Does Wal-Mart Destroy Communities?

In a recent poll on the CNN website, viewers were asked the "poll" question of whether or not they believed that Wal-Mart stores were "good" for the "community." Perhaps it is not surprising that a large majority answered "no."

Now, this by itself does not mean much, since these online "polls" are not scientific and reflect only the views of the moment by people who choose to participate. What is more significant, however, was the anti-Wal-Mart content of a speech recently given by Teresa Heinz Kerry, John Kerry's wife and an influential person in her own right. Speaking at a Democratic Party rally, Mrs. Kerry declared that "Wal-Mart destroys communities."

Indeed, Wal-Mart bashing is in vogue. Whether one journeys to the sight of Sojourners Magazine or reads even mainstream news publications, the charges against Wal-Mart abound. According to the consensus of the critics, Wal-Mart is guilty of the following:

Intimidating shoppers by having them "greeted" by an elderly person at the door. (As one writer said, the real purpose of that greeter is to let shoppers know that they are being watched.)

Putting small stores out of business, as shoppers stop patronizing the little "mom-and-pop" boutiques for the big box, thus "destroying" the look of "Main Street" in small towns and cities.

Purchasing low-priced goods from abroad, which puts American workers out of jobs.

Contributing to that allegedly harmful disease known as "consumerism," in which Americans are constantly purchasing goods that the Wal-Mart critics insist that they really don't need. As the bumper sticker of one of my faculty colleagues proclaims: "Mal-Wart: The Source of Cheap Crap."

Of course, what really bugs the critics is that people choose to shop at Wal-Mart instead of the places where they would want people to spend their money. (Activists on both left and right often will invoke the name of the "people" when their real goal is to restrict the choices of those "people.") Yet, while up front I question the real motives of the Wal-Mart haters, it still behooves us to answer the charges using economic logic, since many of the arguments against this chain store also appeal to economics.

In a recent article, "Always Low Wages," Brian Bolton declares that Jesus would not shop at Wal-Mart, since the company's employee pay scale is not up to Sojourners' standards. Furthermore, he all but declares it a "sin" for Christians to patronize the store because it imports cheap goods made by people who make even less money than Wal-Mart employees. As Bolton writes, "lower prices equal lower wages."

Nearly all of us would accept higher payment for our services, and Wal-Mart employees are no exception. Yet, that condition alone hardly makes a company's pay scales illegitimate, as Bolton and other critics contend. If my employer were to double my pay tomorrow (which is highly doubtful), I doubt I would object, although I'm sure that most of my colleagues would see the event in a different light. That Frostburg State University does not make that offer to me does not make my current salary illicit, nor does it make my employer the second coming of Silas Marner.

The point is this: payment for services involves mutually agreeable exchanges. They are not manifestations of power, as some would say. No one is forced to work at Wal-Mart; people who choose to work there do so because they prefer employment there to other circumstances.

At the local Wal-Mart where I shop (contrary to Bolton, I do not believe that shopping at Wal-Mart violates the Holy Scriptures), I have noticed that many employees have stayed with that company for a long time, and there does not seem to be much turnover there. Furthermore, from what I can tell, they seem like normal people, not the oppressed slaves that the critics claim fill the ranks of Wal-Mart workers.

Now, my personal observations hardly constitute proof that Bolton and the other Wal-Mart critics are wrong, but unless they can repudiate the opportunity cost argument, they have ground upon which to stand. Wal-Mart is not engaged in a grand conspiracy to push down wages in any given market, and twisted logic cannot prove otherwise.

For example, Bolton writes that part of the problem faced by recent striking union grocery store workers in Southern California was that Wal-Mart super centers in the area paid lower wages, which placed pressure on the other grocery stores. Thus, he reasons, it was Wal-Mart that ultimately kept workers from receiving "just wages" for their work.

