'Tis the Season for Bashing Wal-Mart
November 2005
There is a new movie out, just in time for Christmas, bashing the company that will be offering holiday shoppers some of the best bargains of the season. "Wal-Mart: The High Cost of Low Price," is the latest offering from producer/director Robert Greenwald. The film paints a grim picture of a heartless behemoth that rolls into communities across America and "crushes" local businesses. This stark portrayal is strongly backed by labor leaders angry over the retailer's refusal to make its employees join a union as a condition for holding their jobs.
Wal-Mart critics are hoping to apply the same three-step strategy that worked so well against tobacco companies: 1) target a large, successful industry; 2) demonize it in the public mind as "evil;" 3) wring concessions and large cash payments from it.
Key to this strategy is step two, demonizing the targeted industry. In the film, H&H Ace Hardware in Ohio is said to have been "crushed" by a Wal-Mart opening nearby. It turns out the store shown in the film closed more than a year before the new Wal-Mart opened. In any case, the former H&H Ace Hardware later re-opened under new, and no doubt more effective, management as Middlefield Ace Hardware. Today it does a thriving business at the same location. But even if the two stores had directly competed and Wal-Mart had won, it would only mean that Ace's former customers found better deals somewhere else and voted with their feet.
In their zeal, critics miss the true benefit Wal-Mart brings not only to its customers but to the broader community. After shopping at Wal-Mart, millions of families have money left over that they would not have had otherwise. According to the company, families shopping at Wal-Mart save an average of $1,250 a year in lower prices.
People do one of two things with the extra money - they spend it or they save it. When they spend it they improve their own standard of living while creating jobs for other businesses in the area. When they save it, they increase their financial security and provide capital that in turn is invested in growing businesses and that, again, creates new jobs.
In the classic and surprisingly easy to read book, "Economics in One Lesson," economist Henry Hazlitt shows that when debating economic issues people tend to see only the effects that are immediate and obvious - like a local business that may have to close because it can no longer attract customers - and ignore benefits that are long-term and unseen, like higher living standards and thousands of jobs created elsewhere.
Short-sighted activists like Greenwald believe it is important for Americans to pay higher prices and suffer a lower standard of living, all in pursuit of a romantic elitist vision of what they think "main street" should look like. If we followed their misguided advice millions of dollars in savings would remain unavailable for new businesses, jobs and investment.
Wal-Mart is not some new and dangerous phenomenon in the world, as Greenwald would have us believe. Thousands of small businesses go under every day - and thousands of new ones are created. That is the democracy of the marketplace. Through voluntary choice and persuasion, our free economy is constantly adjusting to what people want.
Greenwald's film is wholly negative. It offers no proposals, no new ideas, no solutions - just criticism of one of the most successful American companies in the world. And, by extension, the film criticizes the judgment of millions of American who choose to shop and work at Wal-Mart every day.
Consumers do not shop at Wal-Mart because the company is run by nice people (although that may be true). They keep coming because Wal-Mart intelligently pursues the strategy that has always been the formula for market success: offering customers quality goods and friendly service at low prices.
The solution to competition from Wal-Mart is not calling on government officials to shift power away from consumers by arbitrarily picking winners and losers in the marketplace. It is to beat Wal-Mart at its own game, by finding ways to offer better prices or unique services that even the big discounter can't match. Successful small businesses do it all the time.
When public policy focuses on letting private entrepreneurs compete for our business based on quality products, low prices and good service - that's when we all win.