This page has been archived and commenting is disabled.
Why Wal-Mart Is the Embodiment of Economic Stimulus
By: John Tamny, Toreador Research and Trading (Guest Contributor)
In a speech given several years ago, former Wal-Mart CEO Lee Scott noted that shoppers at the retailer’s stores get raises each time they enter them. Thanks to Wal-Mart’s size, and its global reach as a buyer in bulk, it can secure the best deals on consumer goods that are then passed on to its customers.
Not surprisingly, Scott’s highly truthful statement earned him scorn from activists and media members possessing a congenital dislike of profits, but a recent article in the New York Post revealed how very true Scott’s statement was. As the Post found, if Wal-Mart were allowed to open stores in New York City, the average buyer of a diverse basket of groceries – from hamburger buns to cereal to butter – would save 33%.
The problem now, of course, is that Wal-Mart has so far been unsuccessful in its efforts to secure permission to open stores in the five boroughs. This has no doubt pleased its many clueless detractors apparently able to afford higher-cost grocery items, but for the New Yorkers already suffering nosebleed rents in what is one of the world’s most expensive cities, they’ll continue to overpay for basic goods in order to prop up local grocery stores able to mark up prices thanks to a lack of realistic competition.
The collateral economic damage that results from this form of local protectionism is vast, and worth noting.
For one, money saved is money that, if left in the bank, is lent out to entrepreneurs and businesses eager to grow. In short, were Wal-Mart given the freedom to open its stores in the largest city in the U.S., not only would many of its citizens receive instant raises, but the realized savings would expand a capital base that is presently a bit subdued as evidenced by difficult economic times.
Extrapolated across the country, though Wal-Mart’s reach is impressive, it remains the case that it’s not everywhere it wants to be not because it lacks the means, or consumer demand, but thanks to local barriers meant to protect well-connected, local businesses. If removed, Wal-Mart’s continued expansion would on its own enhance the capital outlook for a country populated by businesses ever needful of more of it.
When prices of goods are kept artificially high thanks to government barriers, the first-stage losers are those with limited funds forced to do business with merchants whose prices don’t reflect market realities. Not mentioned enough, though, are the successful businesses actually offering what customers desire, but that are similarly weakened by unnatural hurdles that keep the most efficient businesses from opening.
Indeed, assuming a removal of the impediments to Wal-Mart’s expansion, its customers would quickly find themselves more flush, and if eager to consume rather than save, more able to patronize other local businesses eager to serve them. The beauty of free trade is that it expands the range of businesses that consumers can do business with. In Wal-Mart’s case, the presumed decline in receipts for inefficient grocery stores would redound to the sales of other businesses giving customers what they actually want.
Some will naturally say that it’s not fair for the behemoth that is Wal-Mart to potentially put its weaker competitors out of business, but what’s not said enough is how unfair it is that government obstacles require consumers to pay higher prices than they otherwise would. Furthermore, last this writer saw, Wal-Mart is not forcing shoppers to walk its aisles; instead, they do so voluntarily.
What’s similarly not asked enough is if it’s fair to foist on the citizenry reduced economic growth thanks to hurdles being put in Wal-Mart’s way. If the question isn’t clear, we need only remind ourselves what protectionism actually is.
Imposed on consumers by governments, protectionism at its core is the cruel process whereby weaker, less efficient businesses are kept in operation thanks to barriers that keep the goods and services of the more efficient producers out; either locally or internationally. Put simply, protectionism subsidizes the weak at the expense of the enterprising. And in a world of limited capital, this is problematic because it ensures the perpetuation of business practices that would otherwise cease if market forces were allowed to prevail.
Considering New York City’s economy, or any other for that matter, impediments to competition ensure that capital is destroyed, underutilized or both thanks to the inefficient being given a lease on life through pull with politicians. If it’s remembered that all jobs exist thanks to financial capital finding its way to worthwhile businesses, protectionism – be it local or between countries – destroys it on the way to less company/job creation.
