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The Wal-Mart Dilemna

Posted by Chance on September 15, 2006

There are several posts about Wal-Mart.

Glen Dean: Loves Wal-Mart
Lee: Neutral on Wal-Mart, thinks it is another battleground for conservatives and liberals.
Katherine Coble: Breaks away from conservative fellows and hates Wal-Mart.

Each post makes good points. But one thing I want to discuss. Kat refers to another post that says

Sure Walmart has low prices that are good for poor people. But they also make people poor by refusing to pay what a decent price for the things they sell.

I want to address this particular argument. I know liberals (and Kat) have other good arguments, and I don’t mean to ignore them, but I want to address this particular one. There are 2 extremes, it is really a sliding scale, but I will present it as 2 options for clarity.

Option 1) Pay people good wages, charge more for products.

Option 2) Pay people poor wages, charge much less for products.

Here is the issue I have. Wal-Mart critics point out the problem with Option 2, because of poor wages. But here is the issue. Option 1 also has a negative tradeoff as well. Wal-Mart critics have done a fine job of pointing out the problem with Option 2, but in my mind they have failed to demonstrate why Option 1 is a superior, even moral option. The fact that a certain option has a negative tradeoff is not enough to convince me to go another route, when the other option has a negative tradeoff as well.

This is what Wal-Mart critics must do. Demonstrate that it is better for the economy to pursue Option 1, rather than Option 2. Why exactly is it better to pay someone a certain wage, instead of selling cheaper products? The liberal will argue that everyone has the right to a decent wage, but one could just as easily argue that everyone has a right to groceries or toiletries at a “decent” price.

And this is really part of a larger economics problem. With free trade for instance, we can have cheaper products, but we run the risk of losing jobs, or have lower paying jobs for Americans.

I would argue that the burden of proof is on the Wal-Mart critics, because I believe on must make the case for government to intervene. However, I still believe that free marketers must make their case as well. Why is Option 2 better than Option 1? Will lower prices of products make up for lower wages? Will the gain of jobs in the lower classes compensate for loss of jobs in the middle class? Will there be a net loss of jobs in the middle class?

This is a complex issue. All I am saying is that criticizing low prices because they lead to low prices is not a sufficient argument; because high wages lead to high prices. Both sides, but especially those that want government intervention, must demonstrate why one option is better than the other.

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18 Responses to “The Wal-Mart Dilemna”

  1. Dan Trabue said

    “Demonstrate that it is better for the economy to pursue Option 1, rather than Option 2.”

    How’s this? Because Walmartization is doing away with a previously existing system (local economies paying acceptable wages and purchasing largely locally and having local accountability VS Walmarts “superlow” prices that push the costs off somewhere else – on the environment, on desperate workers overseas, on our children and with little local accountability and much less local circulation of the dollars) and prudence suggests we ought to be cautious in willy-nilly replacement of a working existing system.

    Just because our larger systems makes it possible for the walmartization of the world does not mean it is moral or desirable.

  2. Dan Trabue said

    Might I offer Wendell Berry’s Rules of Good Work?

    1. Beware the justice of Nature.
    2. Understand that there can be no successful human economy apart from Nature or in defiance of Nature.
    3. Understand that no amount of education can overcome the innate limits of human intelligence and responsibility. We are not smart enough or conscious enough or alert enough to work responsibly on a gigantic scale.
    4. In making things always bigger and more centralized, we make them both more vulnerable in themselves and more dangerous to everything else. Learn, therefore, to prefer small-scale elegance and generosity to large-scale greed, crudity, and glamour.
    5. Make a home. Help to make a community. Be loyal to what you have made.
    6. Put the interest of the community first.
    7. Love your neighbors–not the neighbors you pick out, but the ones you have.
    8. Love this miraculous world that we did not make, that is a gift to us.
    9. As far as you are able make your lives dependent upon your local place, neighborhood, and household – which thrive by care and generosity – and independent of the industrial economy, which thrives by damage.
    10. Find work, if you can, that does no damage. Enjoy your work. Work well.

    Hope that wasn’t too much, but it succinctly helps me form some of my ethics in relation to business.

  3. The Prophet said

    I’m for taking care of the employee. A happier employee will do a better service to the customer.

    And I’ve been curious as to what the affect of lack of insurance (that only mgmt positions at Wal*Mart can currently afford) has made on the employees, sick time, etc, loss of work, etc.

    I feel the Spirit of Sam Walton present with this post.

