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October 09, 2006

You Know Better

Sigh. Come on Jane Winterspeak, no Democrats are focused on putting Wal-Mart out of business. The anti-Wal-Mart movement -- including Wake Up Wal-Mart and Wal-Mart Watch -- want to see the employer unionize, pay better wages and benefits, and stop choking out their suppliers. No one I know, including me, wants to see the largest corporation in America shutter its doors, deprive all manner of rural areas of their only nearby shopping center, fire 1.3 million people, drive a slew of suppliers out of business, and throw the economy into havoc.

The question is never Wal-Mart: Yes or no? The question is whether Wal-Mart's business practices, when mixed with its gargantuan size and clout, are having negative impacts on the economy, and if so, in what ways they can be changed. It's worth noting here that Wal-Mart itself recently decided its business practices were having negative impacts on the environment and committed themselves to a full-on greening. So obviously there's room for improvement, and the company has not achieve perfection in any and all ways. Nor is it necessarily true that such improvements would force them to lay off large numbers of workers: It's perfectly possible that Americans can handle a couple cents more per item, and better labor standards would allow Wal-Mart to expand into urban and blue areas that have thus far resisted their entry.

That post was written by Winterspeak, not Jane. Thousand apologies.

October 9, 2006 in Wal-Mart | Permalink


Ahem, coff coff.

Written by Winterspeak, not Jane.

Posted by: Tim Worstall | Oct 9, 2006 1:03:53 PM

Well, I for one would like to put Wal-Mart out of business, but that's because I work for Amazon.com :).

Posted by: Nicholas Beaudrot | Oct 9, 2006 1:09:26 PM

Winterspeak qualifies the claim that Democrats are focused on putting Wal-Mart out of business by adding, "or at least require it to lay some people off and/or substitute them with machines." To your credit, you don't deny that the effect of what Democrats would like to see might be the loss of some Wal-Mart jobs, only that it's not "necessarily true that such improvements would force them to lay off large numbers of workers." Maybe not large numbers, but you're not actually contradicting what Winterspeak said. The improvements would likely make Wal-Mart less competitive, in a very competitive market.

Posted by: Sanpete | Oct 9, 2006 1:50:51 PM

The improvements would likely make Wal-Mart less competitive, in a very competitive market.

So, uh, who are those competitors with whom Wal-Mart is just barely maintaining parity by dint of their gripping fingernails? Why, if Wal-Mart paid even marginally better wages to its employees, they would be crushed by the Montgomery Ward behemoth!

Posted by: mds | Oct 9, 2006 1:57:23 PM

Funny, Costco hasn't had any problems remaining competitive...

Posted by: Constance Reader | Oct 9, 2006 2:03:54 PM

Again, why bother?

Posted by: mickslam | Oct 9, 2006 2:14:23 PM

Wal-Mart succeeds on the basis of lower prices on key goods. Generally the difference is actually small overall. Raising prices by a few cents, as Ezra says might be the result of the policies he favors, would obviously reduce the competitive edge with Target, Costco, and a host of smaller competitors who are often close in price and may have some other edge in quality, style, whatever. If you think raising prices wouldn't affect competitiveness, contrary to basic economic theory and common sense, give some kind of argument beyond just showing that some other competitors are still making a profit. The question isn't whether Wal-Mart could still make a profit, it's whether they could make as much profit as they do now.

Ezra suggests they could move into other markets more easily with the improvements he favors. I think they're already doing this quite effectively, and will continue to as quickly as they wish. I've been in the downtown Salt Lake City superstore a few times (a more blue area than you might imagine--very progrssive mayor there), and it's been packed each time, regardless of time of day. There are stores in Southern California urban areas when I visit there too. From their point of view, I doubt what Ezra suggests is a sufficient inducement.

This isn't to say that I'm against the improvements. I'm just pointing out the facts as I see them. It will probably take a good deal of pressure, from a union or boycotts or something, to change Wal-Mart's perceived interests in this.

Posted by: Sanpete | Oct 9, 2006 2:33:51 PM

Yea, you don't want Wal~Mart out of business, almost everything you say is a plea for nationalizing the firm. Forced benefits, forced wages, etc. You don't want them out of business, you want to replace welfare with Wal~Mart.

Posted by: Guy Montag | Oct 9, 2006 3:33:22 PM

Ezra, you don't want Wal Mart not to be... you just want them not to be Wal Mart. But your wish is almost as fanciful as the notion that Wal Mart could cease to exist tomorrow. There just aren't a lot of economically feasible ways for Wal Mart to do the kind of things you, and others, want to see happen. Increased wages and health benefits have large costs associated with them. Changes to how they work with their supply chain would be evn more so. While Wal Mart may want to expand into more urban areas and more of the northeast, that's not necessarily good business for them, because those markets have more customers who choose not to shop solely for price, but for less tangibles like style and coolness. That's Target's market, not theirs.

