Wal-Mart and Its Discontents

In a previous post on Wal-Mart, I was chastised for defending the company. I wrote,

If one were looking for a shining example of a Randian protagonist, Wal-Mart is it. Wal-Mart is hated for no other reason than being so damn successful.

I somewhat regret mentioning Rand at all because it gives the false impression that I am an Objectivist. Far from it. I agree with very little of Rand's philosophy, but one of the things I do agree with, or at least find interesting, is how she characterized the hatred of success. I stand by what I said before: Wal-Mart is hated for no other reason than being so damn successful.

Many commentators took me to task on the grounds that Wal-Mart takes advantage of such government benefits as eminent domain, subsidized utilities, and--most outrageous of all--publicly funded highways.

If this is the best these critics can come up with, I'm not impressed. We live under a mixed economy; there are few areas where the hand of the state does not reach. While I certainly do not support eminent domain abuses or corporate subsidies, I hardly see this as a reason to dislike Wal-Mart. Wal-Mart is not known for lobbying the government for new welfare benefits and protection from competition, unlike many other corporations. Rather, Wal-Mart is simply taking advantage of the government benefits that already exist, and would most likely be sued by its shareholders if it didn't take advantage of these benefits. I don't like the system any more than anyone else, but the appropriate target for scorn is the government, not Wal-Mart.

Returning to the original question: Why is Wal-Mart hated so much? What differentiates Wal-Mart from similar retail chains like Kmart, Target, and Sears? I doubt that Wal-Mart disproportionately takes advantage of eminent domain, corporate subsidies or federally-funded highways compared to these other stores. Further, I've seen little evidence that Wal-Mart pays significantly worse wages or benefits to its workers relative to similar jobs in other retail chain stores.

On the contrary, the only thing that meaningfully separates Wal-Mart from its competitors is its incredible success. Wal-Mart got to where it is today by doing what successful businesses do best: developing more efficient practices for delivering value to their customers, cutting costs, inventing new business processes (in Wal-Mart's case, they revolutionized supply-chain management and database management), and most importantly, satisfying the subjective preferences of consumers.

The original Esquire article I cited discusses some of the factors which separate Wal-Mart from its competitors:

Yet all of these fundamentals, while impressive, don't reveal the heart of why Wal-Mart is not just a better store but a fundamentally different kind of business.

Here's an example: While some stores might install state-of-the-art software to manage inventory, Wal-Mart hands over much of the management of its floor space to the vendors themselves. Once a vendor is doing enough business at Wal-Mart to be trusted, the company will actually allow that vendor to decide how much of its product to put on the floor. After all, who better to ensure a store is stocked than the company with the greatest interest in moving that inventory? Done right, this allows the vendor to better plan its production, since it knows in advance how much product one of its biggest accounts will be ordering. And what happens if a vendor gets cute and orders too much? According to one vendor partner I spoke to, "Wal-Mart gives you one mistake. You don't risk making a second. They hold you accountable."

Accountability is a theme that runs throughout the company. A couple years ago in these very pages, I slammed Tyco, which was then a Wall Street darling. I criticized its obtuse financial statements and the belligerent, smarter-than-thou attitude of its CEO. The company cared more about impressing bankers and investors than it cared about impressing customers. Wal-Mart, on the other hand, has never gone out of its way to woo Wall Street. Wal-Mart issues simple and transparent financial statements, a habit dating from long before corporate governance became chic. The fact that the company provides monthly and even weekly sales information makes it even more difficult for something to go wrong without investors knowing about it. ...

When Wal-Mart executives throw a dinner to welcome a guest, they do it in the nice-but-modest golf clubhouse in the housing development where many of them live in nice-but-modest homes. Wal-Mart's headquarters are in a bland rectangle of a building that could easily be mistaken for a warehouse. CEO Lee Scott's small, plain office overlooks the parking lot. A company like this couldn't spend $15,000 on an umbrella stand if it tried. Instead, Wal-Mart uses that building to instill a parsimoniousness that permeates the entire company. ...

How can I tell the belief in the company's value mantra is real? Well, the vendor I spoke to put it this way: "The buyers for every other big retailer we do business with expect things from us?not exactly bribes, but concert tickets and Christmas gifts. When you go out for lunch with the buyer at Wal-Mart, he won't even let you buy him a Coke. It's all business."

These successful business practices have given Wal-Mart a huge market share, and this makes the company a very visible target. When people think of big corporations, they think of Wal-Mart. When people think of cheap products made with sweatshop labor, they think of Wal-Mart. When people think of the "creative destruction" that capitalism inevitably brings, i.e. the closing of sentimental but inefficient and pricey mom-and-pop stores and their replacement with large, impersonal retail chains, they think of Wal-Mart. These are the reasons why Wal-Mart is hated, and, despite the corporate subsidies enjoyed by Wal-Mart and every other large corporation in a mixed economy, these are the reasons why Wal-Mart should be defended from its critics.

