The online home for Greg Leedberg, since 1995.

Friday, February 03, 2006

In Defense of Walmart

It's popular these days to bash Walmart. For example, the recent hubub over requiring them to provide health insurance for their employees, or the constant hatred for squeezing out small "mom and pop" stores. A lot of the criticism is probably warranted. Big corporations have a tendency towards imperfection. However, it also seems to have become popular to criticize them, even if it's not warranted. I don't think Walmart is perfect, nor do I think any single corporation needs to be defended by me. But, I think a lot of the issues and complaints surrounding Walmart are actually symptoms of larger sentiments endemic to our society. Personally, I feel a lot of these base feelings are, to be nice, not well thought out. As such, this post is a defense of Walmart -- but slanted towards the "bigger picture" of what battling Walmart on specific issues actually means.

First, recently there has been a complaint involving the fact that Walmart doesn't provide its workers health insurance. The complaint says that this forces workers into either a life of squalor, or that health care must be provided at taxpayer's expense. This, in turn, hurts taxpayers while leaving Walmart with big profits.

If Walmart paid for insurance (which it probably will do soon), that money doesn't just come out of nowhere. Walmart makes its money from selling goods. If Walmart decides to take on a big expense such as insurance, then that expense will be paid for through revenue from selling goods. In order to do this, they have to raise their prices (assuming they want to maintain the same profits they have currently). In the end, consumers will pay for it either way, either through general taxes or through higher prices at retailers. The market is a closed system. Striving to lower taxes will only result in something else being more expensive which was previously funded through taxes.

This really comes down to the question of should an employer be forced to provide insurance for employees? For that matter, should an employer be forced to do anything? I don't think so. I'll come back to this later.

Another complaint: Walmart doesn't pay well, and treats its employees badly. Somewhat like above, this can force employees into a life of poverty -- but this time, maybe not at taxpayers' expense. Moreso, people seem to think this hurts society.

However, Walmart is a private company and can do whatever they want. If they don't want to provide insurance, fine. If they want to give low wages, fine. If people really do have much better options available to them, then they won't work there, and Walmart will go out of business with no employees. Employment within a free market is a two-way benefit. I agree to work for you and you agree to pay me. Either party can get out at will, and so both parties need to be pleased -- and to strive to please the other. Staying in a bad situation is only your own fault. Once again, should an employer be forced to be a good employer, or forced to do anything?

But first, one last complaint. It goes something like this. Walmart enters an area and offers a large selection of products at a very low price, with which small stores can't compete, and so they are forced out of business. This leaves just Walmart in the area.

Walmart only squeezes out little stores because consumers allow it to. If you really value your community more than your costs, then don't shop at Walmart. If the majority of people feel that way, Walmart won't make money and won't survive. There's nothing illegal or wrong with Walmart charging a low price. They can charge whatever they want to. If they really charged too little, they wouldn't survive (If they charged too much, they would probably also not survive!). If they force out smaller stores, it's because they offered something that those stores didn't. If Walmart later on decides to raise its prices more than it should, then another, better, competitor can go up against it, with lower prices. Just like Walmart did with the mom and pop stores. The free market is largely self-regulating in this respect, and any attempt to artificially regulate it (by making low prices illegal?) does a disservice to the ideals of our society.

Along the same lines, this just another instance of times changing. Whenever there are major shifts within our culture, people resist them at first -- because most people don't like change. But times change, and those insitutions of the past aren't necessarily going to be a big part of the future. Witness the current battling in the music industry as CDs and record stores give way to MP3s and online music downloading. Witness the phone industry as 100+ years of telephony infrastructure gives way to cell phones and VOIP. The major players of the past that don't adapt will be replaced with new companies who better understand the current market. And in the future, they too will be replaced.

As I alluded to above, all of these issues really come down to whether or not we should tell companies what to do, in the event that they are doing something we don't like. I would say no. The economy and the market are largely self-regulating. Companies can only mess up for so long. A company that becomes a dominate player with low prices is exercising the American ideal, and providing a good service. A company that mistreats employees is setting itself up to not be a desirable place to work, and so will not have as many possible employees to pick from. A company that gives low prices and then raises them merely creates a situation where another aspiring company can swoop in with legitimate, lower prices. Preventing a company from changing the landscape of an industry is attempting to stop natural progress and development. We gain temporary complacency at the expense of forward movement as a society. The economy is almost a natural organism. It can take care of itself, by and large. We, the consumers, as well as the competing corpoartions, are the "checks and balances".

It's fine -- and healthy! -- to have complaints about Walmart, or any company, and to let them be known. But it's not fine to try and undermine free market ideals and forcibly produce what seems, at the moment, to be an ideal economic environment.