Is Wal-Mart good for America? (Response to PBS hit piece)

On Tuesday, the Public Broadcasting Service ran a scathing attack on Wal-Mart, the world's largest retailer, on its "Frontline" series. The title of the program was, "Is Wal-Mart Good for America?" Although never stated explicitly, it is clear from the overwhelmingly negative portrayal of the company that the answer clearly is "no."

I watched this program with special interest. In fact, it was the first PBS program I'd seen in some time. I'd stopped watching shows like "Frontline" long ago because of their heavy liberal bias. But I thought perhaps this one would be different because I had been extensively interviewed for it.

Over several hours at my house, I patiently explained to Hedrick Smith, the chief correspondent and producer of the program, that the main beneficiaries of Wal-Mart's low-price policy are the poor, who could now afford products that would be out of their reach but not for Wal-Mart, improving their lives and raising their standard of living.

I was trying to make the same point that the great economist Joseph Schumpeter made about the Industrial Revolution. In his book, "Capitalism, Socialism and Democracy," he said, "The capitalist achievement does not typically consist in providing more silk stockings for queens, but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort."

I also pointed out to Smith that Wal-Mart, all by itself, was responsible for a significant amount of the productivity miracle we have seen in this country over the last decade. In a 2001 report, the McKinsey Global Institute, a respected think tank, concluded that Wal-Mart's managerial innovations had increased overall productivity by more than all the investments in computers and information technology of recent years.

Wal-Mart's innovations include large-scale (big box) stores, economies of scale in warehouse logistics and purchasing, electronic data interchange and wireless barcode scanning. These gave Wal-Mart a 48 percent productivity advantage over its competitors, forcing them to innovate as well, thus pushing up their productivity. The McKinsey study found that productivity improvements in wholesale and retail trade alone accounted over half of the increase in national productivity between 1995 and 1999.

A new study from the prestigious National Bureau of Economic Research found that Wal-Mart has a substantial effect on reducing the rate of inflation. For example, it typically sells food for 15 percent to 25 percent less than competing supermarkets. Interestingly, this effect is not captured in official government data. Fully accounting for it would reduce the published inflation rate by as much as 0.42 percentage points, or 15 percent per year.

Ignoring these beneficial macroeconomic effects, "Frontline" focused almost exclusively on the loss of jobs allegedly caused by Wal-Mart. Acting as what economists call a monopsony, it supposedly forced countless American manufacturers to close their domestic operations and move to Asia in order to get their costs low enough for Wal-Mart to sell their products. It is also said to have caused innumerable local retailers to go out of business, further adding to the job loss. In fact, academic research by economist Emek Basker of the University of Missouri contradicts this last point, finding that Wal-Mart permanently raises local employment.

Even restricting oneself to the material presented in the "Frontline" episode, it is hard to justify its sweeping indictment of Wal-Mart. For example, it accuses Wal-Mart of buying $15 billion to $20 billion worth of goods from China each year, implying that this is largely responsible for our trade deficit. But since our trade deficit with China is about $150 billion, Wal-Mart can be responsible for at most 13 percent of that.

But even looking at the issue that way is stupid. If Wal-Mart didn't buy from China, its competitors would. And if Wal-Mart had to depend only on high-cost American suppliers, it never would have grown the way it has and its sales would be far less than they are. Yet "Frontline" always implies that somehow Wal-Mart could have done things differently, kept more production and jobs in America, without paying a cost. No alternative scenario was presented.

Finally, "Frontline" relied heavily on biased sources, such as testimony from openly protectionist organizations like the U.S. Business and Industry Council and a union representative who admits to being a disgruntled former employee of Wal-Mart. In other cases, the report relies on hearsay evidence that no responsible newspaper would publish in order to make its case. Supporters of Wal-Mart and free trade were limited to a few short minutes of camera time (I got about 3 seconds), mostly by a totally ineffectual company spokesman.

In short, "Frontline" presented a one-sided hit piece disguised as objective news reporting. Everyone responsible for it should be embarrassed for this grotesquely unfair case of taxpayer-financed liberal propaganda. I will know better the next time they call me for an interview.

