Wal-Marts of An Earlier Age
The attack on Wal-Mart essentially comes down this: opposition to economic progress, defined as greater availability of goods and services people want at ever lower prices that indicate an ever wiser use of resources in the service of society. It is hardly the first time such progress inspired opposition. The history of 19th century economic expansion serves up many examples. FULL ARTICLE
Comments (60)
Has anyone done any work worth reading on other effects of a market democratization:
1) A decrease in the number of choices (people want cheaper goods but they do not want to reduce their choices) This is temporary, but so can the decrease in price reduction be.
2) A decrease in the available distribution of quality of the goods. THis is temporary, but not necessarily short term.
3) A decrease in the ability to fund knowledge workers and therefore a transfer of the expense of gaining that knowledge to the consumer. This appears at least to be permanent.
Thanks
Published: March 22, 2006 9:37 AM
Who ordered the four-way Walmart flambée? Here it comes.
Published: March 22, 2006 9:52 AM
Has anyone made a definition worth reading of "market democratization"?
Published: March 22, 2006 9:53 AM
It's so fashionable to pick on Wal-Mart, but what people seem to forget is there is no such thing as a perpetual juggernaut. A century ago Sears Roebuck was challenging region-based manufacturing with its mail order system. Fifty years ago Woolworth was challenging sole proprietor general stores. Today, Sears has trouble staying afloat and Woolworth is gone except in Mexico.
Published: March 22, 2006 10:49 AM
Which part of our government monopoly on education teaches its students that the industrial revolution brought on cheaper prices, more variety and a better standard of living. I hear the exact opposite that unions and government save us from the robber barons of the industrial revolution.
Published: March 22, 2006 10:51 AM
I have no problem with the way Wal-Mart does business except for the enourmous amount of corporate welfare it extracts from federal and state governments and it's abusive use of emminent domain. It's great to hold Wal-Mart up as an example of the free market helping consumers, the problem with that is that Wal-Mart is not free market. Wal-Mart is using taxpayer money to subsudize it's low prices so, yes, Mom and Pop stores do have a reason to complain.
Published: March 22, 2006 11:07 AM
Roy,
I ordered it on purpose and without qualification, because, of all things, I actually want to know the answer.
-LN
Oh. MD=a decrease (if only temporarily) in the variety of goods in favor of a lower price point. Implies decrease in excellence in favor of price.
Published: March 22, 2006 11:53 AM
How come no one's chipped in with the "Walmart uses government roads so obviously their entire existence is dependent upon state subsidies" inanity?
Published: March 22, 2006 12:59 PM
Person
Yes. I know what you mean. There do appear to be people fixated with hatred for the Wal-Mart shops.
We don't have Wal-mart here. Instead we have chains like Woolworths, Franklins and Big W. We also have shopping malls operated by Westfield and the AMP. No-one seems to be concerned about them and there are plenty of customers. Plenty. Nevertheless we also have a lunatic fringe that maintains that big shops are evil. I laughed out loud recently about a related story in a regional newspaper.
A while back a man was awarded a McDonald's franchise for his town (in a regional, out of the way part of Australia). He purchased some property and got to work building his shop. Certain locals objected and held street protests. In the end they were able to prevent him from going ahead. He moved out of town with his family. Not so long after that the Woolworths supermarket chain wanted to build but once again a few vocal locals shut the project down. Now they are all whinging in their newspaper that the town is dying and the young people are moving out to the cities. Strange that should happen after such efforts were expended to save the town. Strange indeed.
You have to laugh at these morons. I hope they choke on the dust and tumbleweed that'll be moving in.
Sione
Published: March 22, 2006 1:30 PM
R May,
I don't want to pick on Walmart. I want to understand it's effects.
Sears, Woolworths and others, have generally brought lower prices as well as a greater variety of goods. The question is, and I have no idea if it's true or not, whether they increase or decrease the comsumer's options regarding the choice of goods. Whether the goods they sell are subsidized through IP violations. Whether they are subsidized through government welfare. Whether they actually decrease the availability of high quality goods. Price is not the only preference. While one can say that in any given market, those with less, subsidize the choice of those who have more, and post wallmart, this subsidy is removed, it also is a stateful way of looking at the outcome. It also removces the abilty of people to refine their preferences for other than price.
Published: March 22, 2006 1:42 PM
How come no one's chipped in with the "Walmart uses government roads so obviously their entire existence is dependent upon state subsidies" inanity?
If you accept the Hamiltonian view that the General Welfare clause gives Congress a seperate power to spend so long as the money is directed at the general rather than a specific welfare, then government roads do not effect the competition between Walmart and it's competitors since they all get the benefit if the government roads (let's not go into the fact that roads are authorized in the constitution, I do understand the libertarian argument for privatizing roads.)
It's when Walmart lobbies for tax breaks, credits and rebates, uses emminent domain to bully people into selling their property, calls for increasing the minimum wage in order to harm their competitors, or gains any other type of competitive advantage through the political system that their competitors don't have the clout, money or power to achieve that Walmart moves from being a good example of the free market to being just another example of a statist, and I would argue communistic, company. Why aren't libertarians taking Walmart to task for these strategies?
Published: March 22, 2006 2:11 PM
What does "subsidized through IP violations" mean?
Published: March 22, 2006 6:24 PM
Wait, if Walmart gets a tax break - i.e., gets to avoid having so much stolen from them - they're being statist communists?
So presumably if we all got to keep all our resources - taxation was abolished - that would be pure communism?
Published: March 22, 2006 6:28 PM
My question [...] whether they increase or decrease the comsumer's options regarding the choice of goods.
