"What Wal-Mart Gets and the Candidates Don't"

Terrific op-ed from the Washington Post from Sunday a week ago. Warren Brown, self-admitted union man, explains it to the elitists like Obama, Clinton, and the PARDners. It's not about globalism, offshoring, or union-busting. The average person doesn't think about politics when they shop. I made this point last week. It's about being able to buy quality goods at the lowest price. Period.

I wish to say at the outset that I hold no grudges against Wal-Mart. In fact, my family and I are rather fond of that giant retail chain, where we often find the best prices, especially on pharmaceuticals.

It is an odd thing to admit. Many in our clan, including yours truly, hold union memberships. Politically, with me being the sore-thumb exception, we run from left to leftist. Yet, regardless of politics or union affiliation, when it comes to searching for the best quality at the most reasonable prices, Wal-Mart is one of the places we look first.

As I said, this is odd, almost embarrassing. Wal-Mart is no friend of unions. Wal-Mart is one of those American retailers keeping foreign factories humming and foreign workers employed. Viewed from that perspective and in context with the current political debate on international trade, Wal-Mart is something of a bad actor, one of those companies supposedly putting people out of jobs in places such as Ohio.

Poor Ohio. It has become one of the rustiest parts of the Rust Belt. It has lost tens of thousands of jobs, largely in the automotive and related industries, and it has shed nearly 200,000 residents over the past couple of decades.

In last week's titanic Democratic presidential primary battle, Ohio, one of the most unionized states in the nation, was made the prime example of what happens in America when international trade supposedly runs amok.

Sen. Hillary Rodham Clinton (D-N.Y.), the victor in that contest, rose to electoral glory on promises that she would fix what is wrong with international trade, that she would somehow find a way to reverse job losses allegedly caused by contracts such as the North American Free Trade Agreement.

Sen. Barack Obama (D-Ill.), who was made to look a bit wishy-washy on the free trade issue, largely lost Ohio as a result.

But here's suggesting that none of us should take seriously anything that politicians, Democrat or Republican, liberal or conservative, have to say against NAFTA in particular or international trade in general. The reason is simple: They neither understand Wal-Mart nor do they routinely shop there.

Consider Ohio: Wal-Mart is one of the largest employers and biggest taxpayers in the state. As of March 2007, there were 99 Wal-Mart Supercenter stores in the Ohio, 38 Wal-Mart discount stores, 30 Wal-Mart Sam's Clubs and five Wal-Mart regional distribution centers.

In Ohio state sales taxes alone, the company paid $410.2 million in 2007. In other state and local taxes, it paid $82.4 million.

All of those Wal-Mart facilities and the money they generated were supported by one phenomenon: consumers, union and nonunion, employed by and laid off by domestic car companies and other manufacturing entities, seeking the highest quality products at the very best prices.

If Wal-Mart could not meet that essential consumer demand, it would not exist in Ohio or anywhere else. It certainly would not be the formidable retailer it is today.

What does that mean for the current political debate on international trade? Simply this: As long as politicians continue to ignore the Wal-Mart phenomenon, the consumer-driven reality of international trade, they are being dishonest. They are blowing smoke.

The truth is as simple as it is harsh. Automotive and other industrial jobs lost in Ohio are not coming back, certainly not the way they were, because the same consumers who shop at Wal-Mart stores in Ohio and everywhere else there is a Wal-Mart store are not willing to pay for those jobs and the products they represent.

Look at it this way: If I buy enough Honda cars made at the lower cost, nonunion Honda plant in Marysville, Ohio, I'm putting pressure on my union buddies at the higher-cost General Motors, Ford and Chrysler plants to offer me equal or better products at prices equal to or better than those offered by Honda.

I might drink with my union buddies. I might tailgate with them. I might even join them in shouting "hooray" for Clinton or Obama. But if they can't give me the car I want at the price I demand, I'm buying that nonunion Honda. If that means GM, Ford and Chrysler plants close, I'm sorry about that and all that means for my friends who will lose their jobs.

But they should have found a way to give me what I was willing to pay for. They should have understood why so many of us shop at Wal-Mart.

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Hope for the future

Hans Rosling's 2006 and 2007 20 minute videos describe (with amazing graphics) how there will soon be NO ‘third world.’ I highly recommend them.

