Thomas Sowell: Is Wal-Mart Good for America?

Capitalism Magazine ^ | December 9, 2003 | Thomas Sowell

[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?

[Kay Soze]

Ping for my walmart file

[AreaMan]

..."radiologist in India makes $20k a year compared to the $300k one makes here. What is that radiologist that just lost his job going to do that's "more beneficial to our economy"?

Assuming that radiologist stays in India, he has zero effect on our economy. Assuming the higher wage entices him to move to the US, we just gained a skilled radiologist.

Huh? Did I miss something here? Putting a $300k/yr radiologist out of work to replace him with a $20k/yr radiologist has "zero effect on our economy?" You're kidding right?

[lelio]

Last time I looked, Castro was still dictator of Cuba.

I think you missed my point: sanctions and "trade" don't bring down dictators.

[discostu]

Radiology isn't a job you can remote, and he's not going to stay a $20/k radiologist once he gets here, he might sign on to his first job that way but at some point somebody will explain to him that the job goes for 150 times that and he'll be bucking for a raise pretty quick. Zero effect on the economy.

[CobaltBlue]

Well, your point has been refused on this thread by others who pointed out that freer trade was, in part, responsible for the fall of the Iron Curtain, and if you know your history at all, you'd realize that China is freer than it was, which doesn't mean it's free.

The hard-line nationalists and Communists in China hate capitalism as much as you seem to.

[Kay Soze]

"Trade-offs have been with us ever since the late unpleasantness in the Garden of Eden."

May be used for the homosexual agenda in a free nation issue as well.

I may include this Sowell phrase in my tag line when a democrat is elected president.

[vbmoneyspender]

His point is that unless there is transpacific ferry that transports American patients to India and back again -- a radiologist working in India has zero affect on American radiologists.

[presidio9]

Huh? Did I miss something here? Putting a $300k/yr radiologist out of work to replace him with a $20k/yr radiologist has "zero effect on our economy?" You're kidding right?

Apparently, you did miss something. The going rate for radiologists is $20/yr IN INDIA. Here in America, they make $300/yr. As long as the Indian radiologist preferrs to remain IN INDIA, he is having no effect on the economy. If the big bucks entice to to immigrate to the US, even better. He is a skilled laborer. If he displaces a less qualified American radiologist, I can live with that (literally). If I ever get cancer, and need a radiologist, I want the best available doctor, not the best American one.

[CobaltBlue]

If one radiologist is paid $300K, does that mean that two radiologists are paid $300K each?

Maybe the reason you hate capitalism is because you don't understand it.

[Cronos]

brand loyalty isn't that strong. Most folks that head to Wal-mart have gone a long way and if they don't get brand X may be satisfied with brand Y. That's how all these here Chinese Hoowei fridges are sellin'

[discostu]

Not me not me, I'm responding to the anti-capitalists.

[annyokie]

What is that radiologist that just lost his job going to do that's "more beneficial to our economy"?

Start a start-up business, as did my brother-in-law. He refurbishes X-ray cameras, cassettes, etc. To the tune of about $3Million a year and employs 14 people. Expansion is underway, as well.

Where there is a will, there is a way.

[sergeantdave]

Your government owes you nothing.

---

The government owes me "Rough men standing guard in the night so I may sleep safe." I paid for that with my taxes. Everything else free enterprise can do better.

[presidio9]

There you go stinking up for me you big softie. You are taking this Christmas spirit thing too far.

[lelio]

The hard-line nationalists and Communists in China hate capitalism as much as you seem to.

Lost your job at the Dept of Rhetoric? If you want to go on believing that McDonald's going up in Moscow made anything beyond a 1% cause in the downfall of the USSR you can tell the people of Iraq that buying their oil actually helped them overthrow Saddam.

and if you know your history at all, you'd realize that China is freer than it was

Freer since it became a communist country maybe. That is, if you know your history at all.

[discostu]

Brand loyalty can be a strong force for various reasons. I generally don't go to WalMart because they don't sell the only brand of kitty litter our cats aren't alergic to (having multiple pets with similar but non-overlapping alergies really blows), Target has it so I go there. I don't go to Fry's grocery stores because they are late adopters of new products that I want to try (oh and the clerks are morons that take forever). I still see plenty of Fords on the road even though not one single Ford has been judged best of class for 20 odd years. Brand loyalty can be undercut but it's a swamp retail businesses step in lightly, especially if they're already selling a particular brand and making a lot of money from it (which if they're responsible for 30% of that brand's sales they would be); it's a different thing to kick a popular product out of your store than never bring it in to begin with.

[presidio9]

The government owes me "Rough men standing guard in the night so I may sleep safe." I paid for that with my taxes. Everything else free enterprise can do better.

Fair enough.

[discostu]

When you're right you're right, call it a broken clock moment ;)

[lelio]

As long as the Indian radiologist preferrs to remain IN INDIA, he is having no effect on the economy.
...
If he displaces a less qualified American radiologist, I can live with that (literally).

I'm trying to understand your logic here: the $20k a year radiologist doesn't have an effect on our economy only if he stays in India?

[CobaltBlue]

Please don't hold yourself out as a "freedom loving libertarian." It's false advertising.