Economic Survival of the Fittest

Economic Survival of the Fittest
By Jenny Lee

See the hometown garden shop,
owned by local mom and pop.
Experts in the local shrubs,
aphids, molds and compost grubs.
They weren't what you'd consider wealthy
But the living made was healthy.

Then one day a Wal-Mart Store
Decided to move in next door
Selling diapers, screws and dishes
Everything a person wishes.
Including grass and garden seeds,
as well as stuff to poison weeds.
Rakes and shovels trowels and hoes,
tools for everything that grows.
Offering the lowest prices,
High school dropout help suffices.

Interest in the shop starts waning.
Their higher prices spark complaining.
Folks still stop in for advice.
But Wal-Mart's got the lowest price.
Soon old "Mom and Pop" must close it.
They can't compete and Wal-Mart knows it.
They sell off plants for half their cost.
Another local business lost.
When the shop closes its door
expert garden store know more,
Wal-Mart's lower prices rise.

Predatory scheme surprise.
Evolution's grim direction.
Darwin's natural selection.

I thought that this poem was quite appropiate, not only because its about economics, but also because of the new super Wal-Mart going up in Jefferson. Wal-Mart, a very well known monopoly, often puts local businesses out. BUT small towns like say Jefferson, see a Wal-Mart as a source of profit for their city overall. A super Wal-Mart is going to attract a lot of people to Jefferson. Those people are more likely to eat there after their shopping, or shop else where in Jefferson providing extra revenue. Wal-Mart also provides very low prices. Many families are able to shop at Wal-Mart and buy things that may have been too expensive elsewhere. It all basically boils down to the one point: Is a monopoly (Wal-Mart as an example), necessarily always a bad thing for an economy??? Just a little food for thought! :-)

Economics has been Hijacked by the Rich and Powerful

"Economics has been hijacked by the rich and the powerful"

I found a very interesting interview done by D. Murali and B. Baskar. They interviewed US-based economist and author Mr. Jared Bernstien about questions or concerns the common man/consumer should be aware of. To check out the entire article go to:
http://www.thehindubusinessline.com/mentor/2007/04/30/stories/2007043000731500.htm

"Politics and economics can get pretty silly sometimes. In American politics, if the economy improves, the President will take credit for it, much like the rooster who thinks his crowing made the sun rise. "

Mr. Bernstien stresses that the common man should know more than the basic supply and demand relationship. He feels that learning "political economics" is of more importance to us as U.S. citizens. For example: so the majority of people know that economics is about making the best choice, given a scarce amount of a certain resource...but who decides whats "best"? The government? politicians? The interview leans toward the direction that it is important to educate ourselves about the ENTIRE economy, so as to let the citizens decide what "best" implies, and not simply to leave this to the government.

"Presidents and Congress do have a great deal of impact on the course of the economy, through fiscal (tax and spending) policy, regulations, and social spending. That said, I've gotten used to politicians "connecting the dots" between their policies and economic outcomes in ways that are pretty suspicious.

Too me, I feel this may be to much to ask of the general public. Look at our voting statistics...I don't think the "common man" seems much concerned with who is in charge of our country, economy, and war...until of course it directly affects their pay cheque. The benefit of books, articles, and interviews like this is there though. If for every interview, article, and book published, ONE more person begins to understand that the power of the economy lies with us, the common man, than that is at least a start. Do you think the 'common man' needs a lesson in political economics??? Or do we let the politicians, presidents, and congress define whats 'best'?

$2.8M Katrina verdict against Allstate

This post is a combination of two articles I found which both revolve around Hurricane Katrina and insurance claims. I took a small excerpt from both (the essentials), and posted the URL so if you so choose you can read the article in its entirety online.

1. The first: $2.8M Katrina verdict against Allstate

http://news.yahoo.com/s/ap/20070416/ap_on_bi_ge/katrina_insurance




"NEW ORLEANS - Allstate Insurance Co. must pay a Louisiana man who lost his home to Hurricane Katrina more than $2.8 million in damages and penalties, a federal jury decided Monday in a case that hinged largely on whether it was wind or storm surge that wiped out his house."

