Posts Tagged ‘dollar stores’

Dollar

The United States is increasingly becoming dollarized. That’s because, for decades now, those at the bottom have been left behind, forced to attempt to get by in ever more precarious conditions.

If you asked mainstream economists what dollarization means, they would immediately define it as a country officially adopting the currency of another for financial transactions. Often, of course, that currency has been the U.S. dollar, as was the case for Ecuador in January 2000. Recently, mainstream economists, such as John Cochrane, have been suggesting that Argentina today should follow the same policy in order to “insulate the private economy from government fiscal troubles.”

While that kind of dollarization comes up in the context of macroeconomic crises, generated by volatile capital flows and other economic shocks beyond the control of traditional monetary authorities, the dollarization I’m referring to here stems from a very different kind of crisis, one that is happening inside the United States.

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According to a new report by the Institute for Local Self-Reliance, the United States now has more dollar stores—including Dollar General, Dollar Tree, and Family Dollar—than Walmart and McDonalds locations combined.

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Moreover,

Alongside aisles lined with clothing and household goods, these small stores offer a narrow selection of processed foods, such as canned peaches and cereal, cookies and frozen waffles.

There are no fresh vegetables, fruits, or meats in most dollar stores. And yet, as limited as their offerings are, dollar stores are now feeding more Americans than Whole Foods is, and they’re multiplying rapidly.

The fact is, both groups of food retailers have grown rapidly in recent years. As of September 2017, Whole Foods operated 470 stores, with 448 stores in 42 states and the District of Columbia (and an additional 13 stores in Canada and 9 in the United Kingdom), up from 275 in 2008—mirroring the rising share of income going to the top 10 percent (the red line in the chart at the top of the post). Dollar stores have grown even more rapidly: Dollar General alone went from 8,362 stores in 2008 to 14,534 in 2017.

That dollarization of the U.S. economy is both a condition and consequence of the relative impoverishment of the bottom 50 percent of Americans, whose share of income (the blue line in the chart) has fallen from 19.4 percent in 1969 to 10.3 percent in 2014 (the last year for which data are available).

As the authors of the report explain, dollar stores are both a symptom of larger economic trends and a cause of additional economic despair. On one hand, they move into impoverished, low-income neighborhoods that have few if any other retail merchants and grocers.

Today the dollar chains are capitalizing on these conditions, much like an invasive species advancing on a compromised ecosystem.

On the other hand, the proliferation of dollar stores are also causing economic distress since “their strategy of saturating communities with multiple outlets is making it impossible for new grocers and other local businesses to take root and grow.”

What we’re seeing in the United States is growth at both ends of the income pyramid. Just over a year ago, Amazon announced that it was buying Whole Foods for just under $14 billion, the retailer’s largest acquisition ever. Clearly, the giant on-line retailer is betting on the continuing rise of inequality, especially the increasing share of income captured by the top 10 percent of Americans, not only for luxury food, but for all the other commodities Amazon sells.*

And the dollar stores? According to Garrick Brown, a researcher with the commercial real estate firm Cushman & Wakefield,

Essentially what the dollar stores are betting on in a large way is that we are going to have a permanent underclass in America. It’s based on the concept that the jobs went away, and the jobs are never coming back, and that things aren’t going to get better in any of these places.

That, unfortunately, is what dollarization means in the United States today.

 

*“Amazon did not just buy Whole Foods grocery stores. It bought 431 upper-income, prime-location distribution nodes for everything it does,” tweeted Dennis Berman, the Wall Street Journal’s financial editor.

 

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Class has once again reared its ugly head.

Throughout U.S. history, class has always been there, if only just below the surface. But then in times of crisis, such as the aftermath of the crash of 2007-08 and during the Second Great Depression, class comes to the fore.

Thus, in recent years, class has become a significant theme in a wide range of media: literature—both fiction (for example, Lionel Shriver’s The Mandibles: A Family, 2029-2047) and memoir (such as The Draw, by Lee Siegel)—as well as literature made into films (especially The Hunger Games); in television, both reality TV (for example, Undercover Boss) and sit-coms (2 Broke Girls is a good example); and, of course, in non-fiction—from journalistic exposés (the best of which is George Packer’s The Unwinding: An Inner History of the New America) to data-heavy best-sellers (I’m thinking, in particular, of Capital in the Twenty First Century by Thomas Piketty).*

And for a country that at least in its public pronouncements and mainstream economic theorizing mostly denies the existence of class, it is remarkable that a great deal of attention is now focused on the working-class, especially one segment of that class: the so-called white working-class.

The decline of the white working-class was, of course, the overriding theme of Charles Murray’s Coming Apart, which would have sunk into much-deserved obscurity had it not been for conservative commentators (like David Brooks) and a well-financed, right-wing-engineered string of controversial college-campus visits (including my own university).

