The flip side: Evidence that the Wal-Mart effect is hurting, not helping.

Recently I wrote about the Wal-Mart effect: How the company has lowered prices nationwide with their hyper-efficient practices. They claim to be saving U.S. families $260B+ this year.

But there's a price to pay for all that cheap stuff, even if some of it's intangible and difficult to calculate. This is where evidence-based public policy is needed to weigh the benefits against the societal costs. There's more to life than cheap electronics and groceries, and evidence shows Wal-Mart has pushed too far in some areas:

Extreme cost-cutting and contact-sport shopping put people in danger. The most recent example is the death last week when a Black Friday crowd trampled a worker, bursting into a store to get a limited number of TVs being sold at unfortunately named "door-buster" prices. Is one incident enough evidence that Wal-Mart cuts too many corners on security? No -- although according to today's Wall Street Journal, local police are accusing the company of inadequate crowd control (behind paywall).

Locking employees inside stores just ain't right. As detailed in the 2004 New York Times piece Workers Assail Night Lock-Ins by Wal-Mart, the company has locked its overnight workers inside Sam's Club stores "to keep robbers out and, as some managers say, to prevent employee theft." This was the case when one worker was injured and could not get out of the locked doors. "As usual, there was no manager with a key to let [him] out. The fire exit, he said, was hardly an option — management had drummed into the overnight workers that if they ever used that exit for anything but a fire, they would lose their jobs.... Another worker made some phone calls to reach a manager, and it took an hour for someone to get there and unlock the door." I don't think we need evidence-based management for this one: It's wrong, inhumane, and shouldn't be allowed to happen.

Unfair pay practices go against established public policy. The company has been sued for not paying pharmacists overtime, claiming they were salaried and exempt. However, they tried to have it both ways by allegedly violating "federal labor law by cutting the base pay of full-time pharmacists when business was slow". Oops.

We're creating our own environmental & health consequences. If we import cheap stuff and tainted food from places with lax rules, we tacitly encourage environmental damage and food-safety risks. At some point, shouldn't we pay more for these goods, in return for sustainable policies and higher quality in supplier countries?

Is this about quality of life? And how do you measure that? I'm guessing that some of the negative consequences blamed on Wal-Mart would have happened without them (hey, I buy lots of inexpensive, made-in-China stuff at Target). People like to reminisce about the personal relationships they've enjoyed with small-town business owners, and resent how Wal-Mart has pushed those folks aside. But the company's arrival in remote communities has significantly expanded the variety of merchandise and groceries available, often at lower prices than people are accustomed to. (In extreme cases, this can even improve the nutrition that people get.)

Some market interference is justified. I'm all for free, competitive markets, and have personally experienced government regulations that seem to protect no one while burdening companies needlessly. But some rules and constraints are defensible and effective. Isn't that the purpose of public policy-making: To give us good government? And to draw a line when private companies won't?

Comments

[Tracy Allison Altman]

P.S. Thanks for introducing me to TrickleUp.org ...excellent!

[Tracy Allison Altman]

Scientific Leader, you make many good points. The U.S. is lucky to have relatively good government, compared to other nations (knock on wood that this continues). Still, government isn't the answer: People are.
And thanks for the wolf-sheep quote: Hadn't heard that one for a long time.

[The Scientific Leader]

I really like your blog and find myself agreeing with nearly everything you author. I have no doubts that your evidence of Wal-Mart's wrongdoings is accurate and legitimate. But I don't think all of the evidence is able to paint Wal-Mart black. If customers didn't want their cheap trash & trinkets, made by low-wage and high polluting companies abroad, Wal-Mart would go out of business.

I once had faith that public policy could thwart the occasional misdeeds of the generally honest free market companies, as you suggest. But my read of the global evidence around public policy strongly condemns governments. I'll take Hong Kong and Singapore's economic freedoms; with Netherland's personal freedoms anyday over North Korea's national socialism; or Sweden's nanny state.

As for the US Government, whether it's polluting (e.g. the US military is one of the world's biggest polluters), the housing bubble created by the Federal Reserve, Hurricane Katrina, hanging chads or myriad other non-US examples of government failure, I can't ignore the overwhelming evidence. Sure, Wal-Mart and other firms may have occasional lapses. I fully recognize that there are downright evil and dishonest organizations out there like Enron, Adelphi's and MCI/Worldcom. But they pale in comparison to the mother of all dishonest, and uncorrectable behavior that comes from the ruling class. Zimbabwe's inflationary horror; and Iceland's recent riots seem to foreshadow what's in store for the US.

I don't think there will ever be a free market nor socialist utopia. But I would rather see Consumer Reports grow 10x to offer new products and services that take corporate misdeeds to task and destroy brands where appropriate (e.g. Enron). I'd also rather see Red Cross, United Way, and a thousand other charities blossom to take care of the desperately poor than send another penny to politicians who seem to mismanage everything. Remember way back, oh say a month ago, when a $700 Billion bailout was going to be sufficent? When the US is already insolvent? I'd rather send a check to http://www.trickleup.org , but Uncle Sam will throw me in a jail cell if I don't pay for his ineffective and inefficient charity (and global police behavior).

Unfortunately for me, the idealism of my youth when I had untested faith in public policy (before my understanding of science) was utterly rejected by the overwhelming evidence that public policy is a form of gang violence run by world-class marketing gangsters. Wasn't it Ben Franklin who said, democracy is two wolves and a sheep deciding what's for dinner; and liberty is a well armed sheep?