Wal-Mart, or, why I am (possibly) not a conservative

Prof B reacts to my message on the benefits of Wal-Mart. Actually the message wasn’t aimed at him, or I would have have linked him.  I had simply forgotten about his “conservative case against Wal-Mart” last February.  Odd that I forgot, because at the time I had planned to respond to it but never got around to it.

Steve’s carefully reasoned post does not belong in the knee-jerk Wal-Mart hating crowd I was reacting to, but I disagree nonetheless. The “conservative case” against Wal-Mart is this:

• Though Wal-Marts create jobs on net, some Wal-Mart jobs come out of existing businesses.
• New Wal-Mart jobs are part-time and lower quality. 
• Wal-Marts are bad for small local entrepreneurs, unless you include the ones in China.
• Wal-Mart wipes out attractive and viable small-town communities and replaces them with ugly boxes that are social failures; "[b]eing a conservative is supposed to be about things like tradition, community, and, yes, aesthetics."
• So, though we should not legislate against Wal-Mart, we should not subsidize it.

I guess my problem is that I am not smart enough to be a conservative.  It’s very difficult for me to do my own calculation of whether the benefits of Wal-Marts outweigh the costs, including the aesthetic ones.  So I let the market do it for me.  Wal-Mart is successful because it produces profits.  In other words, people engage in voluntary (yes, voluntary) transactions with Wal-Mart that produce more consumer and supplier surplus than other available transactions.  As with markets generally, it's reasonable to assume that these private profits add up to a net social benefit.

But what about all the stuff that can’t be quantified, like tradition, community and aesthetics?  Out here in rural Virginia we do much of our shopping at Wal-Marts.  What I see are lots of kids learning retail skills from the most skilled retailer in history.  I see people buying things like DVD players they couldn’t have afforded from the shoppes Wal-Mart replaced.  And I do see community – many people gathering and talking to each other on a Saturday in a big vibrant place instead of a dusty, decaying downtown (and, yes, that’s what a lot of Virginia small towns were like before Wal-Mart and are like now without Wal-Marts).

And if things are worse in some way here, what about the huge impact of Wal-Mart elsewhere?  Among other things, Mexico’s largest employers, accountable for 10% of China’s total exports, as summarized here.  If I were a conservative I would be smart enough to know that jobs in the US are more important than jobs elsewhere in the world.  But I don’t know this, and wouldn’t know it even if I cared only about the US, because we gain big-time from the growth of markets elsewhere, and from the spreading respect for markets, and the democratic values that accompany markets.

If I were a conservative I would know that Wal-Marts are better than what would happen if we didn’t have Wal-Marts.  I would know that the economic forces that make Wal-Mart’s success possible wouldn’t eventually bring in some other replacement for our non-viable small-town entrepreneurs.  Instead of having a local-stocking Wal-Mart, people in these towns would buy their stuff on-line from a warehouse in South Dakota, leaving wind-swept decay where the Wal-Mart would have been.

If I were a conservative, too, I would know not only that entrepreneurship is good, but exactly how big and successful entrepreneurs are supposed to get.  I would love the story of Jobs and Wozniak in their garage, and let them grow into a pretty big company, as long as this company  mainly just makes attractive little white boxes and doesn't get so uppity that it revolutionizes the industry like, say, Bill Gates.  But not being a conservative I have this idea that entrepreneurship is supposed to be about generating ideas, and that it's the market that demonstrates the power of these ideas.

Or maybe a conservative would love Microsoft, though it crushes small entrepreneurs, but not Wal-Marts, because it not only crushes small entrepreneurs but builds ugly stores. But not being a conservative I can't figure all that out.

But what about the conservative prescription for Wal-Mart – no additional regulation, but no tax and regulation breaks either?  Well, if I were a conservative I would know what the right level of tax and regulation is for every jurisdiction, and I wouldn’t need jurisdictional competition to work this out.  Of course we don’t need Wal-Mart for jurisdictional competition – we can leave that to the little shop owners, who can just tell their towns that they’ll up and go to South Dakota if they don’t get a break. 

The point is – just as it was the big corporations that broke down special chartering and gave us the great engine for entrepreneurship that is the corporate form, so the Wal-Marts of today continue to break down the power of government. Moreover, local communities are essentially selling bundles of government services for the best price they can get.  This appeals to my (non-conservative) love of markets. I would think it would also appeal to a conservative's distrust of government, but not being a conservative I can't say.

Anyway, if the conservative's problem here is with subsidies and tax breaks as a matter of principle, then we should focus on that, and the whole thing about Wal-Mart is beside the point.  And if the problem is Wal-Mart and not the prinicple of the subsidies, then why is it not better to  increase tax and regulation on Wal-Mart vs other businesses?  After all, isn't Wal-Mart causting additional costs for aesthetics and the community that would justify such regulation?  And if not, then why can't communities subsidize Wal-Marts if the communities decide Wal-Marts bring net economic gains.  Is this not a matter that voters are competent to decide, as long as they respect private property rights?  Not being a conservative, I'm confused.

So, with all respect to an intelligent and thoughtful conservative like Prof B, I can't say that I am one, too, at least not strictly speaking.  I do like Burke, though, and remember, too, that he was a fan of the American revolution.  So maybe this conservative thing is more complicated than it first appears.

Update:  Division of Labor has more on the claim noted above (and accepted for the sake of argument) about Wal-Mart taking jobs away from other businesses. Turns out it isn't all that clear.

Comments

[Jimbo]

The real problem isn't that Wal-Mart is driving out small town stores, but that Wal-Mart is driving US businesses to make short term cost cutting decisions that will in the end hurt Wal-Mart's (and America's) bottom line. This situation (http://www.pbs.org/wgbh/pages/frontline/shows/walmart/china/trade.html)
causes lower prices in the near term by driving manufacturing into an area with artificially low costs (China), improving China's manufacturing base at the price of America's. Looking at the stores misses the key point- but then again most consumers don't bother to look at where the goods they buy are manufactured (nor do many seem to care, even if they can buy domestic goods for the same or nearly same prices). I'm all for free trade, but when governments use their currency to blatantly tilt trade in their favor, people should take notice and action (of course then there are the arguments that Wal-Mart will get better access to Chinese markets, but I'll take a bird in hand....).

[James]

I'm very surprised at what seems to be consistently missed in this conversation, and it's the hidden costs of WalMart's way of doing business that belie, or at a minimum bring into question, your following conclusion:

"As with markets generally, it's reasonable to assume that these private profits add up to a net social benefit."

The net social benefit, in terms of profit, may well be good, but to whom do they go? It's by and large not to the communities where the store in question is built, and indeed those profits are to a degree predicated on taking additional money out of the pockets of those communities through tax breaks on the one hand, which is alluded to elsewhere in this discussion, but in the costs borne by the communities and states when employees of WalMart are unable to obtain adequate healthcare through their employer, or their pay is so low as to require subsidization via food stamps. Hidden costs in the form of tax breaks are one thing, but the costs for taking care of employees specifically is rarely calculated or factored in, and there, more than a corporate behemoth coming in and leveling small businesses, or a boxy, anti-aesthetic building, is where a good part of what makes people hate WalMart comes from. WalMart treats its employees as it treats its suppliers, which is that it'll milk all that it can from them, at the lowest possible cost to the company --- if WalMart could get away with hiring illegal aliens (as it tried to via its cleaning contractors) to stock the shelves and run the cash registers, it would.

[Sharpshooter]

"The net social benefit, in terms of profit, may well be good, but to whom do they go?"

To the investors that take the risks and make it all happen, maybe?