J. D. Vance’s Hillbilly Elegy also should have been consigned to oblivion. But, of course, it wasn’t. To my mind, it became such a media and commercial success not only because it was celebrated by American conservatives (lavishing praise on it to give it credence it didn’t deserve), but also because of the growing class divide in the United States and the curiosity on the part of those on the other side (including many concerned, well-meaning liberals) about what is actually happening to the white working-class.

Much better, in my view, is Strangers in Their Own Land, Arlie Hochschild’s attempt to climb the “empathy wall” and make sense of the “great paradox”: why hatred of government appears to most intense among people, including the white working-class of Louisiana, who need government services most. (Her answer: it’s all about the “deep stories”— about who they are, and what their values are—that people feel to be true.)

And then there’s Nancy Isenberg’s White Trash: The 400-Year Untold History of Class in America—a remarkable book that serves as a reminder of both how class is a central thread in the American narrative and the fact that class has been configured not only by finances but also in geographical and even bodily terms.

Crackers and squatters, rednecks and hillbillies, sandhillers and mudsills, clay eaters and trailer trash: over the course of its history, America has developed a rich vocabulary to describe its uneasy and unresolved relationship to one part of the underclass—the dispossessed—its economic and social institutions have presumed and produced on an ongoing basis.

According to Isenberg, the designation of a portion of the U.S. population as “waste people” and later “white trash” existed at the founding of the republic, having derived from British colonial policies designed to resettle the poor, which left a permanent imprint on postcolonial conceptions of American society and of the American Dream. From the very beginning,

marginalized Americans were stigmatized for their inability to be productive, to own property, or to produce healthy and upwardly mobile children—the sense of uplift on which the American Dream is predicated.

Poor whites haunted the writings of such diverse founders as Benjamin Franklin, Thomas Paine, and Thomas Jefferson—because they threatened both to disrupt “enlightened” democracy and to undermine national economic prosperity. The political and economic menace they posed continued into nineteenth-century American society but then was intertwined, starting in the 1840s, with its opposite, as the landless vagrant and squatter became romanticized and morphed into “the colloquial common man of democratic lore.” From then on, American white trash were alternately threatened with expulsion and even sterilization (especially in the first two decades of the twentieth century when the eugenics movement flourished), to reduce the burden on the national political economy, and greeted with populist calls (from the rise of Lincoln’s Republican Party to the campaign of Donald Trump) to make American great again.

Isenberg’s compelling survey of the invoking of white trash and its various synonyms across 400 years of American history teaches us, first, that “not only did Americans not abandon their desire for class distinctions, they repeatedly reinvented class distinctions.” The United States is, and has been from the very beginning, a class society. Second, it shows that those class distinctions exceed financial inequalities and invoke as well geographical and physical characteristics. White trash are poor but they are as often as not rural Southern white trash, living in shacks, hovels, and trailer parks, with dirty feet and tallow faces that are signs of “delinquency and depravity.”

If I have one major bone to pick with Isenberg’s otherwise absorbing and persuasive analysis, it’s that she overlooks the changing foundation of white trash—and thus of class distinctions generally—across American history. It is true, property, especially land, played a significant role in designating the gulf separating waste people and everyone else when the U.S. economy was mostly rural and white trash evoked landless laborers who were pushed to or beyond the margins of feudal, slave, and independent agricultural production. But that changed with the rise of capitalism, after which poor whites were either members of the working-class who found themselves in low-paying jobs or who failed in the effort to sell their ability to work to employers and thus were jettisoned into the ranks of the underclass, the lumpenproletariat.

So, yes, as Isenberg argues, “pretending that America has grown rich as a largely classless society is bad history.” But so is presuming that the basis of class can be found in an uninterrupted pattern of unequal ownership and dispossession in the presumed land of opportunity.

Today’s white trash are not merely yesterday’s landless vagrants on wheels. Those wheels are the only way they can get to their jobs at Wal-Mart and shop at the dollar stores that together represent the injuries, insults, and inequities meted out by an American economy that, over the course of the past four decades, has punished a growing part of the population for whom the American Dream is increasingly out of reach.

 

*Down the road, I plan to write a review of After Piketty: The Agenda for Economics and Inequality, edited by Heather Boushey, Brad DeLong, and Marshall Steinbaum.

Food swamp rats

Posted: 11 February 2015 in Uncategorized
Tags: , ,

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We’ve known about food deserts and swamps for years. But now we’ve learned that big food brands are boosting their profits by targeting the poor:

Packaged food sales were flat in 2014 as people increasingly avoided the brands typically found in the center aisles of grocery stores in favor of the fresher food found on the perimeter. But in other types of stores, such as dollar, drug and club, sales are growing faster than grocery store sales, prompting companies to expand distribution. . .