In a free market, that question becomes irrelevant or of mere academic interest, since prefering fewer choices IS a choice. If people prefer Walmart because of the fewer choices it would be because the store offers just enough choices for their appetites.
(In my opinion, Walmart offers MANY choices).
Like what? I do not understand the implication.
Whether they are subsidized through government welfare.
Only the real estate could be subsidized by eminent domain. Receiving tax breaks, on the other hand, is not subsidizing - it is like saying the robber that lets you escape with your wallet intact is subsidizing you.
Regarding the roads and such, since everybody has access to these, it cannot constitute a subsidy to use them to drive goods or produce around.
Whether they actually decrease the availability of high quality goods.
Quality is in the eye of the beholder, and it is futile to try to compare goods of different use and origin by their quality. I mean, really, who needs a "high quality" plastic bin, or a high quality bag of potato chips?
Price is not the only preference.
Uh, maybe for YOU - VALUE IS SUBJECTIVE. There are many people who prefer lower prices, especially when dealing with many similar products. Or am I to understand that you find the idea of lower prices icky?
While one can say that in any given market, those with less, subsidize the choice of those who have more, and post wallmart, this subsidy is removed, it also is a stateful way of looking at the outcome.
Please explain, because I could not get beyond the convoluted thinking. How can those who have less (I would fancy you mean those of lower income) subsidize the choice of those with higher incomes? Now, how does THAT work?
Published: March 22, 2006 7:12 PM
Sorry, I deleted the comment by mistake:
Whether the goods they sell are subsidized through IP violations.
Like what? I do not understand the implication.
Published: March 22, 2006 7:14 PM
You wrote, "The attack on Wal-Mart essentially comes down this: opposition to economic progress, defined as greater availability..." Not really, citizens who oppose Wal-mart do consider the economic benefits of cheaper goods but decide those gains are outweighed by costs they percieve with the store in their city: ugliness, loss of community character and identity, etc. It's a spatial problem. I.e. it's hard to put a price on things like a pretty sunset, a nice view, or getting laid; but people do it.
Published: March 22, 2006 7:55 PM
The article seems to be mostly about the introduction of large mass-production type suppliers who displace smaller local suppliers.
My experience is that initially this is a good thing if it is the result of true competition. The big guys are more competitive and hence win market share that way.
The danger comes if a situation arises where there is insufficient competition and the big guys become monopolistic, start to make excessive profits, and engage in anti-competitive behaviour.
One example of this would be low prices until small competitors leave. Raise prices. Small competitor returns because he can make a profit at these new high prices. Big guy then lowers prices to bankrupt the little guy. After a while the little guys are too scared to compete and higher than necessary prices are entrenched.
Another danger is within the giant company an anti-competitive process can develop. Eg if a big-box retailer has all the buying decisions made by one person, this person may be bribed to favour inferior suppliers and ignore superior suppliers.
The solution to these problems is wise laws to initially define a market, and vigilance to correct any market that becomes uncompetitive. Sunset clauses are a good practice to avoid legal bloat. eg we don't want laws still around that corrected the buggy-whip monopoly of 1840.
Published: March 22, 2006 7:58 PM
>>Please explain, because I could not get beyond the convoluted thinking. How can those who have less (I would fancy you mean those of lower income) subsidize the choice of those with higher incomes? Now, how does THAT work?
(I doubt that the thinking is convoluted. I may err, make poor word choices in order to avoid loaded terms, or wish some different objective that may not be readily apparent, but I doubt my thinking is convoluted. The attribution of road costs in the posting above is the same line of thinking.)
In a population of say 1000 people, where there are a range of goods available at different prices (which is how the specialty shop, say electrical supply) stays in business by appealing to the range of customers. Some people desire lower prices, even at the expense of additional choices (say for different colored electrical outlets, or those that will last longer, or that have harder plastic, or gold connectors). For a variety of reasons, largely to do with the distributor's distribution costs and the store's lack of volume pricing, the store cannot sell the goods cheaper. The mix of products may cost the average person conducting a home improvement 10% more. When Home Depot comes to town, or Walmart, the cheaper products are available but usually not in the same variety. (Buying appliances for example can be frustrating in this way.) When the local electrical supply closes down, the consumer that desires the more complex and more expensive product loses his ability to make a choice.
In this example, a walmart store would reduce choices for some, decrease the price for others, and probably serve a larger population by making a limited number of products available to them for a price that that would enable them to satisfy a preference that could not, before that time, be sated. But others lose their ability to satisfy their preferences.
For example, let's say that I have more money than time. I can't get good service at a tire store any more because a big chain has come in and put others out of business. Yet the marketplace in my area has driven down the cost of tires, and now they can't afford to spend the sales time with me, nor hire as knowledgeable service people. I must now learn the products on my own, take more time, on tires and tolerate bad service.
While it's true that some of these changes are short term, some may take a decade or more to return to the previous level of choices. All of these events increase related costs.
Reducing choice in this way may effectively be an attack on aesthetics. I suspect that it can be an attack on Excellence in craftsmanship. It may even be an attack on innovation. It may be a regional attack on the concentration of capital. I'm not saying that's necessarily bad, but my original question was of this nature.
So, to the broader question, in these scenarios, effectively, the organized prevention of a walmart entering into a market, asks the people who want lower prices and fewer choices to subsidize the people who want additional choices and care less about prices. This was the subsidy I referred to.