2. The Second: In New Orleans, a lesson in business and hope

http://www.latimes.com/news/nationworld/nation/la-na-mba29mar29,1,4971841.story

"With the assistance of the Idea Village, a nonprofit that has provided scores of local businesses with technical support, contacts and capital, the students — 15 in all — have adopted several enterprises, among them the Community Book Center. Their mission is to show the businesses ways to grow and sustain in post-Katrina New Orleans.The storm destroyed or financially hurt more than 80% of the 12,695 small businesses that were in Orleans Parish before Katrina, local business officials said. The few that have reopened are struggling to stay afloat with fewer customers, reduced profits and higher labor costs.The Stanford students think they can use their college training to help the small-business owners maximize their potential in the face of post-storm challenges."Education is what you learn in the classroom," said Daryn Dodson, 27, who organized the student group. "It doesn't mean anything until you apply it practically."



New Orleans is still in an poor situation economically, although could we expect different? The first article I found, was the $2.8M verdict from Allstate. After reading the entire article i found that numerous other people are awaiting verdict from the courts on similar claims. Should the client have been awarded $2.8M, while numerous others are sleeping on the streets while Allstate battles it out with a single home owner??? That was just a little food for thought, now on to the economics of Hurricane Katrina. What the Standford students are doing is what New Orleans needs...more business. They need to be able to regrow as to support themselves as the city they are. The best way to help them rebuild is to show the businesses how to grow, to attract new people to New Orleans, and to support themselves economically. What better way to help the economy than through the use of human capitol (including the educated Standford Students).

Growth Slows in Services Sector

Growth Slows in Services Sector

ISM's nonmanufacturing index slid to 52.4 in March -- lower than economists forecast.
From Wire Reports Posted April 5, 2007
http://www.orlandosentinel.com/business/orl-econ0507apr05,0,6558117.story?coll=orl-business-headlines

Service industries grew at the slowest pace in almost four years in March, leaving the economy more exposed to slumps in manufacturing and housing.The Institute for Supply Management's index of nonmanufacturing businesses including banks, builders and retailers slid from 54.3 to 52.4, lower than economists anticipated.

Orders placed with American factories rose 1 percent in February, the Commerce Department said Wednesday in Washington, also less than analysts predicted.Services, which account for 90 percent of the economy and have propped up growth for the past year, are now being hurt by rising fuel costs and slowing sales.Even so, March was the 48th straight month of growth in the nonmanufacturing industries."We're in a very uncomfortable place right now," said Cary Leahey, senior economist at Decision Economics Inc. in New York. "Not only are things more uncertain, but the risks of slower growth have gone up."

Climbing costs also make it tough for the Federal Reserve to respond to weakness in the economy by cutting interest rates. Stocks had little reaction to the report, holding onto their gains of the previous session. The Dow Jones industrial average rose 19.75, or 0.16 percent, to 12,530.05. Broader stock indicators made modest gains, with the Standard & Poor's 500 index rising 0.11 percent to 1,439.37, and the Nasdaq composite index gaining 0.34 percent to 2,458.69.

Traders' attention will now shift to the Labor Department's monthly jobs report on Friday, which economists predict will show a pickup in employment.The ISM report found that new export orders, a sign of strength in previous reports, fell hard in March. The export orders index showed a contraction for the month, coming in at 48.5 and down from 59 in February.David Resler, chief economist at Nomura Securities, said that in addition to housing, slowing business investment in machinery and other goods has also weighed on the economy last month."Why it's slowed down is a bit of a puzzle," he said, since all the conditions for business investment are in place: corporate profits are high, interest rates are still relatively low, and companies are putting their current equipment to heavy use.



