Hugh Hewitt praises a tough-minded speech by Wal-Mart's CEO and inveighs against Wal-Mart's critics:
Resistance to WalMart opening new stores always amazes me. Really. Good jobs at good wages, many of them entry-level jobs with training and advancement possibilities. Excellent advantages for consumers, benefits for employees, and neighborhood redevelopment.
But the media loves to hate the giant retailer, and local small businesses always put up a predictable cry. When WalMart is blocked, you never hear about the folks who didn't get jobs or the insurance plans that don't get enrollees. The small stores are happy, but the next time an objection is raised, I'd love to see a report on the wages and benefits paid to employees of such mom and pop operations. There will be some exceptions, but the average worker who is not an owner would be better off at the WalMart.
I respect Hugh a lot, but on this one I think there's a plausible counter-argument to be made; indeed, that one can make a plausible conservative case against Wal-Mart.
First, the data show that entry of a Wal-Mart store into a community has only a very small positive impact on county-level employment. According to a study by Missouri economist Emek Basker, "in the first year after entry, retail employment in the county increases by approximately 100 jobs; this figure declines by half over the next five years as small and medium-sized retail establishments close. Wholesale employment declines by approximately 20 jobs over five years." (3) Note that the "typical Wal-Mart store employs 150-350 workers. These results suggest that employment increases by less than the full amount of Wal-Mart’s hiring, even before allowing other firms time to fully adjust to Wal-Mart’s entry." (14)
Second, the data also show that Wal-Mart's entry into a community has a downward impact on overall retail prices of certain core consumer commodities. (Link)
Third, objective data on the impact of Wal-Mart's entry into a community on prevailing wages is difficult to find, but one suspects it is not positive. (Timothy Noah points out that Wal-Mart's CEO distorted Wal-Mart's wage picture in his speech by using average rather than median salaries.)
Fourth, entry of Wal-Mart typically results in exit by at least some local businesses, as suggested by the fact that the increase in employment is smaller than the number of positions Wal-Mart fills.
Fifth, even if the subsidies given Wal-Mart by many local communities to encourage opening a store are not as large as Wal-Mart's critics claim, does anyone seriously doubt that Wal-Mart often gets breaks on things like zoning, property or sales taxes, and other regulatory issues that small business competitors don't receive?
So opening a Wal-Mart has a small positive effect on consumer prices and employment for the community. The latter effect dissipates over time as Wal-Mart drives competitors out of business or, at least, the area. In addition, many of these employees appear to be part-time, according to Basker's study, who likely get smaller benefits and opportunity for advancement than full-timers. (Timothy Noah also pointed out that Wal-Mart overstates the number of full-time employees by counting as full-time anybody who works more than 34 hours a week.)
But even if Hugh is right that "the average worker who is not an owner would be better off at the WalMart," what about those owners?
In his article, Thwarting the Killing of the Corporation: Limited Liability, Democracy, and Economics, 87 Nw. U. L. Rev. 148 (1992) (Westlaw sub. req'd), law professor Stephen Presser writes eloquently about the role small business plays in our democracy. Presser explains that corporations were endowed with limited liability precisely so as to encourage the growth of small business:
The popular democratic justification for limited liability is rarely observed by modern scholars. Nevertheless, it appears that to the nineteenth-century legislators in states such as New York, who mandated limited liability for corporations' shareholders, the imposition of limited liability was perceived as a means of encouraging the small-scale entrepreneur, and of keeping entry into business markets competitive and democratic. Without limitations on individual shareholder liability, it was believed, only the very wealthiest men, industrial titans such as New York's John Jacob Astor, could possess the privilege of investing in corporations. Without the contributions of investors of moderate means, it was felt, the kind of economic progress states like New York needed would not be achieved.
The author of the most comprehensive study of New York legislative policy toward corporations in the nineteenth century concluded that New York's policy of limited liability, and its policy of encouraging incorporation by persons of modest means "facilitated the growth of a viable urban democracy by allowing a wide participation in businesses that could most advantageously be organized as corporations." "More importantly," he suggested, New York's general incorporation statutes "helped equalize the opportunities to get rich. The passage of general incorporation laws for business corporations was the economic aspect of the political and social forces that democratized the United States during the Age of Jackson, 1825-1855."
Note carefully this line: the "policy of encouraging incorporation by persons of modest means 'facilitated the growth of a viable urban democracy by allowing a wide participation in businesses that could most advantageously be organized as corporations.'" By trampling small businesses underfoot, through its mix of volume pricing and subsidies, Wal-Mart and its ilk undermine the possibility of "wide participation in businesses." Prospective entrepreneurs are thus pushed out of fields like retail.
Of course, maybe Wal-Mart makes up for that by buying products from small entrepreneurs in places like China. But do we really want to encourage our nation’s most likely future superpower rival to further build up its economy with massive trade deficits?
Finally, there is an aesthetic/humanistic argument to be made. I come back here, as I do so often, to Russell Kirk's description of his beloved Detroit:
All my life I have known the city of Detroit, called-during World War II "the arsenal of democracy." ... In the shocking decay of that great city nowadays, we behold the consequences of an inhumane economy-bent upon maximum productive efficiency, but heedless of personal order and public order. Henry Ford's assembly-line methods had much to do with the impersonality and monotony of Detroit's economic development; and so, in some degree, did Ford's concentration of his whole productive apparatus at the Rouge Plant; but of course Henry Ford had no notion, in the earlier years of his operation, of what might be the personal and social effects of his highly successful industrial establishment; nor did the other automobile manufacturers of Detroit. Indeed, they seem still to be ignorant of such unhappy consequences, or else indifferent to the consequences, so long as profits continue to be made. Consider the wiping out of Poletown through the unholy alliance of industrial, municipal, and ecclesiastical power structures, regardless of the rights and the wishes of Poletown's inhabitants-all to build on the site of Poletown a new industrial complex, which already, far from supplying the promised increase in tax revenues for Detroit, is involved in grave difficulties.
Outside the most heavily urbanized areas, Wal-Mart typically builds on the edge of town, putting up a huge (and butt-ugly) big box building surrounded by acres of bare concrete parking lots. There are few sights in the American scene less attractive or appealing to the eye.
Kirk observed that "Detroit, during my own lifetime, has produced tremendous wealth in goods and services. But it has been a social failure. And so have nearly all of America's other major cities." I put it to you that Wal-Mart contributed to moving those failures into small town America by shuttering local business and creating huge barriers to entrepreneurial entry into fields traditionally the province of local small business men and women.
Being a conservative is supposed to be about things like tradition, community, and, yes, aesthetics. If I'm right about that, it's hard to see why a conservative should regard Wal-Mart as a societal force for good even if Hugh's right about the job story.
So what do we do? Well, we must strike a balance between respect for private property rights (see my Kelo post) and our other values. How? On the one hand, government should not legislate against Wal-Mart and its ilk. On the other hand, government should not subsidize Wal-Mart either through zoning or tax breaks. Wal-Mart’s a big boy, so to speak, who can take care of itself. We ought to let it compete in a free market. And those of us with a bully pulpit out to use it to encourage Wal-Mart to become a better neighbor and citizen.
