Wal-Mart Rules, Mom and Pop Stores Hate America

[pvn]

Common wisdom says that Wal-Mart is an evil entity, putting moms and pops all out of business all over the country. This is a good thing, not a bad one. Retail is an economic black hole. There is no direct creation or innovation there. It's all overhead. Ultimately, the only innovation possible in retail is minimization of that overhead.

The first argument against Wal-Mart (or any other big-box retailer) is that they remove money from local economies by shipping profits to the home office. But tons of profits are already being extracted from your community and shipped off every time you buy a product produced elsewhere. Wal-Mart does a double favor to the "local economy" by first minimizing the cut the manufacturer can take (by applying price pressure), then minimizes its own cut as well. If local economies are more important that non-local ones, than the most important economy of all must be the most local - my personal economy. And nobody extracts less from my personal economy than Wal-Mart.

Retail can't build your economy. You can't export it. Its effects are primarily negative. How could minimizing it be bad?

[Skidoo]

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If local economies are more important that non-local ones, than the most important economy of all must be the most local - my personal economy.

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Somewhat oversimplified, but okay.

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And nobody extracts less from my personal economy than Wal-Mart.

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Only in the short-term. That's the whole point. Wat-Mart is a developer of distant capital that is in competition with your own locally (where you are most likely to work), thus lowering your standard of living.

[almostbusto]

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Only in the short-term. That's the whole point. Wat-Mart is a developer of distant capital that is in competition with your own locally (where you are most likely to work), thus lowering your standard of living.

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skidoo,

Could you flush out the above quote. Everything in it seems absolutely wrong imo.

Could you further establish how Wal-Mart lowers Joe Citizen's standard of living? His real income rises due to Wal Mart's efficiency. Furthermore, if he is not directly competing with walmart then there is no reason to believe he will be aversely affected in some other capacity.

Also walmart is directly creating wealth for your community, I am sure there are many shareholders of wal mart stock in your community. so there is localized capital formation as well.

at the heart of the matter though, I think people vastly overestimate how much greater their utility is affected by the communities utility vs the macro economy's

[Skidoo]

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Could you further establish how Wal-Mart lowers Joe Citizen's standard of living?

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Essentially by reinvesting Joe's consumer dollars in capital production distant from, and potentially in competition with, his local community. (See below.)

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His real income rises due to Wal Mart's efficiency.

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And it is lowered more for the reason just stated. Joe's consumption dollars are not being fed back into production with external benefits to himself, just the opposite. Joe is on a one-way feel good. Eventually, as the process continues, he will be left with credit cards buying ever-cheaper imports. And that's just what we see happening for many American consumers.

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Furthermore, if he is not directly competing with walmart then there is no reason to believe he will be aversely affected in some other capacity.

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Sure there is. Of course Joe the individual probably does not own a competing retail business. The local merchants, who are his family and friends, are the ones directly hurt there. Joe Citizen (taken as representative of a local community) suffers a subtler but no less complete bankruptcy. The goods on the shelves of Wal-Mart are not being produced where he works, but rather by the competition. That is how, by shopping at Wal-Mart, Joe is "investing" contrary to self-interest.

[AlexM]

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The goods on the shelves of Wal-Mart are not being produced where he works, but rather by the competition.

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Your complaint here is something where Wal-Mart is the same as everyone else, including Mom and Pop stores. If you just have a general problem with capitalism, fine, but it's completely off topic.

[Skidoo]

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The goods on the shelves of Wal-Mart are not being produced where he works, but rather by the competition.

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Your complaint here is something where Wal-Mart is the same as everyone else, including Mom and Pop stores. If you just have a general problem with capitalism, fine, but it's completely off topic.

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No, it is not the same. I explained how it works. It's not the one-for-one relationship you are implying. Huge externalities are at play. Do you just criticize without trying to understand?

If the production that is consumed by the community also originates there, the community itself benefits through an internal feedback of investment. If, instead, the production is remote, the community does not benefit and probably looses by financing its own competition.

[almostbusto]

Skidoo,

wealth is created when capital is allocated efficiently. just because walmart isn't part of the 'home team' (which isn't really accurate) doesn't mean that it hurts the 'home team'.

it sounds like you are a protectionist. I think you are 250 years behind the theory in what you are suggesting. if foreign entities have a competitive advantage, you WANT them to develop their capital to that ends. you as an individual want to specialize in what you have a comparative advantage in. trade is mutually beneficial between two entities even if one of the entities has an absolute advantage in all forms of productions. it does not create a system where the entity with the absolute disadvantage effectively exports wealth to the other entity. David Ricardo and Adam Smith knocked out these ideas a long time ago.


this is basic stuff.

[Skidoo]

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wealth is created when capital is allocated efficiently.

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True, but incomplete in this context.

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just because walmart isn't part of the 'home team' (which isn't really accurate) doesn't mean that it hurts the 'home team'.

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What's that, some kind of slogan? How about a nuts-and-bolts economic argument?

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it sounds like you are a protectionist. I think you are 250 years behind the theory in what you are suggesting.

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Fluffy. Progress in this case means restoring aspects of what once was.

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if foreign entities have a competitive advantage, you WANT them to develop their capital to that ends.

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I certainly don't want to underwrite such developments with my consumer dollars. That would be to the detriment of the community and national resources and support structures I and future generations who follow me will need to facilitate our individually profitable enterprises.

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this is basic stuff.

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Yeah, a basic error on your part. The results in the real world speak for themselves.

[AlexM]

Wal-Mart is an evil entity because it brings all new levels to using the government to meet its goals and it severely abuses its relationships with its distributors. I'm sure you'll agree that any entity that uses as much military force to meet its ends as Wal-Mart does is evil. If you want to talk about the benefits of chains vs. local stores, you should make your discussion that instead of about Wal-Mart.

[bobman0330]

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Retail is an economic black hole. There is no direct creation or innovation there. It's all overhead. Ultimately, the only innovation possible in retail is minimization of that overhead.

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Wow, I'm really surprised to hear this from you. I agree with your overall sentiments, but this is completely wrong. First of all, some retail places are involved in direct production (like butcher shops or supermarket meat counters). Second, retailers perform a huge informational function in helping people find what they want and understand how to use it. (Think of an auto parts shop helping guide you through a simple repair, or the guy at Gap who helps you find good clothes.) Third, retail shopping is, in itself, desirable to many. Chicks usually love shopping for clothes. I love browsing book stores.

The point is not that ultra-low cost distribution is the perfect form of retail. The point is that most people, for most goods, prefer Walmart prices and the Walmart experience to a more expensive, more personal business. Walmart's attempts to expand overseas have often failed because other groups of consumers have different preferences.