No doubt, Bolton can appeal to the anti-capitalist mentality of many people, but his work stands economic logic upon its head. By paying lower wages, Wal-Mart makes grocery stores like Vons and other places that pay union scale more attractive to workers (although labor unions do not exactly welcome some potential employees with open arms). The success of Wal-Mart does not have to do with the pay scale of its employees, but rather with the perception by consumers that the store will have the goods they want at an affordable price.

Bolton claims that Wal-Mart can charge lower prices and still be profitable because it pays its employees less than do other companies. As anyone with even cursory training in Austrian Economics knows, such an argument is false. As Murray Rothbard points out in Man, Economy, and State, economic profit exists because of temporarily underpriced factors of production. Over time, as the owners recognize their position, they will either refuse to sell their factors at current prices and look to other options, or accept the current price because the opportunity costs of selling to other buyers may be higher than they wish to incur. If it is the latter, then one cannot say that these particular factors are even underpriced, as their owners are not able or willing to do what is necessary to gain higher prices for their employment.

In places like Southern California, where there are numerous employment opportunities, to say that workers are "forced" to work at Wal-Mart for "slave wages" is ridiculous. As noted before, the fact that workers there would be willing to accept higher pay is not evidence that they are enslaved. That they would prefer more to less simply means that they are normal, purposeful human beings.

One can easily dismiss the charge about the "greeter" at the door—unless one truly is intimidated by the presence of a diminutive 60-year-old grandmother. (What I have found is that if I select merchandise and actually pay for it, then no one there bothers me at all. If activists are upset that Wal-Mart does not like individuals to steal goods from their shelves, then they are advocating theft, and one does not have to pay attention to their arguments at all.)

The "Wal-Mart destroys the community" charge, however, needs more attention. It goes as such: Wal-Mart enters a geographical area, and people stop shopping at little stores in order to patronize Wal-Mart. The mom-and-pop stores go out of business, the community is left with boarded-up buildings, and people must leave the small businesses and accept lower wages at Wal-Mart. Thus, while a shiny new store full of inexpensive goods is in the locality, in real terms, most everyone actually is poorer.

Again, these kinds of arguments appeal to many people. For example, all of us have heard of the theoretical owner of the small, independent hardware store who had to close his shop when Wal-Mart or Home Depot moved into his community, then suffer the indignity of having to go to work at the very place that put him on the streets. The former owner has a lower income than before, which is held up as proof that the "big boys" create and expand poverty.

A few items need to be put in order. First, no one forced the hardware owner to close his shop; he closed it because it was not profitable enough for him to keep it open. If the new chain store meant that many of his former customers had abandoned him, that is not the fault of the new store. Instead, consumers faced with choices and lower prices that they had not previously enjoyed freely chose to patronize the new store.

Second, while the owner of the smaller store has suffered a loss of income, everyone else has gained. Third, if the employees of the smaller store go to work at the new chain store, it is almost guaranteed that their pay will be higher than before and they will enjoy new benefits that most likely had not been available to them previously.

Third, the presence of Wal-Mart means local consumers will pay lower prices for goods than before, and also will benefit by having a wider array of available items than they had previously. (And they save on time by being able to stay under one roof while shopping for different items.) Whatever the reason, we can safely assume that consumers in that particular locality are exercising their free choices, choices that they perceive will make them better off than they were before the store existed. Activists may not like their reasoning, but that is irrelevant to our analysis.

Having dealt with the "Wal-Mart" creates poverty argument, we now turn to the more nebulous claim that the chain store "destroys" communities. Now, I have never seen a place that has been severely damaged or "destroyed" by Wal-Mart. (I have seen places that have had their quality of life spoiled by rent controls, "urban renewal," and other statist interventions that so-called activists have championed, but that is another story for another time. Suffice it to say that activists are unhappy that individuals freely choose to shop at Wal-Mart, and they want to restrict their choices in the name of "community.")