And lastly regarding preferences and value: these are not something to be confused. The individual's action determines measureable value. This is the genius of Mises' epistemology. The set of preferences are not attributable to actions and cannot be measured, but that does not mean that they do not exist, or that a set of them is not cleared during any action. Nor can a preference exist except in relation to other preferences, and preferences are cleared as a set, or they cannot be preferences.
This is just so one does not get caught up on confusing the methodology that helps us understand the world, with what actually happens in it. Any form of categorization being necessarily limiting, simply by definition. :)
-Cheers
Published: March 22, 2006 8:24 PM
>>>"The solution to these problems is wise laws to initially define a market"
Argh. No, the solution is for the population to develop a contract and all sign it, specifying the purpose of any land that is conveyed during sale, specifically limiting that purpose as part of the sale. And letting them pay the consequences if they make bad decisions. The last thing anyone needs is a law.
Published: March 22, 2006 8:28 PM
Is a $5 hairdryer purchased from Wal Mart and made in China a wise gauge for a better standard living?
Published: March 22, 2006 10:58 PM
Is it Bizarro day here at the Mises blog? I could have sworn that it ain't the 1st of April yet..
I'm suprised the anti-"vulgarian pro-walmart libertarian" vanguard is MIA. Ok, you can all come out of the woodwork now!
Published: March 22, 2006 11:13 PM
The question is... whether the goods they sell are subsidized through IP violations.
How is the act of circumventing a subsidy like IP, legally or otherwise, a subsidy? I guess this is similar to the "a tax break is a subsidy" argument.
Is a $5 hairdryer purchased from Wal Mart and made in China a wise gauge for a better standard living?
What is the relevance of the hairdryer being made in China?
Published: March 22, 2006 11:23 PM
Wait, if Walmart gets a tax break - i.e., gets to avoid having so much stolen from them - they're being statist communists?
If Walmart lobbied for lower taxes for all, that would be one thing. They are aguing that they should not have to pay the taxes that their competitors should have to pay.
It's the use of emminent domain that drew the communist remark.
Published: March 23, 2006 1:36 AM
Could someone please give a Wal Mart-emminent domain example? This accusation is tossed around a lot but I don't recall see anything in the press about an actual case. Given the meida's Wal Mart bashing trend and the New London v. Kelo debacle, I would have expected to see something by now. And I am not takling about voluntary sales, I am talking about gubmnt siezure of the land and subsequent granting of it to Wal Mart's private developer.
Published: March 23, 2006 7:32 AM
The accolades for Wal-Mark oozing from Libertarians who celebrate this entrprise as a magnificant example of 'free enterprise' are simple minded and fail to look at the full context in which the marketing of cheaper goods reach the American market.
Factor in the subsidies to petroleum companies through the use of American military in the past and now ongoing in Iraq andelsewhere and suddenly the cost of that cheap item looks different.
What would the available options be if these wealth transfers had not become our reality?
Wal-Mart did not prosper in a free market; free markets do not exist when they are managed by government. Equating financial success with virtue without examining the full context is a mythological distortion adopted through the very flawed but emotionally compelling work of Ayn Rand, It has great appeal, the appeal does not last through the cycle of extended adolescence. The forward costs imposed covertly through the medium of government's unholy alliance with mega corporations extracts costs through both subsidies and the distortative impact that the lack of accountability in government and in the corporate world has on the range and choices available.
You would be well to remember how often Congress has acted to eliminate liability at the behest of corporations; something no responsible individual could view with approval.
Published: March 23, 2006 7:41 AM
Ok. How 'bout we stop berating Walmark for behaving like typical born again 'mericns.
Come on! Sort out your political system. Stop prostrating yourselves at the feet of your facist owners. Let's start seeing some examples of a move towards freedom from you moaning minnies. Walmart is a nothing. You guys are attacking an outfit with little political relevance. Walmart can lobby but they do not write the laws. Shit-oh-dear. The laws are what you all demand. They can't operate in the absence of your consent.
You guys are the heroic invaders of iraq. You have created the resources to do much. So go do it. Just stop winding us up about the so called wrong-doings of a box store.
Sione
Published: March 23, 2006 7:54 AM
I think I can summarize this thread as follows: The author is right, Wal-Mart is indeed the focus of criticism of the market process. According to the critics all things bad nowadays are indeed bad because of Wal-Mart. It is the epicenter of corporate fascism and the war for oil. It doesn't pay taxes. It's bringing in the illegals. It's propping up the chicoms. It's behind al Qaida, global warming, Jeffrey Dahlmer, and the aids epidemic.
Another thing I notice is that nobody has even thought to counter the assertion that even as Wal-Mart marches on, we have a vibrant small business sector and the wages of skilled workers are increasing. According to the author, this is not a contradiction, but the result of the creative destruction of the market process. That small business and skilled workers have new opportunities opening up while the march of progress destroys old opportuntities is not a coincidence, but the result of the wealth created by greater efficiencies in production and distribution. But, whereas the author sees BOTH the good and the bad of what is going on, the critics only see the bad, and completely ignore anything good.
Published: March 23, 2006 8:11 AM
Factor in the subsidies to petroleum companies through the use of American military in the past and now ongoing in Iraq andelsewhere and suddenly the cost of that cheap item looks different.
I hear this all the time, and upon close examination, it's completely bogus. There is no such subsidy. The government *does* have military involvement in the MidEast, but its effect is to *increase* oil prices for those who use it. If the government left tomorrow, and some revolutionary forces took over the country, that new government would sell oil to someone, and due to the fungibility of oil on the global market, would not hinder American access to it. Quite simply, there is no government subsidy to petroleum prices.
