Tapsearch Com EditorGreenspan Dancing in the Dark (LINK)
December 22nd 2007 18:53
Bizarre Politics Reports:
Living in two different worlds
This continues our review of Alan Greenspan's book The Age of Turbulence - It should be called - The Age of Parallel Dimensions in Two Different Worlds
Greenspan Dancing in the Dark
While Greenspan was playing in an orchestra and most likely played Dancing in the Dark, a popular song in those days, I was a young teenager working in our family grocery store. Greenspan spent the rest of his life dancing in the dark in the elite economic world where only a few get to dance. During his time in the orchestra and at New York University of Commerce, I was learning about the Lost Leader Economy in our family's grocery store. During World War Two, President Roosevelt imposed ceiling prices on food and other products. Merchants were not allowed to sell food and related products at prices more than what the ceiling prices allowed. However, the cost of many of these items were higher than the ceiling prices. Grocers were caught in a contradiction with no way out.
Prior to this time, margins and markups were usually based on single products at a fair market vallue. With ceiling prices, retailers had to find a way to make up for the products they had to sell at costs or even under their costs. Obviously, this prompted a vast black market too especially with products not easily available. The honest grocers had a very difficult time. In the end, business ethics were tossed out the window resulting in miles of main streets in our cities and towns with empty store fronts, empty factories and empty farms.
Before this happening, the chain stores which were the first super markets could not compete with the small grocery stores. We had several small grocery stores just on our block with each offering some specialty of their own. The chain store did not last and more failed down the avenue. No one needed a car because everything was up the street. Ceiling prices broke open a new Lost Leader Economy. It provided a new ability to mass merchandise groceries as lost leaders. The chain stores found out that if a certain number of people flowed by a high priced items, sufficient numbers would buy the higher priced product to make up for all the lost leaders they were selling. As a young boy, I calculated a small grocery story needed about a minimum of gross 27 percent mark up with an operating cost of only about 7 percent which added up to about a 20 percent profit for the business. The chain stores which were evolving into super markets required about a minimum of 33 percent because their operating costs were more than 20 percent. After a time, a super market which was able to make a 7 percent profit was considered to be a good one. However, this proved to be an endless road to nowhere and eventually the roads let to places like China where labor itself became a Lost Leader. Workers now are the main commodities traded in the workday
In our store in those early years, the woman shoppers on their way home from church, came in and just purchased the lost leaders we advertised on our front windows. Depending on how much they spent on these items, we lost about a dollar or so while we had to be nice to the customer at the same time. A dollar in those days is like $10 loss today. I asked my father how this all was supposed to work. He said this was the new economy where you had to get more volume in order to survive. I thought this was nonsensical and knew it would never work. The next fifteen years proved I was right.
The Lost Leader Economy took off like a rocket. The winners were the ones who had the most money to survive. The Lost Leader Economy took over in many other ventures too.
Companies with the most money knocked out the ones with less. Some companies went a decade or so selling under costs to capture the market from all those with lesser funds or stomach to do the things they had to do to survive. I can go deeper into this evolution and evaluation of what followed but it would take pages to record it a. Although the fair trade laws were on the books and for that matter still are on the books, no one enforced them. This evolved into the World Coms and the Enrons of our times. Many cooked the books for years hoping they would reach a time to gather in some profits from what they did and not have to play games with the stock values and investments alone. Many large corporations just like to gather in volumes of cash to play games with the stock marker and other investments rather that run a real business based on making or selling something for a living.
The Lost Leader Economy had an appetite that could not be satisfied and it meant that in an anything goes competitive environment - anything goes. Today this has evolved into owners and workers being thousands of miles from each other. Ethics have been priced out of the picture. American consumers now have to depend on destitute workers who will never climb out of the hole with many of these workers being children. The Free Traders like Alan Greenspan says this is a good thing but, it is obviously a race to the bottom. The supply of under class workers is endless in a Lost Leader Economy. Production is now portable and can be moved from place to place anywhere in the world for the sake of cheaper and cheaper labor.
Alan Greenspan started out dancing in the dark and never ended the dance. Workers have no voice in the process and stand by the walls with no one to dance with.
