Friday, August 5, 2011

Even Marked Up, Luxury Good Fly Off Shelves

Nordstrom has a waiting list for a Chanel sequined tweed coat with a $9,010 price. Neiman Marcus has sold out in almost every size of Christian Louboutin “Bianca” platform pumps, at $775 a pair. Mercedes-Benz said it sold more cars last month in the United States than it had in any July in five years.

Even with the economy in a funk and many Americans pulling back on spending, the rich are again buying designer clothing, luxury cars and about anything that catches their fancy. Luxury goods stores, which fared much worse than other retailers in the recession, are more than recovering — they are zooming. Many high-end businesses are even able to mark up, rather than discount, items to attract customers who equate quality with price.

“If a designer shoe goes up from $800 to $860, who notices?” said Arnold Aronson, managing director of retail strategies at the consulting firm Kurt Salmon, and the former chairman and chief executive of Saks.

The above, including the headline, is from a story in the New York Times which ran two days ago, on August 3, 2011.

Since Reagan's first term, U.S. economic policy has aggressively catered to rich people, corporations (with a strong emphasis on defense, pharma, and energy), banks (with a strong emphasis on investment banks) and insurers. Tax cuts and deregulation topped the list of priorities, but direct subsidies, lucrative government contracts, union-busting, and the privatization of drug and space technologies which were researched with public money have also been part of the program.

The rationale has always been that prosperity at the top would result in greater opportunity below. It was called "trickle-down" during Reagan's campaign and presidency, but it was also called "voodoo economics" by George Bush, Sr. while he was still running against Reagan for the 1980 Republican nomination. Neither of these terms (especially the latter) are in use now, but the trickle-down argument was the exact same one that John Boehner and the senate Republicans used during the recent debt ceiling debate.

To be clear: trickle-down had no historical precedent. It was implemented based on a purely theoretical model starting in Reagan's first term and continued relentlessly through Bush Sr.'s presidency. There were few rollbacks in the Clinton years - yes, he raised marginal tax rates, but he also signed Nafta and the overturning of Glass Steagall, paving the way for the mortgage mess. Bush Jr. picked up deregulation and tax reduction like a man possessed, and much to the distress of the political left, Obama has done little to stop the bleeding.

An economic theory with no precedent was sold to America thirty-one years, and what has been the result? Four major stock market convulsions, each resulting in massive job losses and devastated retirement accounts. Real wages at historic lows. Massive unemployment. A systematic destruction of the nation's manufacturing base and export of jobs to countries where wages are even lower. The Tea Party, who think they can improve the situation with more tax cuts and deregulation. And, for a fortunate few, $860 shoes.

I started writing this before the stock market began yesterday's plunge. If this turns out to be more than just a correction, it will be the fifth stock market panic since Reagan's first term, and the resulting pain will, as always, be felt most acutely by the middle class and the poor.

Obama, can you spare some hope and change?