Posted on 11/19/2004 3:44:14 AM PST by The Great Yazoo
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.
Wal-Mart doesn't destroy small businesses. Small businesses' former customers choosing to shop at Wal-Mart instead destroys small businesses. Small businesses that offer quality goods and services at competitive prices aren't destroyed by Wal-Mart.
America grew due to freedom. Those who want the government to intervene are those choosing serfdom!
I think you intended that reply for Nephi - not me.
Vlad ... couldn't agree more, but what does this have to do with WalMart. It seems the problem is the politicans in Alabaster and their misuse of eminent domain.
It is communism.
Damn Henry Ford, he ruined my carriage business!!
Wal-Mart's prices are not competitive and that is the point. With their mass central planning approach to the market, they are prohibitive to competition by local economies.
There has been abundant "factory" job creation in America.... auto industry (BMW-Toyota-Honda etc) and in many other high tech sectors as well.
Correspondingly, there has been an out sourcing of many low tech support jobs to the likes of India (e.g.customer service for service industries).
Hamburger flippers are always used to underscore the so called destruction of America...total nonesense. The U.S. patent office shows America still leads the world. Freedom rules!!!!
One could make a case that small businesses are the second largest beneficiary, since they're now able to purchase supplies and food at a lower cost than ever before.
Mass production is different from mass market dominance.
Good point! Small businesses' employees can also choose to benefit from Wal-Mart's prices.
Mass production is different from mass market dominance (of distribution).
Are you drunk? You need to focus and direct your replies to the appropriate individuals. Your replies to me with respect to my "one" post (#22) make absolutely no sense.
Yes. Once they eliminate competition in a given locale, they are "free" to increase prices.
Any wonder why Wal-Marts have different prices at different stores?
So your solution is to have government determine competitive prices and force Wal-Mart to charge them? To avoid a "central planning approach?"
I don't think you can state that, along the continuum from monopoly to perfect competition, any move toward monopoly is inherently damaging free enterprise and free capitalism.
"Free enterprise and free capitalism" is precisely what's brought us the current market structure. Millions of decision-makers have weighed in, and their choice has been Wal-Mart. If, instead, small businesses everywhere were offering better value, we'd be moving toward perfect competition.
If WalMart is the ethical business it claims to be, then simply making them aware of the Alabaster situation should be enough to make them pull out of the deal and thus collapse it. Makes you wonder why they haven't. You're right, though. This sort of abuse of eminent domain is widespread. Ft. Wayne, IN has done the same thing with its Southtown Mall. If it's good for the city and economic development, and therefore taxes, they'll just take it.
How so?
Can you provide any example, at any Wal-Mart, of price gouging?
I'll settle for just one...
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