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December 19, 2005

Julian Sanchez and Paul Krugman Think About Wal-Mart

Julian Sanchez doesn't like Wal-Mart that much: it cheats its workers, and gets away with it because it has too much local monopsony power:

Reason: Balls to the Wal: Big-boxing a mega-retailer's ears : There are some solid points in the film, providing genuine grounds for criticism of Wal-Mart. Former managers allege that time sheets were routinely and systematically altered to deprive workers of overtime pay, and that race and gender discrimination were endemic—though with thousands of Wal-Mart stores in the U.S. alone, it's difficult to get a sense of how representative the anecdotes cited really are. Almost as execrable is the company's unapologetic grubbing for subsidies....

But he dislikes Robert Greenwald's anti-Wal-Mart movie even more:

Robert Greenwald.... No matter what you think is wrong with the world—environmental degradation, street crime, poverty, outsourcing, racial prejudice, failing public schools—-Greenwald knows something that's making the problem worse: Wal-Mart. In Wal-Mart: The High Cost of Low Price [Greenwald] flings an ample supply of feces at the world's largest retailer and hopes that some of it will stick. Some of it does. But a far larger pile, alas, sails from the screen, falls short of its target, and lands with an unceremonious plop on your coffee table.... The single sin for which Wal-Mart catches the most flak is undoubtedly the low wages it pays. And they are low—-but critics seem determined to depict them as uniquely awful. Usually, that's done by picking higher-paid grocery workers rather than all retail workers as the point of comparison. (Wal-Mart, on the other hand, engages in a bit of its own distortion by publicizing its high "average" associate wage, which is skewed up by the inclusion of managers.)...

An interesting counterpoint to the dire portrait painted in the film proper comes in a "making of" featurette. Producer Jim Gilliam is explaining that, due to Wal-Mart's "culture of fear," employees were even more reluctant than insiders at Fox News to talk to the documentary crew. "Their jobs were far more important to these people," said Gilliam, "because there was nothing else." Perhaps the obscene profits that drive Wal-Mart's expansion are helping to create still more such opportunities for other prospective workers who have "nothing else." But if that thought occurred to the filmmakers, they don't give any hint of it....

At times the film's indictment of Wal-Mart passes from strained to simply bizarre. At one point, text scrolling over a black-and-white image of a vacant superstore, to somber music, informs us that there are 26,699,678 square feet of empty Wal-Mart in the U.S., "enough room to build 29,666 classrooms and educate 593,326 kids." The argument, insofar as it's possible to extract one, seems to be that subsidies and infrastructure spending on Wal-Mart divert funds from other public services, and that there's no guarantee that the retailer will stick around. But the strange floor-space metric the film invokes is brazenly, even heroically irrelevant to that point....

The anti-Wal-Mart movement is, in the end, both more and less than the sum of its parts. It is less, in that it seems likely that most critics of the company are—-at least initially-—motivated not by the full bill of indictment, but by one or two pet issues: An affection for small shops, or a distaste for outsourcing. It is more, in that Wal-Mart has by now, perhaps as a function of its sheer size, taken on a symbolic role as an emblem of necrotizing corporate power...

Paul Krugman has similarly conflicted views on WalMart, as found through Mark Thoma:

Economist's View: Paul Krugman: Wal-Mart's Excuse : Big Box Balderdash: I think I've just seen the worst economic argument of 2005.... A union-supported group, Wake Up Wal-Mart, has released a TV ad accusing Wal-Mart of violating religious values.... You may think that this particular campaign - which has, inevitably, been dubbed "Where would Jesus shop?" - is a bit over the top. But it's clear why those concerned about the state of American workers focus their criticism on Wal-Mart. The company isn't just America's largest private employer. It's also a symbol of the state of our economy, which delivers rising G.D.P. but stagnant or falling living standards for working Americans.... So how did Wal-Mart respond to this latest critique?

Wal-Mart can claim, with considerable justice, that its business practices make America as a whole richer.... [I]ts low prices aren't solely or even mainly the result of the low wages it pays. Wal-Mart has been able to reduce prices largely because it has brought genuine technological and organizational innovation to the retail business. It's harder for Wal-Mart to defend its pay and benefits policies. Still, the company could try to argue that... it cannot defy the iron laws of supply and demand.... But instead of resting its case on these honest or at least defensible answers to criticism, Wal-Mart has decided to insult our intelligence by claiming to be, of all things, an engine of job creation....

A recent study by David Neumark of the University of California at Irvine and two associates at the Public Policy Institute of California, "The Effects of Wal-Mart on Local Labor Markets," uses sophisticated statistical analysis to estimate the effects on jobs and wages.... The authors find that retail employment did, indeed, fall when Wal-Mart arrived in a new county. It's not clear... whether overall employment... rose or fell... But it's clear that average wages fell: "residents of local labor markets," the study reports, "earn less following the opening of Wal-Mart stores." So Wal-Mart has chosen to defend itself with a really poor argument...

I suggest a convergence on a simple position: efficient production and distribution, good; using local monopoly power to sleaze and cheat your own workers, bad!

Posted by DeLong at December 19, 2005 12:20 PM