Wal-Mart Seen and Unseen
How do we measure a community’s net loss or gain when new stores come to town?
There is no easy way to measure progress, nor to measure decline. From a distance, and over decades or centuries, perhaps it is easier. But now, today, as well look around us, and inside our own lives, how do we come to know, or to feel, that things are getting better, or getting worse? For some, new products, new stores, or new music may seem wonderful advances. For others these same products, stores, and music may feel disruptive and decadent. How can the impressions and emotions experienced across hundreds or thousands in any society be compared?
How can we hope to measure a community’s net gain or loss when new retail stores displace established stores? Some may be irritated, others impressed, and still others indifferent. In the small suburban town I live in, major drug store chains arrived in the 1990s. Walgreens and Rite-Aid came to town and locally-owned drug stores folded. Net loss or net gain for our town? Without looking into every individual mind, one by one; somehow measuring every customer, employee and ex-employee, how could total progress or regress be determined? And even a total town survey wouldn’t be enough. Townsfolk might feel pleased today but less so tomorrow, as new store features fade. And how revealing are surveys? Do people really feel what they tell us they feel, or does our question somehow alter their answer, making it less real as it rises to the surface? Some may tell us they prefer vanilla ice cream, but then buy chocolate.
Instead, we have a market-process survey every day. You can see the surveyors every day entering each town drug store. They walk down the aisles and either find what they want or don’t. They leave with drugs and household goods or they don’t. And if enough times they come away empty-handed, survey says, they don’t return. If enough don’t buy or don’t return, management is swept away and replaced by another team with another system or vision or products. Human action may give us an imperfect measure of human preferences, but is it any less perfect than surveys trying to measure impressions of “net loss” or “net gain” when new retail outlets come to town?
When The Great Atlantic & Pacific Tea Company’s swept the country in the 1930s with 16,000 “new-fangled” grocery stores, thousands of small “mom and pop” stores went out of business. Consumers benefited from lower prices, wider and more standardized selection, and by finding more goods in one location. Competitors were hurt, and the social fabric nationwide was altered. Restricting A&P stores to protect local firms was even a national high school debate topic. Much was lost in the transition (a transition still in process in Japan, as various regulations have long protected small local retail outlets). But much was gained as well. Consumers voted with their feet and their dollars. Grocery stores bring products from producers to consumers. They serve no higher purpose. Some jobs were lost, others created as new pathways developed. After the transition, consumers saved time and money, and gained access to higher quality and more uniform products.
How could net gain or loss to the communities have been calculated for A&P then, and how could similar changes be calculated for Walgreens or Wal-Mart now? What measurement tools can compare how people feel about change? Some don’t care, some like changes a little, others hate them a lot (should we let “utility monsters”, those who feel gains or loss far more intensely that others, rule the day?). Some benefit, some are hurt. We have to trust to people’s own sense of their best interest. We let people decide. If don’t like their decisions, we should have no alternative but to try to enlighten them, to help them understand what we take to be their own best interest.
In today’s common debates over Wal-Mart, some claim that wages paid are too low, and that too many can only work part-time without medical benefits. For health care, Wal-Mart’s management logic would be similar to the owner of a local latté stand. If labor costs go up significantly when using full-time vs. part-time workers, employers would, on the margin, prefer part-time workers. But there are other benefits to part-time work. Many people have families and are only available part-time. Others are taking college or other training courses. Still others just don’t want to spend 40 hours a week working at Wal-Mart.
I don’t think the Boeing Company can offer part-time employment without heath-care and other benefits. So they don’t offer much part-time work. Many highly-qualified former Boeing employees, who left to raise children, might wish to return for part-time work. They could generally earn more at the firms they had trained for and worked with. And large firms like Boeing would benefit from being able to draw upon a wider part-time workforce. Unless, that is, they are forced to pay union-scale wages and provide full-scale medical benefits. I believe a combination of legislation, regulation, and union rules limit the freedom of Boeing and former Boeing employees to come together voluntarily on mutually agreeable terms for part-time work.
