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The Calling: Why I Defend Walmart

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In the aftermath of Black Friday (or now Thursday, I guess), much will be written about Walmart.  It remains the favorite whipping boy of many on the left, not to mention their enablers in what Deirdre McCloskey calls “the Clerisy,” or what Hayek called “the second-hand dealers in ideas.”  More broadly, even those without strong left-leaning opinions often have something to say about how terrible Walmart is.  Many of these critics rely on generally misguided economic thinking at the level of both theory and the facts.

However, Walmart does come under some fire from libertarians because of its sometimes cozy relationship with the state and, to a lesser degree, its support for raising the minimum wage and its anti-union stance.  Although I recognize that those are legitimate criticisms, I remain a strong, but not uncritical, defender of Walmart and what it does.  I also believe that even in a world with freed markets, we would still see Walmart in something close to its current form for reasons I will detail below.  Whatever its flaws, Walmart’s success in providing both employment and cheap goods is mostly due to the underlying forces of the market that would still be in place in a libertarian society.

The facts surrounding Walmart are pretty clear.  (A good overview of these benefits, at least as of 2005, can be found here.) Not only has it provided hundreds of thousands of jobs for American workers, its low prices have reduced the cost of living for millions more, with one estimate (pdf) putting the effect from 1985-2004 at $2,329 per household.  If one includes the jobs that Walmart has indirectly created through its suppliers in China and elsewhere, the jobs it is has brought into existence number well into the millions.  For the workers at its Chinese suppliers, Walmart’s buying power has provided the jobs that have lifted them out of poverty.  This is no small accomplishment.

The sheer size of Walmart’s operation has also enabled it to influence the behavior of its suppliers, leading to more efficient designs for many everyday consumer products. One result is more efficient use of energy in transportation, since more of a good can be packed in a given truck or rail car.

Walmart Supercenters also reduce the time needed to shop by putting all kinds of products under one roof — a huge benefit to dual working parents.  Supercenters also mean less driving, which saves families money on gasoline and reduces automobile emissions.

Much of Walmart’s ability to keep its prices low come from the ways in which it has revolutionized management of its inventory and supply chain.  Their techniques have been copied by other retailers, and the impact of these savings has been dubbed “The Walmart Effect.”  One of the ways it does this is by empowering its associates on the floor with handheld devices that enable them to tap into the corporate database to track products on the shelves.  Walmart’s sheer size means it can spread its fixed costs across a large number of stores, taking advantage of economies of scale.

Finally, as my own work has demonstrated, Walmart came to the rescue in the aftermath of Hurricane Katrina, saving lives and property in the process.  They have done this after other disasters as well.

The libertarian criticisms of Walmart are all fair ones.  The company has indeed taken advantage of eminent domain or other government subsidies to get favorable locations or other benefits.  The Supercenter up the road from me got that town to cover the cost of widening a road and putting in new traffic controls.  Walmart has also engaged in activities that threaten the presumed right of their employees to freely associate in unions.  Of course this taps into libertarian debates over “right to work” laws and the acceptability of work contracts that explicitly deny the worker a right to unionize.  Finally, Walmart has supported increasing the minimum wage, a proposal that libertarians rightly object to.

Before responding to the individual points, I will note that even if all of this is true with no offsetting considerations, the sum total of those harms, I would argue, is less than the benefits Walmart delivers.  In fact, the concerns about eminent domain and subsidies reflects only a fraction of Walmart’s profitability.  Even without them, i.e., even if Walmart had to pay the full cost of buying land and the like, Walmart would still be more or less what it is.

Walmart’s support of raising the minimum wage is actually an argument against one of the biggest criticisms they face: that it pays terribly.  The whole reason Walmart wants to raise the minimum wage is because it pays above the minimum wage and sees this as a way to raise its competition’s costs.  Libertarians who (rightly) criticize Walmart for that stance need to recognize that it implicitly shows one of the good things the company does.

As noted, Walmart’s attempt to prevent unionization is less clearly a problem, depending on where one stands on “right to work” laws.

Finally, Walmart is no worse than other firms in its willingness to take advantage of eminent domain and subsidies, yet we seem to hear far more complaining, especially from libertarians, when Walmart does it.  One of the sure signs of an irrational prejudice is applying different standards to similar people or institutions.  Criticizing Walmart for things that lots of other firms do while remaining silent about the others is simply unfair.  In a mixed economy there will be no clean hands, and Walmart’s are no dirtier than anyone else’s.

The real danger of libertarians enthusiastically joining the Walmart-bashing is that we are providing aid and comfort to the enemies of freedom.  Walmart’s critics are not concerned about eminent domain and subsidies because they want to eliminate them so we can have a freed market – it’s the freed market itself that they are unhappy with.  When we cheer them on, we harm the cause of freedom and, in the process, the well-being of the least well-off among us.

Walmart is not a paragon of virtue, and even if, as one of my Facebook commenters recently said, “Every store looks like a Coen Brothers movie,” Walmart shoppers and employees are humans too, and they are often the folks who most need jobs and lower prices.  They are also the people we as libertarians should be most concerned about.  To that degree, the net effect of Walmart is clearly positive and a reflection of the power of the market.  We should, enthusiastically but not uncritically, applaud what Walmart has done.

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    Steven Horwitz is Charles A. Dana Professor of Economics at St. Lawrence University in Canton, NY and an Affiliated Senior Scholar at the Mercatus Center in Arlington, VA. He is the author of two books, Microfoundations and Macroeconomics: An Austrian Perspective (Routledge, 2000) and Monetary Evolution, Free Banking, and Economic Order (Westview, 1992), and he has written extensively on Austrian economics, Hayekian political economy, monetary theory and history, and the economics and social theory of gender and the family. His work has been published in professional journals such as History of Political Economy, Southern Economic Journal, and The Cambridge Journal of Economics. He has also done public policy research for the Mercatus Center, Heartland Institute, Citizens for a Sound Economy, and the Cato Institute. Horwitz is also a Senior Fellow at the Fraser Institute in Canada and a contributing editor of The Freeman. He has a PhD in Economics from George Mason University and an AB in Economics and Philosophy from The University of Michigan. He is currently working on a book on classical liberalism and the family.