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<p class=MsoNormal><font size=3 color=blue face=Garamond><span
style='font-size:12.0pt;font-family:Garamond;color:blue'>Mean while back at the
WalMart war…..</span></font></p>
<p class=MsoNormal><font size=3 color=blue face=Garamond><span
style='font-size:12.0pt;font-family:Garamond;color:blue'>Steve Cooke</span></font></p>
<p class=MsoNormal><font size=3 color=blue face=Garamond><span
style='font-size:12.0pt;font-family:Garamond;color:blue'> </span></font></p>
<p class=MsoNormal><font size=3 color=blue face=Garamond><span
style='font-size:12.0pt;font-family:Garamond;color:blue'> </span></font></p>
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<p class=MsoNormal><b><font size=2 face=Tahoma><span style='font-size:10.0pt;
font-family:Tahoma;font-weight:bold'>From:</span></font></b><font size=2
face=Tahoma><span style='font-size:10.0pt;font-family:Tahoma'> Stephan J. Goetz
[mailto:sgoetz@psu.edu] <br>
<b><span style='font-weight:bold'>Sent:</span></b> Tuesday, June 14, 2005 12:11
PM<br>
<b><span style='font-weight:bold'>To:</span></b> cenet@aaealist.org<br>
<b><span style='font-weight:bold'>Subject:</span></b> Re: [cenet] Re:
WalMart... you all got me going!</span></font></p>
</div>
<p class=MsoNormal><font size=3 face="Times New Roman"><span style='font-size:
12.0pt'> </span></font></p>
<p class=MsoNormal><font size=3 face="Times New Roman"><span style='font-size:
12.0pt'>The PBS show is actually available (or was at one time) on the PBS
web-site.<br>
<br>
I think there are a number of reasons why Wal-Mart is being targeted in the
media and elsewhere. In addition to the direct employment impacts
(possibly replacing full-time with part-time jobs, although we do not know for
sure) on the moms-and-pops, Wal-Mart also displaces those service providers who
supplied the moms-and-pops with legal advice, accounting services, logistics,
transportation, advertising, wholesaling, etc. These functions are all
handled out of Bentonville, AR, with tremendous economies of scale. Some
of the latter jobs may have been better-paying and also have provided
benefits. From our colleagues in sociology we learn that owners of
these firms tend to represent the "leadership class," and when that
is destroyed, so is the civic capacity (social capital) to solve local problems
that are of a public nature. Of course, in some declining rural
communities that capacity had disappeared long before Wal-Mart came to town.<br>
<br>
Wal-Mart's PR folks point out that the chain gets 1,000s of applicants for 100
or 200 jobs in some communities. No one is forcing these individuals to
apply for and take the jobs. As community economic developers, we might
wonder about the opportunity costs of these local workers, and whether we can
deliver programs (such as entrepreneurship training), that might raise the
returns to their labor. [George Gilder's 1981 (updated in1993) book <i><span
style='font-style:italic'>Wealth and Poverty</span></i> is an interesting read
in that regard]. Things will get really interesting once Wal-Mart fully
implements Radio Frequency Identification (RFID) tags; as I understand it, a
single cashier will be able to check out 10 customers simultaneously once this
system is fully implemented (you won't even have to place your goods on a
check-out conveyer).<br>
<br>
My own work with Hema Swaminathan shows that the presence of Wal-Mart is
associated with higher family poverty rates, after controlling for
endogeneity--i.e., the WM location decision (the chain actually avoids counties
with higher poverty rates -- and with higher shares of self-employed, all else
equal). The paper is available at (comments are welcome): <a
href="http://cecd.aers.psu.edu/pubs/PovertyResearchWM.pdf" eudora=autourl>http://cecd.aers.psu.edu/pubs/PovertyResearchWM.pdf</a>
The Readers' Digest version is here: <a
href="http://cecd.aers.psu.edu/pubs/WalMart%20Brief.Oct25.pdf" eudora=autourl>http://cecd.aers.psu.edu/pubs/WalMart%20Brief.Oct25.pdf</a>
A back-of-the envelope calculation suggests that an additional 20,000 families
fell below the poverty line between 1989 and 1999, as a ceteris paribus
by-product of Wal-Mart. Note that the poverty line was adjusted for
inflation between 1989 and 1999, so this number should take into account the
fact that Wal-Mart reduced the CPI by 1 percentage point annually during the
decade. <br>
<br>
If Wal-Mart creates externalities (e.g., shifting health care costs and other
welfare costs to taxpayers), then that could be one reason why people are
upset. Wal-Mart is also masterful at extracting direct subsidies from
communities (e.g., for infrastructure improvements) even though, as a retailer,
we may not think of it as part of the economic base in the traditional
sense. This can be debated; David D.--you can insert your rebuttal here,
but keep in mind that what happens locally may not be comparable to what
happens nationally. These subsidies are transferred dollar for dollar to
the corporation's bottom line, and WM extracts them by promising 150-200 jobs
for the community per store (see, however, the note about RFID tags
above). It is probably not surprising that Emek Basker's (U Missouri) 2005
REStat paper indicates that WM has no effect on overall employment in a county
(her data are already a few years old).<br>
<br>
As an aside, WM has phenomenal amounts of information, because every single
transaction is recorded; one can only marvel at what a clever marketing
economist might be able to do with the billions of transactions
(price-quantity) data points that are collected every month by Wal-Mart.
