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.

The critics of Wal-Mart, Christian or not, focus on the corporation's stores destroying "community." (The same criticism is applied to other large retailers.) In the last 20 years, retailers have copied what was accomplished by manufacturers of consumer products and durable goods in the late 19th Century, the entertainment business in the early 20th Century, and fruit and vegetable growers and beer brewers in the mid 20th Century: the creation of a national/international market for what had been locally based. Just as firearms from Colt or Remington and Ritz crackers replaced the products from the local blacksmith or bakery, so Wal-Mart has replaced the locally based retailer.

The communitarians tend to forget that there has been nationally based retailing for over a century: chain stores like Sears, Montgomery Ward, J.C. Penney, A&P, Woolworth, and Kresge could be found in most towns with at least 10,000 in population 50 to 100 years ago. Indeed, Sam Walton started his retailing career at Kresge's 5 & 10 Cent Stores, and Wal-Mart is to a great extent just the old five and dime store writ large. Wal-Mart, unlike its predecessors, has been a more effective competitor to local retailers.

Come call me a commie to my face. I have not bashed WalMart per se. I just haven't shopped there since they changed.

A super store on every interstate exit is their strategy. They are starting to compete with themselves. That is when the great meltdown will occur.

I shop at Wal-Mart for the low prices. Apparently, however, one of the ways Wal-Mart is definitely NOT a free-market entity is the following:

They apparently are enthusiastic about using the power of eminent domain to have city governments take people's private property and then turn it over to developers... because the governments are extremely greedy for more tax money, and they will get more tax money out of a Wal-Mart than from, say, a bunch of small private property owners. Costco is another entity that is engaged in similar practices.

I listened to a speech by Neal Boortz on this very issue this past weekend at the Libertarian Party National Convention. Next time I see an article about city governments stealing private property so the city government can practically give away the property to a developer or a Wal-Mart or Costco, I'm gonna write an absolutely rabid letter against it.

I don't think I ever been followed at Walmart, but I have been followed at Sears. After a snow storm one day my family went to the mall just to get out. We go into Sears and this lady kept following us around. When she asked us what we wanted we told her we were just looking right now. She told us then the store was just open for ''emergency shopping and told us if we weren't going to buying anything we should leave.''
When we were driving home I noticed a bar open with plenty of cars in the lot. I commented to my husband the bar must be open just for ''emergency drinking.''

"my liberal sister made a show of buying gifts from mom-and-pop type businesses"

Some people get sad when they see a homeless man rummaging around in a garbage can; others when they see a dead dog or cat at the side of the road. I get sad when I see a small business close. These institutions represent the dreams of every day people who are willing to risk everything for the American dream. I love it when I hear they've hit it big and made millions, but my customer loyalty will always be to the little guy who's just starting and still dreaming of becoming a Sam Walton or Bill Gates. You see, they're all cut from the same cloth.

And who works in Wal-Mart? Slobobians? Give me a break.

Great thinking there. Lets have one hundred $10 workers sell sweat shop items made overseas so that 1000+ skilled American workers can lose their jobs. Super strategy. I very rarely go to Walmart. The place makes me sick.

I didnt call you a commie. In fact youve been one of my favs here for some time.

That doesnt require me to always agree with you.

I could conclude that you called me a traitorous cheapskate and buyer of worthless crap, and not to my face. But that is petty and I understand you are expressing your opinion which is what is done here.

The only "positive" I can come up with regarding Wal-Mart:

Wal-Mart's competition and now near monopoly in some areas has gone a long way towards keeping inflation in check. Wal-Mart has fed the consumer desire for cheap goods. Yes, that involves buying abroad - mostly China - but it's what consumers want. Amazing that those same consumers will complain and bellyache when their own manufacturing jobs are lost to overseas sweatshops. But these same consumers won't quit shopping at Wal-Mart.

Unfortunately, it's geting more difficult - if not impossible - to find many daily needs that are not "Made In China" or some other overseas location.

This isn't "theoretical" because I saw this happen with my own eyes. A local family-run store that had been in business for generations went under shortly after Wal-Mart moved in. A few months later I saw the former owner stocking items in the automotive section at Wal-Mart.

I think that was Wal-Mart really destroys is quality by demanding that suppliers maintain or even lower their prices regardless of how much it costs them to produce their goods. I've heard a couple of specific stories about how manufacturers sacrificed quality to keep costs down. Let's just say that you get what you pay for. If you want cheap, you get cheap. Paying half the price but replacing it three times as often is not a bargain.

You can't buy any baby equipment there which isn't COSCO (China Ocean Shipping COmpany) stuff.

Oh yes you can! When I worked at Target I generally stocked the infants/toddlers department and I always made sure that American made baby equipment outnumbered China-made goods on the salesfloor. And now I'm having a big brain fart trying to think of the manufacturer's names... I think Safety 1st was one, Graco may have been another one. I'd stock them on the shelves in a way that made the "MADE IN USA" sticker figure prominently for shoppers.

I couldn't agree with you more. Eminent domain is absolutely abhorrent. IKEA has attempted. Wal-Mart. Trump. Etc.

I don't really fault the corporation for this usually, although they should definitely know better. It is the government that shoulders the majority of the blame in my eyes.

The corporation is just looking for more money, which is what corporations do. It's up to the government to protect individual (property) rights. Eminent domain is an obvious example where our government is failing in that regard.

Most excellent analysis. I grew up in the 60's in a small town in Texas (Angleton). There is no question that, the first Walmart killed several family-owned businesses. (If you doubt my validity, I'm talking about Brockman's, Cliff's, Taylor Hardware,etc...) Many of these families were friends of my family. And, for them, Walmart was clearly a terrible thing.

However, the city.. (and the Walmart) has continued to grow. I think an objective observer would be hard-pressed to say the city was "destroyed" by Walmart.

There are MANY other cases in Texas where the same thing has occurred. Wal-Mart definitely changes things... but, It's hard to see whether it's for the better, or worse...overall.

I have several issues with Walmart, but my biggest is the fact that about 65% to 70% of all their employees are classified as part time. This means no health insurance, no job security and W/M pays very little in federal and state un-employement taxes. Walmart never fires any of these part-timers, they just keep reducing their hours scheduled until is is no longer practicable to even drive to work for a 2 hour schedule. My wife and I have been in Walmart less than 5 times in the past 3 years (and then spent very little).

Yes, I did know that.

About stuff made in China. Well, nearly everything is made overseas. Try to find something that is not. Also, while the people overseas are getting paid wages that we consider low, it is the best they have ever done. And people are working. About destroying neighborhoods. All I can say is that in Prince Frederick, Md., there was one hardware store - the only game in town before WalMart - that had high prices. The store is still there but it is forced to compete with WalMart. Some stores did close but again, for years they were the only game in town. With forced competition, they either had to put up or shut up. WIth the greeters - the funny thing is that as retired military, everytime I see the greeter, I feel I have to pull out my id and show it to her.

The one complaint I have with WalMart is that there never seems to be a worker bee around when you need assistance looking for something. If these greeters were following me, I could turn around and ask them to help me.

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