Kraft operates an in-house kitchen, where it tests recipes that it hopes will appeal to budget conscious consumers and tries to figure out how families stock their pantries, said Robin Ross, director of Kraft Kitchens.

“There is no room for waste,” she said. “There is no room to choose products and recipes that won’t go over well in our families. We know that in some of these households there might be higher propensity to buy canned foods or vegetables because there is more of a guarantee that those products won’t go bad before it’s time for use.”

Shrinking package sizes allows Kraft to reach higher profit margins on products, though it won’t sell as many as it would in a larger store. For instance, a 12-ounce package of Velveeta Shells & Cheese cost $2.50 at the a Dollar Tree store in New York City. Meanwhile, a 2.4 ounce cup cost $1.25. That’s 21 cents an ounce versus 52 cents an ounce.

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Of course, there’s a bidding war for Family Dollar Stores, one of the country’s biggest deep-discount retailers!

According to Richard W. Dreiling, Dollar General’s chairman and chief executive,

“It’s fair to say that the economy is creating more of our core customers,” he said. “The middle-income customer is getting squeezed.”

Dreiling’s view is confirmed by the latest report on household income trends from Sentier Research [pdf]. Their Household Income Index shows the value of real median annual household income in any given month as a percent of the base value at the beginning of the last decade (January 2000 = 100.0 percent). As readers can see in the chart above (red line), the index for June 2014 stood at 94.1 compared to 98.8 in December 2007, when the “great recession” began, and 97.0 in June 2009, when the “economic recovery” supposedly began. The index had increased unevely from August 2011 (the low point) to this summer.

What does it mean? In short, it means that average American households have been beaten down—and therefore have been forced to pinch pennies by purchasing at discount retail stores like Family Dollar, Dollar Tree, and Dollar General—and that their incomes, while far below their peak, have in fact been rising over the last few years—which means they are able to spend more of their pennies at those same discount retailers.

Clearly, as I’ve argued before, “there’s a lot of profit to be made in selling discount commodities to the low-income and falling-income American families whose numbers have grown over the course of the past three decades, and especially in the midst of the Second Great Depression.”

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What does it mean that Dollar Tree is buying rival discount store Family Dollar in a cash-and-stock deal valued at about $8.5 billion?

It means, at a first cut, that Family Dollar stockholders will receive $59.60 in cash and the equivalent of $14.90 in shares of Dollar Tree for each share they own—a transaction valued at $74.50 per share, which is an approximately 23 percent premium to Family Dollar’s Friday closing price of $60.66—and that Dollar Tree will now have more than 13,000 stores in the U.S. and Canada—nearly three times as many as Wal-Mart Stores Inc. (although Wal-Mart’s square footage is still greater).

More generally, it means there’s a lot of profit to be made in selling discount commodities to the low-income and falling-income American families whose numbers have grown over the course of the past three decades, and especially in the midst of the Second Great Depression.

As Sriya Shrestha explains in her recently published study of dollar stores,

US consumers experience a kind of “thirdworldization,” that marks them not as exceptional but rather increasingly on par with rest of world as they become yet another population of consumers marked by their lack of income. Hence, multinational corporations’ and discount retailers’ techniques aimed at incorporating what are known in marketing literature as the “bottom of the pyramid” (poorest populations in poorest countries) overlap with methods used at US dollar stores. For example, brand- name goods at the dollar store are often sold in packages substantially smaller than the standard sizes found at Target or CVS. This technique also surfaces in places like India where companies like Unilever and Proctor & Gamble sell single-serving sachets of laundry detergent, fairness cream, and shampoo for around 2 rupees. These methods rely upon a particular model of frugality aimed at those with extremely limited incomes that actually costs the consumer more in the long-run. This contrasts with other recently popularized methods of shopping, like purchasing in bulk from warehouse retailers and couponing that actually save money. These latter shopping styles require more money upfront, time, storage space, and membership fees ensuring its association with normative American middle-class, feminine “home-making” and smart budgeting rather than poverty.

Thus, the sense of loss of an American consumer identity and American dream emerges through the sense of a compromised American exceptionalism as people in the US find themselves unemployed, underemployed, facing compromised conditions of labor and consumption. Chinese Tide detergent and Indian Colgate toothpaste make their way to US dollar stores because major US and European multinationals are now targeting growth markets among the middle classes and poor in the former peripheries of the global economy as the centers have slowly begun to crumble.

Clearly, poor and working-class families are being forced to have the freedom to pinch their pennies, which turns out to be a profitable opportunity for the likes of dollar stores that feed at the bottom of American capitalism.