In fact, I would like to make a reverse argument; Wal-Mart and stores like it add to the quality of life in large and small communities because they provide consumer choices that otherwise would not be available. Take the area near Cumberland, Maryland, where I live, for example.

Cumberland is something of a time warp, a place that 50 years ago was a manufacturing center and was the second-largest city in Maryland. Today, most of the large factories are long shut down and the population is less than half of Cumberland's heyday numbers. Furthermore, the area has a relatively high unemployment rate and many jobs do not pay very well.

The presence of Wal-Mart and Lowe's (a large hardware store), along with some large grocery chains, however, means that people here can stretch their incomes farther than we would if those stores did not exist. If they suddenly were to pull out, one can be assured that our quality of life here would not improve in their absence. Furthermore, the fact that Wal-Mart and other large stores are willing to locate in smaller and poorer communities also makes these areas more attractive for people who wish to live here but do not want to have to give up all of the amenities of living in a larger city.

Others on this page and elsewhere have dealt with the charge that Wal-Mart destroys American jobs by purchasing goods from abroad, where the goods often are manufactured in what activists call "oppressive" conditions. (In fact, Sojourners elsewhere has openly stated that Third World peoples should simply be supported by American aid, and that the West should do all it can to make sure that the economies of these poor nations do not grow, all in the name of environmentalism. In other words, none of us are poor enough to satisfy the anti-Wal-Mart activists whose real goal is to eviscerate our own standards of living and "turn back the clock" to an era when life expectancy was lower and people generally were more deprived.)

The last objection—that Wal-Mart helps create "mindless" consumerism—is easily refuted by Austrian economics. The very basis of human action is purposeful behavior; to call human action "mindless" is absurd. Consumers at Wal-Mart and other chain stores are not zombies walking aimlessly through the building with glassy stares. They are human beings with needs and desires who perceive that at least some of those desires can be fulfilled through the use of goods purchased at Wal-Mart.

In a free society, activists would have to try to convince other individuals to change their buying habits via persuasion and voluntary action. Yet, the very history of "progressivist" activism in this country tells us a story of people who use the state to force others to do what they would not do given free choices. Yesterday, Microsoft was in their crosshairs; today, it is Wal-Mart, and tomorrow, some other hapless firm will be declared guilty of providing customers choices that they had not enjoyed before. A great sin, indeed.

Having worked for some time in a clothing-related industry when I was in high school, I learned at a fairly young age that the label "Made in the USA" is largely meaningless. There are two reasons for this:

1. Just last week, there was an article posted here about sweatshops in U.S. possessions in the South Pacific (Saipan, Guam, etc.) that only exist to provide textiles for sale in the U.S. The people who work in these sweatshops are no better off than those who work in China or Mexico, but because the factory where they work their 16-hour shifts for 25 cents an hour is in a "U.S. possession," the manufacturer who produces these goods can put a "Made in the USA" tag on their garments just to fool an American buyer who thinks he's keeping a South Carolina textile mill open.

2. Tags that identify the nation of origin of a product usually only identify the point of final assembly. A jacket that is 95% made in China is still considered "Made in the USA" if the buttons are sewn onto it here in the U.S.

Talk about mom and pop and profit margins. A big misnomer. Most mom and pops do not know how to buy wholesale and sell retail. Profit margins are many times less than 30 percent. I have known margins of less than 7 percent (but thats on the wholesale end)

It of course depends on the item being sold and the perceived value. There is a lot of market psychology out here.

Wal Mart of course does operate on lower profit margins, lower than mom and pops because its wholesale prices are less to begin with. I have known businesses being put out of business on the wholesale ed because of Wal Mart reneging on contracts over pennies.

I shop at Wal Mart. I do not regard them as evil. But some of their business practices are cut throat to say the least.

