The Empire Page

No one likes a person who says I told you so, but I did warn you in my November 2004 Eye from Albany column titled “Low prices are taking their toll”. I began the column by saying, “Low prices are killing us. You won’t hear this from your leaders in Albany or Washington, DC, but the price of gasoline, Wal-Mart prices (based on the China price) and food prices are undermining our security, health and environment.

Let me add that our economy is also undermined. Now we are paying the real price and not just in $4 plus a gallon for gasoline. One might call what we are suffering a “perfect storm” affecting almost every basic sector of our lives. The I.M.F. calls it “the biggest financial crisis in the United State since the Great Depression”. Along with our own shrinking pocket books and the loss of jobs, the retail sector is reeling. Anne Taylor, Starbucks, CompUSA, Steve and Barry’s, Sharper Image, Talbots and Linens’n Things are closing stores, declaring bankruptcy or going out of business.

The binge on sub-prime mortgages started the collapse of our bargain basement house of cards. Mortgages became a little cost up front way to get a home. There was no down payment mortgages and initially low interest for people without the income to support payment when interest flexed upwards and the economy flexed downward.

When the greedy were able to package these fantasy mortgages as security to raise capital in the world market, it was only a matter of time for capital to dry up and for financial powerhouses whether they played along or not from Bear Stearn to Fannie and Freddie to fail or get very shaky and need for government bail outs.

It isn’t unusual for market economic systems to suffer periodic and occasional instability. Not unusual at all if you remember the S & Ls and the collapse of the tech bubble from resent time. But this instability may be different than its predecessors as it reveals the unsustainability of an economy based on low prices for food, energy and consumer goods coupled with huge profits making one new billionaire after another.

So far the powers that be in Washington, New York City and Albany show they only understand the traditional fixes for economic declines like providing financial stimulus for consumers, talking tax cuts and assuming the financial liability for trillion dollar financing institutions like Frannie and Freddy. I am not an economist but rather a long time observer who believes the low price and huge profit binge we have been on is a last gasp for an economic system that is no longer viable in a global economy with growing power houses like China and India and an energy economy that is destroying us environmentally through climate change and security wise through dependence on foreign oil.

Everyone and especially the politicians know the immediate pain of ending our dependency on foreign oil, becoming a saving rather than a consuming society and accepting less consumer goods. But do they know that these changes will actually give us more. Take Wal-Mart for example. We spend 21 cents of every dollar spent for food at Wal-Mart. Some predict that may increase to 50 cents as the company continues to drive down costs to unsustainable low levels, our health bills will rise as more food of lesser quality and nutritional value is eaten. The more from higher prices will be better health and lesser public costs for the health system. Are we to dumb to accept that message?

There are other significant gains from the pain that will come with rising prices. If we are willing or have to pay the real rather than the China price, we will have more local jobs, more durable products and food with more nutritional value. Getting to a sustainable economy is not going to be easy. When the owner of my fitness club tells me, “no pain, no gain”, I am likely to still retreat from the pain. No one likes pain. This puts the burden on our political and other leaders to show the way both in their own practices (not, for example, driving an SUV or living in the countryside) and by educating, educating, educating on global warming, the value of local economies and living in walkable communities with supporting density.

To conclude on an optimistic note, look around and see the increased attention on growing our local and regional food production and distribution systems. National chains like Macy’s have also started their own process of “striving for local focus”. Macy’s tried to cut costs through consolidation and is now finding that the “best department stores were the ones that were merchandized to the local market”. Perhaps we will get our economy off the unsustainable fast track, and come back to a healthy, sustainable and local market based economy. Do we have a choice? This is the real challenging facing state government and us.

Paul M. Bray is an Albany attorney and lecturer in the Department of Geography and Planning at the University of Albany.