Going to the Wal-Mart for China

by Don Boudreaux on August 22, 2006

in Foreign Aid, Wal-Mart

FLOW‘s Michael Strong explains Wal-Mart’s role in lifting hundreds of thousands of Chinese people out of poverty.

Between 1990 and 2002 more than 174 million people escaped poverty in China, about 1.2 million per month. With an estimated $23 billion in Chinese exports in 2005 (out of a total of $713 billion in manufacturing exports), Wal-Mart might well be single-handedly responsible for bringing about
38,000 people out of poverty in China each month, about 460,000 per
year.

There are estimates that 70 percent of Wal-Mart’s products are made in China. One writer vividly suggests that "One way to think of Wal-Mart is as a
vast pipeline that gives non-U.S. companies direct access to the
American market."  Even without considering the $263 billion in consumer savings that
Wal-Mart provides for low-income Americans, or the millions lifted out
of poverty by Wal-Mart in other developing nations, it is unlikely that
there is any single organization on the planet that alleviates poverty
so effectively for so many people. Moreover, insofar as China’s rapid manufacturing growth has been
associated with a decline in its status as a global arms dealer,
Wal-Mart has also done more than its share in contributing to global
peace.

Be Sociable, Share!

Comments

comments

Add a Comment    Share Share    Print    Email

{ 35 comments }

Martin August 23, 2006 at 2:31 am

Poverty is relative.

And who really gives a damn about how many Chinese get lifted out of poverty by Wal-Mart when it can only be enabled by the loss of American jobs?

Jack August 23, 2006 at 6:49 am

Martin,

Relative or absolute, millions of Chinese are better off.

And who cares? Well, if 100 Chinese (or 1000) are made better off at the cost of 1 American being worse off, as a human being, isn't that something positive?

There are channels through which we can address the situation of those (relatively few) Americans made worse off by Wal-Mart.

Martin August 23, 2006 at 7:39 am

Jack,

The answer to your question 'isn't that something positive', is No.

It's the job of the Chinese government to improve its peoples' lot, not the American welder.

JohnDewey August 23, 2006 at 7:57 am

Martin,

Three hundred million U.S. consumers enjoy sharply lower prices because labor-intensive manufacturing has been shifted offshore. Would you take away all those real gains in order to save the jobs of the very few U.S. workers that have lost manufacturing jobs – and not found replacement jobs? I wouldn't, and I've repeatedly told my congressman so.

True_Liberal August 23, 2006 at 8:03 am

The benefit to both Chinese employees and to American (& other) consumers is a BIG plus.

But wasn't it just a few years ago WalMart was touting a "Buy American" mantra – only to be caught with pants down?

True_Liberal August 23, 2006 at 8:19 am

Andy Young some months ago signed on as spokesman for Working Families for Wal-Mart.
See: http://www.usatoday.com/money/companies/2006-03-15-young-walmart-usat_x.htm

But this month he got canned for – WHAT? – Racially insensitive remarks about Jews, Koreans, Arabs?

Martin August 23, 2006 at 9:05 am

John,

If the replacement jobs being available to those 'very few' pay less than their old jobs, the answer is yes.

What you're saying is that it's OK for a group of people to benefit from money taken from other peoples' pockets. There are three expressions to describe such a redistribution. The first is globalisation, the second is socialism and the third is mugging.

Tom August 23, 2006 at 9:15 am

"What you're saying is that it's OK for a group of people to benefit from money taken from other peoples' pockets."

Exactly what happens when you interfere with my right to do business with Wal Mart or Wal Mart's right to do business with China. It's taking extra money from my pocket to force me to buy from a more expensive vendor. I don't appreciate it.

John Dewey August 23, 2006 at 9:53 am

Martin,

WalMart didn't take money from someone else's pockets. They just stopped giving their money to overpriced workers.

How is that mugging? What right does anyone have to higher wages when someone else will do the job far cheaper?

Suppose WalMart's suppliers used robots instead of cheap Chinese labor to produce their goods. Would you advocate saving the jobs in the non-robot firms by preventing Wal-Mart from purchasing from the robot firms?

Millions of jobs have moved from the Northeast and Midwest into the Sun Belt. Firms have sharply lowered their labor costs by taking advantage of less restricitve laws and cheaper labor in the Sun Belt. Should the government have prevented those jobs from exiting the northern states?

Tom is exactkly right. Using the government to interfere with my right to less expensive goods – from SunBelt states or from China – is mugging.

