Date: 2024-12-21 Page is: DBtxt003.php txt00005033
US ECONOMY
America: The Next Woolworth's?
The situation the United States finds itself in today is very
similar to claims made by Woolworth's executives in the 1960s.
America: The Next Woolworth's?
The situation the United States finds itself in today is very
similar to claims made by Woolworth's executives in the 1960s.
New York's Woolworth Building, c. 1913.
Photo from the Library of Congress via Wikipedia.
Original article: http://www.theglobalist.com/storyid.aspx?storyid=10044
Peter Burgess COMMENTARY
My comment on Facebook about this article:
I agree very much with the theme of this article. I would add that the situation will move faster than it did in the case of Woolworth's. So the question is, what would it take to replicate the Apple failure and ultimate super success rather than have the Woolworth scenario, and I would respectively suggest that we need to measure and talk about the right things in decision making circles ... getting away from money profit, stock prices and GDP growth to optimizing for quality of life for people, good living for the place, sustainability for the planet, and yes, some profit as well!Update ... August 2023
I made the above comment in 2013 almost exactly 10 years agp. Since then there has been the awful Trump presidency and the emergence of MAGA Republicans replacing the more mundane conservative Republicans. An experienced and competent President Biden has done a huge amount to offset Trump's incompetence and malevolence but has only modest popularity. Why? Bottom line is that the media is no longer doing the essential job that it must do to have a healthy democracy and is merely operating as a for-profit business where 'click bait' dominates and important news is relegated to the 'back page' or eliminated entirely!
Politics in Washington is a mess ... but politics in a lot of the US State Capitals is even worse. There is little indication that this is going to get fixed in a constructive way . The American populace is not well informed and are being manipulated by local, national and international bad actors. Most of the 'systems' of government are archaic and no longer 'fit for purpose'. Worse, many of the people with political power are octagenarians or worse whose grasp of what is possible in the modern world is limited at best!
While President Biden is no spring chicken, and is an actagenarian, he is a team player and his team is very competent and young and diverse and the results over the past three years have been very impressive ... though the media does little to tell this important story. I have tried to point out that Biden has done more important legislation that any president since the combination of Presidents Eisenhower and Johnson more than 50 years ago!
Thanks to President Biden the United States has more 'friends' around the world now than in a long time. NATO is reinvigorated thanks in large part to President Biden, not to mention the malevolence of Russian President Putin and to some extent the concern there is over what Xi and China are preparing for!
Sadly, the USA and to a considerable extent the UK have become weaker than is healthy because of the embrace of what I call 'financialization' ... a mindset which is very simpistic and embraces the idea that if something is 'profitable' it must be good. This is what Reaganomics was all about, and it is to be hoped that the new Bidenomics can start to put right much of the social, environmental and economic damage that has been done over the past 40+ years.
These are difficult times ... but there are huge possibilities if the best possible policies are embraced.
And I have not even mentioned the huge role that the people of Ukraine are playing in standing up for what is right!
Peter Burgess
Written by Stephen Ezell
Monday, June 24, 2013
The situation the United States finds itself in today unfortunately is very similar to claims made by Woolworth's executives in the 1960s. As Stephen Ezell explains, they, too, fatally believed that there was no need to worry about emerging competition — in their case, from Kmart and other rival stores.
Woolworth's, the original 'five and dime' store, pioneered the modern American retail model.
By the 1950s, Woolworth's had thousands of stores globally. It was synonymous with retail shopping.
Founded in 1878 in Utica, New York, Woolworth's was a leading innovator in merchandising, marketing and customer service, which allowed it to quickly overtake its inefficient general store competitors.
The company expanded rapidly and, by the 1910s, it had almost 600 stores across the East Coast.
The chain was anchored by the Woolworth Building in New York City, one of the first urban department stores and then the world's tallest building.
By the 1950s, Woolworth's operated thousands of stores around the world and was virtually synonymous with retail shopping.
Unfortunately, Woolworth's became a victim of its own success. By eradicating practically all its competition, the company had little need to experiment with new business models or focus on customer satisfaction. After all, people had nowhere else to go.
Ultimately, the chain became known for long lines, a poor shopping experience, high prices and an inability to change with the times.
