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Monday, Jul 22, 2024
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Economic Illiteracy Rampant in Coverage of Circuit City, CompUSA

Remember the hue and cry in March when Circuit City announced its crass policy of suddenly firing its high-priced sales force, and then offering to hire them back at significantly lower salaries?

The press and the public went nuts about that. Condemnations were universal. After all, the layoff policy was indefensible, right?

Let’s compare Circuit City’s drastic cost-cutting approach with a similar struggling electronics business, CompUSA. At the end of February, CompUSA announced it was closing its four San Diego County stores, firing hundreds of employees. With its full-service overhead (similar to Circuit City), CompUSA decided it could not compete with Fry’s, Wal-Mart, Costco and the Internet. Hardly a murmur of public criticism resulted.

Given the failing business model of both corporations, which policy (if either) deserved condemnation? Making drastic adjustments to try to stay in business, or quitting, firing everyone, boarding up the stores and slinking out of town?

Of course, the Circuit City cost-cutting policy was the one blasted by the press. For too many economic illiterates, somehow there is some perceived fatalistic honor in going out of business, rather than taking unpleasant, dramatic steps to try to survive.


Richard Rider is chairman of San Diego Tax Fighter, a grass-roots taxpayer group. He frequently writes the ballot measures opposing higher taxes and debt.

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