Improved health and wealth are taking over the planet and we hardly noticed. Rosling's presentaions are to me the most interesting analysis of the world’s population since the idiot Paul Erlick wrote “The Population Bomb”. Erlick, whose book I read while I was in high school in the 70’s, predicted that all was lost. We’ll soon run out of food, and we’ll all die - if we don’t force people to stop reproducing. That sort of short sightedness has always affected my politics. The correct answer to Erlick’s 'dilemma' was of course staring him in the face: free market economies and the green revolution would totally transform the planet. Though Rosling is from socialist Sweden you’ll see he can’t help but come to the same conclusion.

You can run Rosling’s software at http://www.gapminder.org/ but check out his talks first.

Lessons for Teacher Lu

Scotty writes about Chris Lupke's Town Crier column in the Daily News today:

He makes it seem like the businessmen in China are complaining about WalMart. But, that is not what was being said.

Given previous letters to the editor from PARD, I'm surprised Lupke stopped at lead paint and didn't blame Wal-mart for kiddie porn and crack houses as well.

Let's examine a few of Lu Laoshi's claims further, shall we?

If Wal-Mart is such a all-powerful monopsony that it squeezes poor Chinese suppliers to "commit suicide," then why has it's stock declined 25 percent in the last three years? You can't have it both ways. As a recent Wall Street Journal article so gleefully touted by the PARDners states, "As Wal-Mart's influence erodes, so does its allure to manufacturers." The Journal continues,

In some ways, Wal-Mart's loss of clout is a reflection of a more fragmented world. Retailing is a mirror to how we live and work. Big-box stores thrived by selling highly recognizable national brands, which themselves were fed by two phenomena: the growth of mass media and freeways, which encouraged large stores in remote areas. Stores and brands together achieved scale efficiencies that allowed them to overwhelm local chain stores and regional brands.

But the Internet is transforming the retail definition of scale. The once-stunning compilation of 142,000 items found in a Wal-Mart supercenter doesn't seem so vast alongside the millions of products available on the Internet.

At the same time, the cost of creating and sustaining a national brand is rising because of media fragmentation. Niche brands, created by Internet word of mouth, are winning shelf space and sapping profits required to fund big brands' advertising.

So it is the free market and consumers, as always, not union-funded "grassroots" pressure groups like PARD,that are changing Wal-Mart.

By the way, according to the New York Times, Wal-Mart's stock stumbled because the company abandoned its traditional customer base and tried to go "upscale."

If Chinese workers average $150 per month working in factories that supply Wal-Mart, what were they earning before they started working in those factories? What are the alternatives? I find it highly interesting that liberals like Lupke who want the U.S. to stop trying to impose American-style democracy on countries like Iraq are so anxious to impose American-style wages and working conditions on countries like China.

If PARD is a "grassroots group" contending that Wal-Mart damages "smaller and locally owned businesses," why did Lupke have to use a quote from a furniture store owner in Chicago? Is it because the only anti-Wal-Mart business owner in Pullman left town a year ago? Is it because ALL the public comments from business owners in Pullman have been in favor of Wal-Mart coming to town?

Speaking of Chicago, Lupke leaves out a few salient points, as you might expect. For one, the fact that 25,000 Chicagoans applied for 325 jobs at the store. I guess Wal-Mart must not be as bad a place to work as Lu Laoshi claims. Also, since Wal-Mart opened in the West Side of Chicago a year ago, according to the Chicago Tribune, it has generated more than $5 million in state and local taxes. And all of that despite massive union efforts to block the West Side store and continuing efforts to block a South Side store.

Fortunately, Mayor Daley vetoed the city council's union-bought and paid "living wage ordinance" designed to stop Wal-Mart from opening on the West Side and sided with folks like Alderwoman Emma Mitts of the predominantly minority 37th Ward on the West Side who stated:

I'm not in your business, so don't get in my business in my ward. If they don't want a Wal-Mart, fine, I do. I have kids in my neighborhood telling me, "I need a job." I can get opportunities for them. I started out working in a grocery store. It helped me.

And speaking of labor unions, it is no coincidence that Lupke used the phrase "Wal-Mart actually does seem to be waking up a bit." Wake Up Wal-Mart! is the anti-Wal-Mart organization funded by the United Food and Commerical Workers union. That is the same union that PARD's attorney David Bricklin just recently represented over in Fircrest, WA in a Wal-Mart appeal.

