July 12, 2012

‘Death Spiral’ Economics

By Don Kirk in Left-Liberalism, Socialism's "intellectual suicide"

There is an article by Don Terry in July 2nd’s American Prospect, a prominent magazine of the Left-liberal ideology, which bemoans the collapsed status of Gary, Indiana from steel-mill powerhouse to impoverished decrepitude. In the article, mention is made–but only in passing–that there are no super-box stores in the city.

Hmm. A quick check of Walmart stores in Gary confirms there are no Walmarts within city boundaries. The closest Walmarts are six or seven miles away in neighboring cities.

For many years across the United States, Left-liberal activists prevented Walmarts from locating in their cities, using lawsuits, protests, and demonstrations to compel local city councils to forbid local Walmarts. Especially in cities with strong union membership–like steelworker’s Gary, Indiana–the non-union Walmarts were prevented from opening their highly competitive stores. The clear result is local consumers within Gary pay more for the same goods that are cheaper at a distant Walmart.

As the local Gary economy based on steel was hollowed out by Schumpeter’s ‘creative destruction,’ the frigid thinking that goes into forbidding competition–regardless of the ‘reason’–proved to be economically suicidal. Gary is on an economic ‘death spiral,’ some of it self-inflicted by employing ideology to make economic decisions.

Gary’s economy might well have collapsed with or without any Walmart presence. But the suicidal economics makes sure the collapse is deeper and longer than would otherwise have been the case.