Wal-Mart Facts

by Don Boudreaux on April 25, 2008

in Current Affairs, Myths and Fallacies, Regulation, Wal-Mart

A few days ago I sent this letter to the New Republic:

Jordan Stancil alleges that “rural Americans have seen their ownership of their communities hollowed out by relentless consolidation in the retail and financial sectors” (“It’s the Wal-Marts, Stupid,” April 18).  He laments that he and his fellow thirtysomethings from rural America are “the first generation of non-owners.”  To support these claims, however, he offers only personal anecdotes and impressions.

Fortunately, economists Andrea Dean and Russell Sobel have investigated this oft-told tale using data.  Their findings cast serious doubt on the veracity of Mr. Stancil’s allegations.  For example, Dean and Sobel find that the five U.S. states with the greatest number of Wal-Mart stores per-capita have a self-employment rate identical to the self-employment rate in the five states with the fewest Wal-Mart stores per-capita.  And in those states enjoying a high density of Wal-Marts, the number of businesses with nine or fewer employees is higher per-capita than in those states with a low-density of Wal-Marts.  Dean and Sobel conclude that “Wal-Mart has had no significant impact on the overall size and growth of U.S. small business activity.”

Donald J. Boudreaux

You can find the Dean-Sobel paper here; it’s entitled “Has Wal-Mart Buried Mom-and-Pop?”

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save_the_rustbelt April 25, 2008 at 1:15 pm

True,Wal-Mart has not buried mom-and-pop.

Wal-mart has developed one strange habit though.

As WM upgrades to super-stores, rather than remodel older stores they are often abandoned. Not rented, not torn down, not remodeled to other uses, just left to sit, something like 400 of them. 400 eyesores.

From a pure beancounter standpoint this seems counterproductive, or just dumb.

On another note, Wal-Mart is positioning itself to be the 2nd leading conduit for laundered money to Mexico. The first is the Federal Reserve.

Better then fiction.

JMR April 25, 2008 at 3:05 pm

If we can apparently just use casual observation as evidence, then the Walmart in Morgantown, WV has either been rented or sold to a flea market type of business. Thus disproving the claim they just let the properties sit, which as you point out doesn't make sense anyway.

Nick April 25, 2008 at 3:39 pm

We had two walmarts sit empty for several years as they tried to block competition from coming. A far more intelligent 20 yr. University Study than above nonsense can be found entitiled "The Hometown Advantage" You won't find it in walmart but Amazon has it.

Justin Ross April 25, 2008 at 9:01 pm

Stupid poor people shopping at Walmart and ruining our community just so they can "have more food and money." Pretty selfish of them if you ask me.

Semantic Overload April 26, 2008 at 3:19 am

Andrea Dean and Russell Sobel reported their findings at the state level. What does it mean for people in small communities where Wal-Mart has moved in? It seems quite plausible that Wal-Mart took away most mom-and-pop stores in rural America forcing people to move to urban areas and open shop there, and afford a quality if life far inferior to what they enjoyed earlier.
This would explain the Dean and Sobel's findings adequately while still being consistent with Jordan Stancil's allegations.

Something to think about.

Dano April 27, 2008 at 2:07 am

Nick wrote:

"'The Hometown Advantage' You won't find it in walmart but Amazon has it."

Why do you suggest we buy the book from Amazon.com and not an independent local bookstore?

FreedomLover April 27, 2008 at 6:47 pm

I hate Wal Mart because it's like walking into a 3rd world cesspool. I don't shop there anymore.

John Dewey April 28, 2008 at 6:38 am

semantic overload: "It seems quite plausible that Wal-Mart took away most mom-and-pop stores in rural America forcing people to move to urban areas and open shop there, and afford a quality if life far inferior to what they enjoyed earlier."

If WalMart "took away mom-and-pop stores", it was because consumers perceived they offerred far better value than did the mom-and-pops. How then could those consumers have experienced a decline in quality of life?

My in-laws live in a small rural community where Wal-Mart entered 30 years ago. Wal-Mart provided a much larger variety of goods than the community had ever been previously offerred. Wal-Mart provided goods of equal quality as the mom-and-pops had sold, but at far lower prices. Like most rural communities, this small east Texas town loves its Wal-Mart.

Michael Fisk April 28, 2008 at 9:13 am

The one Wal-Mart supercenter in my hometown (Kalamazoo, Michigan) was remodeled from the original store… seeing how that was done, I can see why they prefer starting fresh. It was rather chaotic around the store for just over a year, and left the entranceway looking like a war zone. The end result is fantastic, but, in the process, most of their customers ended up going to the Meijer just around the corner.

enoriverbend April 29, 2008 at 1:11 pm

In my small town, when Wal-mart opened a new SuperCenter, the only business that seemed to go belly-up as a direct result was the worst-run, dirty, poorly-lit grocery store in town. The other grocery stores mostly upgraded their act as a competitive response, and stayed open. Wal-mart may be a fierce competitor to deal with, but in the end, it's just normal business competition. Nothing special about that, and none of us mourned the loss of the worst store in town. That may be because the town has relatively few people who are starry-eyed and romantic about the death of the mom & pop store: The ones that were good have survived (and we have several good ones); the others failed.

Jason DeSanti May 3, 2008 at 9:41 pm

I agree with enoriverbend, the only stores that go out of business as a result to Wal-Mart, are the dirty little shops that have nothing to offer consumers. I've never seen a Wal-Mart completely surrounded by abandoned shops. They're always in very large popular shopping centers. The reason for that is that Wal-Marts tend to bring a lot of business to small towns. So what if a few mom-and-pop stores go out of business, it's for the greater good of the town to have a Wal-Mart. The only people that benefit from mom-and-pop stores are mom and pop. To me that sounds a little selfish. Wal-Mart gives jobs to people and also provides goods to people with small budgets. Wal-Mart might put mom and pop out of business, but they'll turn around and give them a job as a greeter.

Dan May 5, 2008 at 2:59 am

When looking at both sides of the argument, I would have to agree and say that Wal-Mart really is not that bad. They, in the long run, offer more opportunities for people, while saving them money. Wal-Mart is just producing a competitive market and stopping the mom and pop stores from overcharging their customers along with providing a greater selection of food, clothes, and your everyday needs all at one convenient location. I actually heard recently from my economics teacher, not too sure on the validity, that the local or state governments are giving Wal-Mart a tax break for them to build a store in certain areas. Wal-Mart like any other business is after a profit so, why wouldn’t they accept deals to persuade their reasoning’s? Also, on average they pay a higher wage rate then most of the leading competitors. I for one do not shop at Wal-Mart, but that’s just personal preference and there is not one that is too close by, but if I need a tee-shirt, TV, and a can of soup at 3a.m. then I know Wal-Mart is there to help, while saving me a little money.

John Dewey May 5, 2008 at 11:24 am

" I actually heard recently from my economics teacher, not too sure on the validity, that the local or state governments are giving Wal-Mart a tax break for them to build a store in certain areas."

Here in north Texas, almost every large employer or large sales tax generator gets property tax breaks from local government. A Wal-Mart will generate millions in annual sales tax revenue for a town, so it makes great economic sense for a town to attract a Wal-Mart by forgoing a few hundred thousand in annual property tax revenues. Competition between taxing entities is especially keen where a Wal-Mart Supercenter can be equally successful in any one of three or four adjacent suburbs.

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