Communities Should Welcome Wal-Mart

By Edwin A. Locke

How would you like to be penalized because you do your work too well–for example, for running your business so effectively that it attracts hordes of happy customers? Well, this is what is happening more and more frequently to Wal-Mart. A lengthy anti-Wal-Mart campaign by politicians and activists in San Fernando Valley, CA–which included forcing Wal-Mart to have completed a year-long “environmental impact study”–has led Wal-Mart to abandon plans to open a store in the area. High among the activists’ concerns was that the Wal-Mart store would “threaten” other businesses and replace higher-paying jobs in the area with lower-paying ones. Similar activists in California and throughout the country have gone so far as to ban Wal-Mart from their cities.

Wal-Mart is one of the most impressive success stories in the history of business. Founded some 50 years ago as a single five-and-dime store in a small Arkansas town, it has grown into a worldwide behemoth under the leadership of its brilliant founder, the late Sam Walton, and his able successors. It is the largest corporation in America in terms of sales, $245 billion. Wal-Mart has over 4,000 stores worldwide, employs 1.3 million people, and serves 100 million customers per week.

It is quite true that Wal-Mart has been successful in outcompeting other stores which sell the same products, such as toys, clothing, and groceries. But how has it been able to do this? By discovering new ways of using computer systems and other technology to better manage its inventory and costs and reap the benefits of economy of scale.

Wal-Mart is especially popular among low-income shoppers who cannot afford the prices of the more upscale stores. It has put other stores out of business, but that is the way capitalism works. The automobile replaced the horse and buggy. Sound motion picture replaced silent movies. No one has a “right” to business success or a “right” to be protected from competitors through government intervention. One only has a right to try to compete through voluntary trade. In a free economy, companies that offer the best value for the dollar win and the losers invest their money elsewhere.

It is also true that Wal-Mart pays lower wages than many unionized stores. But it must offer a market wage or risk its employees going elsewhere, and it deals with employees on a voluntary basis. Those who do not like its terms are free to do business elsewhere. This makes the company especially hated by “organized labor,” such as the grocery unions. By coercively restricting the supply of labor, these unions, backed by government laws and regulations, have been able to extort wages and benefits far above those which would exist in a truly free labor market. In a free market, how many people doing relatively unskilled work would get $17-19 per hour plus full medical benefits? Unions, of course, have the right to organize and picket but not to benefit from government regulations which give them special favors. No one has the right to dictate what a company offers to pay others.

There is only one proper way to keep Wal-Mart out of any community: don’t patronize its stores. If Wal-Mart cannot make money in a given location, it will either not move there or will close the store. So far, however, it makes money everywhere it opens a store for one simple reason: customers want to shop there. The low prices Wal-Mart offers make people wealthier. They can buy a wide range of quality goods that they could not otherwise afford and they can use the money they save for other purposes.

Local governments should not be allowed to abuse their power by keeping out stores that consumers want to shop in. Nor, of course, should Wal-Mart be allowed to use eminent domain laws, as it is trying to do in several states, to force property owners to sell their land. But so long as it refrains from using eminent domain, we should welcome every store that Wal-Mart builds. We should thank this great company for being so good at giving customers what they want that they make huge profits, which enables them to build more stores, hire more employees, give more profit opportunities to suppliers and make even more customers happy.

Wal-Mart should not be feared but should be admired as an American ideal–a classic rags to riches story. It is the quintessential example of an innovator left free to function. Only in a country where individual rights–at least what’s left of them–are recognized, including the right to earn a profit, could a company like Wal-Mart arise and prosper. Trying to stop Wal-Mart is not only morally wrong, it is un-American.

Edwin A. Locke is Dean’s Professor Emeritus of Leadership and Motivation at the University of Maryland at College Park and is a senior writer for the Ayn Rand Institute in Irvine, CA. The Institute promotes the philosophy of Ayn Rand, author of “Atlas Shrugged” and “The Fountainhead.”

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Comments

  1. Anderson says:

    Oh, goody, just what OTB didn’t have enough of … Objectivism. (U-MD has professorships in “leadership and motivation”? How sad for them.)

    Nor, of course, should Wal-Mart be allowed to use eminent domain laws, as it is trying to do in several states, to force property owners to sell their land.

    So is it still “un-American” to oppose Wal-Mart?

