If you want to know what’s wrong with economics education in America, go here. It’s a web site created by Wal-Mart to convince viewers that Wal-Mart is good for America because lower prices free up income for people to enjoy other things. How bizarre is it that a company has to spend thousands if not millions of dollars on this web site and elsewhere making the case that low prices are good?
The Ultimate Indictment
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More bizarre is that the site feels so much like a hardcore propaganda sell, even my BS meter was pegging out. And I like Walmart, and agree with the message.
Isn't it just a *theory* that consumers like lower prices? j/k
What's amusing, is that Wal-mart still remains strongly competitve, even after fending off lawsuits and other nuisances from anti-wal-mart types.
Not surprising since everywhere you turn there is an op ed about the high cost of low prices.
Not everyone must be convinced else they wouldn't feel the need to put up the website. The best part of Walmart is that all the costs of their business model are internalized. If Walmart were to be playing neighboring communities off each other in an effort to extract municipal concessions or if Walmart were encouraging their workers to avail themselves of free public serivices or if Walmart were transfering vendor techniques overseas without permission or things like that then maybe its' detractors would have some points about externalities in their business model.
rob dawg: "If Walmart were to be playing neighboring communities off each other in an effort to extract municipal concessions "
Why would anyone object to Wal Mart's use of this tactic? Communities large and small across the nation have established Economic Development funds, corporations, agencies, etc. just to assist businesses in obtaining those concessions. In my suburban Dallas town, every business development of any size has been able to "extract business concessions". Walmart shareholders – and Target shareholders and Tyson's Food shareholders and GM's shareholders – expect their managements to gain such concessions.
Dawg, are you saying that the general public would be upset if, once their elected officials set up the process for granting concessions, Walmart actually took advantage of those voter-approved processes?
rob dawg: "if Walmart were transfering vendor techniques overseas without permission "
What do you mean by 'vendor techniques"? Do you mean that Walmart is violating patent laws or contracts? Or is it that their managers observe a good business technique and then apply it elsewhere?
You guys clearly have a false consciousness. Keeps you compliant and easier to exploit. Lucky that enlightened guys like me exist to tell you what you really want, eh?
RobDawg:
You say "The best part of Walmart is that all the costs of their business model are internalized." (One presumes you say it with a touch of sarcasm)
It would be great if it were true, but Wally World is most assuredly not a financial island. They shun many, many costs onto the backs of the public and are always working hard to externalize costs wherever possible. On that basis alone, they're not as cheap as they imply – it's just that ALL of us (not just those who patronize them) get to pay Wally's bills.
JohnDewey,
As usual, you defend Wally World in everything they say and do. Your sycophantic adherence to the "Wally World Way" makes me wonder if you aren't on the payroll. I'd be willing to bet if they made lead-painted children's toys laced with arsenic you'd say it was a good Darwinian experiment to rid us of "bad kids"…after all, if Wally does it, it must be good. Right?
faultolerant,
To call that a strawman would be unfair to strawmen everywhere.
Faulttolerant, I'm curious to know what costs Wal-Mart is shunting "onto the backs of the public."
faultolerant,
When I argued that deporting 12 million illegal immigrants was infeasible, and that the Supreme Court has protected the rights of even illegal immigrants, you suggested I might be "a representative of LULAC or MALDEF or any of the other latino subversive groups."
Now I point out that Walmart simply takes advantage of a voter-approved offering, and you suggest I may be on their payroll.
What is your problem, faultolerant? Why can't you accept that someone else may just see the world differently than you do?
Faultolerant, accusing someone of hidden motives will not gain you much respect on this blog.
Amazing that no one wants to touch "…if Walmart were encouraging their workers to avail themselves of free public serivices."
Look, I am not passing judgement, just stating facts. Walmart's very successful business model is very much dependent upon externalizing as many costs as possible. Their siting model seeks to exploit public infrastructure. Their employment model public services. Their vendor model information flows and anticompetitive restrictions. Their competitor model seeks undercutting profit (not price, profit). Their customers are even external profit centers with their client cachement and parking policies.
Walmart's policies have worked for a very long time. On the whole most of them are legal. Even some of their practices are illegal only because the laws are stupid. Still a great deal of Walmart's success is due to their core efforts to offload as many internal costs on external payers.
I'm on my customers' payroll and I swear, I tow their line every single chance I get. No joke — some people find it offensive that I'm arguing such obvious points, but it really must be all the money they're paying me….
Methinks it a strange point of contention that the use of public services, created for the greater good, is demonised when Wal-Mart encourages their use. Is it not a question about overly inclusive public service legislation, rather than a question of employee encouragement? Wouldn't this problem be solved more simply by just narrowing the scope of the initiatives? Or is it that narrowing the scope of any entitlement or public service is downright impossible?
