Archived Story

Three cheers for Wal-Mart

Published 11:00pm Wednesday, July 18, 2012

In July 1962, the first Walmart store in America opened in Rogers, Ark. Today, 50 years later, Wal-Mart Stores Inc. has more than 10,000 stores and 2.2 million employees. More than 200 million customers are served per week in these stores, and Walmart continues to satisfy consumers through its commitment to low prices.

Wal-Mart’s contribution to prosperity and consumer well-being should be celebrated. Much of the productivity in clothing, food, and consumer staples over the last 20 years can be attributed to Wal-Mart’s innovative supply chain-system; as Wal-Mart innovated, many of its competitors – Target, Kroger, and Winn-Dixie imitated. The effect of this competition for consumers was lower prices and greater purchasing power. Whether you shop at Wal-Mart, Whole Foods, or Macy’s, chances are you have benefitted from the competition Wal-Mart has brought to many different markets.

Though the benefits of Wal-mart seem obvious to many of us, Wal-mart has plenty of critics. The “people of Wal-Mart” web-site, for example, pokes fun at the diversity of customers Wal-Mart attracts. Many liberals complain that Wal-Mart’s market share is too large and think Wal-Mart should be paying its workers more. Again and again, their criticisms have been challenged by economists.

Take the low wages Wal-Mart allegedly pays it workers, for example. Why should Wal-Mart have to pay more? If willing Wal-Mart store managers and willing employees agree to a contract that pays an employee $9 per hour, why not let the agreed upon wage prevail? Any price higher than $9 just means higher costs for Wal-Mart and higher prices for consumers. Economists have rebutted the critics on the low-wage criticism, and they’ve argued, quite convincingly, against a number of other Wal-Mart criticisms.

For example, a Johnson Center colleague of mine, Andrea Dean-Crowley (and her co-author, Russ Sobel), used statistical analysis to study the effect of Wal-Mart on small businesses. After carefully breaking down the data, the authors could not find evidence that Wal-Mart has a negative effect on small businesses in the United States. While some direct competitors to Wal-Mart might close, many new small businesses start up as a result of people having more disposable income because of Wal-Mart.

Art Carden, an economist up the road at Samford University, has also dug into one of the common Wal-Mart myths: the myth that Wal-Mart makes us fatter. Carden and his co-author, Charles Courtemanche, find that greater consumer access to Wal-Mart actually leads to lower probabilities of obesity. The effect they find is subtle and counterintuitive: Wal-Mart’s lower prices increase our purchasing power; increased purchasing power leads many people to choose healthier food options.

Despite the important work being done by people like Carden and Dean-Crowley, the criticisms of Wal-Mart pile up, and the critics show no sign of putting an end to the myths they’re peddling about Wal-Mart. There’s a simple reason for why the critics won’t leave Wal-Mart alone: Accepting that Wal-Mart is a net benefit to the world means accepting that entrepreneurs and managers – people focused on controlling costs and making profits – can actually do good; it means accepting the premise that freedom and capitalism also might be good for the world, and that’s just going too far for many of Wal-Mart’s critics.

Fifty-year marks are nice moments to pause and reflect. If the critics of Wal-Mart reflect at all on the company’s first 50 years, they might come to realize that a business environment committed to freedom allowed for a tiny “mom and pop” company – the kind of company they say they’re in favor of – to emerge and transform the retail sector in America. For the sake of the little guy, they should be hoping America’s business environment remains free and open enough for today’s start-ups to become tomorrow’s Wal-Marts. In other words, they should be fans of Wal-Mart and fans of freedom because it was freedom and the little guy that gave us Wal-Mart, and we sure could use more stories like Wal-Mart, not less.

Scott Beaulier is Executive Director of the Manuel H. Johnson Center for Political Economy at Troy University.

 

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