As for corporate limited liability, recall that it never shields individual liability. The individuals can still be sued.
Published: March 23, 2006 8:51 AM
Rob, eminent (only one 'm') issues are easy to find. A search at Google for Wal-mart and "eminent domain" will yield plenty of instances where they've stolen land from its legitimate owners for their stores and parking lots.
On a related topic, some of Wal-mart's negative effect on the market, where and if such an effect exists, might come about from zoning and regulations. Smaller businesses that could compete with Wal-mart are not allowed to, because the difficulty of arranging re-zoning and business "licenses" prevents them from setting up shop where the market needs them.
Published: March 23, 2006 8:54 AM
On the suggestion of one poster, to look up eminent domain and Wal-Mart on google, I did that, and here's what I found: Lots of companies are involved in eminent domain, including Wal-Mart, and it's not clear that Wal-Mart is the worst abuser. But, it is clear that Wal-Mart is the #1 retailer. Therefore, in accordance with the theory propounded by the author, it will be blamed for the abuse of eminent domain. Why don't people blame Costco or Target, or professional sports teams or any other business that needs a large, contiguous plots of land, and find it convenient to use eminent domain? Because they're not the focus of attention, Wal-Mart is. Economists, starting with Adam Smith, do not idolize business people. To the contrary, economists have been generally wary of business people, especially when the get together and doubly so when the get together with government. And, just as business people are angels, neither are government people, as was shown in the Supreme Court's decision on eminent domain. Why do people blame business people for doing what is in their self interest when the law is screwed up, instead of demanding that the law get fixed up? Is it because they believe business people are particularly amendable to moral exhortation? Economists predict that business people will do what is in their self-interest, and, therefore, that it is vital for the law to be fixed-up.
Published: March 23, 2006 9:30 AM
Just because someone isn't guilty of lying about sex doesn't mean they shouldn't be impeached as there are six other deadly sins.
The attack on Wal-Mart essentially comes down this: opposition to economic progress, defined as greater availability of goods and services people want at ever lower prices that indicate an ever wiser use of resources in the service of society.
This is the socialist/liberal (democrat/labor variant of the term) attack.
I've tried to make the libertarian case against Wal-Mart. Lets see if I can summarize it here.
China is now giving organs for transplants, mainly to Japanese. There are problems, especially on the supply front since there are just so many political prisoners you can execute efficiently. Most libertarian critics would note the problem is one of government monopoly, and non-transferability. If they could do a ship-on-demand, and auction them off on EBay, many critics would consider it an improvement, and maybe sell them at discount at walmart.com
Why not? Of course the organs (and the actual lives) are stolen property. If I'm selling used cars more cheaply because they are disappearing in another area of town, it is not capitalism or a free market (or, technically it is, but one that is not virtuous, but viceous).
When WalMart leverages the Chinese Credit Expansion, I can only think of what Mises, Hayek, Rothbard, and anyone else who is featured as a hero here has said about it. The initial effects are pleasant. Cheaper goods for poor Americans since WalMart can grab the newly created money very early in the chain before it depreciates. For some reason, many here who should be familiar with the economics of credit expansion shuts off their reason when it comes to China and/or Wal-Mart. The theft of inflation makes products produced cheaply because of the inflation stolen merchandise.
A second problem is the lack of property rights. This is usually in the form of takings (farmland converted by force to other use) or pollution. When factories destroy the air, water, and land quality, and those affected have no recourse to preserve their own property (including health), it is theft. Even in the most anarchic societies, an egregious polluter will be cleaned up or shut down. Not in China. This theft of health and destruction of property used by the factories making the cheaper goods stolen merchandise.
I will throw out one more thing, the case of Snapper lawnmowers whom Walmart wanted to carry. The Snapper trademark has a cachet because they are very high quality. What WalMart wanted Snapper to do is keep the name, but outsource the production and produce a comparatively shoddy version but keep the Snapper name. Good will or Trademark inflation. Snapper didn't agree, but look at the concept - grab something that has a good reputation, and use that for a while to sell lower quality stuff until the reputation gets tarnished. They didn't suggest to Snapper what it should do when they were associated with cheap lawnmowers. (There were other factors as well).
If I am buying a $10 toy at WalMart, which should be $20 but is only $10 BECAUSE an additional $10 was stolen in the form of inflation, non-recourse pollution, property takings, and other government evils, is this what you are calling a "free market".
Published: March 23, 2006 10:58 AM
>>>If I am buying a $10 toy at WalMart, which should be $20 but is only $10 BECAUSE an additional $10 was stolen in the form of inflation, non-recourse pollution, property takings, and other government evils, is this what you are calling a "free market".
Well said.
It is what's called a free lunch, (in the negative sense) the impact of which is significant over time and in large numbers. Just as taxation is a disincentive, so are these less visible thefts, and our accumulation of knowledge capital, our rate of innovation, and our future production suffer from it.
I would not regulate this process, I would stop statist interference in communities that want to prevent such incusions.
Published: March 23, 2006 11:38 AM
Yeah, totally, man, anyone who in any way interacts with the world economy is totally supporting statism. We should all just go live in a cabin.
Published: March 23, 2006 11:41 AM
nobody at the top of the heap stays on top forever, especially if graft and corruption become more common shortcuts. heck, just look at the turnover of Fortune companies over the decades.
Published: March 23, 2006 12:48 PM
nobody at the top of the heap stays on top forever, especially if graft and corruption become more common shortcuts. heck, just look at the turnover of Fortune companies over the decades.