Looking at New York City, no doubt some businesses will fail if Wal-Mart enters the market, but not discussed enough are the businesses that will replace the ones exposed as unworthy by Wal-Mart’s arrival. The word “capital” ultimately describes access to the human, mechanical and property inputs that comprise businesses, so while Wal-Mart’s hoped-for ascendance in New York City will reveal some businesses as wanting, its success will be stimulative for redirecting underutilized capital to higher, more economically productive activities.
Lastly, it must be remembered that government barriers to business formation are explicit taxes on our labor and liberty. As workers all, we produce in order to consume, and when unnatural obstacles retard our ability to trade our labor for what we want, we face a tax, along with a certain loss of liberty.
To transact with Wal-Mart or any other business entity is ultimately a voluntary act, and as such, Wal-Mart should be allowed the opportunity to set up shop wherever it desires. That its continued growth will expand the range of goods within our reach in concert with a more efficient deployment of capital makes plain that its continued good fortune will be economically stimulative too.
-Mr. Tamny is a senior economic advisor to Toreador Research & Trading, columnist for Forbes and editor of RealClearMarkets.com. Mr. Tamny frequently writes about the securities markets, along with tax, trade and monetary policy issues that impact those markets for a variety of publications including the Wall Street Journal, National Review and the Washington Times. He’s also a frequent guest on CNBC’s Kudlow & Co. along with the Fox Business Channel.
- advertisements -
Gotta love these comments. Doncha know you have a patriotic duty to overpay for the stuff you buy? Sheesh, the same arguments could be used to justify paying extra fees to banks because such fees support hard working bank employees.
Has Wal-Mart considered the subversive approach of just building a store on a barge and docking it here and there, then sending in teams of lawyers to tie up any court challenge ... I mean, they seem lawless enough in every other way, why not attack the boroughs that way?
How much of this economy is benefited by small business compared to Shitmart? Like about 80% of the economy is dictated by smaller Mom and Pop business and smaller businesses. Global conglomerates take away more non-union jobs away from small business than they add. Saying walmart is good because they union bust is a red herring. Walmart is ruinous to the basic economy, union or not.
Besides, has any pro Walmart asslickers here discussed one of my points which is Target is already there, so its not like New Yorkers don't have a big Box alternative with cheap Chinese crap?
If you allow more Walmarts in town, that is 100% bad because you lose non-union jobs, get blight, traffic problems, more trash and a decline in revenue in the city as they lose businesses that cannot compete with slave labor and predatory dumping.
So, maybe a politician benefits from largesse, but the City is harmed and loses.
Adding. Walmart is about as good as having an Indian Casino in central Park
This is total bullshit and fodder for the weak minded. Anyone who would fall for the weakass attempt at logic as portrayed by this reporter is a dipshit who is deserving of the slave existence being foisted upon them by the likes of Walmart. Good ol' 'Mericans will just keep on lapping this crap up.
I could care less if NY'ers want to pay more
for what they buy. I guess they will move to a
cheaper state with lower taxes if they don't like
it.
Great article. Anarcho-capitalism is the only way out of this mess.
WOW! Looks like the union halls finally bought computers!
I am a private chef with clients in Manhattan. It is rediculous what people pay for food, compared to the stores where I live in Queens. I never go to Whole Foods, or Dean & Deluca, or the Gourmet Garage, where the self-important foodies and snobs go to shop. I go to Gristedes, where the prices are much more reasonable. My clients, who have literally eaten in every one of the high-end troughs in the city cannot tell the difference.
