Hillary Clinton and Lake Wobegon Economics

 

marketbasket41On Thursday, Hillary Clinton invoked the famous (in New England) Market Basket saga while campaigning in New Hampshire:

Using last summer’s epic corporate showdown among members of the Demoulas family over the future of the [supermarket] chain, Clinton said customers realized “it’s not just shareholders who make you profitable, it’s everyone who buys things in their stores … the people at the cash register and stocking their shelves.”

She continued:

Clinton praised the company’s profit-sharing program [….]

“If you actually invest in your workforce and say, ‘You know what? If you work harder and there are profits, we’re going to share them with you.’ Then they work even harder.”

To give some background, Market Basket is a family-owned discount grocery chain that has over 70 stores in New England, employing about 25,000 people, none of whom are part of a union. Despite the chain neither advertising nor having a website, each store does about a million dollars in business every week.

Last year, CEO Arthur T. Demoulas (affectionately known as “Artie T.” to his employees) was fired by his cousins’ side of the family. The employees were furious, and — in a strange turn of events in the days of class warfare — the little guys risked their jobs for their multi-millionaire former boss. They protested every day in front of company headquarters, staged rallies attended by about 10,000 employees, organized a targeted strike (160 employees, mostly in the warehouse, walked off the job and left the chain crippled), and urged their customers to boycott. Read one store manager’s reasons for his actions here. There is even an employee rally song, a re-make of “We’re Not Gonna Take It”:

The customers of Market Basket happily complied with the employees’ request to shop elsewhere: they not only boycotted in such force that the chain lost $10 million a day, they designed, crowd-sourced, and produced a full-page, full-color ad in the Lowell Sun to tell-off the interim CEOs. The saga ended when Artie T. bought-out his cousins’ 50.5% share of the business for $1.5 billion.

What does any of this have to do with Hillary Clinton or her policies, you ask? If the world were honest, nothing. Market Basket gave its employees higher-than-average benefits in exchange for higher-than-average skills, effort, and maturity. All employees wear button-down shirts under their vests, and the men also wear ties; there is not a single self-checkout aisle in any store because the management emphasizes personal interaction; and the employees understand that no matter what job they are doing, they are there to help the customers. The famous Market Basket benefits — profit-sharing, scholarships for employees who are in school, promotion from within, etc. — are only given to those who have been on the job for at least a year. Grouchy schlubs need not apply, and will not last long enough to get those great benefits.

In the higher-pay/loyalty cause-and-effect chain, the awesome employee is the cause; the effect is the awesome benefits, motivated by the desire to retain and develop a superior workforce.

If all stores offered similarly-wonderful benefits, there would be no reason for an employee — who can get the same deal elsewhere — to stay on at Market Basket or for customers to feel such loyalty to the company. This isn’t Lake Wobegon: we can’t pay everyone above-industry average, nor can we expect everyone to become an above-average employee. We can’t reverse causation and assume that paying someone extra means that they will work extra hard or be extra nice to customers.

It is unclear how Hillary thinks her proposed regulations or laws would even be needed. The fact that the Market Basket endeavor is successful shows that current laws effectively protect even non-unionized employees. The entire point of the boycott was to show that customers — i.e., normal people — have free will and cannot be told where to shop.

You cannot legislate loyalty, hard work, or the free will to organize a boycott, but you can allow people to reward like with like in a free-market system. The only rational way to invoke Market Basket in economic policy is, “I’m not going to change a thing, because the system works beautifully.”

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  1. Misthiocracy Member
    Misthiocracy
    @Misthiocracy

    Like!

    • #1
  2. user_352043 Coolidge
    user_352043
    @AmySchley

    And grats to Bridget on her first post!

    • #2
  3. Miffed White Male Member
    Miffed White Male
    @MiffedWhiteMale

    I dream of a day when all Americans are making more than the median income.

    • #3
  4. Mark Coolidge
    Mark
    @GumbyMark

    It’s remarkable how many people didn’t understand what they were saying when they criticized Walmart for not following the Costco business model.

    It’s also amusing to watch Clinton prattle on about the importance of customers given she’s spent her entire career in the sector notorious for lack of customer service.

    Can’t wait to hear more of her business advice.  I believe this is the same Hillary Clinton who, when pushing her healthcare plan in the 90s and facing criticism for the burden she was placing on business, remarked I can’t be responsible for every under-capitalized small business in America’!

    • #4
  5. Rodin Member
    Rodin
    @Rodin

    How many politicians can you watch with the sound off and actually gain a more favorable impression? Actually that might be an interesting test. “Silent Cal” won in 1924. How would that work out today?

    • #5
  6. Misthiocracy Member
    Misthiocracy
    @Misthiocracy

    Mark:It’s remarkable how many people didn’t understand what they were saying when they criticized Walmart for not following the Costco business model.

    Legislation that forces all businesses to charge a $50 annual membership fee could have its own perverse appeal.

    • #6
  7. Misthiocracy Member
    Misthiocracy
    @Misthiocracy

    Rodin:How many politicians can you watch with the sound off and actually gain a more favorable impression? Actually that might be an interesting test. “Silent Cal” won in 1924. How would that work out today?