Isn't public infrastructure there to be exploted?
Isn't it there so we can get to Wal Mart? Or grandma's?
So would you say that my kid's grandma is exploting the public infrastructure since there is a road between my house and hers?
Or would you have the public infrastructure go unused?
Farking economists — know the price of everything and the value of nothing.
Is there any evidence in the economic literature to show that Walmarts help local economies more then they hurt them. Low price sounds like a nobrainer but when my taxes are forced by gun point to pay for their infra-structure and we have people here making excuses for why that's OK it just gives me pause. Are we talking rationally? factually or is this some form of religion?
I keep thinking of
this post and have to wonder if there isn't blow back from "low prices".
You should know how hard it is to change people's opinions – you're a teacher.
"If Walmart were to be playing neighboring communities off each other in an effort to extract municipal concessions "
Bob Frank and many who support his views believe that consumers and parents who compete over status goods/positional goods should be taxed, the reason being that spending to get in a better school district or a nicer BBQ or what have you does not change the relative position of the pertinant distribution, and we therefore have wasteful spending in these arms races.
Since the competition to attract a new Walmart store, for example, is a zero sum game, and competition across cities and states to attract Walmart and other businesses only causes communities to make costly concessions without altering the final distribution of where business and workers end up, then it should logically follow that all localities and states should face a progressive spending tax as well.
I've yet to hear such an argument. Blaming Walmart for this is sort of like blaming BBQ manufacturers for making big shiny BBQs that consumers actually want.
Note that I do not believe that this competition is zero sum, and I also consider the ignorance of the supply side of Frank's argument a tremendous weakness (after all, someone is producing those fancy BBQs and someone owns the companies producing those fancy BBQs and those fancy BBQ companies are paying taxes …)
"Is there any evidence in the economic literature to show that Walmarts help local economies more then they hurt them."
Muirgio, here is a summary I wrote up of this for a debate a couple of years ago. I haven't followed the recent literature as closely.
http://theunbrokenwindow.com/wordpress/2005/11/14/this-would-be-a-funny-picture-if-people-really-thought-it-was-an-exaggerated-caricature/
The links to the PPTs are in the 4th paragraph of that rambling post.
rob dawg: "Their customers are even external profit centers with their client cachement and parking policies. "
Can you explain what you are meaning?
First, know that I'm really trying to understand you, but my vocabulary must not be as broad as yours. Is "cachement" an alternate spelling for the word "catchment"?
When I typed "cachement" at Merriam-Webster's Online, I was told:
"The word you've entered isn't in the dictionary."
I tried http://www.thefreedictionary.com, and was told:
"Word not found in the Dictionary and Encyclopedia"
At dictionary.com, I was told:
"No results found for cachement."
Whatever your word means, could you please explain what Walmart policies you are referring to?
muirgeo: "when my taxes are forced by gun point to pay for their infra-structure and we have people here making excuses for why that's OK it just gives me pause."
Did Walmart point a gun at you? Or did the elected representatives in your community elect to use your tax money to entice Walmart to locate there? If it is the latter, then isn't your problem with the elected representatives?
As to whether it is OK, I think it is up to the voters – through the election process and through their attendance at government meetings – to ensure their representatives are doing what they wish. These are generally very local decisions.
dave smith: "Isn't public infrastructure there to be exploted? … Or would you have the public infrastructure go unused?"
Good point, Dave.
I know that everything has a cost/benefit, but it shocks me, in the same spirit of Russ's original post, that we would study if a profitable business conducting peaceful, voluntary, legal commerical activity with their neighbors does "more good than harm" or "more harm than good."
Only with Wal Mart.
when my taxes are forced by gun point to pay for [Wal-Mart's] infra-structure
That's a great argument for severely limiting the government's ability to tax and spend, not for limiting Wal-Mart's ability to exist and do business (although I agree that they shouldn't be able to use government taxes to benefit themselves).
Treat the cause, not the symptom.
scott: "I agree that they shouldn't be able to use government taxes to benefit themselves)."
These are generally locally elected representatives who make these decisions. They decide that public spending or tax abatements are appropriate for enticing retailers and large employers. We have to assume those elected representatives are actually representing the voters' wishes.
Cachement is the term to describe the area over which something is collected/concentrated. I had no idea it was rare. Walmart refers to customer cachement when siting and sizing their stores and their distribution facilities. When the Oxnard Walmart was being proposed* the claim was that being at an extreme of the Walmart empire it would draw customers from Santa Ynez some 70 miles away. Powerful arguement for sales tax starved municipality. Of course they now go to Santa Maria and Lompoc each half as distant. At the same time in the other direction Walmart now serves Simi Valley and West Hills drawing off the Moorpark and Thousand Oaks customers "promised" to Oxnard.
