Thanks to Nadia McLaren:
RETAILING CHAINS CAUGHT IN A WAVE OF BANKRUPTCIES
By Michael Barbaro
New York Times
April 15, 2008
The consumer spending slump and tightening credit markets are unleashing a
widening wave of bankruptcies in American retailing, prompting thousands of
store closings that are expected to remake suburban malls and downtown
shopping districts across the country.
Since last fall, eight mostly midsize chains — as diverse as the furniture
store Levitz and the electronics seller Sharper Image — have filed for
bankruptcy protection as they staggered under mounting debt and declining
But the troubles are quickly spreading to bigger national companies, like
Linens ‘n Things, the bedding and furniture retailer with 500 stores in 47
states. It may file for bankruptcy as early as this week, according to
people briefed on the matter.
Even retailers that can avoid bankruptcy are shutting down stores to
preserve cash through what could be a long economic downturn. Over the next
year, Foot Locker said it would close 140 stores, Ann Taylor will start to
shutter 117 and the jeweler Zales will close 100.
The surging cost of necessities has led to a national belt-tightening among
consumers. Figures released on Monday showed that spending on food and
gasoline is crowding out other purchases, leaving people with less to spend
on furniture, clothing and electronics. Consequently, chains specializing in
those goods are proving vulnerable.
Retailing is a business with big ups and downs during the year, and
retailers rely heavily on borrowed money to finance their purchases of
merchandise and even to meet payrolls during slow periods. Yet the nation¹s
banks, struggling with the growing mortgage crisis, have started to balk at
extending new loans, effectively cutting up the retail industry¹s collective
Because retailers rely on a broad network of suppliers, their bankruptcies
are rippling across the economy. The cash-short chains are leaving behind
tens of millions of dollars in unpaid bills to shipping companies, furniture
manufacturers, mall owners and advertising agencies. Many are unlikely to be
paid in full, spreading the economic pain.
When it filed for bankruptcy, Sharper Image owed $6.6 million to United
Parcel Service. The furniture chain Levitz owed Sealy $1.4 million.
In September 2007, Bombay filed for bankruptcy protection. The highest bid
for the company came from liquidation firms, who quickly dismembered the
33-year-old chain. Bombay, which once employed 3,608, now has 20 employees
Sovereign Wealth Funds: Power vs Principle (March 5, 2008)
Authoritarian states use their Sovereign Wealth Funds (SWFs) to undermine US hegemony, argues this openDemocracy article. To protect the Western model of global capitalism, the US seeks to stem the fall of the Dollar. The Gulf States [and China] are offering help by dispensing their SWFs – but investment from these state-owned savings entities is help in disguise. Where nations offer SWF resources to the US, they seek, for better or for worse, to challenge US international influence in the midst of a financial crisis.
If we were not now seeing the meltdown caused by
other absurd theories – such as that Wall Street
would be self-regulating if it were just left
alone – I might reject this article as sour
grapes. But we are now witnessing one of those
moments in history that seem sent to remind us
that neither intelligence nor education offer any shield against folly.
The Economist Has No Clothes
Unscientific assumptions in economic theory are undermining efforts to solve environmental problems
By Robert Nadeau
The 19th-century creators of neoclassical economics-the theory that now
serves as the basis for coordinating activities in the global market
system-are credited with transforming their field into a scientific
discipline. But what is not widely known is that these now legendary
economists-William Stanley Jevons, Léon Walras, Maria Edgeworth and
Vilfredo Pareto-developed their theories by adapting equations from
19th-century physics that eventually became obsolete. Unfortunately, it
is clear that neoclassical economics has also become outdated. The
theory is based on unscientific assumptions that are hindering the
implementation of viable economic solutions for global warming and other
menacing environmental problems.
The physical theory that the creators of neoclassical economics used as
a template was conceived in response to the inability of Newtonian
physics to account for the phenomena of heat, light and electricity. In
1847 German physicist Hermann von Helmholtz formulated the conservation
of energy principle and postulated the existence of a field of conserved
energy that fills all space and unifies these phenomena. Later in the
century James Maxwell, Ludwig Boltzmann and other physicists devised
better explanations for electromagnetism and thermodynamics, but in the
meantime, the economists had borrowed and altered Helmholtz’s equations.
The strategy the economists used was as simple as it was absurd-they
substituted economic variables for physical ones. Utility (a measure of
economic well-being) took the place of energy; the sum of utility and
expenditure replaced potential and kinetic energy. A number of
well-known mathematicians and physicists told the economists that there
was absolutely no basis for making these substitutions. But the
economists ignored such criticisms and proceeded to claim that they had
transformed their field of study into a rigorously mathematical
Strangely enough, the origins of neoclassical economics in mid-19th
century physics were forgotten. Subsequent generations of mainstream
economists accepted the claim that this theory is scientific. These
curious developments explain why the mathematical theories used by
mainstream economists are predicated on the following unscientific
* The market system is a closed circular flow between production and
consumption, with no inlets or outlets.
* Natural resources exist in a domain that is separate and distinct
from a closed market system, and the economic value of these
resources can be determined only by the dynamics that operate
within this system.
* The costs of damage to the external natural environment by
economic activities must be treated as costs that lie outside the
closed market system or as costs that cannot be included in the
pricing mechanisms that operate within the system.
* The external resources of nature are largely inexhaustible, and
those that are not can be replaced by other resources or by
technologies that minimize the use of the exhaustible resources or
that rely on other resources.
* There are no biophysical limits to the growth of market systems.
If the environmental crisis did not exist, the fact that neoclassical
economic theory provides a coherent basis for managing economic
activities in market systems could be viewed as sufficient justification
for its widespread applications. But because the crisis does exist, this
theory can no longer be regarded as useful even in pragmatic or
utilitarian terms because it fails to meet what must now be viewed as a
fundamental requirement of any economic theory-the extent to which this
theory allows economic activities to be coordinated in environmentally
responsible ways on a worldwide scale. Because neoclassical economics
does not even acknowledge the costs of environmental problems and the
limits to economic growth, it constitutes one of the greatest barriers
to combating climate change and other threats to the planet. It is
imperative that economists devise new theories that will take all the
realities of our global system into account.
Peace is not won by those who fiercely guard their
differences but by those who, with open minds and
hearts, seek out connections. Katherine Paterson