I sometimes go to Wallymart in upstate if I want to stock up on paper towels, toilet paper, soap, and other name-brand stuff. They have fabric and sewing items that my wife needs. Other than that, we don't buy our regular groceries there. The meat is the stuff you hear about when they recall it, the dairy is always only a couple of days away from expiration, the bread is usually a day old, and the produce is only good if it comes in on the day you shop. There are no real bargains on the food side any more. Sure, there may be a few cents difference here and there, but I will go to Hannafords before I do my usual shopping at Wallymart.
that's interesting, i know the middle class and lower dinin experience at Olive Garden, for instance where everything comes in a sauce, (the french orginally developed sauces to hide the flavor of bad meat) and these things are hypercaloric. people don't like to go out to eat with me, because i dissect everything, i scrape away the breading from the piece of chicken for instance, the sauce, and then look at the size, weight and freshness. this is mostly why i don't go out to eat. but let me ask, your private clients, they don't dine this way do they? but maybe after a few high end vodka martinis maybe it doesn't matter where you bought the vegetables. anyway i am anti-restaurant mostly. but my friend who was in the business for years, first told me how little cooking is done in these places, and how much is frozen, and microwaved. he used to tell a joke about his 5 star hotel where he worked, and the people would ask, how is the Cordon Blue today, and he would say the same as every day, frozen.
Maybe the Onion News Network submission form was open in a different tab and he got confused? I train people on content management systems and sometimes the tabbed browsing thing really confuses certain people.
True capitalism means competition.
Competition is no sustainable. It lasts as long as the resources pool allows it to. Competition has a start and an end.
Why was this posted on ZH?
Here's a better analysis:
http://www.activistpost.com/2011/02/activists-and-local-communities-gain...
I read the article and it fails to explain why Wall Mart should not be allowed to run their business in NYC.
They either should be able to operate everywhere or nowhere in the US and in that article I didn't find any reason for the latter.
'It is a union-busting, tax-evading, wage-suppressing, job-destroying, civil-rights abusing, food stamp-denying, multi-national corporation that has no place in this city.'
You go Melissa!
And I am to believe that we should allow China to continue raping us? If I want rape, then I'll go to an airport!
People shop at Walmart willingly - you can't rape the willing.
People shop at Walmart willingly - you can't rape the willing.
False logic. Example: People use FRNs willingly - you can't rape the willing.
When the other choice is dumpster-diving?
There is NOTHING redeeming about Wal Mart. They only survive due to state's preference of "Big Box" stores--the best way to get their sales tax on a 24-hour basis!
Everything about that conglomerate sucks. I would love nothing more than to see everything "big box" go up in flames.
They represent everything that is wrong with America today.
A moronic article written by a libertarian asshole. Walmart destroys businesses that pay real wages to workers. This is good for the economy? FU Mr. Tamny.
Save the labels, GT2021, or at least get them right. This article was not written from a libertarian vantage point. Other than that, I agree with your sentiment.
Go back to the hall - it's cold outside
Walmart = the decline of civilization.
Where the bottom line rules everything.
So, the labor force is distressed and abused. The products are made by slaves in another country.
Americans like Walmart because they can buy more plastic crap that ends up in the Pacific Ocean or in storage.
Well, NY doesn't have room for all that cheap crap. The value is marginal, and there are Targets in NY anyway so whats the big fucking deal.
Walmart isn't IKEA or anything special. Just another warehouse full of plastic crap and GMO food from General Mills. Do New Yorkers really need Cheerios for 30 cents cheaper?
You sir, are a fucking idiot!
You sir, are a fucking shill!
No, you are the shill. You're that dangerous voice that claims to stand up for the 'little guy', telling him it is in his best interest to pay more, that it is in his best interest not to have choice and that he should be grateful to have dumb-ass politicians and union politicos watching (or is it LORDING) over him because he is too small and stupid to make up his own mind
Doesn't work any more - your message is crap and folks are waking up to it. Get used to folks telling you to get out of their way
Wal-Mart's motto of 'Always Low Prices' goes diametrically opposed to every philosophical fiber of The Ben Bernank's essence, and he's asked them to change their motto to the more appropriate 'Everyday Inflationary Enough Prices.'
