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Newsweek Columnist on WalMart

Discussion in 'Anything goes' started by poindexter, Sep 7, 2006.

  1. poindexter

    poindexter Well-Known Member

    Wal-Mart's A Diversion
    On any list of the nations major concerns, the giant retailer would not rank in the first 50. So why are Dems spending so much time talking about it?
    By Robert J. Samuelson

    Sept. 4, 2006 issue - It's not surprising that, as the New York Times reports, leading Democratic politicians have latched onto bashing Wal-Mart as a "new rallying cry" that "could prove powerful in the midterm elections and in 2008." America's political culture routinely demands at least one hideous corporate villain. In recent decades that role has fallen to General Motors, IBM, ExxonMobil and Microsoft; now Wal-Mart has assumed the mantle. But these wishy-washy politicians have missed the obvious solution to the Wal-Mart problem: nationalization.

    Congress should just buy the company and then legislate good behavior. Wal-Mart executives "talk about paying them [workers] $10 an hour," Sen. Joseph Biden told a rally in Iowa, according to the Times. "How can you live a middle-class life on that?"

    Well, if $10 is too little, the government could order the Department of Wal-Mart to pay more. How about $15 or $20? Similarly, if Wal-Mart's health insurance is inadequate, Congress could command more coverage. (I asked Wal-Mart for coverage figures, which it declined to provide. All a spokesperson said is that more than half its 1.3 million U.S. employees are full time, enjoying higher coverage rates, and that 75 percent of all workers have some coverage through the company, the government or spouses' plans.)

    OK, I jest. Congress isn't going to buy Wal-Mart—which would cost roughly $183 billion at its current stock price of about $44 a share—and I don't think it should. Still, pretending to nationalize Wal-Mart is a useful thought exercise. It shows why Wal-Mart as a government agency would actually provide fewer public benefits than as a grubby, profit-seeking colossus. The company's incentives would shift. Instead of trying to lower costs, improve efficiency and raise profits, it would focus on pleasing its political patrons and complying with their demands.

    These would doubtlessly burgeon beyond wages and benefits. Politicians would find unending opportunities for grandstanding and meddling. Does Wal-Mart import too much from China? Order it to cut back. Does it treat suppliers brutally? Require it to be nicer. Are its stores ugly? Appoint architectural advisers.

    Wal-Mart would deliver more political benefits to favored constituencies—workers, suppliers, competitors—and fewer to the public. Retail prices would be the biggest casualty. Scholarly studies show Wal-Mart's price reductions to be sizable. Economist Emek Basker of the University of Missouri found long-term reductions of 7 percent to 13 percent on items such as toothpaste, shampoo and detergent. Other companies are forced to reduce their prices. On food, Wal-Mart produces consumer savings that average 20 percent, estimate Jerry Hausman of the Massachusetts Institute of Technology and Ephraim Leibtag of the Department of Agriculture.

    All told, these cuts have significantly raised living standards. How much is unclear. A study by the economic-consulting firm Global Insight found that from 1985 to 2004, Wal-Mart's expansion lowered the consumer price index by a cumulative 3.1 percent from what it would have been. That produced savings of $263 billion in 2004, equal to $2,329 for each U.S. household. Because Wal-Mart financed this study, its results have been criticized as too high. But even if price savings are only half as much ($132 billion and $1,165 per household), they'd dwarf the benefits of most government programs.

    A collateral benefit is less understood. By restraining inflation, intense competition of the sort that Wal-Mart provides eases pressure on the Federal Reserve to do the job with tight credit and higher interest rates. Note the paradox: at one level, intense competition destroys jobs, as some companies can't compete, but the larger effect is to increase total job creation by fostering favorable economic conditions.

    No company should be above public scrutiny. But much of the political criticism of Wal-Mart is shallow and, if followed, undesirable. Wal-Mart doesn't pay high wages and benefits mainly because it's in an industry (retailing) where those are rare. In 2005, average hourly wages were $10.85 for food stores, $10.63 for clothing stores and $10.84 for department stores. As General Motors and Ford are now discovering, companies that pay above-market labor costs ultimately shrink and destroy jobs. The efforts of some local governments—notably the Maryland Legislature and Chicago city council—to mandate higher labor costs on Wal-Mart are shortsighted.

