Whenever something happens quite suddenly, there is usually a reason. If a tire suddenly goes flat, there’s probably a nail in it. Clouds may mean rain or snow, and when a store wants to move slow merchandise, they have a sale. When an economy grows, seemingly almost suddenly, there has to be a reason. Ronnie Reagan cut taxes and the American economy took off. The same thing could happen with Donald Trump. We’ll see. But in history, the almost sudden growth of one of earth’s economies, demands a reason. At least to me. My logical reason for China’s growth is rather complex, but I think I can make it simple.
Let’s begin with a man born in 1918. He had many jobs, and was born in poverty. He had brains and a way with people. His brains and personality took him through several meager jobs. With borrowed money, he ended up being a retailer, and becoming the richest man on earth. The man was Sam Walton, who started Walmart and Sam’s Club. Sam became one of Ben Franklin 5 & 10 cent stores’ best franchisees, and soon Sam, decided to go into business for himself. He started his first Walmart (Walton Mart obviously),store in 1962, in Rogers Arkansas, and his personality, brains and patriotism, made him an almost immediate success. Sam had one cardinal rule, and that was, “WE SELL ONLY MERCHANDISE MADE IN AMEICA.” That was it, and no exceptions were made. Sam Walton’s Walmart success, has been unparalleled in retail history. From that humble beginning in 1962, by 1980 there were 276 stores grossing over a billion dollars a year. In 1988, Sam was 70, filthy rich, and he decided to retire. He divided the stock, giving 20% to each of his four kids, and 20% to his wife. Sam’s kids took over and Sam retired. Like all dads, I am certain that Sam instructed his kids, (Jim, Alice, Robson, and John), to keep his business principles intact.
In 1955, China was a backward, communist nation, with virtually no manufacturing or business ability. A strictly hard boiled communist nation. Wages were 50 cents an hour or maybe less, and their GDP was $91.6 billion. For a huge nation with a population of 583 million, simple arithmetical computation will indicate that poverty was widespread…to put it mildly. Walmart stores were selling only American made goods, and Sam would have it no other way. Sam retires, and maybe his kids want to make Sam proud, or better him perhaps. We can only look at what history indicates, but somehow, Walmart, under Sam’s kids, began shopping for merchandise in China. Chinese wages were so low, that Walmart could lower its prices even more, if merchandise could be bought from communist China. When Sam retired and left Walmart to his kids, the ‘big box store’ was unknown, except a small scale of it at Walmarts. The switch from American made goods to Chinese made goods, happened as quick as China could build factories, its communist government got a taste of capitalism, and relaxed some of its rules. Walmart stores lowered their prices, and American factories went out of business. Prices were lower, but more and more factory workers were unemployed, and had little to spend. Within a seemingly short time, Walmart merchandise all seemed to have a “Made in China” label on them. The kids took over in 1968, even though Sam was still alive and healthy. We can only imagine the arguments that went on, but it happened, and Walmart profits and store numbers kept on climbing. What was 100% made in America, now if 10% were made in America, became the norm.
Then, something else happened in American business, and that was mass selling in big box stores. Home Depot started in 1978, Hobby Lobby in 1972, and I am certain that with a bit of research, a link can be found which couples China’s economic growth, with the Walton kids buying in China for Walmarts, and the idea catching on in all American retailing and wholesaling. China’s GDP in 1970, had gone from $91.6 billion to $227.97 billion, and in 2015 it was $6,890,510 billion. There are virtually no big box stores, hardware stores, clothing stores, auto parts stores, and you name it, that don’t have most of their merchandise, ‘Made in China.’ This is only my theory, but like a jigsaw puzzle, all the pieces seem to fit. Sam Walton’s kids got it started, and like a snowball rolling down a steep hill, it gets bigger all the time. Till it crashes? That’s another column.