Wal-Mart Wars

Recently, Wal-Mart's attempt to enter the New York City market was defeated, which seems to have helped spark a significant debate on the nation's biggest employer.

The company has very few outright defenders. Heck, there's even a website dedicated to bashing it. The basic liberal critique is that it is anti-labor, given its union-busting practices and its policy of low wages, low benefits, importation of suspect foreign goods, and its pressure on its suppliers to do the same. However, even some conservatives (like Bainbridge) have criticized Wal-Mart for its delerious effects on small business and damage to small towns. They're also mad that it receives government subsidies in the process.

Now the real debate is what to do about it. Some of us would like to take a hammer to Wal-mart's buildings. Others just want to stop subsidizing it (like Bainbridge), while the likes of Kevin Drum and Matt Yglesias want to pass laws regulating its behavior to prohibit its worst practices. Max Sewicky seems to want to limit Wal-Mart's growth because of its harmful effects on small proprietorships. Robert Reich wants consumers to take on more of the burden, since their obsessive pursuit of low prices is what makes Wal-Mart so successful in the first place.

So where do I stand on this? I suppose you could place me in the Bainbridge-Sewicky camp. My objection to the "management" strategy for dealing with Wal-Mart is that it does nothing to rescue small entrepreneurs. Having your own business is a major component of the American dream, and as I have said before, we need to preserve it. I also reject the real economic benefits of giant retailers. Unlike producers, I fail to see what economies of scale are generated by selling products (as opposed to making them, where there are efficiency gains to be had). I think the only reason Wal-Mart can generate cut-rate prices is because of its exploitative labor & lobbying practices. There is really no reason why a small store (or a consortium of them) could not negotiate deals from their suppliers that would be just as good as a Wal-Mart that didn't have horns.

Versus Reich, I think he is forgetting the collective action problem. Certainly it is in everyone's individual interest to get the best deal. I am unduly sacrificing myself by buying the more expensive good, something particularly difficult to do when my dollar is stretched thin as it is. The reason we have governments is to solve these problems by using government sanctions to impose a solution so that people can do the right thing without getting penalized. We don't drive on the right side of the road out of some social imperative, but because the state just arbitrarily decided that is how we are going to do it. Thank God.

On a side note, Drum & Yglesias think that Bainbridge and Sewicky have an undue romanticism about small-town, small-business America. Yglesias describes this as a communitarian attachment, while Sewicky objects to this term in favor of populism. I think this debate just reveals that Populism, with its desire for property ownership, is a closely related to a traditionalist version of small-town communitarianism. The ideas really are in inextricable. And contra Drum, just because he doesn't think small town life is so great doesn't mean that we should allow a big company to destroy a way of life that many people find a wonderful one. I think we need to preserve the possibility of small town America, which means we have to preserve small companies and put restrictions on big box retailers.

Having said all this, I have a proposal. Why not pass a franchisers' bill of rights, giving them more autonomy and real independence from their mother company. By shifting the center of gravity within these organizations, we might capture the benefits of having big commercial networks while preserving the possibility for independent entrepreneurs.

Just an idea.