Wal-Mart did not launch its $4 prescription program to "cultivate support in communities," it did it to help revive those flagging stock values Lupke touts. I couldn't find any Wall Street Journal editorials critical of this, but I did find a Wall Street Journal/Harris poll that found low-priced generic drugs are likely to attract a big share of the market for prescription drugs. And there was a Journal editorial in December 2005 that concluded that the campaign against Wal-Mart is about union politics.

Is Wal-Mart Good for America?

It is a testament to the public-relations success of the anti-Wal-Mart campaign that the question above is even being asked.

By any normal measure, Wal-Mart's business ought to be noncontroversial. It sells at low cost, albeit in mind-boggling quantities, the quotidian products that huge numbers of Americans evidently want to buy--from household goods to clothes to food.

Funny, Lu Laoshi didn't mention that one.

Lastly, as to Lupke's point of the lawsuit against Wal-Mart for hours worked off the clock, I suppose it bears mentioning yet again that Costco, the preferred big-box store of PARDners everywhere, is the subject of a class action lawsuit for gender discrimination. Why, the PARDners will sputter, Wal-Mart has been sued much more than Costco. Indeed. Wal-Mart has 1.6 million employees versus 136,000 for Costco and Wal-Mart garners five times as much in annual sales as Costco. Do the math. Who's the bigger target?

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Wal-Mart and China: The Truth

Is Wal-Mart unfairly exploiting Chinese workers and companies through its "monopsony power" (a market with only one buyer) and offshoring American jobs as critics claim? Of course not, that's an absurd notion.

Emek Basker, from the University of Missouri, and Pham Hoang Van, of Baylor University, released a scientific study in May 2007 titled, "Wal-Mart as Catalyst to U.S.-China Trade."

They concluded:

There is a common perception that Wal-Mart and trade with China are related. But the discussion of the relationship betweenWal-Mart’s growth and import growth tends to focus on Wal-Mart’s monopsony power implied in the often-made claim that Wal-Mart “forces” suppliers to move production overseas in order to cut costs. In a model with increasing marginal cost, a monopsonist who cannot price-discriminate depresses production to extract a lower input price. Such a model counter-intuitively implies that in the absence of Wal-Mart and other large chains, imports would have grown at a rate even faster than the one we have observed over the past two decades.

Basker and Pham found that it was improved technology and liberalization of trade with China that have driven Wal-Mart's growth and created a two-way relationship between the chain’s size and its sourcing choice. If you want to blame anyone for loss of American jobs, blame Bill Gates and Congress, not Wal-Mart. They just took advantage of the system, as any business would do, and in turn have benefitted millions of Americans through lower prices.

But of course, globalization of trade is not bad. It's good for all concerned. In The Wal-Mart Revolution, Richard Vedder and Wendell Cox stated:

World economic and trade meetings usually attract demonstrations, sometimes violent ones, against "globalization." One of the principal claims is that the international factories supplying products to companies such as Wal-Mart and General Motors drive down the wages and standards of living in their low-income host countries. If this were so, then it should be evident in the economic data. Where there is significant manufacture of products for American and Western European markets, gross domestic product growth per capita should be falling. A review of the five low-income Asian nations with strong export growth indicates the opposite. From 1999 to 2005, world real GDP per capita rose by an average of 19 percent. By comarison:

China increased the value of its exports 229 percent. At the same time, its per-capita real GDP rose 53 percent.

Indonesia increased the value of its exports 49 percent. At the same time, its per-capita real GDP rose 10 percent

India increased the value of its exports 79 percent. At the same time, its per-capita real GDP rose 56 percent.

Bangladesh increased the value of its exports 57 percent. At the same time, its per-capita real GDP rose 22 percent.

Vietnam increased the value of its exports 139 percent. At the same time, its per-capita real GDP rose 29 percent.

Each of the export-driven nations has experienced greater economic growth in income - significantly above the world rate. The factories provide jobs and income that would not exist if the big-box stores weren't selling their products. China, India, Indonesia, and their people would be worse off without them. Moreover, the countries that import their products, such as the United States, have been better off as well. Economic growth in the United States has not slowed with rising globalization, and lower prices from imported goods at places like Wal-Mart have brough billions of dollars of consumer surplus and welfare to ordinary Americans - aspillover effect of the internationalization of retail trade.

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