The Walmart Economy
I was reading an article in The New York Times entitled: “Why American Mask Makers Are Going Out of Business.” To some of us it came as no surprise.
During the height of the COVID pandemic, the U.S. was short of all personal protection gear (PPE). Our health care professionals were reusing equipment such as masks, gowns, and gloves. The simple reason for this was most of that equipment had to come from China. Because of their own COVID cases, they needed the equipment domestically, and since so many Chinese also contracted the disease, there was a shortage of workers in the PPE manufacturing facilities.
This is not the first time that the manufacturing of PPE moved offshore. By the late 1990s and early 2000s, most PPE was made in Chinese factories. The few American manufacturers left were having their troubles staying in business because production costs were higher here. Buyers were looking for cheaper prices and Chinese factories could produce the PPE at lower cost.
When the Swine Flu virus happened in 2009, Chinese plants had difficulties fulfilling our demand. The few American PPE manufacturers had more orders than they could handle. New American companies were started to manufacture PPE. Of course, once the Swine Flu epidemic ended hospitals and governments went back to sourcing the cheapest equipment. Chinese factories soon had 90% of the market.
Now the same thing is happening again. In keeping with the American obsession for paying as little as possible, the domestic manufacturers that sprang up during the latest pandemic are closing their doors. Hospitals and governments have decided that price and quality are secondary to our bargain loving hearts.
America has what is known as the “Walmart Economy.” If goods are not the lowest price possible, then Americans won’t buy it. That leaves us vulnerable in situations where we need to have a domestic source.
Price should not always be the reason we choose one product over another. In the past fifty years, our domestic textile and clothing manufacturers have been decimated because it costs more to do business in the U.S. than in other places. Our standard of living is higher than China and other Asian nations because we pay better. Most everything we produce is more expensive.
Not everything should be made in the U.S. In most cases, importing products such as clothes is beneficial to our economy and those of the producing nation. When government has been involved in attempting to keep an industry viable, it has resulted in unintended consequences.
The commercial maritime industry would be an example of this. The Jones Act of 1920 requires all shipping between U.S. ports to use vessels that are U.S.-flagged, U.S.-built, and mostly U.S.-crewed and owned. This has all but eliminated using ships to carry cargo between 2 American cities (e.g., Miami and Boston). Instead, we use more expensive trucks and rail.
Places like Puerto Rico, an American territory, are severely impacted because almost everything must be shipped from the mainland. At the same time, Puerto Rican industry must follow the same protocol outlined in the Jones Act which has severely impacted the island’s economy.
Much of the “Walmart Economy” is controlled by the consumer. On the one hand, a consumer can’t espouse “buy American” and then choose purchases solely based on price. We must become more discriminating in what industries we want to encourage and support domestically.
For example, the garment and textiles industries may not be strategically critical to the US. In such an instance, price could be one of the determinants in the consumer’s purchasing decision. However, for products that are strategically critical to US safety and security (e.g., PPE), perhaps government needs to encourage US production and discourage imports using targeted measures such as tariffs for a few defined sectors as a very last resort.
If we need American manufacturers to pick up the slack only in times of crisis, then our supply of critical goods will suffer. With PPE the consumers are hospitals and governments. They must be willing to sacrifice always having the cheapest price with their need to have a steady supply especially during something like a pandemic.
Even the individual American consumer must be cognizant that always buying the cheapest product is not always best. We need to pick which industries that are critical to our nation and then we need to support the higher prices needed to produce in America. As a government and a nation, America needs to decide if the “Walmart Economy” is what she wants to be.