Some claim that Wal-Mart pays some wages too low for employees to afford a comfortable lifestyle or to afford health care. I would note that social security taxes (at 15%) and other taxes take a significant bite out of take-home pay. And health care would be much less expensive if the many layers of state and federal health-care interventions were removed. In the 1920 and 30s, millions of Americans received their health insurance and care from service clubs they belonged to (Masonic lodges, for example). The lodge doctors were the early HMOs for poorer Americans who couldn’t afford fee-for-service doctors. But this early health care and insurance for low-income workers didn’t survive aggressive state medical regulations (pushed by fee-for-service doctors and the American Medical Association). (This story is told in David Beito’s From Mutual Aid to the Welfare State: Fraternal Societies and Social Services (Chapel Hill: University of North Carolina Press, 2000).)
My point is that private sector options that used to exist for the poor and for those with low-incomes were regulated away, or at least prevented from developing as America prospered. We don’t know what options might exist today if Wal-Mart were legally allowed to offer a no-frills (or fewer-frills) health care plan to part-time workers.
If, as some have claimed, Wal-Mart managers are under pressure to fire workers before they qualify for benefits, that is a problem. If true, one would think Wal-Mart employees would find out about it and adjust their behavior accordingly. That is, they would not believe in promised future benefits (or any other promises made by Wal-Mart). This would seem much worse for Wal-Mart employee moral and productivity that any savings from tricking employees out of promised benefits
Wal-Mart started in small communities, and for people living long distances from cities, the nearby Wal-Mart brought the wider choices and lower margins that the rest of us took for granted. Again trade-offs though: consumers benefited, but the small stores that used to sell washing machines and other products in small towns lost their customers (as did Sears as catalog sales dropped. Mail-order was an alternative, before Wal-Mart, to long drives to larger cities and towns).
Central to good economics is French economist Frederic Bastiat’s idea of “the seen and the unseen.” One can see harms caused in small towns when Walgreens or Wal-Mart stores arrive with their wider selection and lower prices. Local family-owned shops close, people lose jobs, and Main street shops are boarded up or change hands. But unseen or harder to see are the consumers in small towns who gain more buying power. They can purchase more goods at Walgreens and Wal-Mart than they could before. Further, by paying lower prices for everyday goods, they have more disposable income for other goods and services in their local community (two and three dollar lattés, for example).
Comparison snapshots of small towns across America in 1974, 1984, 1994 and 2004 would reveal not only expanded choices of goods available at Wal-Mart, but also expanded goods and services elsewhere in small towns (of course this is a general claim and many small towns have grown smaller or larger for reasons that don’t have to do with Wal-Marts).
The bigger background question we want to ask and have answered is: are people better off or worse off today than ten, twenty or thirty years ago? Are communities really benefiting from the wider choices of retail goods available across America, in towns large and small? (It is worth noting that many of feel worse off. Because, I think, we are ten, twenty, and thirty years older. We aged as waves of progress washing in. Our joints hurt, we need glasses to read, and cheaper goods and gadgets are small compensation for our vanished youth. Maybe we are just getting grumpy and can’t see the local Wal-Mart though the wide-eyed wonder of millions who still live in the deep countryside—rather than just camp or hunt there).
Highly recommend is Michael Cox’s book “Myths of Rich and Poor” for comparisons over time of the everyday lives of Americans. Material wealth can’t make us happy and may for many even distract us from the truly important things in life. But we should be clear on the evidence that average Americans are materially wealthier today than in earlier decades. Their houses are bigger, cars are safer, and clothes less expensive..
Many of the themes and findings in Cox’s books are available in the online Annual Reports of the Federal Reserve Bank of Dallas (http://www.dallasfed.org/fed/annual/). In particular I recommend the 1992 and 1993 Reports. Each begins with a thoughtful essay on economic progress, these first two titled: “The Churn: The Paradox of Progress” and “These are the Good Old Days: A Report on U.S. Living Standards.”
So, for Wal-Mart, Walgreens, and the other box stores big and small that dot the American countryside, we are left with a series of trade-offs, the seen and the unseen discussed above.
But even where progress seems clearer, there other issues to consider. A 42 inch plasma television is better than a 25 inch color TV, which in turn is better than an older 20 inch black & white. But a better TV isn’t the same as better content (and maybe better TV technology leads to worse content, since on much better TVs many seem satisfied with vapid stories as long as the scenery is exotic). Bose stereos, iPods and digital CDs can reproduce sound more accurately, but not insure that people choose to listen to quality music. Culture, however measured, can decline even as prosperity increases.
Fearing Wal-Mart won’t revive culture, and it may dampen prosperity. Worse, fearing Wal-Mart distracts us from the many other opportunities we have to try to make the world a better place.