i would make the point that Walmart and Bernanke are different expressions of the same problem. Bernanke wants to a) destroy the dollar, and any personal savings or wealth and b) he wants moral indemnity for all macro and microeconomic decisions, which is to say bailouts public and private, 7/24. spent your cash at the casino? we'll restore your SNAP account at midnight. (i don't think a man with any great moral compass would have taken the toxic MBS on the Fed balance sheet, unless of course he knew that he would be able to skirt those peculiar restrictions on the GSE's which prevent the government from backing that paper directly) Bernanke advocates higher home prices only as a means of stimulating personal spending, and destroying savings. the housing bubble was a raid on equity, and he wants it to continue.
aw hell, another Forbes columnist. Neoconservative boilerplate. 33%, well maybe New Yorkers are getting screwed, but if you get your bonus from Goldman Sachs?
by analogy the southern borough of San Diego is debating the issue at this moment. the city council had formely ruled against any new Walmart supercenters. like everyone i have come around as well.
i shop at Walmart once a month, 33%? somebody is smoking some good shit. on a lot of items they are MORE expensive than the chains, and on produce their quality and selection is below average.. they do have a wide selection, which means i can use my coupons. and the walmart shopping experience is good for the soul, if you feel old, fat, or ugly, just go shopping there, and you'll feel like you belong.
at least in California walmart isn't running anybody out of business. in fact our local hispanic grocery really kicks butt, and i think they are buying produce and meat direct from below the border. can't be sure.
the ideological paradox is that a neoconservative magazine would defend the enemy of capitalism, Walmart. these guys are the no profit margin leaders. i always though conservatives hated commie economics?
It would be one thing if the small retailers that are so afraid of Walmart actually sold goods that didn't disintegrate after 3 months like those at any other purveyor of Chinese crap. So the competition argument is a straw man. The real agenda is unionization of the world's largest retailer. All of the protesters are part of the Marxist/unionist cabal, including the Communist Party; just look at the carefully produced/printed hand carried signs; no different that any other radical left rally.
HAHA, i wouldn't worry too much about that:
http://www.commondreams.org/headlines05/0210-13.htm
Look, i'm not a fan of unions, but what recourse does an individual worker have against a large corporation like wal*mart?
Why shouldn't the employees of wal*mart be allowed to unionize if they want to? Of course, you say, the cost of the goods will necessarily go up. To which I would respond, don't shop at wal*mart.
Want another reason to not shop there?
http://articles.cnn.com/2008-03-25/us/walmart.insurance.battle_1_wal-mart-retail-giant-health-plan?_s=PM:US
We all remember this debacle. To their credit, wal*mart decided to desist from perusing this matter. Of course, that was only after Keith Olbermann bitched about it every night for a month.
The point I would like to make is that if we continue to sanction these behemoth corporations to continually put profits before people by shopping there, we might one day wake up to find that we have saved ourselves out of existence. Vote with your wallet.
p.s. ...... L.O.L. ..... true story..... I'll never forget the first time I was in a WALMART, must have been at least 18 years ago now ......... I'd never seen a $6 iron & I left a comment card asking why there were so many "old people" standing at the front door !! ...... later I learned that these were called "greeters" & then, it slowly dawned on my ......... THESE AREN'T GREETERS !! THESE ARE SPIES !! ......... SPYING on the WALMART CUSTOMER, put there by management to get on their little walkie-talkies to flag the store manager if they spied any customers who looked like trouble !
oh dear, this is the first time i've ever received so many junks ......... the FIRST remark was supposed to have been funny ! I did park next to a Jaguar, but, my LEXUS is an oldie, with 200,000 miles on it ! & here I thought I was being funny ..... shows you i'll never make it out there in the comedy routine world.......
ALL retailers have "inventory control" personnel in plainclothes...even the shitty Target I worked for as a teen. We used to intentionally lead them around the store acting "suspicious" for a laugh.
What a moronic article. Nothing more than a sloppy wet one to Mall Wart. Target has stores in Manhattan plus the other boroughs.
Oh, and tell Larry Kudlow to bite me.
i was @ WALMART yesterday, stocking up on cheap bar soap & laundry products for when the banks close & at lower prices !! I parked my LEXUS next to a great looking JAGUAR !!