Kent Gatewood August 23, 2006 at 10:28 am

If the government interferes in the world oil trade by spending 30 dollars a barrel for the military to protect the importation of petroleum doesn't this distort the real cost of oil.

John Dewey August 23, 2006 at 11:30 am

Kent Gatewood,

Are you saying that, absent U.S. military intervention, Iraqi or Saudi or Kuwaiti oil would stop being sold on the world market? How would the worldwide supply of or demand for oil be changed?

asg August 23, 2006 at 12:09 pm

Funny, the sentiment that:

It's the job of the Chinese government to improve its peoples' lot, not the American welder.

sounds a heck of a lot more like socialism than does the notion that people should be allowed to trade with whoever they like. If someone chooses not to employ me because another person will do the job better or cheaper, no money is being "taken from my pocket". Otherwise, you're led to the ludicrous view that every time someone buys a car from Ford, GM is being robbed.

Kent Gatewood August 23, 2006 at 1:15 pm

Originally I wanted this because it was fair. But fair isn't cool in the economic world.

Then I decided the Federal budget would drop by 200 billion, and "my" Oklahoma oil company would get a big tax cut. World oil prices don't change.

But Iran, Russia, China, Israel move on Saudia Arabia and take it without damaging anything. Royal family too busy Lear jetting out to blow anything up. No change
in world oil.

More likely,when the foreigners go in, the Arabs blow up the fields, the refineries, and the terminals. World oil prices go up.
Oklahoma oil prices go up. Yankees freeze.
Not fair.

America decides to develop coal to oil or oil shale to oil. Oklahoma oil company not as happy. World oil prices go down.

More likely, Kuwait and Saudia Arabia see conquest coming and pay protection money to the US. The US gets paid for its comparative advantage in the military area.
Oklahoma oil company gets anther ten per cent tax cut. Yankees don't freeze. Not fair.

BUMMER.

TGGP August 23, 2006 at 2:09 pm

Didn't the America get less oil from Iraq after the invasion? The "NO WAR FOR OIL!" people always bugged me. Partly because I got the impression they were angrier about oil and than war, and partly because they ascribe to malevolence what can (and virtually always should) be ascribed to incompetence. Those with a zero-sum view of the world are unable to understand both positive and negative sum situations.

Martin August 23, 2006 at 4:00 pm

Tom,

Wal-Mart has no 'right' to do business with Chinese companies. It is permitted to do so by the governments of the USA and China because they think (mistakenly, I believe) that it benefits all sides. Although you might not appreciate it, why is paying a slightly higher (although still affordable) price for some goods so bad when that will help maintain a fellow citizens's standard of living?

Are your fellow citizens so unimportant to you that their livelihoods, their homes, their families and their prospects are worth less than cheap junk from Wal-Mart? Do you possess any sense of civic responsibility? Or are they to just to be cast aside in the hope of spending a little less of 'your money'?

John Dewey,

Firstly, define 'overpriced workers'. No, let me guess – someone less well off than yourself who's stopping you from keeping a little more.

You write,

"What right does anyone have to higher wages when someone else will do the job far cheaper?"

Beacuse they're your fellow citizens, the kind you'll soon be serving in the soup kitchen to make yourself feel good about having supported the export of their futures.

Your robot point, although subtle on its face, is actually facetious. They don't, so
it doesn't matter.

Discussing job migration from the Northeast to the Sun Belt in the same context as Wal-Mart and China is a pointless a task as the comparison of apples and oranges. Movement of jobs within the internal boundaries of nations, although naturally likely to hit the departing area hard, is of an entirely different character and degree to the shipment of jobs offshore. Why? Because although some of your fellow citizens will be hit, others will gain (or should, if the replacement factories haven't been packed with illegals). Wal-Mart/China involves a citizen of another nation gaining while one of your own loses out.

Can't you guys see the, um, difference?

I hate to remind you of this, but for as long as we live in a world of nation states you have no 'right' to cheaper goods if the exercise of that 'right' involves the impoverishment of a fellow citizen.

By the way, do you have any data on whether any of those companies that relocated to the Sun Belt lowered their prices in line with their labour costs?

Gupta,

I agree with you. The idea that 'people should be allowed to trade with whoever they like' is a notion, nothing more. in this age, people are allowed to trade with whomsoever they are permitted to trade – although offshoring is not 'trade' in any Ricardian sense. Should the political winds change, rules may tighten.

And I can't see you could extract the slightest hint of socialism from my earlier statement.