Published: March 23, 2006 12:49 PM
"One example of this would be low prices until small competitors leave. Raise prices. Small competitor returns because he can make a profit at these new high prices. Big guy then lowers prices to bankrupt the little guy. After a while the little guys are too scared to compete and higher than necessary prices are entrenched."
This is the example most often given for regulating large business. However, I've yet to see a true example of this. Standard Oil is often mentioned, yet they kept lowering prices throughout their growth period.
But in the case of Wal Mart, unless you live hundreds of miles from nowhere, this seems to be even further from a possibility.
In my LA neighborhood, a k-mart closed up and people in the neighborhood became concerned that a wal-mart would move in. I would have loved that. But people like to use force and so made it impossible for wal-mart to acquire the building, even though it seemed like a good swap, a k-mart for a wal-mart. So, this means I have to drive a bit further or shop on the internet to get what I want at a good price. Funny though, it looks like the building is being taken over by walden books; I doubt they will do very well in my neighborhood - we don't have the sharpest knives in the drawer living around here.
Published: March 23, 2006 3:17 PM
Mises gave an example of bad driving out good, but in the context of the credit boom. When you create malinvestments, they can and do destroy profitable investments, often quickly (a business paying off 5% long term market interest loans will be destroyed by one that can get 1% short term credit), but sometimes after a delay. When the bust inexorably comes, credit will be tight, so normal businesses (prudent, with good credit) that would have gone on smoothly if normal credit were available from a properly functioning banking system are strangled as the malinvestments destroy more than they used - there is no credit for even good businesses that may need it (think of something like a car dealer that might have difficulty paying for all the cars on the lot and uses a loan over the time they sit waiting to be sold).
Standard Oil is not a good example because it was not a malinvestment based on easy credit, nor any other form of government intervention.
The S&L crisis has clear examples of this. The prudent ones never did the commercial realestate pinwheels, but were forced to pay higher premiums after the collapse.
China expands credit. WalMart cashes in on this with artifically (state sponsored theft) cheap goods. These drive mom & pop, who don't have access to chinese credit out of business, but who have survived and would have survived non-artificial state sponsored competition. Mom and Pop are gone. When China goes bust, or cuts off credit, or reforms land or pollution laws, what happens to WalMart prices?
Published: March 23, 2006 4:04 PM
In the context of my WalMart apologia, do you consider laws against fraud and theft "regulation", or "statist interference"?
(Put differently, is it proper to call a law preventing Americans from buying goods with a component stolen from some people in China a trade barrier or enforcement of property rights?)
I think China could print perfect US currency. We might call that counterfeiting and probably try to prevent the import of that, but if I can give a few ounces of gold and a Chinese business will hand me thousands of pieces of fine paper with watermarks, strips, and color changing ink, in what context should such trade be restricted.
Or (to get austrian) if they were willing to take my gold coins, melt them down and use them to coat tungsten (density of W=Ag) slugs of slightly smaller size and restore the appearance, so that my 10 ounces of coins are now 100 ounces of identical appearance and weight, would that be wrong?
Let us say that tomorrow I wave a magic wand and the USA is an AnCap paradise with DROs or whatever. Do we accept claims by chinese farmers for their land stolen for the factory that the government took? By the residents near the factory for the damage their government won't recognize? Do the new insurance/security companies allow claims on goods that have stolen components up the chain. If they do, then WalMart will have a far larger problem in an AnCap environment than in the current regulatory regime. If they don't, then they are saying they don't care about theft or fraud if it isn't committed in whatever narrow definition or jurisdiction they cover and they will not recompense clear cases of theft or vandalism as long as they are once removed from the actors.
Published: March 23, 2006 4:17 PM
Problem with Walmart is its enormouse ties to foriegn labor (Usually at human suffering: China?) and it lack of respect and treatment for the small percentage of the americans that depend on it for income (employees and american suppliers). Yes, it is nice to have competition that drives prices down, but what do you think will happen when Walmart has eliminated most of the competition by driving them out of business: unemployement and eventually higher sticker prices at walmart!
Published: March 23, 2006 6:07 PM
Walmart can't eliminate all of the competition. Get real! Not every business has to be saved as some would like. Many businesses deserve to die. Take Kmart. For years, their stores were delapidated, trashy and full of low-quality junk. I grew up in a town where Kmart was the biggest store in town. I hated that store. You would walk in there and immediately feel depressed. I also feel that way with Sears, the old Montgomery Wards and Woolworth. Horrible stores. When Walmart came to my town, Kmart was no more and deservedly so.
Mom and Pop stores are foolish to think they can directly compete with WalMart, Target, Kohl's, Mervyn's, Best Buy, and the other mass retailers. And it's even more foolish to protect these kinds of Mom and Pop stores from a proposed big-box retailer. Smaller stores thrive by catering to a niche market. The store may have ultra-personalized service, or feature locally-grown organic produce. Maybe it's a specialty boutique with one-of-a-kind clothing. Maybe it's a hardware store that all those really hard-to-find nuts and bolts. The choices are endless. It makes no sense to play a victim to Walmart.
It's the same reason other big-box retailers compete with Walmart and each other. Target is very successful with it's focus on design. Kohl's and Mervyn's do very well with affordable, fashionable clothing. Whole Foods does a tremendous job with it's healthy lifestyle approach. They're all niches. Walmart has its own niche: low prices.
Finally, Walmart won't be king of the hill forever. It will be dethroned just like all the others in years past. It's just part of the wonderfully organic nature of markets. The old die off as the new take their place.
Published: March 23, 2006 10:57 PM
>>"Walmart won't be king of the hill forever."
Why does that have any bearing on the issue?
