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The Wal-Mart Revolution

February 19th, 2009 at 11:21 pm David Frum | No Comments |

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Suppose there were a company that saved low-income American consumers hundreds of billions of dollars – created new jobs and opportunities for tens of thousands of people in poor and rural areas of the country – and introduced the greatest range of productivity innovations by any one company since Henry Ford started up his assembly lines … what kind of response do you think they would get?

We’re talking about Wal-Mart of course, so you know the answer. Over the past half-decade, Wal-Mart has received worse press than Osama bin Laden. Books, documentaries, congressional investigations, all dedicated to the proposition that Wal-Mart’s everyday low prices exact some terrible hidden cost upon workers, communities, the environment, the poor. A quick Google search of the terms “Wal-Mart” and “evil” pulls up 1.8 million references. “Bin Laden” and “evil” pulls up only 1.2 million – many of them sarcastic.

In an important book for the AEI Press, The Wal-Mart Revolution: How Big Box Stores Benefit Consumers, Workers and the Economy, economists Richard Vedder and Wendell Cox debunk the nay-sayers effectively and (to my mind) dispositively.

Wal-Mart is good for the poor, good for workers, good for America. For a century before Sam Walton came along, the productivity of retail trade had grown at a rate of about 1% a year. Walton’s innovations kicked retail onto a dazzling new path of more than 3% productivity growth per year – one huge and possibly decisive cause of the sharp upward tick in American productivity since the early 1990s.

Vedder and Cox apply a pounding sledgehammer to false claims that Wal-Mart relies on cross-subsidies from state Medicaid programs, that it drives down wages, that it wrecks downtowns.

Wal-Mart critics often contrast Wal-Mart unfavorably to Costco, which pays higher wages. But Costco locations are concentrated in wealthy suburbs, where all costs are higher. Costco also serves much wealthier customers and so can afford to be marginally less cost-sensitive. But as Vedder and Cox point out, it is not Wal-Mart’s own employees who express dissatisfaction with the terms of work – it is their competitors’ employees.

The first chapter of this book may be a little technical for some readers, and the middle sections offer a broad history of American retailing that I thought very interesting, but that others may find more information than they care to know. The introduction and the final section of this impressively short book represent a really important contribution to this seething debate. To my mind, Vedder and Cox have settled the question once and for all.

One footnote: Some Wal-Mart critics, unable to win the argument on the merits, resort instead to impugning motives. So for the record, it should be said that Vedder and Cox received no grants or gifts from Wal-Mart during the writing of the book. AEI did receive a grant from the Walton Family Foundation after the book was completed. If that history is relevant at all to the debate, then so too are the vastly, vastly larger sums paid by Wal-Mart’s union enemies to denigrate the company. My own view, for what it’s worth, is that we should assume good faith all around and look at the facts and the merits of the argument, not the funding sources. On the facts and merits, this book is recommended to all interested in this controversy.

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