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Thomas Sowell: Is Wal-Mart Good for America?
Capitalism Magazine ^ | December 9, 2003 | Thomas Sowell

Posted on 12/09/2003 1:51:27 PM PST by presidio9

"Is Wal-Mart Good for America?"

That is the headline on a New York Times story about the country's largest retailer. The very idea that third parties should be deciding whether a particular business is good for the whole country shows incredible chutzpa.

The people who shop at Wal-Mart can decide whether that is good for them or not. But the intelligentsia are worried about something called Wal-Mart's "market power."

Apparently this giant chain sells 30 percent of all the disposable diapers in the country and the Times reporter refers to the prospect of "Wal-Mart amassing even more market power."

Just what "power" does a sales percentage represent? Not one of the people who bought their disposable diapers at Wal-Mart was forced to do so. I can't remember ever having bought anything from Wal-Mart and there is not the slightest thing that they can do to make me.

The misleading use of words constitutes a large part of what is called anti-trust law. "Market power" is just one of those misleading terms. In anti-trust lingo, a company that sells 30 percent of the disposable diapers is said to "control" 30 percent of the market for that product. But they control nothing.

Let them jack up their prices and they will find themselves lucky to sell 3 percent of the disposable diapers. They will discover that they are just as disposable as their diapers.

Much is made of the fact that Wal-Mart has 3,000 stores in the United States and is planning to add 1,000 more. At one time, the A & P grocery chain had 15,000 stores but now they have shrunk so drastically that there are probably millions of people -- especially in the younger generation -- who don't even know that they exist.

An anti-trust lawsuit back in the 1940s claimed that A & P "controlled" a large share of the market for groceries. But they controlled nothing. As the society around them changed in the 1950s, A & P began losing millions of dollars a year, being forced to close thousands of stores and become a shadow of its former self.

Let the people who run Wal-Mart start believing the talk about how they "control" the market and, a few years down the road, people will be saying "Wal-Who?"

With Wal-Mart, as with A & P before them, the big bugaboo is that their low prices put competing stores out of business. Could anyone ever have doubted that low-cost stores win customers away from higher-cost stores?

It is one of the painful signs of the immaturity and lack of realism among the intelligentsia that many of them regard this as a "problem" to be "solved." Trade-offs have been with us ever since the late unpleasantness in the Garden of Eden.

How could industries have found all the millions of workers required to create the vast increase in output that raised American standards of living over the past hundred years, except by taking them away from the farms?

Historians have lamented the plight of the hand-loom weavers after power looms began replacing them in England. But how could the poor have been able to afford to buy adequate new clothing unless the price was brought down to their income level by mass production machinery?

Judge Robert Bork once said that somebody always gets hurt in a court room. Somebody always gets hurt in an economy that is growing. You can't keep on doing things the old way and still get the benefits of the new way.

This is not rocket science. But apparently some people just refuse to accept its logical implications. Unfortunately, some of those people are in Congress or in courtrooms practicing anti-trust law. And then there are the intelligentsia, perpetuating the mushy mindset that enables this counterproductive farce to go on.

This refusal to accept the fact that benefits have costs is especially prevalent in discussions of international trade. President Bush's ill-advised tariff on foreign steel was a classic example of trying to "save jobs" in one industry by policies which cost far more jobs in other industries making products with artificially expensive steel. Fortunately, he reversed himself.

Is it still news that there is no free lunch?


TOPICS: Business/Economy; Culture/Society; Editorial; Miscellaneous; News/Current Events; Philosophy
KEYWORDS: globalization; protectionism; thomassowell; trade; walmart
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To: presidio9; Cooter
Can you name the senior Senator of Walmart?

Well John Walton kicked in $100K to the RNC in '02, so I guess it must be Frist.

101 posted on 12/09/2003 3:51:23 PM PST by Willie Green (Go Pat Go!!!)
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To: DeFault User
Not long ago I reviewed a contract a Carolina hospital has with a radiology practice in California for reading its x-rays. If they can read it in California, they can do it in New Delhi.

Again, it is starting to sound to me like the work done by radiologists is not worth anything like $300k/yr.

102 posted on 12/09/2003 3:51:25 PM PST by presidio9 (Islam is as Islam does)
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To: presidio9
With cheap chainsaws


103 posted on 12/09/2003 3:51:30 PM PST by Porterville (No communist or french)
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To: presidio9
The left is always whining about jobs...how many people does Wal Mart employ? Maybe the Libs should change their mantra to "America needs more jobs with such ridiculously high wages and benefits that the industry can't support them!" Which is, of course, the same as no jobs.
104 posted on 12/09/2003 3:51:45 PM PST by Spok
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To: presidio9
I would think Walter Williams would be brighter, as well as Milton Freidman. He's pretty sharp though.
105 posted on 12/09/2003 3:54:08 PM PST by cowtowney
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To: cowtowney
I would think Walter Williams would be brighter, as well as Milton Freidman. He's pretty sharp though.

I am not going to argue with you except to say that neither tackles the range of issues that Sowell does.