Parked my G at one last week to buy supplies as well. Great cars in that lot. Let the dopes pay more for Tide and Bounty....
How do you calculate the cost of the brainwashing effect due to little sis whispering in your ear as you wait to hand over your FRNs for those low-priced goods?
Of course, dismissing everyone who doesn't fall in line with you is a very good way to convince yourself that all is well.
Who knows? Maybe my thoughts on this matter reduce to shooting myself in the foot. Still, I'd rather limp for the rest of my life than shop at wally*world.
Good - That is your choice and your right, it should be respected. As should mine - that is the point of the article. If folks want to pay more for the exact same product, they have that right and there are lots of venues in NYC to do so
Of course you're right.
I was trying to point out that it is important to understand the ramifications of doing things like shopping at wal*mart, to the best of your ability. I apologize if I came off as snide but I was asking a serious question. You completely avoided that so I'll ask it a bit more directly. Do you see a cost in having the DHS team up with wal*mart to promote vigilance within the denizens of this country? Is this partnership completely without consequence?
I am pretty simple minded on these things (yup, leaving myself wide open with that choice of words). THe point of the article above was the insanity of politicos limiting a consumer's choice of where to shop. I agree with that. Don't like Walmart, don't shop there. Don't like their 'cheap Chinese stuff', don't buy them there -- just buy the stuff that P&G, Kraft and other American companies make - and buy them for LESS.
As for the DHS and Walmart, what can I say but LMAO. It is classic goofiness on the part of this inept government of ours and some misplaced 'feel good, let's do something patriotic' sentimentaility from the Walmart management team. If the ads start telling little children to report on 'strange behavior' of their parents and supply an 800#, I'm with ya...
It's not quite that simple. With the entrance of Walmart, you will have no choice but shop at Walmart because they will put all competitors with less scale - read as all competitors under 200 million dollars - out of business.
then, the coice that you speak of will be no more, by default!
The goal of competition is not to provide more choices. On the contrary, competition is a process to reduce uncertainty on options, to remove choice (as a crisis in decision making processes)
The goal of competition is to eliminate concurrence.
The end term of competition is to establish an oligopoly at least.
Well, not quite that simple. If one wants to enter retail on a small scale - there could be successful plays:
1. Niche market products that Walmart cannot (availability) or will not stock -- successful paradigms exist across the retail landscape and across all merchandise categories. If one is an entreprenuer and is crazy enough to risk life savings going into a tough business like retail - stocking commodity products that large scale retailers provide is suicide
2. Play geography (locate in villages or out of way places), convenience, home delivery, knowledeable sales, etc to your advantage -- this blurs the cost adavantage of the big guys
And the list could go on. This kind of stuff is healthy IMHO. Why pay more for a commodity product like dish detergent or paper towels. Those things should belong in a big building, under garish lighting and sell for only pennies above cost. Now prosciutto, a warm baguette and a wonderful bottle of Kistler - that you ain't gonna find at a Walmart...
This is exactly how it works in this town. Walmart has commodity hardware, but for any specialized tool or part you need the local hardware stores. Another example: the meat and the produce suck at Walmart so you go to the other grocery stores, etc, etc. There are even local farmers here selling fresh stuff still in business.
At the edge of the great swamp here, there is a Walmart, has been here many years. There are also still 2 local hardware stores, many local grocery stores, a tractor supply and a lot of other business that *mysteriously* were not put out of business by Walmart.
I think the Walmart hate is a little overdone. I of course (as always) would be willing to look at creditable articles proving otherwise.
In essence, they are a logistics and shipping company more than they are a retail company.
/hat tip/
they simply have too much power right now.
in general, we seem to be on the same page, just different sides of it. happy shopping!
You and Robert Rubin have something in common: a willingness to destroy your country for a quick buck!
Can someone please tell me why there is no Wal-Mart to sack PhD and banksta jobs?