    It is also true that Wal-Mart pays lower wages than many unionized stores. But it must offer a market wage or risk its employees going elsewhere

    Which they do all the time, to be replaced by the latest batch of the Otherwise Unemployable.

    It’s a corporation. Period. Don’t demonize it, don’t worship it.

  2. James Joyner says:

    No worship from me, at least. It is what it is: A low end business that does amazing volume. I go occasionally to buy certain dry goods but don’t enjoy the shopping experience and mostly avoid it.

    I also don’t work there.

    But the fact that W-M has made such a success out of hiring “the Otherwise Employable” is commendable. Not only is it a sign of amazing management to be able to pull that off but it creates a vast pool of employed people who would otherwise not be. That’s a pretty good thing, no?

  3. floyd says:

    ed, let me get this straight; anything goes for a profit,no moral limits. government protection for profiteering is a good thing. profits are good.anything done for wages,collective bargaining,government protection for workers,etc, is a bad thing. wages are bad. wages go up= inflation. profits go up= prosperity. have i got that about right? profits are always fair. wages are only theft of profit, right? zoning housing, a good thing. zoning wal-mart,a bad thing. right?

  4. Herb says:

    Obviously Mr. Locke doesn’t know how Wal Mart and a whole host of other big busoinesses work with competition. I think Mr. Lacke would do better if he were to join the real world of big business. Wal Mart however, is not the only big business to put competition under the table. In Cincinnati Ohio, Delta Airlines has successfully kept other low cost airlines from operating in Cincy by undercutting them in price until they go broke and leave, then Delta raises prices back to their ususal high prices. Wal Mart does the same thing. They under sell their competition until they go under, and leave many people out of work, then come in, paying low wages and work conditions.

    I would bet that if employees of wal Mart were given a chance to vote for a union, they would vote to be unionized.

    Mr. Lock also does not know a lot about purchasing leverage.

  5. Matt says:

    Umm…Herb? Do a little research. There have been many times that WM employees have had the opportunity to vote for a union, They just keep voting against it. Perhaps they’re just smarter than your average reporter and understand artificially raising the price of a commodity isn’t usually a great thing.

    Let’s be real, the only interest that organized labor has in Wal-Mart is money. Just imagine if those 1.3 million employees were paying $35 per month for the “honor” of be represented by the UFCW. Pretty soon you’re talking moveon.org type money.

    I do have to ask thunderbird, though. What exactly are “mesinfedemines”?

  6. floyd says:

    matt; it almost never comes to a vote due intimidation and threats from wal-mart. they recently followed through by closing a canadian wal-mart store because they voted in a union. i think the latter is true but i don’t remember my source.

  7. DAV says:

    I will never understand why the political right, which claims to be on the side of business, supports a business killer like Wal-Mart (Maybe it’s because you guys don’t think about stuff you read, if you read at all, or are Bribed to say this). Wal-Mart does more then drive local retailers out, it squeezes the profit margins of its suppliers into near nothingness.

    The whole point of having a brand name is to generate a price premium associated with the expected quality inherent to the brand. Wal-Mart’s pricing strategies force suppliers into a massive price degeneration which subsequently leads to brand degeneration. Suppliers such as P&G, or Kimberley-Clark, may either take this forced price degeneration up the ass, or lose a major distributor of its products. Price degeneration, along with the further expense of new product innovation to stay competitive inevitably lead to a drop in shareholder value. Not good for business.

    Let’s be clear. Wal-Mart is good only for Wal-Mart. Businesses in Wal-Mart’s supply chain distribute through Wal-Mart only because they have to. Look for the Wal-Mart model to implode within a decade.

  8. Matt says:

    OK, Floyd. The reason the unions have not been successful with WM employees is because of illegal activities on WM;s part. It can’t possibly be because there are two sides to the issue and said employees chose the other.

    DAV. You talk about WM being a “business killer” because the only perspective you have is the quaint little Mom and Pop hardware stores being crushed. How many people in this country are employed because of WM suppliers? Say your average hardware store employed ten people. Now take a manufacturer of a single product (If you need a concrete example, research Brass Eagle), and imagine how many people they’d have to employ to keep up with the demand generated by shelf space at Wal-Mart.