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It's just the unions

It's just the unions preaching to the anti-capitalist choir. The unions have government-supported monopolies over the supply of labor in certain (shrinking) areas, and they're rent-seeking, in the Public Choice sense (per Nobelist Buchanan). Over-the-air media have similar government-supported monopolies and they often carry the unionists' water.

You're in for it now. When I

You're in for it now. When I made a similar argument, the noodleheads at The Bellman responded that if I couldn't explain how you were supposed to feed your family of four on a Wal-Mart cashier's salary, that I should shut up. My mistake was going further than you did, and arguing that just because you won't get rich at Wal-Mart or maybe even support your whole family on a Wal-Mart salary, it soesn't make Wal-Mart evil. Anti-capitalists clearly believe that we should deprive consumers of choice in order to prop up inefficient competitors who, in their idealized and clearly non-factual worldview, pay "living wages" to employees. The market generally works efficiently in setting appropriate terms of employment, including wages. If Wal-Mart's wages were substantially below competitors, they wouldn't find labor to sell their sweatshop-produced, rain forest-destroying, wouldn't-buy-it-but-for-evil-marketers, anti-humanity products anyway, would they?

One reason companies like

One reason companies like Wal-Mart tend to draw a lot of political fire is--as your post describes--they employ a different business model. One of the hallmarks of the mixed economy is a profound mistrust of genuine innovation, because the effects of such innovation cannot be known in advance. The mixed economy requires a large dose of central planning to succeed.

Agree with your post. Yet I

Agree with your post. Yet I still hate shopping at Wallymart, despite all the money I save there. Narrow aisles, too many other people in the store, not much selection.

well the context of the

well the context of the argument over state support was that a company like walmart was capable of putting smaller local companies out of business not neccesarily just out of pure ingenuity.

You're right about the state reaching into many sectors of the economy. I've been saying that all along, adn it seriously damages the idea of a free market it my opinion.

How does that seriously

How does that seriously damage the idea of a free market system? Does the mere existence of capitalist market seriously damage the idea of a democratic socialist Chomskian political economy, whatever that might be? Did the existence of monarchy seriously damage the idea of democracy? Did the existence of slavery seriously damage the idea of universal freedom from slavery? I'm really not following your argument.

The most common complaint by

The most common complaint by the Left against Walmart is the low wages & no benefits provided to the workers. What is never mentioned are the massive benefits provided by low prices to lower income consumers. In this regard, Walmart is a whopping success for the free market, far more "compassionate" to a society's citizens than any government anti-poverty program. The Left knows this and it infuriates them to no end. I suspect that the Left feels it must destroy/discredit Walmart lest the common man realize that it is a perfect example of how Capitalism is far superior to Socialism.

And so goes the second civil war for this country....

On a lefty Website I once

On a lefty Website I once defended Wal-mart as well. And at the end of the Arguement, if Tomorrow Wal-Mart quit doing what they are doing. The next day I open Step-Mart. And I start their practices. Surely, my first batch of Employees will not be as good as the Wal-mart ones. But once I run the new Wal-mart out of business, I can hire their employees.

Some of these people think a corporation can say the hell with profits. They can not. You tax a Corp more, the consumer pays the tax, not the corp. You raise the wages of the employees and the Consumer pays for the raise, not the corp. You give health benefits and the Consumer pays for it, not the corp.

Any of the above leads to inflation. You raise the pay of the Walmart workers, raising the price of goods there, workers at other places now need a pay raise so their money buys the same amount of goods. So those companies raise the prices of their goods. Meaning the raises the Walmart employees got will still buy exactly the same amount of goods.

But some people, idiots mostly, believe that money can just be grabbed out of the sky and given to people. They have no concept that the money a Corp grabs would come out of their pockets, in raised prices, taxes, whatever.

But then again, maybe they were sleeping during the Economics classes.

Actually, I have a big

Actually, I have a big problem with Wal-Mart coming from the other direction. When they use the power of government to steal private property from land owners rather than paying market price, they don't get to be held up as good capitalists.

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I commend you for giving

I commend you for giving credit to Ayn Rand for her idea of Envy as the hatred of the good for being the good.

No one with very much exposure to Objectivism would ever make the mistake of referring to her ideas as "Randian," it is a label that she specifically rejected in regard to her ideas. But then again, the people complaining at you about her likely know little of her ideas, much less what her philosophy is called.