

Americans don’t realize it, but almost 90 percent of Japan’s fighting forces in World War II were in China, not the islands we fought over.

While powerful back then, the Japanese of today are struggling to recover from a lengthy economic malaise.  As they do, they watch China grow wealthy and strong. Out of frustration, a bunch of them jumped in boats last weekend and landed on an Island that China claims. They planted Japanese flags.

This lit a fuse back in China, and several thousand took to the streets in protest.

All very interesting, and right now harmless. If, however, these skirmishes escalates and Vietnam, the Philippines, Indonesia and Taiwan also feel threatened, the U.S. could be lured in.

Anticipating the future, our presence in the Pacific already has grown. If the events of last week continue, it is likely to grow further.

Will there be a dialogue or will it just happen? In such a case, Americans will have to ask themselves: Is this our role, and are we willing to pay for it?

 

I think debate is needed now, while it is only pleasure craft and civilians taking over disputed islands, while decisions on budgets and taxes are still pending, and while national lunacy is still treatable.

This one could make Afghanistan look like a street fight.

Lanny Morgnanesi

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