    Your argument about P&G and KC don’t really work either. The smaller vendors have banded together (union-style) and now market their goods to the company as a group, rather than trying to negotiate one-on-one. As to Wal=-Mart only being good for Wal-Mart, the stock price has remained static for the last five years, there are almost no dividends paid to investors and a majority of the profits are drilled back into growth. Meanwhile, complete morons like Warren Buffet call WM a $10 Billion tax cut every single year. Can you honestly say that lower income families would be better off paying higher prices at unionized supermarkets?

  9. DAV says:

    Hey Matt. Obviously you believe everything you’re told and have a big confederate flag on your truck. Sorry that’s just a typical Republican, which based on your stupid reply, I assume you are.

    Study up on some business, like I have, and learn that there are other businesses then Wal-Mart(Hard for you to believe?). There are Big corporations like Rubber-maid which have crumbled due to Wal-Mart’s price degeneration. Do you honestly think reduction of profit margins is good for business? I hold my breath, hoping that you at least understand this is bad business.

    Perhaps you should watch the video(Hey you don’t even have to read, so you can understand it too!)”Is Wal-Mart good for America” which details how Wal-Mart sets its prices with suppliers. T’Aint pretty.

    Suppliers like Snapper for example are already starting a revolt. Look for the bully tactics Wal-Mart uses on quality brand name suppliers to backfire in the future.

  10. Jim says:

    James,

    Its been a while since I have spent anytime looking at comments…too bad reasoned discourse has devolved to name calling (although I don’t blame the site…just some of the people on it). Wal-Mart is a funny issue: how many people enjoy shopping there? Me and the family usually go to Target or Costco which is a far more enjoyable experience. What will kill Wal-Mart (like K-Mart) will be the inability to adapt to another competitor and a decline in service. In 30 years, everyone will be complaining about anoter retail giant…perhaps Costco.

  11. LJD says:

    ‘Obviously you believe everything you’re told and have a big confederate flag on your truck. Sorry that’s just a typical Republican’

    Abe Lincoln, the Great Emancipator’ was the first President of the Republican party.

    Perhaps you need to ‘study up’ DAV?

  12. floyd says:

    dav ; that’s not the flag of the confederacy, it’s a battle flag

  13. oj says:

    Hmm, Apple started in a garage, Dell in a dorm room, J.D Rockefeller at an oil well, walmart in a 5 and dime. Lets stop this now. We should ban all new ideas , innovation, lest they get to big for their britches.
    IBM the only computer mfg.now has a world of competitors.
    IBM still in business. Innovation.
    The Wrights started in a machine shop. They owned the patents for flying. Where is the Wright Airline today? Should’t they of all people been allowed to be the only airline in the world today?

    Ford started auto industry. Now they are facing bankruptcy. They pay more salary and benefits per car that other competitors. I wonder why?

    Southwest airlines is too big. They take away business from the Old economy airlines. Stop them now! They started with one plane and due to unrelenting innovation they attract customers who are willing to hold their nose while they fly with SWA rather than the old dinosaur airlines who are saddled with costs not associated with SWA ticket prices. I wonder why dinosaur airlines are in bankruptcy?

    I payed $500 for my first VCR. Now I pay $50 for the same dinosaur that will cease to be produced soon. Economy of scale and new innovation.

    My father in his lifetime 1902-1998 lived from the first flight of man to moon landing to space station. Innovation.

    Kodak went from box camera and film production and chemical lab film development to digital cameras and laser printers in 110 years. They survived and thrived.

    Polaroid went from idea to demise in 50 years. They died.

    AT&T born in 1876 wounded in 1980, died in 2005. The worlds biggest corp to non existence in a little more than 100 years.

    We must regulate and legislate these upstarts lest they get too big and put corporations out of business. We need more horse and buggys, we need more 400 asa film, more instamatics, more instant photos, fewer airlines, fewer cell phones, higher prices, more health benefits, more regulation, more job security, more unions to protect the health and welfare of the downtrodden employees.
    We need to send more jobs and manufacturing overseas to help the poor downtrodden exploited workers. Its the american thing to do!!

    Corporations form and dissolve. Jobs lost in one corporation are added in another.

    Regulation stifles, free market thrives!

  14. floyd says:

    oj; your prolixity is astounding, why don’t you just say that no working person deserves a living wage!