When hungry competitors like Walmart, Kmart, and Target emerged in the 1960s with a focus on low prices and a pleasant customer experience, Woolworth's simply couldn't keep pace.
The retail giant lost significant market share, was forced to close stores and eventually went out of business altogether. Today, Woolworth's is often used as a cautionary tale of the dangers involved in taking your customers for granted.
Unfortunately, the Woolworth's image sounds eerily similar to how multinational corporations the world over now view the United States, as inefficient, bureaucratic and high-priced. If we continue to follow the 'Woolworth's model,' we risk the same fate.
Today, Woolworth's is a cautionary tale of the dangers involved in taking one's customers for granted.
The United States has rested on its laurels and many of its economic and trade policies remain based on a model created when U.S. industrial power reigned preeminent.
But in today's global economic environment, companies shop the world looking for the best locations to invest.
The nations with the strongest digital, physical and scientific infrastructures, access to pools of skilled talent, reasonable corporate tax rates and incentives for investment will be the nations that win this race.
And while the United States technically can't go out of business like Woolworth's, it can — and is — losing significant amounts of 'market share.' The result is stagnant job growth, slow productivity growth and growing income inequality.
Yet amazingly, at a time when concerned citizens should be issuing a clarion call for action to address this growing crisis, too many U.S. pundits claim that all is well.
Some point to the fact that the United States is second only to China in inward foreign direct investment (FDI). But this misses the reality that in 2008 just 7% of that FDI went to establish a new factory or office. The rest went to buying U.S. firms.
Others claim—with no evidence, at least from the trade statistics—that domestic manufacturing is experiencing a renaissance.
MNCs now view the U.S. as the new Woolworth's: inefficient, bureaucratic and high-priced.
Stories abound regarding the reshoring phenomenon and the news that Apple is moving some production back to the United States.
More equitable wage rates, cheaper energy and superior American 'know how' are cited as signs that we as a nation are competitive again.
However, these stories fail to note that the U.S. trade deficit in goods the past two years amounts to negative $727 billion — and negative $7 trillion over the past decade.
Worse, numerous studies find that the vast majority of corporate location decisions are favoring foreign countries over domestic locations.
For example, a 2012 study by the Harvard Business School found that the United States loses to other countries two out of every three times it competes for a company's investment in R&D or production facilities.
That, in part, explains why U.S.-headquartered manufacturing multinationals are favoring foreign over domestic investments.
In 2000, those firms invested 33 cents overseas for every dollar invested domestically. The ratio was over double that (71 cents) invested overseas in 2009.
Some argue that it doesn't matter if manufacturing moves overseas. R&D and 'innovation,' they say, will always stay here. Wish it were so.
From 1998 to 2007, foreign R&D investment by American corporations increased more than two and a half times as fast as all corporate R&D investment in the United States.
Anti-alarmist arguments seem to be based on hope more than fact.
In addition, foreign nations — from the European Union to India to China — are now investing hundreds of billions in R&D and technology transfer programs to further attract global investment.
Others have claimed that instead of manufacturing we should focus on the service economy. They see this as providing 'clean,' well paying jobs that are a positive alternative to the 'dirty' industry jobs of the past.
But as has been said, we 'can't get rich doing each other's laundry.' There simply are not enough pure service jobs to meet domestic demand.
And these jobs are in part based on the economic growth and consumer demand created by the industrial and traded sectors.
In short, all the anti-alarmist arguments seem to be based on hope more than fact.
The situation the United States finds itself in today unfortunately is very similar to claims made by Woolworth's executives in the 1960s. They, too, fatally believed that there was no need to worry about competition from Kmart and the like.
The 'retail' environment for innovation and economic development is only becoming more competitive.
Those firms may take the low cost, 'ordinary' goods market, but customers will always want the quality and 'experience' of Woolworth's, their executives thought.
That also proved to be factually inaccurate and ultimately contributed to Woolworth's downfall.
It is high time for U.S. policy makers to recognize that the 'retail' environment for innovation and economic development is only becoming more competitive and the nations with the best policies will be the ultimate winners.
If the United States does not make major strategic changes soon, we run the risk of becoming a latter-day Woolworth's.