John Dewey August 23, 2006 at 5:34 pm

Martin: "Are your fellow citizens so unimportant to you that their livelihoods, their homes, their families and their prospects are worth less than cheap junk from Wal-Mart?"

Which of my fellow citizens are unable to find jobs? I work in the airline industry, where thousands of my coworkers have been laid off. The ones I know all found new jobs very quickly.

FYI, I shop regularly at WalMart. I do not buy "cheap junk" there.

Martin: "Wal-Mart/China involves a citizen of another nation gaining while one of your own loses out."

I disagree. Millions of citizens in my nation, the U.S., have gained from WalMart's low prices.

Martin: "Movement of jobs within the internal boundaries of nations … is of an entirely different character and degree to the shipment of jobs offshore."

Not to me. Isn't the nationalist protection of jobs a form of mercantilism? That's an 18th century policy that was repudiated 200 years ago, right?

Noah Yetter August 23, 2006 at 6:09 pm

"Wal-Mart has no 'right' to do business with Chinese companies."

By what moral standard could this possibly be true? Do you really think that rights come from the government? Were you asleep through revolutionary history? Do you even WANT to live in a free country?

Kent Gatewood August 23, 2006 at 7:00 pm

What will be "fun" to see is the social turmoil in a fully integrated world economy with a 4 dollar an hour average wage.

asg August 23, 2006 at 7:21 pm

"The idea that 'people should be allowed to trade with whoever they like' is a notion, nothing more."

Well, gee, I suppose the ideas that "people should be allowed to vote for their leaders", or that "people should be allowed to say what they think about the government" are just notions, nothing more. You say that "in this age, people are allowed to trade with whomsoever they are permitted to trade". Why not equally claim that "In this age, people are allowed to say whatever they are allowed to say"? "In this age, people are allowed to vote for whoever they are permitted to vote for"?

You may be right about your earlier statement not containing socialism, though. It's beginning to look like one of the other 20th-century ideologies to me.

Martin August 24, 2006 at 6:53 am

Charlie,

Where Bill Clinton had his book published is of absolutely no interest to me. That he didn't demand that it be finished by an American printer just about sums the guy up.

John,

What about the guys you don't know? Were they all able to get similar paying jobs in the same field? Or did they have to uproot themselves and their families in order to earn less money?

Your point about people 'gaining' from shopping at Wal-Mart – hang on! If I earn $5 an hour, which means I can buy a $4 item, then my job is offshored and my new rate is $4 an hour, meaning I can only afford to buy an $3 item inferior to the $4 item I used to be able to buy, how can I be possibly be said to be 'gaining'?

If you can't see the difference between keeping jobs in the USA and sending them offshore, then I can't help you (although I do note you didn't answer my comment on the replacement factories being 'packed with illegals').

Noah,

Ah yes! The moral blackmail card! 'Rights' do not, of course flow from the government – its purpose is to, well, govern. Trade is a matter of law. In 2004, Kerry's comments about 'Benedict Arnold CEO's' carried less electoral weight than the ongoing attempt to devastate the country of Iraq. Two years on, we'll may be see a different trade tune being sung in Congress come November.

The question is not whether I 'want to live in a 'free country', (I'm not an American , by the way), it's whether I want to live in an entity called a 'country', more properly a nation, at all. Globalisation spells the end of the nation state – and all you happy folks seem to be quite happy to cheer on the death of the Great Republic for no purpose greater than reducing the size of your shopping bills.

Washington wept.

Gupta,

To equate free speech with 'free trade' is facetious.

asg August 24, 2006 at 10:32 am

"To equate free speech with 'free trade' is facetious."

Why's that? They're both just "notions"; neither is particularly commonplace in the world. Why are we unquestionably entitled to one but not the other?

Martin August 24, 2006 at 10:54 am

Gupta,

Does the First Amendment to the Consitution of the United States specifically protect 'free trade'?

No. There's your answer.

Jeez, it's like pulling teeth…

John Dewey August 24, 2006 at 11:05 am

Martin: "did they have to uproot themselves and their families in order to earn less money?"

I'm sure that some former airline workers now make less money. I'm also sure that some make more. So what? Companies have been laying off workers in the U.S. for two hundred years. Throughout the 20th century millions of U.S. workers have been forced to migrate to find work.

Today it is easier than ever before to match employee skills with available jobs. Anyone who stays unemployed for long periods of time just doesn't really want to work.