As to municipal competition; Why is the prisoner's dilema such a shock to this audience? Walmart tells each municpality that they will go to one or the other locales. The winner gets sales taxes and the loser gets only the traffic and lost revenue. Unsophisticated planning staffs used to fall over each other with unwise concessions in order to not be the loser.
Your final comment on municipal competition is well taken, but the presence of a prisoner's dilema suggests that cities should stop offering incentives. (This may be a place where action of the Federal Gov't is required). Why do you suggest that Wal Mart should unilaterally step away from the public trough and then suggest that they, and no one else, are misbehaving when they don't.
Wal Mart did not make the rules.
"As to municipal competition; Why is the prisoner's dilema such a shock to this audience? Walmart tells each municpality that they will go to one or the other locales. The winner gets sales taxes and the loser gets only the traffic and lost revenue. Unsophisticated planning staffs used to fall over each other with unwise concessions in order to not be the loser."
(1) Again, this seems to be a myopic zero-sum view of the world.
(2) Then do as I suggest above and advocate the federal government step in a tax localities that compete in this way. It would stop southern states from "stealing" auto manufacturing from Michigan for example. It would stop states like New York from dumping billions to attract AMD to the Capital Region. And so on.
(3) And this is not exactly a prisoners' dilemma. Can't "competing" municipalities talk to each other? Is it unheard of for the Mayor of Ithaca (hypothetically speaking of course) and the Commissioner of the town of Lansing to discuss where the Pyramid Mall will locate (and Target, Walmart, etc.)? Couldn't they each agree not to make huge concessions, and to make some revenue sharing arrangement? It is just implausible that city officials play the role of exploited serfs here.
You have to love how the strongest argument against WalMart is that local government planners are stupid. It's a start…
Dave smith: "the presence of a prisoner's dilema suggests that cities should stop offering incentives. (This may be a place where action of the Federal Gov't is required)"
Why would you suggest that the Federal Gov't take away the freedom of cities to compete? What could be gained from restricting competition?
Here in Texas, voters in many communities have affirmed their desire to compete for businesses. Voters approved sales tax increases for economic development. This is the will of the people speaking loud and clear. Why would anyone want the Federal government to interfere?
In the midwest Wal-Mart is moving from "stores" to "super-stores," adding tires and grocery and etc.
Rather than remodel the existing store, they are building a new store, and letting the old store sit empty. They do just enough maintenance to keep the old building from being condemned as blight.
If anyone understands that strategy please enlighten me. Did they lease the first building and are sticking the landlord with the empty shell? If so, who would lease to them now?
Weird.
Another strategy is to build in the township just outside the city limits, so as to avoid paying city taxes, but receiving fire and police protection through reciprocal agreements (city and township).
Good neighbors heh?
(In a slightly amusing case Wal-Mart built right on a border line, conned both the city and the township into building new infrastructure, funded by diverting school taxes in exchange for "economic development". Problem is they built on a flood plain, and a few weeks ago had four feet of water running down aisle 5. Is the might Wally World slipping a little?)
Rob Dawg mentioned that one of Wal-Mart's indiscretions involves encouraging worker's to take advantage of government services. I seem to recall some state government agencies, when they noticed the number of food stamp recipients was falling, they didn't declare this a success, they decided they needed a marketing campaign to get more people to apply for food stamps, to expand the program. The government agencies are promoting the use of these welfare schemes, Wal-Mart cannot be blamed for pointing out the existence of a government program, that's just non-sense.
save-the-rustbelt: "If anyone understands that strategy please enlighten me."
Walmart did not become a $300 billion company by making poor decisions. When they decide to relocate, they do so because a new site has significant revenue or operational or tax advantages. Those advantages will far outweight the cost incurred at the vacant building.
save-the-rustbelt: "Did they lease the first building and are sticking the landlord with the empty shell? If so, who would lease to them now?"
Landlords are thrilled to have Walmart as a tenant. They gladly sign a multi-year lease knowing there is no guarantee Walmart will be there forever. Those leases generally include a buyout clause that prohibits the landlord from releasing the property to a department store for some period of years.
It's a contract for a fixed period of time, not a lifetime commitment. Two parties enter into a legal agreement that will benefit both.
Retail and industrial businesses have been relocating for decades. What's the big deal?
FYI– The term is catchment, not cachement. See catchment area. Planners attempt to estimate the area from which customers and/or labor might be drawn. The size and shape of a catchment area is significantly influenced by transport infrastructure.
foxmarks: "The term is catchment, not cachement."
Thank you. I was pretty sure that's what Rob Dawg meant. I offered him the correct English spelling, but he apparently prefers "cachement".
I have seen the word spelled "cachement" on Canadian web sites. Could that be a French word with similar meaning?
