Comments (11)

• Brad Dexter

• Without being privy to all of the agreements made between Wal-mart and municipalities X, Y, or Z, it is hard to discern if Wal-mart is being helped or hurt. But from Wal-marts perspective, maybe they take the freebies when they can get them, because they get a shake down by the locals in other areas. And it can be assumed that Wal-mart pays a hefty sum in taxes, so if they take a little from another pocket, perhaps they only see it as getting some of their own back.

  Obviously the set of rules for taxation and regulations is serpintine, and again, it is beyond one to figure out how it they impact Wal-mart, but I doubt, no matter how much 'subsidy' Wal-mart gets, they break even overall by a long shot.

  I don't want to excuse the practices involved, but I can at least see the realpolitik of the process, and it applies to more than just Wal-mart. Many businesses get incentives to locate their enterprises in certain places. As an arch-conservative, I don't care for it no matter who benefits. Picking Wal-mart out of the mix for special consideration must still be based on an inherent bias though.

• Published: March 16, 2005 2:30 PM

• Jeffrey

• Gene Epstein of Barron's just sent me this letter he sent in response to some lefty argument (I couldn't find the piece by Simon Head) along the same lines:

  In any case, even if we believe the $2.5 billion "cost" Head calculates from the Committee's report, he should have noted a far reliable figure on the other side of the ledger: Wal-Mart paid $4 billion in federal taxes last year.

  Finally, Head's analysis leaves a great hole. A few back-of-the-envelope calculations reveal how Wal-Mart lifts the living standards of ordinary people by offering them goods at bargain prices.

  In 2004, the company's domestic sales ran $210 billion. How much more would these items have cost if Wal-Mart were selling them? According to a recent study (not mentioned by Head) from the National Bureau of Economic Research about the company's influence on food prices, Wal-Mart offers "identical food items" at prices that run "15%-25% lower than traditional supermarkets."

  Assume the mid-point of that range (20 percent less) for all items sold by Wal-Mart; if the $210 billion were 80 percent of what consumers otherwise would have paid, their annual savings comes to more than $50 billion. For some perspective on that figure, after-tax income of the poorest three-fifths of households runs about $1400 billion. So $50 billion boosts their nominal income by more than 3 percent.

  Now realize the potential, if only people like Head and Miller would get out of the way. Wal-Mart's domestic market-share is only 10 percent.

• Published: March 16, 2005 2:47 PM

• Vanmind

• I'm still waiting for people to realize that no one's standard of living rises via price controls--whether socialist in nature or quasi-capitalist.

  I must laugh as well at any suggestion that Walmart is the reason a new restaurant opened in "...bustling downtown Clayton, MO." Prove the causation and maybe I'll agree, but until then such a claim is as ridiculous as statists who insist that their pet social programs "help everyone" (i.e. both are wishful thinking).

• Published: March 16, 2005 3:35 PM

• Logan Buck

• I can tell you, as a person who formerly worked in the retail business, that we certainly did target Walmart areas. Walmart encourages increased traffic, increased traffic leads to visibility, and visibility leads to increased sales. As we were a competing retail establishment, I can only imagine the degree to which Walmart effects the food industry.

  Also, I do not see how giving Walmart tax breaks could possibly be a bad thing. However, the case for subsidies is a bit more difficult. If taxes are increased in order to subsidise Walmart particularly, then this is certainly wrong. If Walmart were to regain some of their profits which were stolen through taxation at no increase in taxes, I would hold that this is perfectly fine. Certainly, I would not object to the government returning some of my stolen funds.

• Published: March 16, 2005 3:47 PM

• Kevin Brancato

• Simon Head's piece "Inside the Leviathan" is in the New York Review of Books

  (http://www.nybooks.com/articles/17647)

  I found Mr. Head's article particularly irritating.

• Published: March 16, 2005 4:13 PM

• prosolution

• Nice blog. I just got mine started today. I hope it will look like this someday. Its just hard to keep finding fresh content

• Published: March 16, 2005 7:54 PM

• Joe LaBaw

• Welcome to the blogging world, prosolution. I've only been blogging for a few days myself.

• Published: March 16, 2005 7:57 PM

• tz

• actually I've made most of the points of the "conservative case" in posts over the last few months. Specifically the subsidies WM gets that don't apply to local businesses (or they build just outside the regulation zone).

  And you go to WM this evening and buy stuff inexpensively. But then a lot of businesses nearby - perhaps your own depending on what you do - close. And aren't replaced. The old business district gets blighted and maybe crime increases. The friends who owned and worked at the now closed businesses may have to leave or declare bankruptcy. Maybe you work where WM won't displace either your job or your customer's jobs, but if you do, it will eventually turn negative. The variety available from the businesses will no longer be available either.

  This can be part of the Shumpeterian "creative destruction", but may not be. Generally there are also diseconomies of scale. The access to equity markets favors giant corporations - your local hardware store can't have an IPO, and the local bank - if there is still one and not another megacorp who is only interested in loaning to a wal-mart - won't give them the same terms. Note it isn't merely credit risk - look at FNM and GM today.

  WM may be good or bad, but rarely is this decided on a level playing field, and the description makes the same fallacy Henry Hazlitt notes about most government subsidies - the benefits are immediate and concentrated, but the costs are delayed and dispersed. (Cigarette smoking is also like that - you won't feel the bad effects for years, but then they will be irreversable).

  So with a horribly distorted regulatory environment, where WM might get a regulatory subsidy, as well as access to capital at lower prices, they can succeed. And you benefit from their subsidies just as you would if the government subsidized food or fuel for you, hiding the costs somewhere else. Yet neither are the products of competition.

• Published: March 16, 2005 9:18 PM

• Michael A. Clem

• As libertarians, while we should be arguing that companies like Wal-Mart have the right to run their business as they see fit, we should also be arguing against special privileges and tax breaks that corporations sometimes get.
  
  
  If we try to argue the comparative advantages of Wal-Marts versus smaller stores, then we're practically admitting that governments have the right to control economic development, which I don't agree with at all.
  

• Published: March 17, 2005 10:47 AM

• Vache Folle

• I don't see anything wrong with a libertarian encouraging another person or a business to be socially responsible. Just because you oppose the use of force to impose your values does not mean that you cannot use other non-coercive means to influence behavior. There might also be good business reasons for a business to accede to such persuasion, eg as a PR move.

• Published: March 17, 2005 2:24 PM

• arielb

• What company doesn't get special breaks from such government programs like the SBA and the amazing lesko.com? Picking on walmart when the real villain lies elsewhere is a bit unfair.

  Ari

• Published: March 22, 2005 3:47 AM