A woman from South Africa, back in the early eighties said to me "neutrality is a convenience of those who are not affected."
Such a statement isn't an argument. It's a justification no matter which position one holds.
This isn't a question of whether one can compete against a greater source of capital, which is what determines the outcome of walmart competition. That's an IS question. The debate is about the inherent OUGHTS.
Published: March 24, 2006 8:39 AM
No business - be it a multinational or a Mom-and-Pop can compete against another business that can engage in theft, fraud, and vandalism (usually in a hidden way). There's also murder and such, but economic viceousness suffices.
There were few if any non-slave cotton producers in the antebellum south. This was not due to a lack of innovation or market. Theoretically they should have been more efficient driving the peculiar institution into the dust economically. But if I have to pay for labor and you don't, I may not be able to overcome that advantage even with vast efficiencies.
Published: March 24, 2006 9:27 AM
On the issue of slave labor, the U.S. has laws against the importation of products of slave labor, spends a few shekels monitoring the same, and has been effective in ending some abuses of prison labor in China. There are continuing concerns about kidnap-slavery, abuse of prison labor, and abuse of child labor in various places in the world, and we should continue to support monitoring and diplomacy and other efforts, to include trade restrictions. But, this doesn't mean that companies are to be condemned because somebody suspects they may be involved, if only indirectly, in something bad.
Published: March 24, 2006 10:11 AM
I own a manufacturing business in the Midwest. I have around 75 people in 50,000 sq. feet. We do 10-15 million a year. We have been in business over 20 years.
Several people have referred to "subsidies via IP violations" and others have asked what that means.
I will tell you because I own over 12 patents (Intellectual Property or IP) and just about every one has been willfully violated by a Chinese company. I know most libertarians have "issues" with government granted "monopolies", but as someone who has participated directly in acquiring patents and who is familiar with what their real purpose is, I can make a very good argument that patents FORCE innovations into the market. How? Because a patent doesn't give you the right to make something, it gives you the right to tell others they can't make it - most people are completely unfamiliar with how the patent process works and what it is trying to achieve. It literally creates a process where "leap-frogging" the last invention is absolutely necessary IF you want to be in compliance with the LAW. It forces you to change or upgrade what is alreday patented so you can can be in compliance - "necessity (in this case caused by patent law) is the mother of invention".
That is the problem with the Chinese and the big retailers that they vend to. The Chinese just don't care - I have literally had Chinese tell me that they will violate my patents and there is nothing I can do about it because they are in China (and they are right, what can I do to them in China?) and suing the retailer who bought the product would mean that retailer will never deal with you again (patent infringement is for "buying, making or selling" so you can take anyone in the chain to task on legality) - that is a "subsidy" to the retailer and to the Chinese. There was real capital spent by me (that the patent violators did not have to outlay and that is the "subsidy" and, at least, part of why the product can sell for less than what I am making) to do research, hire engineers, draftsmen, overhead, etc. to create these ideas from nothing - for taking the risk with my capital, I do not see why I shouldn't be granted a temporary monopoly. Would not providing any protection for the entity that outlayed the capital increase or decrease investors willingness to "gamble" on new ideas? I believe decrease - but I'm not omnipotent and am open to any insight anyone else has on this issue.
The problem with Wal-Mart and stores like it are the "double-standards" that it wants to exist for economic advantage. It would be great if China and other countries actually abided by the WTO and doing business with them was like doing business between any two states in the US, but that is FANTASY at this point in time.
It seems many libertarians are looking at this issue with the assumption that "trade" between the US and China and other countries is just like trade between any two states in the US - IT IS MOST CERTAINLY NOT. This same assumption is found in almost every article at Lew or Mises and forms much of the basis for the favorable outlook on global trade. I don't think this assumption is correct based on my first hand experience, but again, I am not omnipotent and would like to hear any other thoughts.
Published: March 24, 2006 12:03 PM
Okay, here are my thoughts: Intellectual "Property" is an intellectually bankrupt concept, and though Wal-Mart has its legitimate faults, evading IP laws is not one of them.
Published: March 24, 2006 12:13 PM
With regard to Intellectual Property, this is VERY important to the United States. Among our most important competitive edges in the world is our investment in the development of knowledge. Therefore, in GATT and the WTO, we strongly advocate for the international recognition of IP. This is a real struggle, because of pirating in China and elsewhere in the world, a lot of it done by the PLA, where it "officially" goes unnoticed. We are working the system, and we have made some progress, but until the day comes when China sees its self-interest in joining in the enforcement of IP, this is going to a problem. China, not being a democracy, doesn't have the vision that India has for the India. India can look forward to a future where its people will be as inventive and creative as any other people in free countries. India, therefore, sees its self-interest in the recognition and protection of IP. But China is trying to figure out a way to take have economic growth without political freedom. Until it does, we will have to use our diplomatic options and our recourse to measured trade sanctions through the WTC to impress on them that can't steal our IP with impunity.
Published: March 24, 2006 12:36 PM
Roy W. Wright,
I would like to know why you feel this way, so tell me, instead of just making blanket statements backed by nothing.
I believe the patent system stimulates creativity in many cases - it did for me. We had to "design around" 18 different Fuji patents. We did and came up with a "better way" than Fuji and now license our idea/patent to others who can do it better, cheaper, and quicker because of our idea. I am not sure if I would have invested the capital necessary (1 million plus over several years) if there was no way to protect my idea. That is what you don't understand - developing ideas is capital intensive and if investors don't get a good return (patents help this a lot!), then why should they invest?
