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DISSIDENT No. 3


POLITICS AND DEMOCRACY

Everything You Know About Politics

The Thoughtless Orthodoxy

Wal-Mart: The Big Friendly Giant


BOOKS + IDEAS + PROVOCATIONS

Islamic Democracy; An Exercise in Futility?

The Wisdom of Markets Isn't the Wisdom of Crowds

Hunters, Liars, and Philosopher Kings

Modern Economics as a Flight from Reality


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DISSIDENT No. 1

DISSIDENT No. 2


politics and democracy
Wal-Mart: The Big Friendly Giant
BY PIOTR BRZEZINSKI



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ITS MONOLITHIC TICKY-TACKY BOXES LITTER THE countryside, destroying all that is good: the local butcher, greengrocer, and neighborhood bakery. By oppressing workers and squeezing suppliers dry, Wal-Mart drives out small, friendly shops, undermining livable communities and living wages.

Or that’s what the activists would have you believe.

Around the country, the anti-Wal-Mart movement continues to gather steam, making its way into new legislation and Democratic congressional campaigns. Community crusaders, union activists, and liberal politicians have joined together to oppose the latest corporation to “oppress” us. Through a flurry of zoning restrictions and targeted laws, the Lilliputians hope to tie the giant down, or at least hamstring him.

Wal-Mart has become a lightning rod for Americans’ latent suspicions about capitalism. For a country of capitalists, we have always had an ambivalent relationship with the progeny of laissez-faire, from Standard Oil to Microsoft. Simply by offering people what they want — low prices, wide selection, and decent products — the Beast from Bentonville has become this generation’s corporate bête noire.

So activists pamphlet, picket, and legislate against Wal-Mart. Meanwhile, Wal-Mart shoppers are voting with their feet. Despite having the aesthetic appeal of a disorderly warehouse, Wal-Mart offers impoverished (and not-so-impoverished) people a way to lift their standard of living.

The average American family saves $2,300 a year by shopping at Wal-Mart. In fact, because of its relentless drive to lower costs, Wal-Mart may be America’s single greatest anti-poverty program. In terms of groceries alone, a study by MIT economist Jerry Hausman found that Wal-Mart’s low prices increase poor families’ effective household income by 6.5 percent. Other studies have found that when a Wal-Mart opens, its mere presence drives down prices in an area by 10-15 percent. Wal-Mart saves U.S. consumers more than $200 billion a year; compare that to the federal government’s $33 billion food-stamp program.

DOES WAL-MART HURT ITS EMPLOYEES?

The behemoth’s workers benefit as much as consumers do — even apart from the fact that many of its workers shop where they work, and can therefore buy vastly more for their wages than if Wal-Mart didn’t exist.

Although Wal-Mart workers, like all of us, would surely prefer higher wages and better benefits, they too, have voted with their feet, by choosing to work at Wal- Mart. It’s hard to claim that a corporation oppresses its employees when 11,000 people apply for 300 positions there, as happened when a Wal-Mart recently opened near Chicago. If Wal-Mart were truly undervaluing employees’ labor, people wouldn’t line up for the jobs it offers.

Is it fair that many people are so poor that they flock to the chance to work, or shop, at Wal-Mart? No. But legislating against Wal-Mart doesn’t do anything to alleviate the unfairness of poverty. Quite the opposite: it deprives the poor of access to jobs and low prices. Poverty is endemic, but Wal-Mart actually helps address this unfairness by making its customers and workers richer than they would otherwise be.

On the other hand, excluding Wal-Mart exacerbates inequality by forcing everyone, including the poor, to pay for the luxury of local shops. The thoughtless “Wake Up Wal-Mart” campaign accuses the retailer both of “hurting other businesses when it comes to town” — through its low prices — and of harming the poor through low wages (which seem to be higher than those offered by the existing stores). Somehow the contradiction between protecting expensive local shops and helping the poor escapes these activists.

With similar obliviousness, many activists sympathize with Wal-Mart’s suppliers, who are allegedly coerced into selling their products to Wal-Mart at too-low prices. In what other context would leftists protest lower prices — the equivalent of higher wages — in order to help “corporations” preserve their profits?

