Tag Archive | real-estate

Kenya Day 9

We visited another rehabilitation facility in Nairobi. We found out that the guy we are looking for has been telling his counselors about his employers, but they thought he was just making it all up. His story was so implausible that his employers were a figment of his troubled imagination.

They are surprised to find these fictional characters standing in the sitting room of their facility. One of them has the same name as a good friend of mine, Justin Farrar. I’m somewhat taken aback by his business card.

Capitalism is the cause of drug problems in Kenya, apparently. The market economy has robbed Kenyans of their culture and they are now turning to drugs for comfort and solace. I’m interested in this. I ask where most of the patients of this $500 a month facility come from. They are mostly children of the wealthy Kenyans, half of which probably have real problems, and the other half of which are sent here to get them out of their parents’ hair.

I’m wondering if all those with brains pickled (or eyes blinded) from changaa (an awful homebrewed alcoholic beverage common in the villages) are the victims of capitalism as well. While it’s important to discuss the causes and roots of social problems, it was an odd aside.

We stop by a new Ethiopian restaurant. The owner is excited because we are the first foreigners at his place, which opened up three days ago. He takes numerous pictures.

I’m told that much of the real estate boom in Nairobi has been funded through proceeds from Somali piracy. I look and find that it’s probably true.

In fact, I reflecting on how Nairobi is in the middle of a real estate bubble. Rents are absurdly high in Nairobi, but then one will pay a premium for security, particularly after Westgate. I keep thinking about what an awful strategy this is. Investors are looking to make a quick buck, building and turning over real estate prices for ever higher prices. I remark that Kenyans are wholly uninterested in developing their country, preferring risky, short term assets like real estate to investment in new manufacturing sectors.

The Kenyan government, of course, is uninterested in encouraging growth through enterprises which create jobs, preferring to skim off the top of real estate in the form of bribes and taxation for imported supplies. It’s all sad, really. I’m wondering when the bubble is going to finally burst.

It turns out the Nairobi Java House that got bombed was the one outside, not the one inside the terminal. I’m looking at it and noticing how dangerous the location is. Anyone could drive by, lob a bomb here and kill five or ten foreigners in a split second.

It’s time to go, though I’m sad. Nairobi is an exciting place, far more exciting than my own boring, though pleasant, Ann Arbor.

November 25, 2012

in Economics, Social Problems
1 Comment

Thoughts on WalMart, America’s Ectoparasite

An ectoparasite is an organism which lives on the exterior of a host’s body, completely dependent up the host for nourishment. WalMart (like corn) is such an organism.

WalMart is one of the world’s most profitable companies. It sells household goods at competitively low prices, while at the same time doling out 20% of its massive earnings to stockholders. It is able to do this by 1) offering bottom of the barrel wages for workers 2) outsourcing manufacturing to China, for basement level prices and 3) lobbying to manipulate government programs and the tax code to enable its business model.

As discussions of walkouts and strikes by WalMart workers rages, WalMart’s stock is doing better than ever.

WalMart’s low wages are, of course, part of it’s business model. Customers go to WalMart to buy goods at low prices. WalMart employees are poorly paid and recieve 10% off of purchases at WalMart, meaning that their wages are simply fed back into the company, creating an awful vicious cycle that cripples local economies.

WalMart depresses wages. Opening a single WalMart can depress the average wage in a county by up to 1%. This effect, of course, is additive. According to a U Berkeley study in 2000:

With an average of 50 Wal-Mart stores per state, the average wages for retail workers were 10 percent lower, and their job-based health coverage rate was 5 percentage points less than they would have been without Wal-Mart’s presence.

Wages in 2012 are even lower. If we repeated the study, we might find that the situation now is even worse.

Besides the more than $1 billion in real tax subsidies that support the opening of new WalMart stores, the federal government picks up the tab for benefits in the form of EBT payments and Medicaid.

One oft repeated right wing mantra is that WalMart workers choose to work there. What happens to them is their own fault. As the entry of WalMart devastates the local business community in rural areas, there really aren’t many jobs to “choose” from anymore. I’ve been through plenty of rural towns where the only employer is WalMart.

The opening of a WalMart has also been shown to increase poverty. Increases in poverty are, in the end, merely shifts of capital, which could go to education or small business ventures, from the group of the bottom to the top.

WalMart bleeds communities dry through schemes that minimize its property tax burden:

This first-ever investigation of Wal-Mart’s local property tax records finds that the retail giant systematically seeks to minimize its payment of taxes that support public schools and other vital local government services. Online appendices with lists of stores and distribution centers examined.

The moral of the story is that local businesses can’t compete, potential entrepreneurs lack capital to start businesses and localities are bled dry of resources to support community investment.

After reading this post, I found that I didn’t develop the idea of WalMart as blood sucking parasite very well, but it’s there anyway.