I think Wal Mart's curse comes from being public. Tied to an endless demand for an ever increasing bottom line, Wal Mart has few choices left in how to significantly expand profitability. The supply chain is almost maxed. Thw rokers are about as low as you can go, and with the "havey part time" plan they're executing, that's about as far as they can race to the bottom (and we'll see if there's a workforce for it). As someone with a good bit of retail experience, I've rarely seen publcily traded retailers survive long term. Mostly they lose their minds and/or merge. Look at Proffits/Saks, or the long sad history of the other major department stores (now almost all Federated, but formerly May, Allied, and others). There are other examples, such as electronics retailers. Wal Mart is on the brink of losing its mind - chasing Target's customers, raising its prices, and dismissing much of its experienced store sales force (i.e. the net effect of its part time plan). You may not need to wait for Wal Mart not to be Wal Mart; but a failing Wal Mart could start a massive downward spiral.

I don't believe activists want Wal Mart out of business, but I also think that many activists betray their distrust of retailing, and big business more generally with their anti-Wal Mart arguments. The net effect is that their proposals migt not kill Wal Mart iommediately, but they would be part of the pressure on Wal Mart that could lead to a huge reversal of their fortunes. And that may be where the natural business cycle takes them anyway. I just hope I'm not standing too close when the storm hits, cause it will be a big old mess.

Posted by: weboy | Oct 9, 2006 4:34:46 PM

Sanpete, I protest: I've lived in downtown SLC (a block north of the temple), and it doesn't seem like the kind of labor-friendly, dense, urban area that Ezra's talking about. It's still very car-dependent, and the streets downtown are effectively seven-lane highways with traffic lights (a legacy of Brigham Young's unusual city planning I believe).

I also quibble about the Wal-Mart being downtown; when I think downtown I think ZCMI.

Posted by: Matt Weiner | Oct 9, 2006 5:04:37 PM

In re the "WMT does not exist without abusing workers, governments and suppliers" line, hooey. You don't even have to argue: punch up TGT and COST on your screen and tell me why they can exist without WMT's last-two-percent misbehavior. Their margins are no great shakes (especially COST's), but they both make money.

I think you get close to the answer when you blame WMT on being public. TGT and COST are public, too. The difference is that WMT has the Walton family corporate culture. The Waltons, from old Sam to the "death tax" heirs, have a very different view of the world than the Daytons or Sinegal.

I don't get too exercised about what WMT does to suppliers; that's capitalism. However, when they take advantage of government and worker, I do. The former should take care of itself, and of the latter as well -- which is why the subject comes up on fundamentally political blogs like Ezra's. This is not Trader's Insights.

Posted by: wcw | Oct 9, 2006 6:06:28 PM

Wal-Mart's having massive problems moving into urban areas. That's not a theory of mine -- it's the focus of their current business strategy, a major part of their organic push, and a constant topic in the WSJ. SLC isn't quite the point.

As for the rest of it, you're right: I want to do things that'll make Wal-Mart less competitive. I want to do them because I believe Wal-Mart has, in part, achieved such competitive advantage by defying the unlegislated contract that large firms will pay well, offer decent benefits, work cooperatively with suppliers, and possibly even accept some level of unionization. Ensuring that businesses operate in a way that's not deleterious to the country is, I think, largely what government is for.

Posted by: Ezra | Oct 9, 2006 6:23:35 PM

Yeah, the same people who accuse us of wanting to destroy Wal-Mart brick-by-brick store-by-store are the same people who do literally want to destroy unions.

Pretty damn annoying.

Posted by: Matt Singer | Oct 9, 2006 6:26:09 PM

"Written by Winterspeak, not Jane."

Posted by: Tim Worstall

Well, everything written by 'Jane Galt' is presumably written by Megan McArdle. A second penname isn't all that unlikely (note: I'm not making a terribly important point here, just pointing out that anybody who uses a Randite penname deserves at least *some* ridicule).

Posted by: Barry | Oct 10, 2006 1:18:09 PM

"Yeah, the same people who accuse us of wanting to destroy Wal-Mart brick-by-brick store-by-store are the same people who do literally want to destroy unions.

Pretty damn annoying."

Posted by: Matt Singer

If you assume that the right is one big classic case of Freudian projection, what they say makes far more sense. The only reason that they aren't already doing 10x what they accuse the left of doing, is that they might not have had a chance to do so yet.

Posted by: Barry | Oct 10, 2006 1:20:34 PM

We know you don't want to destroy Wal-Mart. You are just misguided in thinking that Wal-mart paying higher prices for goods will somehow benefit Americans.

Posted by: Adam Herman | Oct 13, 2006 4:47:34 PM

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Posted by: Ryan | Jul 3, 2007 10:54:58 PM

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