Information is power, after all (and in this case we are not talking about
consumer power).<br>
<br>
Some individuals may take issue with the fact that the $20 billion or so of
wealth held by each of the five Wal-Mart heirs translates into more income on a
single day (of leisure), even at a conservative rate of return of 1%, than the
average Wal-Mart worker would earn over a lifetime of working at the chain,
appropriately discounted. As WM spokespersons have pointed out in other
contexts, when you are at the top of any list, you are likely to become a
target. <br>
<br>
In terms of the globalization debate, it has been suggested that there may be a
link between abandoned local manufacturing plants and the "made in China" label of products sold at local Wal-Mart stores. While Wal-Mart is
not the only firm sourcing from overseas, it is clearly viewed as a
leader. The moms-and-pops (and their wholesalers) that previously
supplied Main Street with retail goods are not likely to have developed the
expertise and knowledge needed to develop China into the main supplier--or at
least not as rapidly (which might have given local stores more time to adjust).<br>
<br>
Despite all of the negative press, it is not clear that anything should or
could be done about Wal-Mart. Our job as academics interested in regional
and local economic development, it seems to me, is to point out that the consumer
savings produced by the chain must be balanced against some of the other
considerations listed above, and that community leaders should think carefully
about redirecting public subsidies to the chain and away from public schools,
for example, as they were "encouraged" to do recently in a nearby
county here in Pennsylvania.<br>
<br>
SJG <br>
<br>
At 12:42 PM 6/14/2005, you wrote:<br>
<br>
</span></font></p>
<p class=MsoNormal><font size=3 face="Times New Roman"><span style='font-size:
12.0pt'>Since the discussion is presently on WalMart, folks might want to catch
the Frontline show on PBS tonight. It is called "Is Walmart good for
America?" It is on Iowa Public TV (CDT) at 9 pm this evening
(Tuesday). As they say, check your local listings.<br>
Best wishes,<br>
Jan<br>
<br>
At 09:59 AM 6/14/2005, you wrote:<br>
<br>
<br>
<br>
</span></font></p>
<p class=MsoNormal><font size=3 face="Times New Roman"><span style='font-size:
12.0pt'>I've sometimes wondered about the apparent inconsistency of
economists. Most of us support free trade, and will argue at the
suggestion of a trade restriction that consumers, collectively, benefit more
from getting goods at lower prices through free trade than workers,
collectively, lose. Yet benefits from lower prices to consumers seem to
be forgotten when Wal Mart threatens to move in to a new community.<br>
<br>
Granted, some part of Wal Mart's price advantage is due to monopsony, but even
there, we have become so accepting of monopoly power in our present-day economy
that I suspect in substantial part they are merely bargaining away monopoly
profits of their suppliers.<br>
<br>
Tom<br>
<br>
<br>
Tom Hady<br>
thady@att.net<br>
<br>
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<p class=MsoNormal style='margin-bottom:12.0pt'><font size=3
face="Times New Roman"><span style='font-size:12.0pt'><br>
Jan L. Flora<br>
Professor and Community Extension Specialist<br>
Dept. of Sociology<br>
317D East Hall<br>
Iowa State University<br>
Ames, IA 50011-1070<br>
Phone: (515) 294-4295<br>
Fax: (515) 294-0592<br>
E-mail: floraj@iastate.edu <br>
<br>
<br>
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cenet-owner@aaealist.org, who will be happy to help.</span></font></p>
<p></x-sigsep><font size=3 face="Times New Roman"><x-sigsep><span
style='font-size:12.0pt'>Stephan J. Goetz, Ph.D.<br>
Director, The Northeast Regional Center for Rural Development<br>
Professor of Agricultural and Regional Economics<br>
7E Armsby Building<br>
The Pennsylvania State University<br>
University Park, PA 16802-5602<br>
<br>
Phone: 814/863-4656 Cell: 814/777-4656 FAX 814/863-0586 <br>
e-mail: sgoetz@psu.edu; <a href="http://www.cas.nercrd.psu.edu/"
eudora=autourl>http://www.cas.nercrd.psu.edu</a> <br>
<br>
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