Published: March 24, 2006 2:07 PM
Roy W. Wright,
Sorry, I didn't see your link when I first read your post.
I read it (it doesn't say much more than a lot of libertarians have a lot of different opinions on IP law), and I find that this is the fundamental statement from that paper that I disagree with:
"Intellectual Proprety is a broad concept that covers several legally recognized rights arising from some type of intellectual creativity, or that are otherwise related to ideas."
That is only HALF the story - ALL ideas require capital to turn into reality. I still do not believe that new ideas would come about as quickly without some type of system that allows owners to get a return on capital and forces others to design around (in many cases designing around in ways that are better, faster, cheaper and protected themselves which forces the process to start again)to be compliant with the law.
The perfect example of this would seem to be the United States itself - truly the leader in the 20th century regarding development of new ideas. This was becuase of many things, but I have no doubt that IP law was one of them. IP law gives the investor a limited "safe-harbor" to recoup capital investment IF the idea is good. There are lots of patents and ideas that aren't worth squat, so any investor in patents still "gambles", but it is a gamble that sees "the pot" go to "one player" - the one that gambled and won - and not get divided between everyone at the table whether they "gambled" or not (a very communist thought, actually). The other players can wait until the next hand and decide again if they want to "gamble".
For me it is an easy choice, without the limited monopoly I get with a patent, I won't invest in new ideas because the risk involved with getting my investment back is huge. I have to imagine many others with capital available to develop new ideas would feel the same.
Finally, I am disappointed with what I read in your post about Wal-Mart and IP law. You advocate Wal-Mart breaking the law if it is IP law. That is just plain silly and certainly not a libertarian position.
Published: March 24, 2006 4:47 PM
JB: There is plenty of material in mises.org about intellectual property. Just look around.
My biggest problem with it is that it is a race to get a PATENT. The incentive is to come up with the quickest valid patent that will pass screening.
You are only focusing on your patents. How do you know that you were the only one to come up with them? What if you simply beat out other people by minutes, hours, or a few days? Does a running track winner have the right to shoot of the loser's legs?
If your ideas were so good, you could have pitched it to several companies under an NDA, And sold it to the highest bidder, or whatever.
There are so many ways to prosper from ideas - a government monopoly privilege seems to be the worst.
"I believe the patent system stimulates creativity in many cases"
Well, being in a jail cell stimulates creative ideas to trade contraband and figure out ways to escape - but no one would argue that being jailed will incite general creativity.
If one tries hard enough one can be creative in some of the worst imaginable situations. That doesn't mean we encourage people to be trapped in those situations.
Published: March 24, 2006 4:50 PM
Quincunx,
"My biggest problem with it is that it is a race to get a PATENT. The incentive is to come up with the quickest valid patent that will pass screening."
I'm not sure where this opinion comes from, but you have obviously never gotten a patent. Average time to get a patent is 2-3 years - the examiners have made me re-do my claims on EVERY patent I have ever applied for. The review process is time consuming and thorough.
"You are only focusing on your patents. How do you know that you were the only one to come up with them? What if you simply beat out other people by minutes, hours, or a few days? Does a running track winner have the right to shoot of the loser's legs?"
This shows me that you have, most likely, never been through the patent review process. There are ways to prove you were the first inventor.
"If your ideas were so good, you could have pitched it to several companies under an NDA, And sold it to the highest bidder, or whatever."
I have actually done this with other intellectual property - do you think the "highest bidder" just forgets about the IP because they bought the idea? No, they do the same thing I would have done if I would have held the idea - they get IP on the idea they buy from me and then develop it and market it. In the end, I can take a percentage of sales or a flat royalty of 1% IF the patent issues and IF we ever get any sales.
""I believe the patent system stimulates creativity in many cases"
Well, being in a jail cell stimulates creative ideas to trade contraband and figure out ways to escape - but no one would argue that being jailed will incite general creativity."
This not a valid analogy. Please refute my explanation of how I believe the patent system stimulates new ideas and investment.
You do not address my concerns with patents increasing the chances for recouping capital or why that is important to a business deciding whether or not to invest capital in a new idea. Why would any business invest in an idea that they believed there would be a good chance of not getting back their capital investment in? Why the communist view on sharing the benefits that come to individuals from ideas being invested in and turned into reality? There are no guarantees in anything, but if the chances of recouping the capital investment are increased via IP law, doesn't that spur investment of capital in new ideas?
The US has the strongest IP laws in the world and has so for the last 100+ years - when I look at the last century and see how much creativity came about in a country like the US versus any other country that did not have strong IP laws, I tend to believe there is a correlation between strong IP law and creating new products and ideas.
Published: March 24, 2006 8:19 PM
Patents here can thus act like the grant of monopoly to the East India Company of which the boston tea party is remembered.
The problem is that I, in the US will have action taken against me if I violate patents. The Chinese will not. The playing field is not level. It would be if we both honored patents, or both disregarded them. I'm sure the above manufacturer would be able to work if he could use other inventions without paying the royalties or licensing fees.
If IP isn't truly property, then we are being restricted from engaging in free trade by not being able to freely use inventions of others here. If IP is truly property, then the Chinese are engaging in theft, so it isn't properly free trade either.
Published: March 24, 2006 9:33 PM
Stimulating new ideas and investment isn't necessarily a good thing if it diverts resources away from more productive tasks. The Fed's artificially low interest rates encourage risky investments too, but you will find plenty of articles on mises.org detailing why that is a disasterous policy.
Published: March 25, 2006 7:47 AM
So true, PR. People seem to think that investment, or at least many kinds of investment, are objectively good and should be "encouraged." Just look at the rhetoric from advocates of public schools, financial aid, national science programs, etc.
