Monday, July 25, 2005

Wal-Mart and the Culture Wars

We recently did an Op-Ed piece for a free market think tank in Chicago, the Heartland Institute, and it ran just yesterday in the Journal-Sentinel.

In it, we pointed out the speciousness of many of the attacks on Wal-Mart, and especially the fact that the mega-retailers opponents seem to be fighting the culture wars rather than trying to make rational economic policy.
If a capitalist corporation gets to be a big success, it inevitably finds itself in the cross-hairs of leftist political activists who don’t much like capitalism and especially don’t like large corporations.

In the 1980s, General Motors found itself in this position when Michael Moore made the movie “Roger and Me.” More recently, McDonald’s has been a target, attacked by (among other people) filmmaker Morgan Spurlock in “Super Size Me.”

[. . .]

I suspect what the critics really dislike about Wal-Mart is not economic but cultural. Wal-Mart is very “red state.” It’s headquartered in Arkansas. It’s mentioned in country songs.

The crowd that likes to say it’s on the side of poor Americans ought to appreciate a place whose prices make a modest paycheck go a long way. But they prefer to fight the culture wars, and Wal-Mart is their bugaboo.
Of course, we are happy to argue the economics of Wal-Mart, and do so in the Op-Ed piece, but we think the cultural factors are paramount.

But one interesting take on the economics of the issue comes from Don Salyards, who notes that small-town retailers have long been under threat from larger or more efficient competitors:
Once upon a time, towns in America were served by local merchants who ran small retail establishments. These small businesses gave great personal service. The owners of these small shops knew their customers by name. They knew your wife or husband’s name. They knew the names and ages of your children. They supported town activities. They hired their employees from the towns where they resided and spent their money locally, boosting their hometown economies.

Furthermore, the profit margins of these small retailers were relatively slim. These “mom and pop” stores applied a modest but fair mark-up over their costs. Like their friends and neighbors, few of these small town retailers got rich. They simply eked out a living.

Then, everything changed. The big retailers invaded the space of the small town merchant. They offered a larger inventory of goods and services. The local merchant didn’t have the capital to stock such a large inventory. The big retailer’s costs were so much lower and their efficiency was so much greater, the town folk could now buy their products as cheaply as the local retailer.

[. . .]

I’m not talking about Wal-Mart or Target, or Best Buy, or Home Depot. I’m not even talking about this century. I’m talking about Aaron Montgomery Ward and Richard Sears.
Of course, mail order giants Sears, Roebuck and Montgomery Ward did not drive small town retailers out of business, although they certainly hurt some of the less competitive ones.

But small retailers did compete, although only by offering better quality, or better (perhaps more personal) service or specialized products not available from the big catalog firms.

Economic reactionaries — and this includes most of the political leftists — always dislike economic change when it’s the result of the free market (as opposed to socialist planners). But in a democratic, eqalitarian American political system they can seldom stop it.

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