Saturday, January 15, 2005

Revisiting Wal-Mart, et al.

Riding along with my mother past Wheeling today, we noticed from the highway where they have broken ground for the construction of a new Lowe’s Home Improvement Warehouse. And she immediately began to complain about this monstrosity coming into the outskirts of the downtown, surely to drive out what little small business remains there. Now, what you should know is that there is another recently constructed Lowe’s not 10 minutes drive from this location. Knowing this, I suggested that instead they should have built a Super Wal-Mart since there are none of those for some distance around Wheeling. This threw my mother into what can only be called a “tizzy.”

She denounced Wal-Mart as a corporation that doesn’t pay its workers a living wage, does not provide benefits, etc. Now these are half-truths, but they are not entirely false, either. That said, I tried to explain to my mom the basic economics upon which Wal-Mart operates as a volume discounter, the lack of margin, and so on. I pointed out that the workers she is talking about are nothing by (not that I mean to make light of their livelihoods) cashiers and stock boys, and that this is perhaps not the level of employment that would justify such salary and benefit. And I attempted to explain how Wal-Mart’s clientele are largely working poor and lower-middle class folk who are most greatly benefited from the lower prices Wal-Mart offers – and that these folks typically include the Wal-Mart employees themselves. Mom actually agreed with all of that, more or less, if grudgingly.

But then she stumbled onto the real problem. You see, the City of Wheeling and the County of Ohio, are investing millions of tax dollars to develop this site so that we can beg Lowe’s (or anyone else) to come in and pay petty $6/hour jobs, and only on a 7-year contract at that. That’s not to mention the tax incentives they’re offering in the form of discounts and exemptions. You see, the worry is that Lowe’s will come in, drive out the competition, realize there isn’t enough business to justify two Lowe’s in 10 miles, and then close, leaving what’s left of the downtown industrial quarter absolutely destitute. And I think she’s on to something there.

You see Lowe’s likely wouldn’t build a second facility so close to another one if it had to foot the bill. But since the kindly citizens and businessmen of Wheeling are footing the development bill, and all Lowe’s has to do is plop down a giant cinderblock box, hey why not. And if it doesn’t make a go, the city is contractually obligated to buy it after the seven years. Lowe’s just moves the inventory, and that’s that. Wheeling, on the other hand, is even further behind than when they started, with all the levy debt, and no revenue either from Lowe’s or from their former employees.

Now, I’m all for corporate America. But this kind of collusion is bad for everyone. It encourages bad business practices by alleviating companies of the risks associated with doing business. It’s bad for the city, because that site will either have to be sold (a building that big, to whom?) or re-developed at even greater expense. And it’s bad for taxpayers for sooo many reasons.

It’s not just Lowe’s, by the way. Wal-Mart, Home Depot, Cabellas, and so on are all subject to the same criticism. For my mom’s sake, I think that we would do well to occasionally qualify our pro-business remarks so that people realize that we are speaking of business in purist terms; that in the real world, it doesn’t always go off like that, and that we are ready and willing to be critical of a business that uses the state to pervert the market.


Chris said...

Absolutely Ron. As a matter of fact I believe that this sort of government-corporation collusion is one of the major distinctions that those of a libertarian philosophy need to stress *GREATLY* so as to distinguish themselves in the eyes of the uninformed from crony Republican/"conservatives" if we wish to further our ideas with others.

David said...

Agreement all around, but I don't blame companies. Theya re doing exactly what they are supposed to do: maximize profit within the realm of property rights. I blame the government for giving companies this opportunity to mess around with taxpayer money. This melding of government and business unfortunately leads people to thinking corporations are the evil ones, even though it is government that's giving them the capacity.

An appropriate analogy: this is akin to someone digging a ditch near a river and then blaming the river for flowing into it. Don't blame rivers for acting like rivers; don't blame corporations for acting like corporations.

Anonymous said...

I think the river-ditch analogy would be more appropriate if the river funded the election of the ditch-digger, who then proceeded to dig the ditch right next to the river at the river's request. Despite how much you argue election-funding has nothing to do with ditch-digging, I think the river might be a little more blameworthy in that situation.

But overall, excellent post and comments.