To get back to the Mom and Pops. If Wal Mart can buy 200K units for its store, its going to get a price substantially lower than the local store that can only buy say 20 units. Hence from the get go the wholesale price is lower for Wal Mart and its pricing is reflected against that of the local store. Is that evil? No, but its very frustrating for someone that has products in competition with Wal Mart.

History has proven the Sear's catalog to have been more useful as toilet paper than as a marketing medium.

Afterall, it isn't just coincidence that Sears began to downsize its catalog when Mr. Whipple gained popularity as a television icon.

Maybe if those same smaller shops could carve out a niche of customers by offering something scarce at Walmart (good service), they might find profits.

Sometimes I think of a small business plan such as on ebay, but the competition is so fierce it seems impossible to make a profit...so I fight the traffic and come to this job.

Even if one made something unique that will turn a profit the copycats would be on it like flies on roadkill.

Actually, farmland is not "graded" at all; it is tilled which does not affect the natural grade. The best farmland is good, stable, well-drained areas not prone to flooding and easily accessible. These are the same desirable qualities that many builders look for, especially in rural areas where there are no public utilities, such as sewer; septic systems must drain well.

Also, I think the "skipped" generation in rural areas is more likely due to reasons very different from those that affect urban and suburban areas. Rural jobs and lifestyles for example are vastly different than those in the more "cosmopolitan" areas. While I definintely would not blame Wal-Mart and other mall-type shopping centers for negative changes, I am only saying they have a questionable impact on these communities.

The really funny thing about it is that all the anti-Wal-Mart ranting is probably improving their sales. Until I read something like this, I don't think too much about Wal-Mart one way or the other. That means if any business carrying an item is closer to my house than Wal-Mart, that's where I'm going....

Perhaps not now. I might buy my next load of groceries at Wal-Mart out of spite.

As a veteran Wal Mart shopper, I've watched Wal Mart grow from a relatively low key competitor to KMart and Target, into the world's largest company.

I shop the heck out of Wal Mart, but over the past 5 years the quality of Wal Mart's merchandise has steadily declined as they relentlessy increase pressure on suppliers to cut costs.

In the past, I would have considered buying a TV or carseat from Wal Mart, but these days I'd go to Target or Best Buy instead.

Wal Mart is moving steadily downmarket, but they still rule the roost for most of the non-durable consumer goods I use every day.

Purchasing low-priced goods from abroad, which puts American workers out of jobs

...and which the "American workers" turn right around and buy from Wal-Mart.

We are our own worst enemy

. It's not all Wal-Mart's fault - part of it can be laid to blame on the government. I think if how things are imported/exported and the taxes/duties involved were changed, you might see a shift the other way.

Heck, look at the foreign car companies that are building their cars here while "American" car companies are building abroad. Something is really screwed up when this happens, and the "American" car companies say they can't afford to build here.

As far as Wal-Mart...well, there is also the aspect that a portion of the money spent there goes back to China, which is not a good thing. The other big problem, everybody who says they like Wal-Mart, when asked if they would mind one being built very close by, probably would answer no ;-)

This bothers me.

I shop Wal Mart for stuff that gets used - diapers, motor oil, paper products, light bulbs, fertilizer.

For durable goods, or semi-durable stuff that you intend to keep for awhile, Wal Mart is not always the best choice as they've forced suppliers to cut costs so dramatically, anything you buy there will be made as cheaply as possible, for the most part.

Sorry it was just banter. WalMart is not evil. I just don't shop there. Locally the stores will be full with 2 registers open. I gave up years ago after laying stuff down and walking out. I have a Type A personality and waiting is not my forte when money is to be spent.

People just get so sensitive about WalMart.

Friends?

In my area Wal-Mart has taken over a few malls that were already bust. With the extra retail -- instead of a vacant building -- property values went up in those areas.
One of the first Supercenters in the area (also one that was protested against, but put up) now produces one of the highest revenues because of the businesses that also built around it. The area is being considered a model for the rest of the city, since it's doing better than a lot of the malls and was not tax-funded.

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