Thursday, June 24, 2010

My Moral Defense of Wal-Mart

A friend of mine recently worried on facebook whether or not she could shop at Wal-Mart with a clean conscience. She sees Wal-Mart as evil. This point of view frequently surprises me. It strikes me that those who claim it aren’t looking deeply enough into the total effects of Wal-Mart on the community. Generally, they see that Wal-Mart comes into a community, and then long standing local businesses shut down. Putting people out of jobs. This is, of course, bad news. And they think they can make things better by just preventing Wal-Mart from being there.

But there’s another side to the story. The analysis that Wal-Mart is evil really misses a huge benefit that they bring with them. Specifically lower costs for consumers.

The simple question is this: should local consumers be forced to spend millions more on products in order to save the jobs of local businesses? When Wal-Mart is not allowed into a community, members of that community lose the cost savings that typically accompanies Wal-Mart. And instead are forced to spend more money at existing local business. By what principle should this redistribution of money from consumers to local business be forced on consumers?

Suppose Wal-Mart saves $1000 annually for people who shop there. This is not that difficult a number to imagine. If a person makes a trip to the store weekly, and saves a $20 each week, that adds up more than $1000 annually. Is it worth $1000 per year in extra costs to you to save the jobs of local business? That $1000 is money taken from your pocket and put into the pocket of the local business simply because they’re not as good at getting product to you as Wal-Mart is. If the local business came up to you directly and asked for $1000 every year, do you think you’d just hand them that cash? Well that’s what’s happening when local business demands that you protect their jobs from competition from Wal-Mart.

But maybe you do think that $1000 is worth it. You could be wealthy enough to afford it. Maybe you have friends who work in those local businesses and you can see the harm more directly and the $1000 seems pretty small to you. You’re wealthy enough to afford $1000 per year to help those people keep their jobs. OK, but by what logic do you impose that cost on the poor, who spend even more of their money at Wal-Mart than do the affluent? What makes you think it’s moral to force the poor to buy more expensive products for the benefit of local business?

If you really want to make this into a moral argument, you’d better understand that just about every decision has a tradeoff. When you weigh the decision, it isn’t that there local jobs lost on one side and nothing on the other. Instead you have losing local jobs on one side and higher prices for the poor on the other side.

If you think Wal-Mart is evil for the costs that it imposes on local business, consider what the costs are to the poor when you force Wal-Mart out. Because those are the choices. Choosing in favor of local business is also choosing to further impoverish the poor.

Now maybe your moral compass allows this. But mine does not. I find it incredibly distasteful to force the poor to subsidize local business by removing Wal-Mart as an option for them. So I shop at Wal-Mart with a clean conscience. I’m glad that they help not only me be a little less poor, but also those who are poorer than I am. I want that choice available to all. I am distrustful of local businesses when they demand that it not be allowed.

Perhaps the objection to Wal-Mart is that they hire sweatshop labor in third world countries. It's certainly true that sweatshop labor is horrible and difficult labor. But only compared to the standard of working that we have in the US. For many in the developing world, the alternative to working in a sweatshop isn't working in an office. It's working in a field. It's subsistence living. It's 16 hours of back breaking labor per day earning just enough to get food to survive the day. Compared to that, sweatshops are a step up. Which is why, when a factory in China opens up, the Chinese beg for the work.

There does not appear to be any known way to transition the desperately poor into an industrialized nation capable of producing wealth for its people without going through a phase in which sweatshops exist. The US went through that phase and it appears that others have to go through it, too. But this is only surprising and shocking to us looking back on it. For the desperately poor, stuck in subsistence living, sweatshops are a significant step up.  So, of course you have to go through that phase. In exactly the same way that if someone wants to get to the penthouse, they must first get past the second floor.

For a much better description of how sweatshops are beneficial to third world countries, read this:

Suffice it to say, I'm not convinced that Wal-Mart is evil.

Postscript: I should note that frequently Wal-Mart will come into a community and demand tax incentives from the local government in order to build. No such incentives should ever be granted to just Wal-Mart. If the taxes are too high to get Wal-Mart in, then special exemptions for them are wrong. Lower the taxes for everyone. It’s pretty likely that if lower taxes attract Wal-Mart, they’ll also attract other businesses. And you’ll likely generate at least as much (if not more) tax revenue post tax cut than before. See Laffer Curve.