There was a detailed study done by a group of sociologists about 2 years ago, that examined the cost savings of real consumers at Walmart compared to other stores in their locality, and then factored in the cost of driving to Walmart compared to other stores in their locality. Guess what, it cost more to shop at Walmart, because the average customer drives farther, and the cost savings are small enough on most weekly shopping that gasoline costs off-set them. Sorry I can't provide the reference — the journals in one place and I'm in another.
I'll try to bow to the popular will wrt spelling if my mind is not too ossified. My experience was always "catchment basin" and "cachement area" with the former a civil engineering structure and the latter an extent of influence.
Still, back to Walmart. They relocate but do not usually dispose of obsolete property. In that they are latecomers to that party. Grocery stores understand the process very well. I've been very careful to merely describe how Walmart operates and not criticize or even accuse them of innovative exploits. My intent is to make sure that people understand Walmart comes with externalities.
SPG,
Any idea if the sociologists had real data about the trips of WalMart customers? If a customer drives directly from home to Walmart and back, the trip's cost is easy to determine. But when the customer stops at Walmart on the way home from work, it's not so easy. When the customer combines the Walmart trip with a restaurant trip and a bookstore trip, how would the sociologists allocate the trip costs?
IMO, the typical consumer is aware of the cost of shopping trips. Social scientists with an agenda – the ones out to discredit Walmart – probably also assume its customers are more ignorant than they really are.
rob dawg: "back to Walmart. They relocate but do not usually dispose of obsolete property."
I think that's the case, but not necessarily their intent. My understanding is that they want to dispose of obsolete property – but only to businesses that will not compete with them. Their Superstores compete with just about every retailer who might be large enough to require a Walmart-sized store. They usually cannot sell or lease the property to industrial companies due to zoning restrictions.
John,
"Chained trips" are not the realm of sociologists. It is real science and reasonably well documented. The BTS JTW, Census AHS and other sources are available. As to how many are "Walmart" there isn't anything available outside of Walmart. THat raises an interesting issue eh? The Walmart Tiger Teams dispensed to promote new locations have these at their disposal. Sad that facts in evidence at public hearings on public issues are not available for review eh?
"Cachement" does appear to be a popular spelling on quite a few Canadian and English websites. Catchment, I think, would be the better spelling — "cache" is French for "hide".
Contrary to what we're told over here, the English can seriously mutilate their namesake language — especially if a French-sounding word is involved.
But please, back to economics.
Cache, a store of value. I, for one, think we are making economics here.
I'm still chuckling at the thought of unqualified sociologists attempting to due a minutely detailed economic study. Might as well have a cage full of monkeys do that.
One of the reasons Wal-Mart is so beneficial is that it offers a wide range of products all in one place. People forget, that was quite unprecedented before Wal-Mart came along. And that was certainly an unqualified bonanza to the small towns where Wal-Mart grew into its own.
It proved an enormous time and gas-saving convenience not to have to trek around town all day visiting 6 different scattered shops to run an eclectic list of shopping errands. (When I went off to college in non-Wal-Mart country, that used to drive me insane).
And that fact in itself would probably disprove any lame attempt by sociologist to dream up some reason — any reason — Wal-Mart must be bad.
What's even more amazing is how LITTLE politicians have to spend to dupe people into thinking government run health care is "free". (and other backwards economic policies)
Diapers, at least the last time I had to buy any, were half the price at WalMart as any of their competitors.
I'll go looking for the quote, but a Left wing author who wrote a history on coffee, and its nefarious beginnings (slavery, exploited natives, etc) actually had a choice quote by one of our congressmen in the 1930s. It was verbatim what we hear today about how WalMart is driving away jobs, destroying America, etc.
But they were speaking of the new trend of chain grocery stores like A&P, and the like.
Uncommon Grounds by Mark Pendergrast. The book is interesting if one has an interest in coffee past ordering it just right at your local shop. But his focus is more on coffee's sordid past than coffee.
Anyway, if anyone has that book at home because I can't find the quote myself, he is the one who quotes the congressmen and his attempts to portray chain grocery stores as the end of the American economy.
BTW – Low prices are good.
All the complaints about Wal-Mart don't point to distinguishing characteristics about that company versus any other business, except as a the consequence of their success. Wal-Mart didn't become big because they held had a gun to the head of any customer, employee, vendor, or, especially any governments (e.g., economic development). On the contrary.
Liberals want a Goldilocks economy. That is one where nobody charges too much, nobody charges too little, and everyone sells for a price that is just right.
John Dewey:
A strategy of leaving empty eyesores across the midwest seems just a bit strange.
But then Wal-Mart seems to own enough politicians that it doesn't matter. Getting tax benefits to relocate and leave eyesores tells me just how desperate many local governments are to find any kind of jobs.