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!

Comments

[save_the_rustbelt]

There was a brief news story a month or so ago that went like this:

This Inspector General of the DOL found that Wal-Mart had a sweetheart deal, and was getting prior warnings of some inspection and enforcement actions.

The story quickly died behind more important sotries.

Did anyone see any more on this story?

If Wal-Mart has bought inself an exemption from labor laws they do have quite an advantage.

[JRoth]

Let's be clear on this point: one of Sanchez' damning points is supposed to be that the filmmakers are too ideologically blindered to see that, if the employees are too scared of losing their jobs to talk, then their jobs must be valuable (and irreplaceable). Yet Krugman cites evidence that Greenwald is precisely correct: Wal-Mart has hurt employment in its communities. So in other words, Sanchez is full of....

I wish these "well-meaning" economists would get over themselves and admit that, sometimes, the populists are f***ing right. Sanchez, if the employees are, in fact, worse off for Wal-Mart's arrival, don't pretend that Greenwald is somehow off-base for suggesting that they are, in fact, worse off, just because that sounds to you like an "affection for small stores."

[Robert Waldmann]

I don't see how WalMart can claim that they are more efficient and that they cause an increase in employment in retailing. Well I mean obviously they are lying. If they were that dumb they wouldn't be rich.

I'd converge in a slightly different way. WalMart is efficient so it improves the opportunities open to the USA. WalMart is greedy selfish and apparently actually willing to commit fraud. So the USA has to make sure that son of Sam Walton doesn't capture all (or more) of the gains by actually enforcing laws and adding new ones, such as mandating health insurance for employees.

[Robert Waldmann]

of course health care financed with an increase in the income tax would be better but let's not let the best be the enemy of the good.

WalMart bashing is useful if it leads to reforms partly motivated because they reduce WalMart profits but good in themselves. People who honestly think WalMart is unmixed evil are useful idiots (present company excepted)

[Movie Guy]

I look forward to working as a Wal-Mart "volunteer" under the revised and enforced U.S. economic plan of cost reduction and mandatory labor participation. Patriot Act III.

I am hoping that I get to work over in Automotive. But I'll probably be a cart guy out in the parking lot.

Maybe I'll wear my Buy America button from an earlier decade.

Perhaps corporate will read this post.

[Rob]

Sanchez's argument fails in that it assumes sans WalMart there would be no opportunity. But the fact is that after WalMart, WalMart becomes the only opportunity. Where I'm currently at, Wal Mart recently expanded to include full food service causing another grocery store to shut down. Now many of the low tech jobs, cashiers, stockers, are liekly paid teh same. However they liekly all lossome benfits and more specialized skills like meat cutting are clearly reduced.

[Oskar Shapley]

Exactly what Brad said.

Unfortunately there is no honest public discussion about Wal-Mart. There is only a shouting match between two sides which never listen to the arguments of the other side:

1) anti-corporate leftist (think Chomsky), who believe that companies can only achieve high profits if they rip off their employees. They ignore the benefits of rising productivity and automation.

2) pro-business ideologues (enter Don Luskin), who ignore the evil that is being done to single persons in highly hierarchical organisations with disparate negotiation power. They believe that whatever somebody is paid is always fair because it's the result of the by definition always fair free market.

The world is complex and I'm glad that Brad knows that sometimes both sides are right (and wrong).

[tom f]

Oskar, I think your 1) is a straw man.

save_the_rustbelt, I remember the story now. Thanks for reminding me.

[tom f]

Here's Simon Head reviewing Liza Featherstone's book on Wal-Mart _Selling Women Short_. Featherstone has called Wal-Mart "a scandal, not a praiseworthy business model". In her book and in articles for the Nation, she should safely fit in Oskar's definition of "anti-Corporate leftist". Here's an excerpt from a 2004 issue of the New York Review of Books:

"Although her book Selling Women Short is a powerful indictment of how Wal-Mart has treated its female employees, Liza Featherstone nonetheless acknowledges the lure of the Wal-Mart store for female shoppers, who delight 'in spending as little as possible, all in one place.'...

..."All these innovations contribute to Wal-Mart's remarkable productivity record, and this in turn has opened up another major source of competitive advantage for the company, its policy of "Every Day Low Prices" ("EDLP"), which makes it possible for it to undersell its competitors by an average of as much as 14 percent.[3] Here the picture darkens because Wal-Mart's ability to keep prices low depends not just on its productivity but also on its ability to contain, or even reduce, costs, above all labor costs."

Does this portrait match Oskar's characterization of the anti-Corporate left?

[com]

using local monopoly power to sleaze and cheat your own workers, bad!

In what way are they "cheated"? Cheating implies falsehood. Wal-Mart is brutally honest: you want a job at a substinence wage, you take it. You do not want it, don't take it and if you die on the streets it is your problem. Brutality of this choice is not created by Wal-Mart but an inherent part of Bellum Omnia Omni society.

[tom f]

com:

read save_the_rustbelt's first comment on this thread.

[Pat]

Don't foget that they already settled their court cases concerning environmental violations. It's been a tough year for those guys.

http://notsocommoncents.com/index.php?mode=viewid&post_id=215&PHPSESSID=91c97327e4de56fdeb0c141192687f2c

[Peter Graven]

Donald Luskin did his bit on Krugman's piece. The article remains at http://www.nationalreview.com/nrof_luskin/luskin200512220928.asp but the link from the NRO website has been dropped. I wonder why? The article is senseless? That is as of 11:44am 12/27/05. I have the original text in case it is "updated".