Monday, February 28, 2005

Faber-Mart

CNBC re-aired David Faber's two-hour special, The Age of Wal-Mart, Sunday and for the first time I saw it (I’ve never heard about it until now). Overall, I got the impression that the documentary was slightly slanted against Wal-Mart for two reasons. The first is simply that on two instances, the voice-over referred to the company’s goal of “world domination.” Faber’s word choice and tone was inappropriate; “world domination” can only be practiced by governments and evil geniuses. It requires the use of force, something Wal-Mart doesn’t have.

The absence of a core argument in favor of the company also rubbed me the wrong way (though I should blame Wal-Mart officials for that). While there was lots of talk about stores Wal-Mart drives out of business, there was nothing on the retail stores Wal-Mart encourages. The logic is simple: because Wal-Mart saves its customers money, people have more money to spend on other things. Because Wal-Mart can’t sell everything, completely separate companies get a boost.

For example, while Wal-Mart sells books, DVDs and music, selection of those things is very limited. These limitations are extended because the chain is willing to not sell certain titles. So while mom-and-pop hardware, grocery and electronic stores are run out of business, mom-and-pop book, movie and music stores (appropriately stocked) are enhanced. The outrage by these competitors isn’t so much generated because their businesses might close but because they aren’t willing to adapt to the changing business climate.

That’s Wal-Mart’s great contribution to society (not “keeping inflation down” as an interviewed retail economist said). Because they are so efficient, people as a whole get more. This is how economies grow.

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