[Vision2020] Re: Joan and her arguments against a WalMart Supercenter

[Andreas Schou]

I've got to be brain-damaged to beat my head against this brick wall
again, but ... here I go. Since Donovan doesn't appear to respond to
anything but Wal-Mart's own spin machine, I've decided to use only
numbers from Wal-Mart in this post.

> 1)      Concern: Poor working conditions at Wal-Mart factories
> Answer: Wal-Mart does not own factories it distributes goods, it does not
> make them. They contract with manufactures; the same manufactures that are
> used by ShopKo, Kmart, Target, Dollar General, Dollar Store, Family Dollar,
> Sears, Dillards , TJ Maxx, Ross, etc.

This is true, to a certain degree -- and I disagree with these
business practices when practiced by companies other than Wal-Mart.
However, Wal-Mart is particularly bad in this area, and has actively
encouraged the outsourcing of American jobs to China, where working
conditions are poor, pay is low, and the value of the yuan is
artificially inflated.

If you're interested in the actual mechanics of how this works, you
can read through this excruciatingly boring paper. Or you can just
read the abstract. I'm happy either way.

http://www.globalinsight.com/publicDownload/genericContent/basker.pdf

Oh, and don't complain about the source: it was commissioned by WalMart.

> Concern: Wal-Mart forces its competitors out of business.
> Answer: No shoppers do, and they should have to support higher prices
> because of bad business practices.

Wal-Mart has two particular business strategies of concern. First is
the use of monopsony power. This isn't a form of market power that you
often hear about -- usually, you hear about its inverse, monopoly.
Monopsony is an economic condition where there is only one buyer of a
particular good. Like a monopoly, a monopsony* can be used to wield
undue market leverage.

Take, for instance, the case of the one-gallon, three-dollar Vlasic
pickle jar. You can find the story in its entirety here:
http://www.fastcompany.com/magazine/77/walmart.html

Does a monopsony promote market efficiency? Unlike a monopoly, I'm not
entirely unwilling to say that it can. But in its most basic form, a
monopsony cannablizes the profit margins of the sellers to jack up the
profit margin of the buyer; in other words, the gains in market
efficiency are in fact on the part of the sellers, not the buyer. And,
to return to your first point, one way for manufacturers to more
efficiently manufacture is to move production overseas.

Second, dumping. For those of you who aren't familiar, dumping is the
practice of selling goods on the market at a loss in order to force
competitors out of business. The three-dollar Vlasic pickle jar was
almost dumping itself -- it's hard to tell whether Vlasic ever made a
dime from slelling them -- but the most egregious example of dumping
by Wal-Mart was settled in the WTO just recently.

It involved a sale in 2003, by Apex -- the largest Chinese electronics
manufacturer -- of televisions and DVD players to Wal-Mart. It was
determined to be dumping, and Wal-Mart was punished accordingly.
Again, this is a raw exercise of power by Wal-Mart: using its power as
a buyer to force poor long-term economic decisions, and then using its
sheer size to price competitors out of the market.

This kind of dumping -- selling goods at below the price of
manufacture -- is explicitly illegal. They have another business
practice similar to dumping, however, that is of equal concern despite
not being actually illegal -- and it's particularly apropos to the
situation on the Palouse.

A traditional brick-and-mortar retail business will attracts customers
from a certain radius. Further, shoppers "price" their time and effort
in shopping to counterbalance retail savings. For instance: I live
right by Rosauers. I will often buy food at Rosauers, despite being
able to save money at WinCo, simply because it's closer and on my way
home from work. This is because I have assigned my time an implicit
value and decided to "spend" that value on the closer store.

What Wal-Mart does, and is doing on the Palouse, is opening two new
SuperCenters: one in Moscow, and one in Pullman. This represents a
double-digit increase in the amount of retail square-footage on the
Palouse without a commeasurate increase in retail spending: I am not
making ten percent more money simply because there is ten percent more
retail space. One, or both, of these two SuperCenters is likely to
operate at a loss.

This is not unintended.

By operating at a loss, and capturing consumers in both the radius of
Moscow and Pullman, they can take it away from their competitors,
forcing them to close. Wal-Mart is enormous. It can afford to operate
at a loss here and in Pullman from now 'til eternity. Local retailers
cannot. By forcing local retailers into a spending war of attrition,
they have made the economic game one they can win -- and once they do,
they can reconfigure the rules however they please.

What's the solution to this?

I am not against big-box development. Aesthetic objections to big-box
stores are often thinly disguised classism. What I am against is
allowing a single company to dominate the retail market in both Moscow
and Pullman. Why not attract, and offer incentives to, another,
comparable business? Fred Meyer, for instance, has adopted a business
model similar to WalMart's, and operates the equivalent of a
SuperCenter in Pocatello.