This article puzzled me, and I read it numerous times. Why would the service industries (retail most specficially) be decreasing as more people are becoming employed? It seems to me that more people employeed would cause an increase in spending. Are fuel costs that much of a concern? I can not find a plausible explanation to this problem, and the more i research it, the more it seems no one is sure of the reason this happening. Why aren't consumers spending their money? This is not good news for our economy, we need consumers to spend. Why is this happening and what can we do to change it?

Auto Sales Hurt by Housing Slump

NewsTrack - Business

Published: March 17, 2007 at 10:54 AM (United Press International)

Auto sales hurt by housing slump

FORT LAUDERDALE, Fla., March 17 (UPI) -- The sagging housing market is putting the hurt on auto sales across the United States, the Detroit Free Press reported Saturday.
Mike Jackson of AutoNation Inc. in Fort Lauderdale, Fla., said prospective car buyers' concern about home values is a phenomena he's never encountered before.
"They're reluctant to make a big purchase if they don't know what their house is worth, even if they don't want to sell it," said Jackson, whose company owns 280 new-car franchises across the country. "They don't know how it's going to come out."
UCLA Economics Professor Edward E. Leamer said low interest rates in recent years enticed people to buy homes and cars sooner than may have been prudent. Now homes aren't appreciating enough to give consumers a cushion and that is putting a crimp on auto purchases, he said.
"I think it's going to be a tough year for housing," Leamer said, "and it's a tough story for autos."
Auto purchases are down 8.5 percent this year for General Motors, Ford and DaimlerChrysler.




Though I knew the market for houses was in bad condition, I did not stop to really consider the effects it could have on consumers and other markets. As the market worsens, consumers mortgage payments continue to raise. Many homeowners are forced to take out loan after loan or sell their homes because they can not keep up with payments. This should have an effect on auto sales because consumers do not have the necessary money to make another long term investment when they aren't sure what the value of their home will be in 10 years. Consumers are less likely to make another large commitment when they are already struggling to keep up on payments. Betsy Schiffan is quoted as saying, "Since the housing industry accounts for about 14% of the national gross domestic product, if it were to suddenly crash, the ramifications would be felt across the country. Theoretically, it could be almost as crippling as a stock market crash. America's housing stock is worth about $12 trillion, while U.S. investors' investment in stocks, bonds and mutual funds was valued at about $15.6 trillion in 2001. " How can we aide the housing market, increase demand, and lower costs for consumers???

China's Economic Reform is too slow for U.S. liking

This article was very interesting to me. I did not know about China's economic problems, most specifically the way they affected the United States economy. I love Paulson's blunt attitude toward protectionist policies. This a great follow up to to our tariff/quota talks in class.

http://ap.lancasteronline.com/4/paulson_trade

"The administration is coming under increasing pressure to deal with a soaring trade deficit. It reached $763.6 billion in 2006, the fifth straight year with a record. The imbalance with China climbed to a record as well — $232.5 billion, the highest trade gap ever recorded with a single country." The United States wants China to reform its economy obviously because it is not helping our budget by any means. Because China's currency is undervalued by appx. 40%, imported goods are less expensive for US consumers and exported goods are more expensive for Chinese consumers. The democratic party claims the US government is not doing enough to protect its workers. But Paulson has a very different idea on protectionist policies. "Raising protectionist barriers and isolating ourselves from the gains of trade would hurt our economy," he said. "The long-term cost of protectionism — for us and for the rest of the world — is lost jobs and lost opportunity." Our solution: push China to reform its economy, which will raise the currency value.

Not only will we isolate ourselves, we will cheat ourselves in the long run through protectionist policies. do we protect our workers in the short run or deal with competition and better ourselves from it? If competition and trade take jobs away from workers, does that make trade a bad thing? The book we read before class (Naked Economics) hit on this topic as well. Just wondering what you all thought about this!

Econ and Politics--Budget Cuts!

‘Potentially Devastating’

The president of the American Hospital Association discusses how Bush’s proposed budget cuts could hurt the nation’s medical facilities.