    Interesting questions you ask he tells me.

  4. Chance said

    Dan, concerning your first comment, I think you addressed my concern for the most part.

    The issue I have is you mention “acceptable” wages. My question is, why are we only looking at if the wages are “acceptable” and not the prices of products. Why are higher wages favored over lower prices.

    It seems that you address this somewhat, because you state that these low wages are obtained immorally, or are not reflecting what you call “real costs.”

    Is that correct?

    Part of me says that a community should have control over what businesses come in. Sure, pushing out a corporate giant sounds good, but I could see this used for other means as well. Say a new doctor moves in from out of town. The town establishment, say, the city council, of which many doctors are members of, decide they don’t need this new doctor coming in. Such actions could limit competition.

    “Good” things can be done when the community takes charge, but the community is not always in the “interest” of the community. The power used to kick out Wal-Mart can also be used to kick out the new doctor, or that funny-looking immigrant guy who wants to own a restaurant (I am not using racism to make your opinion sound bad, I am just saying it is a possibility).

  5. Chance said

    “I’m for taking care of the employee. A happier employee will do a better service to the customer.

    And I’ve been curious as to what the affect of lack of insurance (that only mgmt positions at Wal*Mart can currently afford) has made on the employees, sick time, etc, loss of work, etc.

    I feel the Spirit of Sam Walton present with this post.

    Interesting questions you ask he tells me. “

    Good thoughts Josh.

    I do feel that Sam Walton was a better person than the current management. I could be wrong, I’ve just heard good things about him, but Dan, correct me if I am wrong.

    Josh, concerning your statement about service, I agree. Wal-Mart service, well it sucks. But I also feel I have a choice when it comes to grocery stores, so I can make a decision on cost savings vs. service. However, I do agree that small towns may not have this luxury.

  6. Dan Trabue said

    “It seems that you address this somewhat, because you state that these low wages are obtained immorally, or are not reflecting what you call “real costs.”

    Is that correct?”

    Yes, that’s my argument. If a gidget factory is located next to my house and they are able to produce cheaper widgets by hiring illegal aliens and dumping their waste liquid in the ground, it’s not the case that their widgets cost $x – they cost $x + the damage to the ground where I live + any possible poisoning-related costs incurred + under-prevailing wages they’ve paid to the migrants.

    I just fail to see any ethic which believes in personal responsibility accepting that sort of arrangement. Wouldn’t that be akin to purchasing stolen goods? The argument in favor of purchasing stolen goods (“Well, I can get my widgets at HALF the cost!”) does not make it acceptable.

  7. Chance said

    Thanks Dan. Could you provide just a couple of examples of how Wal-Mart pollutes?

  8. Dan Trabue said

    Quickly, when companies go to Mexico, Phillipines, etc, they do so because

    1. It’s cheaper to hire workers
    2. Workers are more desperate/less likely to complain – even about inhumane labor practices
    3. Even if they do complain, the gov’t’s in these other locales are often less likely to enforce labor laws (if they even exist)
    4. Similarly for environmental issues – companies are less likely to have gov’t complain about them polluting their land, air and water.

    I’d have to do some research to demonstrate a Walmart example – my problem is more with unfettered capitalism in general than with Walmart in particular – but what is true for corporations in general will be true with Walmart specifically.

    I’ll get back with you unless someone else provides data.

  9. Michael Westmoreland-White said

    Unlike Dan, I do single out Wal-mart because they have been so successful at their “race to the bottom” strategy that they pressure other retailers (e.g., Target, Sears, K-Mart, etc.) to follow suit or go out of business. So, I see the “Wake-Up Wal-Mart” Campaign as a way of taking on the larger problem by trying to change the corporate culture of the biggest symbol of the problem.

    This is similar to the way reformers targetted Gerber in the campaign to prevent marketing of powdered milk in the 3rd world where (a) clean water was hard to come by and (b) mother’s breast milk was a vital key to greater infant survival. Gerber wasn’t the only culprit, but when the boycott against Gerber was successful, it led to reforms across the board.

  10. Michael Westmoreland-White said

    In addition to Dan’s arguments for increasing wages to employees and not putting mom & pop stores out of business, I’d add these:

    1) Higher wages help the whole economy by increasing consumer power.

    2) Locally owned store’s profits participate in the “multiplier effect.” That is, they circulate locally repeatedly before a small amount leaves the area. This brings greater prosperity to the whole local economy. Multinational corporations whose headquarters is elswhere generate profits that leave the area immediately. Thus, such a company ends up treating the local people as an economic colony whose main function is to generate profits elsewhere.