    President Obama and Hillary Clinton seem to do quite well by refusing to answer questions.

    • #7
  8. Ricochet Inactive
    Ricochet
    @bridget

    Thanks, Amy.

    The Costco business model also involves paying forklift drivers, not high school students, to stock the shelves.  It costs them more per hour, but less overall.

    As for Market Basket: conservatives often talk about minimum wage being for minimum skills. In this case, above-average wages were also there for being kind, loyal, and helpful. If you go to Market Basket, you know that anyone in the store will help you find something, the cashiers will be nice to you, and the bakers will decorate your cake any way you want it decorated.

    Why pay those people the same amount as some cranky jerk who is on his cell phone when he’s ringing you up?

    • #8
  9. Son of Spengler Member
    Son of Spengler
    @SonofSpengler

    If Hillary is so smart about running a profitmaking enterprise, she should take some of her millions and start one. If she’s right about what makes a business successful, she’ll put her competitors out of business in no time.

    • #9
  10. Mark Coolidge
    Mark
    @GumbyMark

    Son of Spengler:If Hillary is so smart about running a profitmaking enterprise, she should take some of her millions and start one. If she’s right about what makes a business successful, she’ll put her competitors out of business in no time.

    She has; it’s called The Clinton Foundation

    • #10
  11. Ricochet Member
    Ricochet
    @MattBalzer

    bridget:As for Market Basket: conservatives often talk about minimum wage being for minimum skills. In this case, above-average wages were also there for being kind, loyal, and helpful. If you go to Market Basket, you know that anyone in the store will help you find something, the cashiers will be nice to you, and the bakers will decorate your cake any way you want it decorated.

    Being kind, loyal, and helpful are also skills, as are knowledge of what the stores stock and advanced cake decorating. I’d say that ~95% of the time cashiers will greet me pleasantly and wish me a nice day, but I don’t know how much of that is based on store training vs. regional dispositions and so forth.

    Also, while minimum wage is for minimum skills, that can mean a lot of things. If I hire someone to count screws, as I recall someone posting about earlier, I’ll pay more to someone who can count them quickly and accurately as opposed to someone who is less effective in the position. Perhaps it should be “minimum wage for minimum effort”.

    • #11
  12. Misthiocracy Member
    Misthiocracy
    @Misthiocracy

    bridget: If you go to Market Basket … the cashiers will be nice to you.

    Ugh, that sounds awful.

    xih1I

    • #12
  13. Ricochet Inactive
    Ricochet
    @bridget

    Let’s ask the important questions: have you all listened to the rally song (produced by a radio station in New Hampshire) and seen the photo montage?

    • #13
  14. jmelvin Member
    jmelvin
    @jmelvin

    bridget:Let’s ask the important questions: have you all listened to the rally song (produced by a radio station in New Hampshire) and seen the photo montage?

    I have now.  That’s good work on the part of those employees!

    By the way, welcome to Ricochet.  Has anyone shown you the member’s pool and workout room in the basement?

    • #14
  15. Frank Soto Member
    Frank Soto
    @FrankSoto

    This is a great post.

    • #15
  16. Ricochet Inactive
    Ricochet
    @JimmyNeutron

    Very well written post.

    • #16
  17. user_533354 Member
    user_533354
    @melissaosullivan

    What a great post!  Just perfect!  Thank you for the story, Bridget!

    • #17
  18. user_138562 Moderator
    user_138562
    @RandyWeivoda

    Son of Spengler:If Hillary is so smart about running a profitmaking enterprise, she should take some of her millions and start one. If she’s right about what makes a business successful, she’ll put her competitors out of business in no time.

    I’ve thought the same thing myself about a hundred times.  The lefty politicians should pool their money and start their own business.  Call it DonkeyCorp.  If they really know what they’re talking about, they could run an oil company, or a grocery chain, or an automobile manufacturing company far better than any of the existing companies. Most importantly, they would be beloved by their employees.

    • #18
  19. Pugshot Inactive
    Pugshot
    @Pugshot

    I think people here may be missing the point. Of course Hillary probably couldn’t run a for-profit business. But she’s not trying to do that. She’s trying to win votes from (for the most part) generally uninformed voters who vote their prejudices. Some of her advisors studied the issue, realized the appeal the issue would have for “their type” of New Hampshire voter, and advised her accordingly. She makes her little speech, those voters think, “Hillary’s on top of this regional issue – she’s one of us!”, and her mission is accomplished. It has nothing to do with running a business, or how Hillary would run a business, or whether the way Market Basket operates would work effectively if all its competitors did the same thing, or whether Walmart or Costco has the better business model. It’s about Hillary showing she’s on top of local or regional issues and therefore more in-tune with the people! It’s about getting votes. We can poo-poo her all we want about her business acumen (or, more correctly, her lack of same), but it’s not about that. Did any of the Republican candidates comment on this? Was it even on their radar?

    • #19
  20. billy Inactive
    billy
    @billy

    Clinton said customers realized “it’s not just shareholders who make you profitable, it’s everyone who buys things in their stores 

    Um..anyone else see a problem here? Like maybe the Democrat frontrunner doesn’t know what a shareholder of a corporation is. Or that “everyone who buys things,” i.e. customers are the only people “who make you profitable.”

