Wednesday, August 30, 2006

Biting The Hand You Shop At

Politics is the art of the impossible. If people like apples but hate apple trees then politicians claim we can have tree-less apples today (or at least after election day). If people like low prices but not Wal-Mart, then politicians tell us it's an easy matter to fix. There's "something wrong" with the free market and politicians have the magic "make it work" button.

AEI recently published a short essay on Delware Democrat Joe Biden who blasted Wal-Mart for supposeably not caring about the middle class. This is a strange claim for a company who relies on the middle class for a good hunk of its business. It's an even stranger claim coming from a party who's constituents shop at Wal-Mart and who's standards of living rise because of Wal-Mart.

Biden, and Democrats like him, are probably thinking people believe in magic. "It's a simple matter to get everything we want. We'll just declare it." But laws aren't spells and even though Wal-Mart (like any firm) could be nicer, no amount of legalese will instantly make it so. Hopefully, people will recognize hurting Wal-Mart hurts them and we can move past all this. Hopefully, people don't believe in magic.

6 comments:

Anonymous said...

David,

Can you provide evidence that it's the middle class which provides "a good hunk" of its business? Judging from the people who are at Walmart those rare times I do visit (a store of last resort) most of the people who shop there are the type of people who would probably have to work there or a place like that.

Also can you provide evidence that the standard of living is increased by Walmart? I have heard of reports telling me the opposite is true.

As for magic, the free market also claims it has the magic power to make things better. How many times have you talked about a free economy being the cure for problems when it is part of the cause of those problems?

Jason

David said...

Jason,

The AEI article I mentioned discusses both those bits of evidence you're looking for. And yes, I've heard the opposite is true. The problem with evidence, especially in the social sciences, is that it's subject to the uncontrolled reality of society. The quality of the study can drastically change the outcome.

It's time consuming, difficult and not always possible to judge a study in all the ways that matter so the story of what's going on also has to work. Most anti-Wal-Mart stories lack a basic understand of economics, needed to get the full picture.

Pro-Wal-Mart stories generally have good economics which basically reduce to more stuff for less increases social totals. Sure some people are hurt, but others are made better. Society as a whole becomes richer.

To many people this seems like magic but it is in fact the best description for how civilizations progress. Nobody says the market makes things perfect (if the market had supposably magic powers, you would hear otherwise). But it makes things better. Not perfect. Better.

But with imperfect improvement comes new challenges, which, in time, the market addresses. Old problems are solved, new ones arise and things get better with each step, but never perfect. Tastes change. The world changes. The adaption continues.

Sometimes economists refer to the market process as a "miracle" not because we actually think it's magic but because the results are so astounding it can seem that way. No one person on the planet knows all the steps to making anything around you, but they exist in abundence. This is because the pricing mechanism conveys information about the world and provides an incentive act on that information. It's amazing, but it's not magic.

SmoothB said...

David,

Well said. But I'm not sure that very many of Joe Biden's voters shop at Walmart -- they're more of the "let them shop at Saks" sort of folks, right?

Anonymous said...

David

If evidence in social science studies is so shakey then how can you trust the claims Walmart helps society? You seem to forget, or discount, not all damage is economic. There is more to society than economics. How can society become richer when one town is a clone of another? There's character, charm, unique characteristics that differenciate one town from another. When Walmart destroies these things, one town becomes too much like another. Would you rather have an excellent economy in towns that are virtually the same from one corner to the other, or a good economy with civic pride? How can any place feel like home when it looks like every other place?

If you scoff at the idea, look at malls, Best Buys, and Walmarts. The last two make a large effort to make one look like their other stores. I could walk into the one here and it would look the same as the one in Iowa. Walmart WANTS that. Go to Pella, Iowa. They have local laws that require businesses to keep the look of the town. The Pizza Hut obeyed, the gas stations obeyed, the Dairy Queen followed the law and was done up like a barn. But the Walmart fought to keep the same bland generic sterile look it keeps at its other thousand plus locations.

"Sure some people are hurt"
How many is "some" and how badly are they hurt? I don't just mean financially, but physically and mentally as well. Walmart is not known for having good health insurance and has been known to treat their employees badly. I heard from a Walmart employee that the manager let someone die of a heart attack rather than scare customers with an ambulance. There are already stories in the news about how Walmart locked employees who punched out in the store to force them to work unpaid overtime. And how was Walmart punished for this? How can Walmart be trusted to obey the law or do you think they should be given a free pass because they are "good" for the economy.