    There may even be political pitfalls to this crusade. By Wal-Mart's estimate, 85 percent of Americans shop during the year at the chain; in opinion polls it generally receives high ratings. People are voting with their pocketbooks. On any list of major national concerns, the "Wal-Mart problem" would not rank in the first 50. Why, then, are some leading Democratic politicians spending so much time talking about it? People who ask that question may conclude that Wal-Mart, though a tempting target as a political symbol, is mostly a diversion from weightier issues where what politicians think and do really matters.
  2. Football_Bat

    Football_Bat Well-Known Member

    Paging Bubbler ....
  3. Ace

    Ace Well-Known Member

    Wal-Mart is evil. Much of the crap they pull is a lot worse than underpaying their employees. That column is weak.
  4. zeke12

    zeke12 Guest

    You have to love that nearly all of his statistics come from Wal-Mart.
  5. terrier

    terrier Well-Known Member

    Ace, what do you expect from a corporate whore like Samuelson?
    I'd rather see the Democrats go after Wal-Mart's CD/DVD policies of editing content (not always labeled, fooling consumers) or refusing to carry said items. I'm fortunate enough to live in a part of the country where I have other retail choices down the street, but those in red state rural areas who are forced to depend on Wal-Mart for virtually everything are screwed.
  6. Um, if you don't like Wal-Mart, here's a simple bit of advice:

    Don't shop there. Or don't get a job there.

    Some of you would feel very much at home in the old Soviet Union, I suspect.
  7. alleyallen

    alleyallen Guest

    There are plenty of evil companies out there. To single out Wal-Mart is weak. And people who refuse to shop there because of some evil corporate culture can spend their money elsewhere. If I need a bag of chips, though, I'm going there because I'd rather pay $2 for a bag rather than sweat over some corporation I can't change anyway.
  8. OnTheRiver

    OnTheRiver Active Member

    I don't normally jump in on what turn out to be pissing match threads, but I will here.

    I realize it's easy to say "If you don't like it, don't shop there," but the problem with using that logic is that by its nature, it's lazy.

    If you have a strong enough feeling about something, then I think it's OK to voice complaints about it, loudly and often, in addition to not acting to benefit a certain place (for example, not shopping at Wal-Mart).

    It'd be like someone saying "If you don't like John Kerry, then don't vote for him" without ever arguing the merits for and against the president.

    Or saying "If you have a problem with people trafficking sex slaves, then don't traffic them."

    It's not socialist or communist to voice your displeasure with a person, place or establishment.

    It's quite American, actually.
  9. tyler durden 71351

    tyler durden 71351 Active Member

    Yeah, I heard a similar thing on NPR about how these prominent Democrats were all involved in this anti-Wal-Mart campaign...I don't see where it makes any political sense. Seems to me if you want to reach out to the broad middle and working class, you don't bash a place where those people shop. It just comes across as whiney liberal B.S. that's out of touch with what average people care about. I'm not a fan of Wal-Mart, but they have great prices and they're convenient. And they are making serious attempts to be better -- raising employee salaries, getting environmentally friendly, stocking organic items, opening more upscale stores.
  10. The Big Ragu

    The Big Ragu Moderator Staff Member

    What was weak about that column? It made a convincing economic argument backed up by reason, logic and everything we have learned over the last 200 years about macroeconomics and market economies.

    What is weak is "Wal-Mart is evil," without backing the statement with anything tangible and without looking at the macroeconomic efficiencies that have benefited consumer prices and overall standard of living as a result of Wal-Mart's growth.

    Labor and management have been battling over wages since the dawn of time. But labor exists in a marketplace, too, just like any other good or service. Wal-Mart buys its labor at the market rate. That is rational behavior. When you go shopping, you don't walk up to the clerk and say, "Hey, this toothpaste is priced too low. Here's an extra dollar." Maybe not doing that makes you evil ... or perhaps it just makes you rational.
  11. cranberry

    cranberry Well-Known Member

    Excellent post. WalMart is SCUM. And while there are "plenty of other evil companies" out there, it should be noted that WalMart is the biggest and most powerful of the evil companies.
  12. JR

    JR Well-Known Member

    Not in Lyman's world. If you criticize anything American, the terrorists have won.

    His "Soviet Union" comment is funny--because Wal-Mart's goal is to become the North American version of GUM. Destroy the competition and become the only game in town.

    A variation on Ford's "any colour as long as it's black" theme.

    And the argument that Wal-Mart can't afford higher wages because its in the retail sector is bullshit. Costco pays substantially higher wages with impressive benefits and they're doing very well, thank you very much.
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