Monday, January 03, 2005

Wal-Mart v. Libertarians (and the rest of us)

William Marinara, of Liberty&Power, points to this review of scholarship on the largest retailer in the country. He refers to it, ironically, as an example of "heroic capitalism" and I think it does present a grave challenge to the libertarians with whom he blogs. Wal-Mart relies heavily on legal and governmental institutions to keep its labor force low, routinely violates fair labor practices, and is heavily subsidized by federal and state governments:
For a two-hundred-employee Wal-Mart store, the government is spending $108,000 a year for children's health care; $125,000 a year in tax credits and deductions for low-income families; and $42,000 a year in housing assistance. The report [February 2004 report by the Democratic Staff of the House Education and Workforce Committee] estimates that a two-hundred-employee Wal-Mart store costs federal taxpayers $420,000 a year, or about $2,103 per Wal-Mart employee. That translates into a total annual welfare bill of $2.5 billion for Wal-Mart's 1.2 million US employees.

Wal-Mart is also a burden on state governments. According to a study by the Institute for Labor and Employment at the University of California, Berkeley, in 2003 California taxpayers subsidized $20.5 million worth of medical care for Wal-Mart employees. In Georgia ten thousand children of Wal-Mart employees were enrolled in the state's program for needy children in 2003, with one in four Wal-Mart employees having a child in the program.
What's the alternative, they might argue. Wal-Mart provides jobs (though rarely more than they take away, particularly when you factor in the outsourcing and cost-squeezing they impose on their suppliers), pays minimum wage or higher (though that's far from a living wage in this country, particularly for anyone who isn't single and childless), nobody is forced to take them (debatable), and they are immensely successful at bringing desirable products (well...) to purchasers at low prices. But the true cost of Wal-Mart's products is considerably higher than the ticket price, or even the ticket price plus sales tax. One way or another, Wal-Mart's customers are paying the full cost of Wal-Mart's labor, but because they've managed to shift the burdens to the state, those costs are hidden.

Full disclosure: I shop at Wal-Mart, sometimes. Mostly for things which are difficult to find otherwise in a small town, and almost entirely for things which, if I didn't buy them at Wal-Mart, I'd be buying them at another national chain store, because that's what we've got a lot of. I have nothing against large companies as such, or efficiencies of scale and real productivity increases; I do have something against companies that abuse their power, violate law and shift expenses from their customers to the taxpaying public.

Now, to be fair, many governments, though history, have subsidized corporations for developmental purposes, to maintain stability or growth, to maintain independence in some strategic product or skill, and though the results are mixed from a purely economic standpoint, non-economic purposes have often been well-served. Wal-Mart doesn't seem to me to fulfill any of those functions, at least not particularly well. Libertarians, in particular, who object to the government's intrusions into markets, should find this sort of pointless subsidy of bad business practices quite objectionable.

1 comment:

Alex said...

Yo, me again...
Thought I'd throw in the pop culture comment: just finished reading John Grisham's latest (I think it's his latest), The Last Juror, and he talks about the economic consequences of a "Bargain City" megastore moving into a smallish town in the South in spite of the well-predicted consequences to the community. And since Grisham generally does his homework, I'd be surprised if the study he's citing wasn't real.