SmoothB,
I'd like to see you back up your claims that Joe Biden voters perfer Saks. And David, I'm still waiting for proof that the middle class is a large part of Walmart. Most of the people I've seen there look like they can't afford to shop anywhere else.

Jason

David said...

The basic idea that people are free to choose tells me that Wal-Mart helps society.

For example, suppose people in the community really didn't like Wal-Mart in their town because they are ugly. Then why would they shop there? If we see Wal-Mart staying in business despite these arguments, this tells us that some people care much more about low prices than pretty buildings. (Actions, not words, reveal preferences.) We have to consider both sides.

One could (correctly) point out that some people, the people that hate the building enough not to go there, still have to feel the cost of the building's existence. (We call this an externalized cost.) But that's still not grounds for a law just yet.

Wal-Mart wants their buildings shaped the same way because it's cheaper. If these detractors would pay the company the difference needed for a redesign, then both parties could win, here, instead of one organization telling another how to live their lives.

You also asked how a society can become richer if all towns are the same. This is a common but ultimately lightweight question, one asked by tourists and answered by natives. Towns become richer because they offer more choice for residents. Society, then, is richer because under ordinary circumstances, most people are residents.

The stories you bring up about Wal-Mart are new to me (except the locking one). The other ones, especially the heart attack one, seems a bit too outrageous to be so simple, even indeed there is even a sliver of truth to them. However, I beg you to ask yourself the following pair of questions:
-If the work is so bad, why do people work there?
-If it is because they have no better option, then why is it bad that Wal-Mart is offering their best option?

It's unfortunate people are in a position where their best option is pretty lousy but the only answer I ever hear is changing the laws. Wave a wand and things will be better. Again, I don't believe in magic.

Anonymous said...

"Wal-Mart wants their buildings shaped the same way because it's cheaper. If these detractors would pay the company the difference needed for a redesign, then both parties could win, here, instead of one organization telling another how to live their lives."
First, isn't the Walmart organization telling the town how to live their lives?
Second, how much would it cost to alter the building's appearance? Let's say $20K. So the first 4 million items would be increased by a penny (giving a generous 50% in taxes). Now I'm sure they can sell 4 million items quickly and they won't loose customers over it.
Third, and you forgot this in your slumlord's post way back when, is that an ugly Walmart will negitively affect property values. So why should their neighbors be hurt financially for Walmart's benefit?

"If it is because they have no better option, then why is it bad that Wal-Mart is offering their best option?"
Because a bad option is still a bad option even it's the best of the worst.

Passing laws is the best recourse people have. With only a few exceptions corporations don't listen unless you hurt them financially.

I found some links you may find interesting:
http://moneycentral.msn.com/content/Insurance/P64954.asp
http://www.comped.net/opinions_recentdisp.php?ID=3518
http://www.nytimes.com/2004/01/18/national/18WALM.html?ex=1389762000&en=659ee9a0025b35de&ei=5007&partner=USERLAND
http://walmart.nwanews.com/wm_story.php?paper=adg&storyid=163190
http://www.pww.org/article/view/4330/1/187/
http://www.expertlaw.com/forums/showthread.php?t=5107
http://www.dailykos.com/story/2005/4/4/124346/6066
http://members.aol.com/walmopboy/abuse/wt49.htm
http://www.youareworthmore.org/node/96
http://www.dailykos.com/story/2005/8/19/0579/63319
http://www.mv-voice.com/story.php?story_id=1364
http://walmartwatch.com/blog/archives/national_media_continues_focusing_on_wal_mart_memo/

The basic flaw in the arguement of Walmart's being a force of positive economic change is that they let other people fix the problems they create. They may save money and "pass the savings onto you" by giving out lousy health insurance, but that just means our tax dollars have to make up the difference.

"You also asked how a society can become richer if all towns are the same. This is a common but ultimately lightweight question, one asked by tourists and answered by natives. Towns become richer because they offer more choice for residents."
How does that make up for the cultural loss? I don't think this is a lightweight question. We're both natives of Iowa. How often would you go back if it weren't for family? Where is the sentimental value in your claim of "more choice"? How does sentimental value fit into anything economically when it can't be measured?

Unfortunately all people see is the short term gain and ignore the long term cost.