> 3)      Concern: Wal-Mart hires illegal aliens.
> Answer: No it does not, it cannot hire anyone that does not have a social
> security number. Wal-Mart has contracted with independent companies that on
> their own violated the law. Wal-Mart also contracts with Pepsi, is it
> responsible for the laws it violates too, or any of the 60,000 businesses in
> the Unites States it contracts with?
> (http://www.walmartfacts.com/newsdesk/article.aspx?id=1012)

Wal-Mart is responsible for conducting its

> 4)      Concern: Wal-Mart pays low wages
> Answer:   Wal-Mart's starting pay is 40% over minimum wage. If you have a
> problem with Wal-Mart wages, you obviously have a problem with minimum wage
> which is even lower. Maybe you should work on raising the minimum wage for
> every company, not just Wal-Mart. Wal-Mart is also in favor of raising the
> minimum wage.
> (http://www.heritage.org/Research/Labor/wm899.cfm)

This is not true. This study, commissioned by Wal-Mart, provides a
thumbnail sketch of Wal-Mart's aggregate effects on employment. In
short: in the retail sector, on average, Wal-Mart stores reduce
employment by two to four percent. Payroll per employee declines by
about 3.5 percent. Retail earnings fall. Overall, there is some
evidence that Wal-Mart stores increase total employment by about two
percent, though not all evidence supports this conclusion. There is
strong evidence that total payrolls per person decline by about five
percent in the aggregate, implying that residents of local labor
markets earn less following the opening of Wal-Mart stores.

Particularly interesting is the conclusion the study makes about the
South -- a conclusion which they connect to state right-to-work laws.
In the South, they conclude, Wal-Mart causes substantial damage to
retail employment, total employment, and total payrolls per person.

http://www.globalinsight.com/publicDownload/genericContent/neumark.pdf

Also, if you are trying to be serious, rather than trying to be
laughed off of Vision 2020, don't quote the Heritage Foundation.
They're the biggest bunch of partisan hacks this side of AEI*.

> 5)      Concern: Wal-Mart forces people on Government Welfare
> Answer: No it does not. Wal-Mart does not decide the standards for
> government programs. In addition, Wal-Mart hires many part-time workers that
> are on disability. Wal-Mart does more to reduce poverty conditions then
> government programs.
> http://www.heritage.org/Press/Commentary/ed052005d.cfm
>
>
> 6)      Concern: Wal-Mart will reduce consumer choice
> Answer: It does not.
>
> "No effect can be seen on retail sectors in which Wal-Mart does not compete
> directly:"
> (http://economics.missouri.edu/Working_Paper_Series/2002/WP0215_basker.pdf)

Were you expecting that no one would read your sources, Donovan? This
paper is about retail employment, not anything even vaguely related to
consumer choice. I hesitate to even try to refute this, because it's
not even clear that I know what you're talking about.

> 7)      Concern: Wal-Mart does not provide Health Insurance to its workers
> Answer: Not true. Wal-Mart offers health insurance for only $11 a month to
> any employee that has worked full-time for more than 6 months or $25 a month
> for their entire family.

This is a catastrophic health insurance plan that does not provide for
regular maintenance health care or prescription drugs. You know this,
Donovan.

On this subject, I offer a memo submited to the WalMart board of
directors at the start of the 05/06 fiscal year. It includes such gems
as: reducing the retirement plan to pay for health care, eliminating
health coverage in favor of tax-deferred health savings accounts,
"making some select strategic investments to better withstand external
scrutiny," and adding physical labor to the greeters' work duties in
order to prevent the disabled from applying.

http://www.nytimes.com/packages/pdf/business/26walmart.pdf

> 8)      Concern: Wal-Mart encourages its employees to seek government
> benefits
> Answer: No it does not. It has a system set up so that when employees that
> are on welfare, food stamps, SSI, are employed by Wal-Mart they can easily
> report the employment number, income, family information etc to the proper
> government agency as required by law. Many large companies have these
> services. In fact, companies are required to have employment numbers to give
> to government agencies, Wal-Mart just set their system up to be efficient
> and easy to use for people on government assistance. 30% of Wal-Mart
> employees where on government assistance when hired.
>
> I encourage people to read this research about Wal-Mart:
>
> http://economics.missouri.edu/Working_Paper_Series/2002/WP0215_basker.pdf

We're both citing Basker. Did you not read the section where he
discusses MedicAid benefits? I can tell you that a conclusion that
Wal-Mart employees do not use substantially more TANF funds is
well-founded, but that on the average, a Wal-Mart worker uses $898 of
federal MedicAid funds per year. This makes the total subsidy to the
health-care of Wal-Mart employees just under 1.1 billion dollars per
annum.

http://www.globalinsight.com/publicDownload/genericContent/hicks-poverty.pdf

I'm using Hicks' data, which was, like everything else I've quoted,
commissioned by Wal-Mart.

> Idaho Wal-Mart FACTS:
> http://www.walmartfacts.com/community/article.aspx?id=152

This is published by Wal-Mart itself.

Does that settle it? It should.

-- ACS

* If you want to get technical about it, Wal-Mart isn't a monopsony in
very many goods. However, it is an *oligopsony* in virtually every
consumer good sold, and can wield that oligopsony power
indiscriminately. Take, for instance, the presusre they put on record
companies to produce special "family-friendly," Wal-Mart only versions
of CDs. This is the sort of power that only a

* To be bipartisan about it, I suppose I can say "or the Brookings
Institution." Is that fair, Jeff?