Saturday, July 15, 2006

Wal-mart

There's been a fascinating discussion at Slate (via 11D) about whether Wal-Mart is good or bad for the US. Go and read it, but my take is that at least some of the argument boils down to:

1 Wal-mart reduces prices by driving a hard bargain everywhere, but particularly on one of their biggest costs, wages. That makes some people better off (by a little bit) as they pay less for the things they buy.
2 It also pays badly and has horrible conditions - they should pay more to their employees and either charge higher prices (reducing item 1) or make lower profits - thereby benefiting fewer people at the expense of the many.
3 The government should have better benefits for those people who have horrible Wal-mart type jobs, so that there isn't as much income inequality

It reminded me of the shock to my system I got when I was chatting to my New Zealand cousins about their cars. One of them had a Mazda MX5 (a car I have always admired - if I really cared about cars, I would probably have owned one by now). It had cost him, a couple of years old, about half as much as exactly the same car would have cost here in Australia. That's because New Zealand opened up their second hand car market to imports about 10 years ago, and gets all of Japan's cast offs (Japan also having right hand drive, like us, and having very strict road rules about old cars). And they have absolutely no tariffs on new cars either.

Of course, that means that they have no car industry, and the workers who used to make cars in New Zealand don't have jobs. New Zealand doesn't have much industry any more, so unskilled jobs aren't exactly easy to come by.

So which is better? A few people not having jobs and being miserable, and the rest of the country having cheaper cars and a better standard of living? Or more jobs for unskilled workers at the expense of more expensive cars for everyone (and over a reasonable period, a car can be a major expense of a household budget, particularly for poorer people).

I don't actually think there's an easy answer, but I do think that most arguments you see (from either side) tend to ignore one side of the argument. Either they tend to ignore the costs to the rest of society from higher prices by tariffs and increased wage costs, or they tend to pretend that the human cost from unemployment and wages that aren't really enough to live on isn't really worth considering if there's a profit to be made somewhere.

4 Comments:

At 8:24 pm, Anonymous JenniferV said...

I tend to think that a little built-in inefficiency can be a reasonable proxy for a decent progressive tax system... The purist economically conservative, socially liberal position is probably to get rid of all barriers to the market producing the most efficient outcome and then use taxation/income support to meet your social policy goals. But a little undermining of the market can do the job just as well sometimes.

 
At 10:00 am, Blogger elsewhere said...

The equivalent of the car I bought brand new two years ago is now retailing at $5K more, with very few additional doo-dads. I find this kind of thing hard to stomach, esp since it's meant to be one of the cheaper, more fuel economic buys on the market.

 
At 3:04 pm, Blogger Jennifer (ponderosa) said...

Hi, I didn't realize you were still writing. I thought you dropped out : )

I think you've got the Walmart bit pegged. But also, when Walmart drives its prices down then its competitors need to drop theirs as well; so they begin to behave like Walmart. Also, I keep hearing that Walmart has been driving such hard bargains with its suppliers that its suppliers also need to behave in Walmart-like ways, esp. outsourcing to China. It's not that a few (employees) suffer for the greater good, but that the greater population *thinks* they're getting a great bargain by shopping at Walmart when in fact Walmart's practices are causing people all over America to lose their jobs -- just to save a few cents on t-shirts.

That may be a bit overstated. But I believe it's the main argument.

 
At 5:09 pm, Blogger Jennifer said...

No, I've just slowed down badly...

Thanks for stopping by again!

 

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