Bruce Bartlett is a senior fellow at the National Center for Policy Analysis, a Townhall.com member group.

No, no, no! I must respectfully disagree! Eminent domain can be invoked only when the land is taken for public use, not to give to another private citizen.

Neil Boortz explains it better than I could. The following is an excerpt from Neal's Nuze on August 21, 2003:

DRAW THE LINE IN ALABASTER

Freedom means little without property rights. What good is your freedom to use your talents and your willingness to work hard to acquire wealth if your rights to that wealth can be denied at the whim of a few politicians?

After the fall of Soviet Union much was made of their attempt to create economic liberty for the victims of communism. All attempts to create a free, market-based economy in Russia met with only limited success, however, until laws were instituted to insure the property rights of ordinary citizens.

Our law recognizes that that there are times when government must use its police power to seize the property of private citizens. Although the right to eminent domain is not specifically recognized in the U.S. Constitution. In 1879 the Supreme Court, in the case of Boom Co. v. Patterson, (98 U.S. 403) said that eminent domain "appertains to every independent government. It requires no constitutional recognition; it is an attribute of sovereignty." The Fifth Amendment contains the words "'nor shall private property be taken for public use, without just compensation." This is a recognition of the government's right to take private property, and a stipulation that it must be taken for "public use."

OK .. sorry for the legal lesson, now let me tell you what is going on in Alabaster, Alabama. I've been talking about this for two days on my show. Many of you, however, don't hear my show ... so I've decided to donate a good part of today's Nealz Nuze to this situation. What you read should horrify you. You just need to know that this sort of government assault on property rights is not confined to Alabaster, Alabama. It is going on virtually everywhere in this country.

Alabaster is a community of about 24,000 people. Interstate 65 runs through Alabaster. A private developer named Colonial Properties Trust wants to build a shopping center anchored by a Wal-Mart on one of the corners of the I-65 intersection. The trouble is that Colonial doesn't own all of the land they need. A few private land owners have refused to sell their property to Colonial. That, my friends, should be the end of the story. If one private individual wants to own a certain piece of property, but the legal owner of that piece of property doesn't want to sell it, the private property rights of the owner of the real estate should be recognized, and the person trying to buy the property should back off.

Well, that's not the way it's working in Alabaster. Colonial, you see, has some friends in powerful places ... politicians on the Alabaster city council. Colonial has decided to use that one unique government asset, the right to use force, to accomplish something that it cannot accomplish on its own. Colonial is asking the City of Alabaster to use force to seize the property under eminent domain and then sell that property to them, to Colonial, so that plans for the shopping center can proceed.

The politicians of Alabaster, Alabama are only too eager to cooperate.

Next week the City of Alabaster will file the condemnation proceedings in the Shelby County, Alabama courts. The City of Alabaster will try to seize the land under the principle of eminent domain. But wait! Aren't governments supposed to use eminent domain to seize private property only when that property is needed for a public use? How can these politicians take that property away from its owners and then sell it to a private company to build a privately owned shopping center?

Here's what the Alabaster politicians are saying. They claim that they simply cannot collect enough property taxes in their town of 24,000 to pay for all of the government they believe the citizens of Alabaster need. They need some sales taxes. Trouble is, there aren't enough businesses around town to generate the amount of sales taxes these politicians want. The answer? Hey! Let's get a shopping center in town. A shopping center will generate thousands of dollars in sales taxes, and we'll have all that money to spend! What a concept!

So, Alabaster's "public use" excuse is that the current owners of the land simply don't pay enough taxes. The land needs to be seized and turned over to someone who will generate some more tax payments. Those additional taxes can then be spent on the public. There's your "public use."

