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?

[discostu]

The boots we had on the ground in the USSR when it fell belonged to VPs of McDonalds Coca-Cola and Levis (the black market trade in Levis in the USSR was legendary, and their books have been crap ever since the wall came down). Trade played a role in it, there can be no doubt of that, if people are willing to wait in line for 3 hours for a BigMac you can bet these people are ready for a major change.

[presidio9]

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?

That's not what I said, but it's close. The radiologist has no effect on our economy if he stays in India. If he immigrates, he has a positive effect on our economy, get it?

[Cacique]

bttfl

[Holly_P]

Hillary Clinton, Board of Directors 1986-1992.

G.W.B.- 1989 Owner Texas Rangers (Baseball)

Does this means he is just representing the interest of the Texas Rangers now?

Hillary has bigger fish to fry than representing the interests of Wal-Mart.

[lelio]

get it?

I suppose if you look at sending money that would of gone to rich US citizens halfway across the world, where its not going to be spent in this country on a house, cars, etc, as having "no net effect" then I suppose I do get it.

[DManA]

After you've read all my posts for 5 years, then you will be qualified to judge what I get and don't get.

[discostu]

No money is being sent over. Radiologist in India aren't doing anything to radiologists in America. You can't do radiology thousands of miles away, the radiologist is the guy that sticks the plates in the X-Ray machine puts the thing up to your chest and hides behind the brickwall before taking pictures of your insides. It would take a really expensive waldo system to offshore that work.

[AreaMan]

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,... blah, blah, blah, ('blahs' added for sarcastic effect)

I understand your point now. I didn't read your post carefully enough.

But riddle me this caped crusader...If I own an HMO and I can import INDIAN radiologists on visas and have them work for a fraction of what the American born Indian radiologist costs me, does 'that' not affect our economy?

Or, if I can have a Radiology TECH shoot some film and then email the shots to Bangalore and have them read there for cheaper, does that not affect our economy?

[presidio9]

I suppose if you look at sending money that would of gone to rich US citizens halfway across the world, where its not going to be spent in this country on a house, cars, etc, as having "no net effect" then I suppose I do get it.

You are making zero sense so I am going to help you out: Radiologist is a terrible example because they must do their work "on site." Protectionists fare a little better when they stick to programming jobs.

[presidio9]

But riddle me this caped crusader...If I own an HMO and I can import INDIAN radiologists on visas and have them work for a fraction of what the American born Indian radiologist costs me, does 'that' not affect our economy?

If the hospital across town is paying six times as much, how long do you think you are going to to hang on to your bargain basement radiologists.

Or, if I can have a Radiology TECH shoot some film and then email the shots to Bangalore and have them read there for cheaper, does that not affect our economy?

Hmmmm.... seems to me like what the TECHs are really doing is fleecing us. They get paid $300k/yr for developing film? Where do you suppose that money comes from?

[Cooter]

The smiling emoticon at the end of my post was meant to indicate that my answer wasn't very series. I'll use the </sarcasm> tag next time.

[AreaMan]

If the hospital across town is paying six times as much, how long do you think you are going to to hang on to your bargain basement radiologists.

They only have to import their own bargain basement radiologist and the the race to the bottom is on.

I am not a protectionist but I think there is a middle ground between Buchanan-like protectionism and the economic "bend over and grab your ankles" that is peddled as "free trade." I posted a piece by Robert Locke on Rational Trade (http://www.freerepublic.com/focus/f-news/1036196/posts)

[lasereye]

Comparative Advantage can be explained in a few pages and less than fifteen minutes of time

Comparative Advantage is beyond the comprehension of the anti-free trade types.

[Holly_P]

Zinged right over my head..

[jern]

for later

[panaxanax]

“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.”

Your reply: 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?

He’s got to be kidding!!!!!

The question here really should be do you want your emergency CT Brain scan read by someone in India?

If someone dear to me (or myself) is in peril and needs a quick life or death diagnosis, I certainly want to know that that person is “certified” to make that decision.

[presidio9]

They only have to import their own bargain basement radiologist and the the race to the bottom is on.

Then, as you seemed to indicate earlier, current compensation levels of radiologists are not comensurate with their productivity. You don't, by any chance, work in the IT industry, do you?

[El Gato]

And just like before when people thought the cotton gin would end slavery (a machine can do the work of hundreds of people!)

And it, along with some somewhat more "disposable" labor imported from China and Ireland, probalby would have, had not folks on both sides of the issue decided it was something for the government to fix, and right now! It would have been cheaper to buy all the slaves and set them free, than it cost the North to fight the war. The long term result would have been much better than what we have now.

Slaves represented a big capital investement, they had high maintaince costs, and weren't especially efficient, requiring much overhead staff, such as overseers. Micks and Chinks were cheaper, and if you worked one to death, why there was another stepping off the boat to take his place. Something like one Chinaman, or Irishman buried, for every mile of track laid.

[presidio9]

The question here really should be do you want your emergency CT Brain scan read by someone in India?

If someone dear to me (or myself) is in peril and needs a quick life or death diagnosis, I certainly want to know that that person is “certified” to make that decision.

(mentally filing this doomsday scenario next to the "Chinese Slave Laborers")

[lelio]

You can't do radiology thousands of miles away, the radiologist is the guy that sticks the plates in the X-Ray machine puts the thing up to your chest and hides behind the brickwall before taking pictures of your insides.

Even if you don't know what a radiologist does (you apparently have a little understanding, perhaps from 40 years ago), put some thought into it: why can radiologist jobs be exported? Because 95% of their job isn't sticking plates in an xray machine.

You don't need to be onsite for a job that is primarily done by a intern or hospital staff (setting up the patient, etc). A lot of radiologists work from home or in a remote office as they can view xrays over the internet.