( See other posts in this series for more - see 1956, the year that changed the world while Greenspan defended the gold standard . )
Greenspan Dancing in the Dark
While Greenspan was playing in an orchestra and most likely played Dancing in the Dark, a popular song in those days, I was a young teenager working in our family grocery store. Greenspan spent the rest of his life dancing in the dark in the elite economic world where only a few get to dance. During his time in the orchestra and at New York University of Commerce, I was learning about the Lost Leader Economy in our family's grocery store. During World War Two, President Roosevelt imposed ceiling prices on food and other products. Merchants were not allowed to sell food and related products at prices more than what the ceiling prices allowed. However, the cost of many of these items were higher than the ceiling prices. Grocers were caught in a contradiction with no way out.
Prior to this time, margins and markups were usually based on single products at a fair market vallue. With ceiling prices, retailers had to find a way to make up for the products they had to sell at costs or even under their costs. Obviously, this prompted a vast black market too especially with products not easily available. The honest grocers had a very difficult time. In the end, business ethics were tossed out the window resulting in miles of main streets in our cities and towns with empty store fronts, empty factories and empty farms.
Before this happening, the chain stores which were the first super markets could not compete with the small grocery stores. We had several small grocery stores just on our block with each offering some specialty of their own. The chain store did not last and more failed down the avenue. No one needed a car because everything was up the street. Ceiling prices broke open a new Lost Leader Economy. It provided a new ability to mass merchandise groceries as lost leaders. The chain stores found out that if a certain number of people flowed by a high priced items, sufficient numbers would buy the higher priced product to make up for all the lost leaders they were selling. As a young boy, I calculated a small grocery story needed about a minimum of gross 27 percent mark up with an operating cost of only about 7 percent which added up to about a 20 percent profit for the business. The chain stores which were evolving into super markets required about a minimum of 33 percent because their operating costs were more than 20 percent. After a time, a super market which was able to make a 7 percent profit was considered to be a good one. However, this proved to be an endless road to nowhere and eventually the roads let to places like China where labor itself became a Lost Leader. Workers now are the main commodities traded in the workday
In our store in those early years, the woman shoppers on their way home from church, came in and just purchased the lost leaders we advertised on our front windows. Depending on how much they spent on these items, we lost about a dollar or so while we had to be nice to the customer at the same time. A dollar in those days is like $10 loss today. I asked my father how this all was supposed to work. He said this was the new economy where you had to get more volume in order to survive. I thought this was nonsensical and knew it would never work. The next fifteen years proved I was right.
The Lost Leader Economy took off like a rocket. The winners were the ones who had the most money to survive. The Lost Leader Economy took over in many other ventures too.
Companies with the most money knocked out the ones with less. Some companies went a decade or so selling under costs to capture the market from all those with lesser funds or stomach to do the things they had to do to survive. I can go deeper into this evolution and evaluation of what followed but it would take pages to record it a. Although the fair trade laws were on the books and for that matter still are on the books, no one enforced them. This evolved into the World Coms and the Enrons of our times. Many cooked the books for years hoping they would reach a time to gather in some profits from what they did and not have to play games with the stock values and investments alone. Many large corporations just like to gather in volumes of cash to play games with the stock marker and other investments rather that run a real business based on making or selling something for a living.
The Lost Leader Economy had an appetite that could not be satisfied and it meant that in an anything goes competitive environment - anything goes. Today this has evolved into owners and workers being thousands of miles from each other. Ethics have been priced out of the picture. American consumers now have to depend on destitute workers who will never climb out of the hole with many of these workers being children. The Free Traders like Alan Greenspan says this is a good thing but, it is obviously a race to the bottom. The supply of under class workers is endless in a Lost Leader Economy. Production is now portable and can be moved from place to place anywhere in the world for the sake of cheaper and cheaper labor.
Alan Greenspan started out dancing in the dark and never ended the dance. Workers have no voice in the process and stand by the walls with no one to dance with.
( See other posts in this series for more - see 1956, the year that changed the world while Greenspan defended the gold standard . )
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