Your example showing that low income workers are not gaining is completely unrealistic. It cannot be based on any real facts. We can make up any hypothetical numbers to "prove" whatever point we wish.

I have seen no evidence that products manufactured in Asia are lower quality than those produced in the U.S. Yet offshoring has sharply reduced the (real) prices of many items formerly produced here. Yes, American consumers have gained from outsourcing.

Martin: "Globalisation spells the end of the nation state "

No, it does not. The U.S. has been importing goods for its entire history.

Foreigners have also invested their capital in U.S. factories and buildings for all our nation's history. I'm fairly sure the level of foreign investment in the U.S. is higher than ever before.

The number of workers employed in the U.S. is higher than ever before. The nation's GDP is higher than ever before. How can you seriously argue that the nation's future is in jeopardy?

asg August 24, 2006 at 1:24 pm

"Does the First Amendment to the Consitution of the United States specifically protect 'free trade'?

No. There's your answer."

So if Congress decided to repeal the First Amendment tomorrow, you would be perfectly okay with laws that suppress criticism of the government? Very comforting.

Moreover, the Declaration of Independence specifically says the nation was founded on the principle that people have inalienable rights to life, liberty, and the pursuit of happiness, and peaceful economic exchange between people sure seems covered by 2 of those to me.

Mike August 24, 2006 at 3:08 pm

Martin – I appreciate your concern for your fellow citizens and avidly support your right to shop at higher priced stores to protect them. However, what about your fellow citizens of the world? What about the poor Chinese people? Are they not worth protecting or heling? Keep in mind the difference between America's poor and the poor in the developing world. Poor Americans are not starving. Poor Chinese people are. There's an argument to made that the world is better off if China has those jobs because the utility of $4 an hour is greater in China (buying food) than it is in the US (paying your cell phone bill).

To someone concerned for his fellow citizens, why are your white, middle-class American factory workers more deserving of your charity (and your interest in having the government force your charitable interests on the rest of us) than starving Chinese people? Is one person less valuable than another because of where they were born?

The Unbeliever August 24, 2006 at 5:52 pm

"Does the First Amendment to the Consitution of the United States specifically protect 'free trade'? No. There's your answer. "

Riddle me this, Martin: does the Constitution or any of the Amendments specifically protect jobs against outsourcing, offshore or otherwise? No? Then wither the idea that our government should regulate an arena it has NOT been given power over, enforcing a 'right' that does not exist?

Kent Gatewood August 24, 2006 at 6:13 pm

"The number of workers employed in the U.S. is higher than ever before. The nation's GDP is higher than ever before. How can you seriously argue that the nation's future is in jeopardy?"

The per capita GDP could be lower given the above facts.

The citizens could stress they don't want fairness for the world but results for American citizen.

JohnDewey August 25, 2006 at 4:51 am

Kent Gatewood: "The per capita GDP could be lower given the above facts. "

Did you bother to find out, Mr. Gatewood, before submitting your argument?

Real per capita GDP in the U.S. was higher in 2005 than ever before. If you don't believe that, disprove it. I'll even help you by giving you some links.

GDP data is available at:

http://www.bea.gov

Population data is available at:

http://www.census.gov

faultolerant August 25, 2006 at 2:45 pm

The argument that Wally World is making Chinese richer is entirely beside the point. One post compared 1000 better-off Chinese to 1 less-well-off American as if though it's some kind of mathematical competition. It ain't.

Mr. Dewey makes a number of wonderful points about free trade – doing so primarily for the benefit of those outside the US.

Frankly, I couldn't give a tinker's damn if every Chinese on the planet starved to death. This afternoon. In front of CNN's liberal cameras. They're totally irrelevent and completely beside the point.

If it took the impoverishment of one – yes just ONE – American to lift a billion Chinese out of poverty, the cost is too high. Especially if you're the lucky guy who gets to be "The One".

The Chinese can continue to produce cheap crap and you can continue to buy that cheap crap at Wally World all you want. Doesn't mean, however, that you're above contempt or that your self-serving rationalizations are worth a warm bucket of spit.

John Dewey August 25, 2006 at 3:37 pm

faultolerant: "Mr. Dewey makes a number of wonderful points about free trade – doing so primarily for the benefit of those outside the US."

No, sir. I repeatedly pointed out the free trade benefits – the lower prices – that American consumers will enjoy. I don't think I said anything about benefits to Chinese workers.