You do realize, don't you, that this very same excuse can be used by any government entity anywhere in the United States that wants to increase its tax revenues? Let's say that you're sitting fat and happy in a home that has been in your family for generations. You're sitting on about five acres in a prime location near a major city. A local developer wants your property to build a subdivision of cluster-mansions. You don't want to sell. The developer goes to the county commission and tells them that if he had that property he could build at least 15 homes there worth about $600,000 each. The developer correctly points out to the politician that the county could collect thousands of dollars in additional property taxes if he could just get his hands on that land and build those homes. A few weeks passes and one day you get a letter from the county attorney telling you that your property is going to be seized by the county. Their only excuse is that they can get more tax dollars if your five acres had 15 homes than they can with your 60 year-old farmhouse. The "public use?" More tax revenues.

If governments can abuse the concept of eminent domain in this manner then your private property rights are virtually non-existent. You own your home only so long as the local politicians tolerate that ownership. Let some developer come along with a better idea, and you can kiss your dirt goodbye.

What are the citizens of Alabaster saying about the rights of the property owners? Let's check in with Councilman Tommy Ryals. Ryals, who works in the environmental compliance department of Alabama Power, thinks that these property owners are just being greedy. He says "Sometimes the good of the many has to outweigh the greed of the few." Sound familiar? Wasn't it Hillary Clinton who said "We must stop thinking of the individual and start thinking about what is best for society." Private property rights? The rights of the individual? Hey, these are all to be set aside for the good of the collective. I wonder if Tommy Ryals and Hillary Clinton have ever met. I wonder if Mr. Ryals would tell us that the individual has the obligation to make sacrifices for the community, for his fellow man. If so, he wouldn't be the first person to express that belief. Adolf Hitler said the same thing back in 1933.

Yes, I'm invoking some pretty ugly names here in the defense of the property rights of these Alabaster landowners. That's because I'm passionate about the right to property and to the idea that one of the prime directives to government is to protect those property rights, not to destroy them for the economic gain of another. Property rights are the absolute foundation of economic liberty, and property rights are under assault by Colonial and the politicians of Alabaster, Alabama.

Not an isolated case:

This attack on private property isn't only happening in Alabaster, Alabama. Abuse of eminent domain is happening across the country. The City of Jacksonville Beach in Florida is engaged in a wholesale onslaught against a group of private property owners. Their crime is that they haven't developed their property to the pleasure of the local politicians. Multiple properties are set to be seized and turned over to developers friendlier to the dreams and schemes of city leaders..

In New York City the revered New York Times recently used the police power of government to seize an entire block of city property. This block, which contained a number of small family owned business, will now be used for the new New York Times building.

Several groups have been started to fight the abuse of eminent domain by government. One such group is the Castle Coalition which has a document titled "The Top 10 Abuses of Eminent Domain." Here is a synopsis of those top 10 cases:

1. Removing an entire neighborhood and the condemnation of homes for a privately owned and operated office park and other, unspecified uses to complement a nearby Pfizer facility in New London, Connecticut.

2. Approving the condemnation of more than 1,700 buildings and the dislocation of more than 5,000 residents for private commercial and industrial development in Riviera Beach, Florida.

3. A government agency collecting a $56,500 bounty for condemning land in East St. Louis, Illinois, to give to a neighboring racetrack for parking.

4. Replacing a less-expensive car dealership with a BMW dealership in Merriam, Kansas.

5. Condemning a building in Boston just to help the owner break his leases so that the property could be used for a new luxury hotel.

6. Seizing the homes of elderly homeowners in Mississippi and forcing them and their extended families to move in order to transfer the land to Nissan for a new, privately owned car manufacturing plant, despite the fact that the land is not even needed for the project.

7. Taking the building of an elderly widow for casino parking in Las Vegas, claiming it was blighted but without ever even looking at the building.

8. Improperly denying building permits to a church in New Cassel, New York, then condemning the property for private retail as soon as it looked like the church would begin construction.

9. Condemning 83 homes for a new Chrysler plant in Toledo, Ohio, that was supposed to bring jobs but ended up employing less than half the projected number because it is fully automated.

10. Forcing two families (along with their neighbors) to move for a private mall expansion in Hurst, Texas, while spouses were dying of cancer.

You can get the details of all of those eminent domain abuses at the Castle Coalition website: http://www.castlecoalition.org/

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