Curiously enough, these community guardians don’t trust their fellow citizens to recognize the merits of the local grocery store. Every time Wal-Mart opens a Supercenter, it has to win over every single customer who passes through its doors. A Wal-Mart can lure people away from where they used to shop only if it gives them something better — or cheaper. So Wal-Mart opponents try to replace the quasi-democracy of the market – where customers or workers can “vote” Wal-Mart out of business by refusing to shop or work there – with zoning restrictions imposed by planning councils or town referenda. As the Wal-Mart Watch “battleplan” proclaims, “the whole fight comes down to winning a majority vote on the planning board of the city council.”

THE WRONG KIND OF DEMOCRACY

Unfortunately, political interventionism empowers economically illiterate voters, and equally ignorant politicians. The same consumers and workers who benefit from Wal-Mart when they shop or work there don’t necessarily understand how capitalism functions. Most people have only a limited knowledge of economics, and overlook the indirect consequences of meddling with the market. In this case, voters are tempted to simply order the retailer to pay its employees more, ignoring the effect of artificially high wages on employment and prices.

Moreover, political restrictions on Wal-Mart necessarily imposse a winner-takes-all outcome on poor and rich alike. In a referendum, 51 percent of the electorate can inflict its fears on everyone else. Markets, in contrast, satisfy a wide range of desires. If most people prefer intimate local stores, then they can shop there — if they’re willing to pay higher prices. The minority gets to shop at Wal-Mart — if they’re willing to tolerate the flourescent lighting.

But let’s not paint a utopian picture of Wal-Mart. It confers its immense benefits on consumers and employees by out-competing other retailers, which hurts those stores’ owners and employees (at least if the employees are earning more than they would at Wal-Mart, which usually isn’t the case). Although many smaller retailers thrive in Wal-Mart’s shadow by offering something that Wal-Mart doesn’t, like higher-quality products or a friendly atmosphere, most retailers can’t compete with Wal-Mart on price.

Nor could horse-drawn buggies compete with cars, or plasterers with drywall. Such is the nature of capitalism: “more, better, and faster” renders “less, worse, and slower” obsolete, because “more, better, and faster” helps more consumers and employees. As cold-hearted as it sounds, capitalism’s “creative destruction” harms the people who are suddenly unemployed only by benefitting everyone else. We can transport ourselves faster with cars, build better houses with drywall, and buy cheaper goods at Wal-Mart.

Alternatively, anti-Wal-Mart activists might argue that the whole ethos of materialist progress is spiritually vacuous or emotionally unfulfilling. Perhaps materialism is just a hedonistic treadmill; maybe a simpler, slower, poorer life would make us happier. That critique of Wal-Mart, however, demands the rejection of the whole modern world, not just the world of big-box retailers. The problem — if it is a problem — is neither Wal-Mart, nor capitalism, but our own materialistic desires. And the solution is not political. It is withdrawal from the economic maelstrom — an option open to anyone who doesn’t care about material comforts.

Few anti-Wal-Mart activists hold such radical convictions. They aren’t living out at Walden Pond. They partake of the same consumerist world as the rest of us, and rail against “corporations” like Wal-Mart not on the grounds that corporations cater too well to unhealthy appetites — but on the grounds that they don’t cater to them well enough. Thus, they charge Wal-Mart, and implicitly capitalism, with inhibiting our quest for material goods (by underpaying workers, etc.). This charge flies in the face of all experience of capitalism, ever since it unleashed on the world the luxuries most of us now take for granted. As Adam Smith noted, the butcher and baker do a very good job of giving customers what they want, and by doing so, the butcher and baker (and the Wal-Mart “associate”) improve their wages.

Although anti-Wal-Mart crusaders think they are defending the poor against low-paying jobs, they miss the fact that low-paying jobs are better than the alternative: no jobs or even worse-paying ones. Forcing Wal-Mart to raise its wages or offer more expensive health-care benefits means forcing up its prices. That, in turn, hurts poor consumers, diminishes Wal-Mart’s competitive advantage, and thus depresses its ability to employ more people. It does the poor little good to mandate high wages and benefits if it means that fewer jobs will be available, and that the prices paid by those with jobs will be higher.

If they remain unconvinced, Wal-Mart’s opponents should relax. What the market gives, the market will eventually take away; sooner or later, the giant will stumble, and a superior competitor will emerge, offering even lower prices or better service. Until then, however, Wal-Mart will continue to succeed only if it gives consumers and workers the goods and the jobs that, in the real world of scarcity and unemployment, they want.

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Piotr Brzezinski is a senior at Harvard and the Editor in Chief of The Dissident .

 

 

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