I do care about the welfare of my fellow Americans, sir. I truly believe that allowing access to a cheap labor supply benefits those fellow Americans.

faultolerant: "Doesn't mean, however, that you're above contempt or that your self-serving rationalizations are worth a warm bucket of spit."

I'll be glad to listen to your arguments in favor of protectionism. All I ask is that you be civil and that you not question my motives.

faultolerant August 25, 2006 at 4:38 pm

Mr. Dewey I will apologize – as I reread my post – that the last three paragraphs seem pointed at you when they aren't. I should have phrased them to be more generalized. You're correct to call me on that.

I am not in favor of protectionism. Not by a long shot. I do, however, completely reject this asinine notion that Wally World "has contributed more to peace…" and that it makes one whit of a difference how many Chinese live in poverty.

Here we go with one more WalMart sycophant (The author of this badly written piece of journalistic trash) claiming that Bentonville's worst inhabitants are responsible for world peace, the tooth fairy, santa claus and can clear acne on contact. To say that Wally World trades a LOT with China is a fact. To assert that Wally World is responsible for peace is projection at its worst.

Furthermore, this argument that I (or any American for that matter) should give a rats patoot about how well or poorly Chinese workers do is intellectually vapid and preys on some misplaced middle-class guilt. Every third-world worker could be in sweatshops and – as long as they're there voluntarily – that's perfectly fine. What difference does it make how many Chinese Wally World sees fit to support?

You may, indeed, care about the welfare of your fellow citizens – I can't comment on the content of your soul. However, far too many visitors to this forum seem to have much more compassion for a Chinese laborer than an American. That's unconscionable.

John Dewey August 25, 2006 at 5:07 pm

faultolerant,

Now that you've cleared it up, I have no problem.

Our disagreement – yours and mine – seems to be over two issues:

- whether or not American workers are harmed when WalMart and other corporations procure goods from China;

- the extent to which all American consumers benefit from the low prices of those Chinese goods.

I will concede that some American workers are harmed temporarily when WalMart stops buying an American-produced good and starts buying a Chinese-produced good. I do not concede that such workers are permanently harmed. The American job engine just seems too strong to me to believe that displaced workers cannot find employment.

For what its worth, I do agree with the notion that interdependence through trade encourages peace.

mrsizer August 25, 2006 at 10:46 pm

I think the "robot takeover" idea was dismissed a bit too quickly. There is one American job that does not exist because I have robots: My housekeeper.

I have a robot that washes my dishes (if only it could put them away). I have a robot that washes and dries my clothes (same problem). I have a robot that takes care of my cats' litter box. I have a robot that vacuums my floors (if only it could pick up the laundry and put in the other robot). I have a robot that mops my floors (if only it could dust). I "outsource" a lot of cooking to robots in factories that deliver fully prepared meals.

Am I a good person for automating an illegal immigrant out of a job or a bad person for automating an American out of job?

Personally, I think I'm a good American. I would rather pay people to design and build (even if in China) robots than to mop my floor – I have a very dirty floor.

BTW: Doesn't the Declaration of Independence say "We hold these truths to be self-evident: That all men are created equal and endowed by their creator with certain inalienable rights…" I don't see a reference to "those men lucky enough to have been born in the 18th, 19th, and 20th centuries on the North American continent south of the 48th parllel and north of the Rio Grand river". Am I missing something?

commonsense August 31, 2006 at 9:03 am

Can someone answer this.
In the last few years 1 in 5 Americans have lost their jobs to offshore outsourcing and that number is accelerating. Manufacturing and Technology jobs are leaving this country at 100,000 jobs a month. Tell me what is going to happen when these Americans can't find replacement jobs and can no longer shop at Walmart?.
Are we giving our power away for the sake of the lowest price!
We won world wars because we could out produce the world and had the highest skilled workers in the world.
What is going to happen when we trade it all away for the lowest price? You know what is really crazy is we are in one country fighting a war and forcing democracy and yet giving a communist country millions of jobs and dollars a year all for the lowest price. What happens when the lowest price cost us everything?
You really have to ask where is common sense.

faultolerant August 31, 2006 at 11:41 am

Commonsense:

Common sense may be found anywhere except in this forum where WalMart is concerned. This is the most uniformly brainwashed bunch of Wally World sycophants I've ever seen – short of senior management in Bentonville. These folks typically can't look past the ends of their noses when it comes to WMT, and have no desire to do so.

You're wasting your time arguing with your average libertarian when it comes to WMT. They simply have no ability to see any other side of any other argument on this particular issue. More's the pity.

Previous post:

Next post: