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The System Is Broken and We Have No Idea How to Fix It

When Wal-Mart stores are having food drives for their employees, something is wrong.
November 22, 2013, 9:05pm

This week Bitcoin touched $900, the Dow closed above $16,000 for the first time, and Kanye West released the most awkward music video ever. But these distractions obfuscate a grim reality. Life is pretty shitty and nothing illustrates that better than the fact that Wal-Mart is holding a food drive for the poor. Which sounds par for the course during the holiday season, except when “the poor” are Wal-Mart’s own employees.

On Thursday, a second Wal-Mart in Franklin, Ohio announced an employee food drive, jumping on the bandwagon initiated by a Cleveland store earlier in the week. "A lot of associates can't even afford to buy a small turkey," Ricki Hahn, a seven-year employee of Wal-Mart, told a local Fox affiliate.

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We don’t expect the dude in Geek Squad support to sport the latest iPhone or that “model” at American Apparel to rock sweatshop-free hipster garb from head-to-toe, but when one of the largest and most profitable corporations in the country doesn’t pay its employees enough to buy their own products, it’s hard to swallow. And by products, I mean food. Instead, management is hoping generous colleagues, presumably receiving the same inadequate wages, will make up the difference. Who needs a progressive tax system when the poor can help the poor?

America has come a long way since its Golden Age. Then, economists applauded the “Great Compression,” a period of true egalitarian spirit that empowered the general populace. From the end of World War II until the mid-1970s, the country’s poorest fifth saw their incomes rise by 42 percent while the wealthiest fifth notched a modest 8 percent. This was how the country’s middle class was built. And on the backs of that middle class, the country would thrive.

Working Americans are more productive than any point in history, yet incomes have stalled. Via

If that was heaven, our current existence is hell. Since 2009, 95 percent of income gains have gone to the one percent. It’s not a recent phenomenon. Wages for the country’s least well-off have been more or less stagnant since the 70s, creating an ever-widening chasm between the lucky and the less fortunate.

In that time, we started borrowing, from our credit cards and our homes, just to keep on trucking. Far from curing the underlying malaise, it's the equivalent of giving a deathly ill person a steady supply of heroin. If we felt better and temporarily forgot our woes, it was transient escapism, an addiction that always comes with an expiration date. The party ended in 2008, when the unsustainable debt nearly blew up the world economy, triggering, as Alan Greenspan put it, the worst financial crisis in human history. Today, poverty is mainstream, with 46.5 million Americans living below the poverty line.

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In the US, our political clusterfuck means there’s little hope for fiscal reprieve in the near term. Instead, the Federal Reserve can only continue its experimental policy of quantitative easing into infinity, which amounts to a balance sheet hack that, without getting into the nitty gritty, is the equivalent of printing money out of thin air. However necessary or successful, it’s a temporary band-aid for a wound that badly requires stitches.

There's the other side of the economy: the ethereal, inflated Snapchat economy. How much does the stock price of Twitter—or any other startup that raises hundreds of millions or billions despite weak or nonexistent profits—matter when the rest of the country is living paycheck to paycheck? Where, after the dust settles, there isn’t enough left for a proper meal?

"We're proud of the pay and benefits at Walmart, but this issue has nothing to do with how much we pay our associates," Wal-Mart spokesman David Tovar told Business Insider in an email. "This story is simply about people being good neighbors, taking care of each other store by store, associate by associate."

And rather than acknowledge why the wages his company took such pride in doling wouldn’t be enough for a proper Thanksgiving, Tovar expressed dismay that the situation was being misconstrued. "It’s unfortunate that an act of human kindness has been taken so out of context.”

The context, however, is that the status quo simply isn’t good enough. Moreover, it won’t be a temporary blip. What if we’re waiting for an eventual recovery that never comes? What if there’s no end in sight?

In a presentation at the IMF this week, former Secretary of the Treasury Larry Summers admitted that we had entered a period of “secular stagnation” with little relief in sight, a view that economist Paul Krugman endorsed. This was the “super bug” we had been warned about and our war chest of antibiotics is woefully ineffective.

It’s a bitter truth we may have to accept, Summers concluded during his widely praised presentation. "I think that [what the] world has under-internalized is that it is not over until it is over,” Summers said.

All of which means that the only hope of putting food on the table this Thanksgiving for cash-strapped Wal-Mart employees is the sympathy of their fellow Wal-Mart employees. The system is broken and we have no idea how to fix it.

@sfnuop