    • #20
  21. user_1065645 Member
    user_1065645
    @DaveSussman

    Outstanding post! Welcome!

    This was a fantastic free market treatise. Kudos to those employees for ‘getting it’. There is still hope.

    P.S. the Twisted Sister remake was awesome.

    • #21
  22. George Savage Member
    George Savage
    @GeorgeSavage

    Great inaugural post. Welcome to Ricochet, Bridget.

    • #22
  23. ctlaw Coolidge
    ctlaw
    @ctlaw

    bridget: Despite the chain neither advertising nor having a website, each store does about a million dollars in business every week.

    Actually they have a website and an app! I grew up exposed to their advertisements (did they advertise on Red Sox broadcasts?) but never saw one of their stores because I lived in an area without any.

    • #23
  24. Mark Coolidge
    Mark
    @GumbyMark

    I anxiously await more examples of Hillary Clinton’s business acumen.  Here are a couple of other recent examples:

    “Don’t let anyone tell that, ah, you know, it’s corporations and businesses that create jobs,”

    Hillary Clinton , October 24, 2014

    Clinton noted that small business creation has “stalled out,” to her chagrin. “I was very surprised to see that when I began to dig into it,” she said while campaigning in New Hampshire. “Because people were telling me this as I traveled around the country the last two years, but I didn’t know what they were saying and it turns out that we are not producing as many small businesses as we use to.”

    Hillary Clinton, April 20, 2015

    • #24
  25. HVTs Inactive
    HVTs
    @HVTs

    billy:Um..anyone else see a problem here? Like maybe the Democrat frontrunner doesn’t know what a shareholder of a corporation is. Or that “everyone who buys things,” i.e. customers are the only people “who make you profitable.”

    Thank you, billy! Was wondering if it was just me who stalled out when I read this.

    Shareholders try to profit off the increasing value of the stock, a value that–among other things–reflects the profitability of the company’s sales made to its customers.

    Hillary understands nothing about business, markets, profits, economies, job creation (as opposed to employment redistribution—aka government work).

    What she understands is that politics is the art of gaining power over things that you neither understand nor need to understand. Power is its own reward in Hillary World.

    • #25
  26. Miffed White Male Member
    Miffed White Male
    @MiffedWhiteMale

    billy:Um..anyone else see a problem here? Like maybe the Democrat frontrunner doesn’t know what a shareholder of a corporation is. Or that “everyone who buys things,” i.e. customers are the only people “who make you profitable.”

    Reminds me of when Obama said that PE ratio stood for “Profits:Earnings”

    • #26
  27. billy Inactive
    billy
    @billy

    HVTs:

    billy:Um..anyone else see a problem here? Like maybe the Democrat frontrunner doesn’t know what a shareholder of a corporation is. Or that “everyone who buys things,” i.e. customers are the only people “who make you profitable.”

    Thank you, billy! Was wondering if it was just me who stalled out when I read this.

    Shareholders try to profit off the increasing value of the stock, a value that–among other things–reflects the profitability of the company’s sales made to its customers.

    Hillary understands nothing about business, markets, profits, economies, job creation (as opposed to employment redistribution—aka government work).

    What she understands is that politics is the art of gaining power over things that you neither understand nor need to understand. Power is its own reward in Hillary World.

    Apparently, Hillary subscribes to the underwear gnome business model:

    Step 1) Hire people to man the cash registers and stock the shelves

    Step 2) ????

    Step 3) Profit!

    • #27
  28. user_1010693 Inactive
    user_1010693
    @Vespacon

    Thanks for taking the time to make us wiser on a subject few of us could have understood without such background and explanation.

    • #28
  29. user_199279 Coolidge
    user_199279
    @ChrisCampion

    billy:Um..anyone else see a problem here? Like maybe the Democrat frontrunner doesn’t know what a shareholder of a corporation is. Or that “everyone who buys things,” i.e. customers are the only people “who make you profitable.”

    If revenues are greater than costs, then it’s profitable.  If people value the product more than what it cost to produce the product, it’s profitable.

    It’s a value proposition.  Hillary doesn’t need to know what any of this means, and she clearly doesn’t care that she doesn’t.  Getting a lecture on how businesses work from someone who has only had experience in backroom cronyism is a slap in the face to people who actually work for a living.

    But I hardly think that’ll make a difference to the voters in the middle, that she’s relying on to get her aging and corrupt carcass shoved into the WH.  So the appeal will work, a little, and she’ll trundle onto her next campaign stop and not answer questions.

    Oh, and when people stop answering questions, they’re guilty.  She just can’t hide behind the 5th amendment.  Yet.

    • #29
  30. user_158368 Inactive
    user_158368
    @PaulErickson

    billy:Um..anyone else see a problem here? Like maybe the Democrat frontrunner doesn’t know what a shareholder of a corporation is. Or that “everyone who buys things,” i.e. customers are the only people “who make you profitable.”

    Give her a break.  Her expertise is in cattle futures, not retail.

    • #30
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