  11. Dan Trabue said

    I’ll note an uncertainty in my position in regards to Michael’s call for increasing wages: I’m not wise enough nor knowledgeable enough to know if it wouldn’t make more sense to be downwardly mobile, rather than upwardly mobile in our income. Finding ways to live well on less.

    But that, to me, is sort of a different discussion. You asked me about Walmart and pollution, let me offer a few resources (and I’m lumping together Walmart’s labor and environmental problems – which I ses as two sides of the same coin):

    A couple of general studies and commentaries:

    http://edworkforce.house.gov/democrats/
    releases/rel21604.html

    http://www.columbian.com/business/
    businessNews/09112006news58110.cfm

    And specifically about specific polluting incidents:

    http://www.organicconsumers.org/BTC/violations081605.cfm

    http://www.coalitiontlc.org/wal-mart_water_pollution.htm

    The point being, if Walmart (or any industry) is encouraged to find the cheapest way to provide goods at the greatest profit AND they’re not regulated, they will.

  12. Michael Westmoreland-White said

    Dan said:
    “I’ll note an uncertainty in my position in regards to Michael’s call for increasing wages: I’m not wise enough nor knowledgeable enough to know if it wouldn’t make more sense to be downwardly mobile, rather than upwardly mobile in our income. Finding ways to live well on less.”

    Simple living, refusing to worship consumerism, etc. is a religious calling–not something to be forced onto employees by employers, especially employers who destroy competitors who might offer better wages–robbing employees of choice. How employers treat employees is a matter of justice.

    If I am paid more handsomely than I need to be, I can choose to resist consumerism and have more disposable income to give to good causes. If I am not paid enough to support my family, pay medical bills, etc., I cannot choose to live simply.

  13. Glen Dean said

    Dan, your rules of good work make me want to go on a Dagney Taggart style rant, but I won’t. Unbelievable!

    Michael, you have revealed yourself a true Keynesian, a demand sider. Of course I am not. The fact is Wal-Mart should pay whatever they want to. It is their company, their private property, not yours, mine, or the governments.

  14. Dan Trabue said

    “your rules of good work make me want to go on a Dagney Taggart style rant, but I won’t.”

    Glen forgive my ignorance, but I’ll have to own up to not knowing what you’re talking about here.

    I’m talking about being personally responsible and pay for stuff as we go, not putting things off on the less fortunate, the environment or future generations. While I suppose you could call that concern about good works, but most conservatives would also claim that as basic conservative doctrine.

  15. Dan Trabue said

    Ohhh, Atlas Shrugged.

    Don’t have much use for that theology, as I’ve heard it explained, but you can give it a try if you want.

  16. Dan Trabue said

    So, have I/we “demonstrated why one option is better than the other” or is there some argument left unsupported?

  17. Chance said

    Dan, I think so, because you argue that these low prices are “artificial”, that is, they do not reflect what you would call the real costs, and that they are obtained somewhat immorally, that is, through slave labor and destruction of the environment. I am not saying I necessarily agree, although I disagree with destruction of the environment, of course, but to what extent?

    As far as what you call “doing away with a previously existing system” it kinda makes sense. If you argue that we should do what we can to prevent loss of existing jobs, that is, loss of current jobs is worse than creation of new jobs is good, I can understand your view, but I think this would make for a stagnant economy. We can’t avoid new businesses or techology simply because it upheaves the current system. I can definitely see the value in mom and pop stores, but I can also see the value in many of the poor finding work and being able to get stuff for cheaper.

    I do think you have an overall good response though, the key being that the low prices are in fact pushed somewhere else.

  18. Dan Trabue said

    “We can’t avoid new businesses or techology simply because it upheaves the current system.”

    On this point (and many others), I think the Amish model is a wise one. They don’t out and out reject technology, but they are the ultimate conservatives in that they approach any technology cautiously, wanting to know if what it is supposed to offer will truly be worth it.

    I may not be as extreme as the Amish, but I think the other extreme is what we currently have, which is, if we CAN do something, let’s. If Walmart CAN supplant this existing system, then let them. We don’t need to stop and examine HOW they will supplant the existing system, nor count the costs of what the results might be, it’s just go, go, go.

    That’s how I’d sum up our current western philosophy: If you can do it, then you should. And I reject that sort of “liberty.”

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