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Wednesday, December 9, 2009

Why Do I Find Myself Sticking Up for Evil Wal-Mart?

A friend of mine asked why I stick up for Wal-Mart, despite all the evil things they do. I never intended for it to be that way. It just kinda happened. It may be that I generally like it when I work hard to understand something, and I feel like I got the answer. Most people don't spend their time wasting away in books like me, so I tend to get this feeling all-to-often! Ha, ha!

There are two basic defenses of Wal-Mart as an institution.

There is no defense for the close-minded haters, who just don't like the company no matter what. For some, its merely cultural, emotional, or just visceral. For those, for whom facts matter, here's an attempt to merely give perspective to a company that's neither all good nor all bad. I merely argue, the good outweighs the bad.

There is also no argument for those who do not care how markets work. Often, these folks deride the "profit-motive," as if pursuing it is somehow less admirable than charitable work. Both pursuits have their advantages and disadvantages. But the numbers show clearly, that the poor of today live far better than the rich did 100 years ago, because stuff got cheaper--and it got cheaper because of the profit motive, not charity. But then again, a free enterprise cannot function at all, unless people are free and willing to choose to be charitable. (It is compulsory charity that causes the multitude of problems).

As Adam Smith famously said that "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest." And Milton Friedman expressed as, "The most important single central fact about a free market is that no exchange takes place unless both parties benefit." But I digress...

Many of the anti-Wal-Marters are not just telling people not to shop there. If it were just that, I would not object. Wal-Mart has a history of doing all kinds of things it shouldn't do. The market has, in fact, punished them greatly for it; many people simply will not shop there. They have a bad reputation and they deserve it.

I read Sam Walton's biography last year, and he admitted as much. He talked of how he realized he could make more money by creating incentive programs and giving employees better pay and benefits. His motivations may not have been right, but like Wal-Mart as an institutions, the profit motivation did more good than altruism may have otherwise done. He created a whole department dedicated to creating incentives to attract and retain employees. They instituted a slew of various programs and ideas.

But, yet again, Wal-Mart is being punished for shoddy employment practices in the courts. (I question why it was all done through settlements, and the plaintiffs chose not to go to court, but that merely means nothing is proven either way).

So people are often right to attack Wal-Mart. My own father proudly boycotted it till the day he died. However, there are two things I object to. First, is to misunderstand all the good things Wal-Mart has done, simply because they did bad things as well. I shop there as much as possible, because I see it as charitable. By any measure, this institution does more for poor people than virtually any other. Name just ONE other institution that reduces prices for people by 50 billions dollars a year - and through voluntary transactions. And in doing so, Wal-Mart provides more than nick-naks. They are America's largest grocer, clothing provider, and private employer—even before you count the industry built up around it.

Secondly, is the bigger issue. There are people who don’t think people can make their own choices. They presume to know what's best for others. But they don’t seek to persuade people what's best for them—they try to use the force of government to get their way, claiming to do so in the name of the public welfare. However, they didn’t ask the public.

Often, this is just classic rent-seeking behavior by Wal-Mart's competitors.

A few years ago, I was working in politics when Wal-Mart wanted to build a store in Powell, Ohio, which is on the northern side of Columbus. It is a rich neighborhood, with an average household income of about 140k a year. The people who I worked with (Republicans) were many of the protestors.

I talked to several of the people who fought to keep Wal-Mart out. They said that "people in Powell don’t want a Wal-Mart here." I found this to be very audacious, because if people really didn’t want a Wal-Mart there, then Wal-Mart would not build there…they'd go out of business because nobody would shop there.

But the fact is, that if there were a Wal-Mart there, they would have plenty of customers. That’s why Wal-Mart wants to build there! So I ask, why cant people decide for themselves where they want to shop? Why do they need you to tell them they don't want a Wal-Mart nearby?

The people who protested didn’t want the "people of the city," to get their way, they wanted to get their own way. They really didn’t care if anyone else wanted a Wal-Mart because they presumed to know what is best for those people. They didn’t want the debate to be settled by the market, by free choice, or by the actions of people who either choose to shop or not.

They didn’t want the market to decide, because they knew they would loose in the market. So they turned to government. Political votes, especially for the wealthy, are much easier to win than persuading consumers.

This is why progressives don’t like the concept of a free society or a free market. The free market gives the consumer the power to choose whether Wal-Mart should stand or not. Every consumer gets a vote, with their pocket book. And since Wal-Mart caters to the poor and middle-class, it will mainly be these classes of people who do the voting. You'll find that the neighborhoods that fight the government the most are the wealthy ones. Poor neighborhoods are generally very, if not ecstatically, receptive of Wal-Mart.

This applies to other issues as well. Some people don't like the free market, not because it doesn't work or because people will be worse off, but rather because they don't like the choices people will make. Therefore, they feel people should be deprived of the right to make such choices. Onerous licensing laws deprive people of the choice to hire who they choose to give legal advise, provide food, medicine, daycare, dogs, marriage, haircuts, and other such things. Some states are trying to license interior decorating. Property restrictions are used to deprive people of the right to choose any business whatsoever in many places.

All this is usually done in the name of protecting people from themselves--and it often is the case. They think people cannot decide for themselves where to shop, so the government intervenes. However, all to often, the real purpose is just pure rent seeking, plain and simple. Wal-Mart has been the victim of this on many occasions. It has become all to easy to demonize a company, not because they deserve to be demonized, but rather to justify rent seeking behavior.

Lastly, is the cultural issue. Some people are snotty, stuck up people (trust me, I know this from a lot of experience there). This small group of people does not want Wal-Mart in their snotty suburbs, because they think that Wal-Mart is for the low class.

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