106 posted on 12/09/2003 3:55:52 PM PST by presidio9 (Islam is as Islam does)
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To: presidio9
I agree. I've long said that I'd have his love-child.

Seriously, though, I appreciate him and pray for him. I was stunned to find out his age. He's not a young man, alas. :-(

My kids will read his BASIC ECONOMICS as part of their home-school curricula when they are high-school age, whether I actually home-school full time or not.
107 posted on 12/09/2003 3:57:10 PM PST by ChemistCat (Someone you know is alone and sad this holiday season. Find that person and help.)
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Comment #108 Removed by Moderator

To: discostu
Brand loyalty can be a strong force for various reasons.

I agree. Brand loyalty is strong. Most folks know what stores carry what products and shop accordingly. I've found that Wal-Mart and Costco are large enough that they can get particular products made specially for them. That's the only major difference I see with Wal-Mart and other retailers.

Target decided it didn't want to be a discount store anymore, and I haven't shopped there since. Price rules.

109 posted on 12/09/2003 3:59:19 PM PST by cruiserman
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Comment #110 Removed by Moderator

To: dennisw
Wal Mart and Home Depot have killed tens of thousands of small businesses. This is not healthy. Home Depot has killed regional lumbeyard chains. This is not progress but monopolization.

Actually, you've missed a step in this process. The biggest impact on big-box retailers isn't on "small businesses," but on large department stores and grocery chains. And this previous generation of large retailers had already driven many "small businesses" off the scene years ago.

The example that Sowell uses of the A&P chain is a good one -- A&P secured a huge segment of the grocery store market in the decades after World War I, by offering more products in larger stores, at lower prices than their "mom & pop" competitors. But A&P lost its edge in the post-WWII years, when the rise of the automobile and the growth of refrigeration turned grocery shopping from a daily trip on foot to a neighborhood store into a weekly trip by car to a huge store in the suburbs.

Somehow we all survived that era. And I think we'll survive this one, too.

111 posted on 12/09/2003 4:01:15 PM PST by Alberta's Child (Alberta -- the TRUE North strong and free.)
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To: presidio9
Could anyone ever have doubted that low-cost stores win customers away from higher-cost stores?

Whodathunkit?

It is one of the painful signs of the immaturity and lack of realism among the intelligentsia that many of them regard this as a "problem" to be "solved."

A former professor of mine, an admitted Marxist, had exactly that attitude.

112 posted on 12/09/2003 4:01:17 PM PST by k2blader (Haruspex, beware.)
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To: Porterville

Or maybe its because the guys who used to own lumber
yards in this country were not exactly hard workers?

113 posted on 12/09/2003 4:02:45 PM PST by presidio9 (Islam is as Islam does)
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To: Veracruz
I see you're a prime contender to be Dennis Kucinich's Secretary of Peace.

Not often do posts on FR make me laugh out loud, but that one did. Thanks!
114 posted on 12/09/2003 4:03:27 PM PST by lelio
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To: Veracruz
I see you're a prime contender to be Dennis Kucinich's Secretary of Peace.

There you go with the absolutes. Are you capable of thinking rationally?

115 posted on 12/09/2003 4:03:55 PM PST by presidio9 (Islam is as Islam does)
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To: Veracruz
Uh, I wasn't the one who said McDonald's were turning China into a Democracy.

Neither was I. Why do you keep indicating that I did? My point is that economic freedom and prosperity end up making people want more. There is more than enough historical evidence for this.

116 posted on 12/09/2003 4:05:19 PM PST by presidio9 (Islam is as Islam does)
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To: discostu
But even then their power is limited by brand loyalty

Precisely: Think The New Coke. It flopped big time.
117 posted on 12/09/2003 4:06:05 PM PST by ridesthemiles (ridesthemiles)
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To: discostu
Check your math.
118 posted on 12/09/2003 4:08:25 PM PST by savedbygrace
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To: Alberta's Child
"Sears hired Roebuck and in 1893 the corporate name of the firm became Sears, Roebuck and Co. Business turned out to be very profitable for the company and in the 1890's the mail order industry for Sears, Roebuck and Co. began to take-off. As of 1895, Sears had introduced a mail order catalog that consisted of 532 pages offering shoes, women's garments, wagons, fishing tackle, stoves, furniture, saddles, bicycles, etc. that helped customers in rural areas receive merchandise that they might not be able to receive at local stores."

Damn that Sears!!!http://www.research.umbc.edu/~lindenme/hist102/searshistory.htm

119 posted on 12/09/2003 4:08:35 PM PST by Porterville (No communist or french)
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To: af_vet_rr
For years Wal-Mart was very pro-USA in their leanings for suppliers. Nafta and all that crap made it impossible for them to continue with stringent purchasing policies.

I had a client 11 years ago that wanted to sell to Wal-Mart and it took lots of paperwork and actual visits by their purchasing dept to make them happy the goods were produced here. Today I am not so sure that still is happening. I no longer live there and had to drop the client.
120 posted on 12/09/2003 4:09:07 PM PST by ridesthemiles (ridesthemiles)
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