By Eve Conant
Newsweek
Updated: 6:03 p.m. CT Feb 5, 2007

Feb. 5, 2007 - More money for the military, but less for medical care—that’s the gist of George W. Bush’s $2.9 trillion new budget handed to Congress today. While the president urged the Democrat-controlled Congress to “listen to a budget that which says no tax increase” and one “that can be balanced in five years,” Democrats remained unconvinced. “[The budget is] “filled with debt and deception, disconnected from reality and continues to move America in the wrong direction,” responded Senator Kent Conrad, chairman of the Senate Budget Committee.
Health care workers were especially taken aback by the plan: cuts to Medicare spending would equal about $66 billion over five years and Medicaid would see a similar decline in funds by about $25 billion over the same period.

The American Hospital Association (AHA), a national organization that represents nearly 5,000 hospitals and health-care systems, immediately condemned the cuts. AHA president Rich Umbdenstock described Bush’s plan as singling out children, seniors and the disabled to carry the burden of achieving a balanced budget. The 35-year veteran of health-care management spoke to NEWSWEEK’s Eve Conant about how the proposed cuts could affect an already overtaxed and understaffed hospital system.

Excerpts:
NEWSWEEK:

Were you expecting these cuts?

Umbdenstock: There were clear signals in D.C. that something was coming, and we’ve been hearing rumors all week about what the numbers would look like. Let’s just say the most aggressive rumors have been realized. These cuts are the deepest we thought could possibly come about. The magnitude of these cuts is hard to understand.

What do you think would happen if these cuts go through?

Cuts of this magnitude would undercut hospitals’ ability to sustain services for the poor, for children, for the elderly—we’re talking about huge and potentially devastating effects. This proposed budget talks about curbing payments to providers but says nothing about costs of caring for patients, which continues to increase. For every dollar that hospitals spend toward Medicaid or Medicare treatment they already get only 92 cents for Medicare payments and an average of 87 cents for Medicaid patients.
Given the needs of the poor and the elderly, these cuts go in a direction that's simply inappropriate. These cuts are significant, to say the least. Hospitals are already losing money.

There is something to be said for balancing the budget, though. Is there some aspect of this plan that holds some merit?
I leave it to the administration to spell out their reasoning here. I understand they are trying to balance the budget and that it’s a priority, but to do it in this way jeopardizes the most vulnerable [and] is impossible to support.




I found the above article on MSN's news website today. I was actually searching in regards to the the wars we are fighting as a follow up on a topic we discussed in Government Honors today. Congress and Senate have both recently said even if they do not support Bush's plan to send more troops, they will NEVER leave the soliders without money. Where is this billions of dollars coming from? My first guess, and the obvious answer, no where. Our debt is growing by enormous proportions. This I realized, but I wondered what our government's plan was to get us out of debt. That is when I stumbled upon this lovely article.

Medicare and Medicaid are a few of the governmental assistance programs I actually believe in. They have a purpose, to ensure that even the poor and underprivileged can get proper health care. My grandmother, a nurse/supervisor of 40 years, has opened my eyes to the way Hospitals are run. They are businesses too, which means they need to pay their employees like every other business. Currently, when a Medicare/Medicaid patient comes in the Government assists in payments, but the Hospital supplies the rest of the money. "For every dollar that hospitals spend towards Medicaid or Medicare treatment they already get only $.92 for Medicare payments and an average of $.87 on average for Medicaid patients." Now lets think about this for a second, the hospital should not be loosing any money for providing care...they should be getting paid for it. The government has not fully stepped up to begin with, and now we are going to make budget cuts in the area of health care??

I don't know about you, but I would almost prefer an increase in taxes. Yes, easy for me to say...I really don't pay them. BUT if we start with health care whats next? America's fear of raising taxes plus a never ending war, puts our government in a tough position. Budget cuts or raising taxes? Maybe a little of both? How are we supposed to get our country into a better position economically? Our country has a limited amount of money and resources, which are being used overseas...now we are in a tough position and will continue to be through the war and even many years after. How do we make it better? Can we?