JB admits that patent law forces (his own word) people to do things they otherwise wouldn't. That he sees this as a good thing is probably a good indication that he's not amenable to arguments from morality.
Published: March 25, 2006 11:58 AM
"market democratization" strange concept. It sounds like an oxymoron.
Published: March 27, 2006 11:18 AM
"I'm not sure where this opinion comes from, but you have obviously never gotten a patent. Average time to get a patent is 2-3 years - the examiners have made me re-do my claims on EVERY patent I have ever applied for. The review process is time consuming and thorough."
How does this disprove my assertion that getting a patent is a race?
"This shows me that you have, most likely, never been through the patent review process. There are ways to prove you were the first inventor."
What? How? What is the magical method by which you can prove that no one invented it? Are you going to sneak into everyones house and see what they have been working on?
"I have actually done this with other intellectual property - do you think the "highest bidder" just forgets about the IP because they bought the idea? No, they do the same thing I would have done if I would have held the idea - they get IP on the idea they buy from me and then develop it and market it. In the end, I can take a percentage of sales or a flat royalty of 1% IF the patent issues and IF we ever get any sales."
So again, this just shows why we shouldn't have a patent system. This argument work against you.
"This not a valid analogy. Please refute my explanation of how I believe the patent system stimulates new ideas and investment."
Are you familiar with Bastiat's SEEN and UNSEEN?
"You do not address my concerns with patents increasing the chances for recouping capital or why that is important to a business deciding whether or not to invest capital in a new idea. "
It's a monopoly grant, you get it? Their investment in it prevents someone else's.
Read this:
http://www.cato.org/pubs/journal/cjv14n2-6.html
What happens to investment in telecoms after AT&T's patent expires? Why did Bell get to beat Elisha Gray? Why was Edison prevented from entering the telecom biz? Why did Bell get to patent an idea of a German engineer, Reis?
Don't come back and argue that Bell's technology inspired telecom entrepreneurship after Bell's patent expired.
"Why would any business invest in an idea that they believed there would be a good chance of not getting back their capital investment in?"
I wonder about the genius who patented the cat exercise device of using a laser pointer. What is the investment here? Going around and preventing five year old boys from discovering this on their own?
The fact that there is a plentitude of sites devoting to silly and down right stupid patents shows that the people who issue them are alcoholics and junkies.
"Why the communist view on sharing the benefits that come to individuals from ideas being invested in and turned into reality?"
That's kinda funny. The individual (in the natural order) is under no obligation to reveal his ideas, nor is he prevented from sharing under a restrictive NDA.
You are the communist advocate. The patent system grants monopoly privilege after the idea is shared. It promotes a "can look, but can't touch" attitude. You are advocating state violence in enforcing ideas.
"The US has the strongest IP laws in the world and has so for the last 100+ years - when I look at the last century and see how much creativity came about in a country like the US versus any other country that did not have strong IP laws, I tend to believe there is a correlation between strong IP law and creating new products and ideas."
Well, there is a strong correlation between crime and new ideas. Environmental laws and new ideas, and basically more state predation with new ideas. Don't commit the basic logical fallacy.
Just look at how many ideas were simply stolen from people of different countries.
Creativity is the regretful mother of strong IP laws. Strong IP laws only restrict creative abilities.
Published: March 27, 2006 1:31 PM
So, to the broader question, in these scenarios, effectively, the organized prevention of a walmart entering into a market, asks the people who want lower prices and fewer choices to subsidize the people who want additional choices and care less about prices. This was the subsidy I referred to.
You could have avoided all that by just saying that some anti-Walmart demagogues are in reality elitist a$$-oles :-)
Published: March 27, 2006 4:25 PM
As Cliff points out, the skilled former competitors of mass marketers find a market for their goods, now considered "upscale." There is a market for the local and unique if the quality is worth the price to the customers.
If you don't like Wal-Mart, McDonald's, P. F. Chang's, Olive Garden, or Macy's; shop somewhere else. I do.
Published: March 27, 2006 10:40 PM
The following is the body of an email I am about to send to Professor Thies:-
Although this article is interesting, the argument seems to have several
gaps in it. For one thing, it claims to bring out the essential argument
against Wal-Mart. While I cannot state whether the arguments I have seen
against it are correct, I have to say that many of them do not go along
the lines you address.
But there are two more important gaps. The first is that you have not
shown that the Wal-Mart case is truly comparable to the specific
examples you bring out from earlier times. The second is that,
historically, many of the examples you leave out were NOT such unmixed
successes as you make out - in fact, some were definitely harmful, at
least to some people. It appears that you are making selective use of
examples. In particular, things like the plight of the weavers in 19th
century Britain showed that it was quite possible for people who suffered
in the short run to fail to reach some long run gain at all. We have to
look out for cases like this rather than to assume blithely that ipso
facto there never are any rocks ahead.
I should also mention that not everybody considers increasing involvement
with the outside world as valuable in itself. For many, it is only a
means to personal ends, and it brings with it the burden of having to
interact with the outside world - it reduces the convenience of devoting
one's attention to personal concerns. It has a downside of opportunity
cost.
I invite your comments on these further issues.
Published: March 28, 2006 12:48 AM
As a tech industry insider and inventor I can assure anyone claiming that patents have any value in promoting progress that nobody in the industry R&D departments gives the flying f*ck about patents -- the actual inventors (engineers and scientists) only bother with them because HR departments reward them with petty cash. In all my nearly quarter century-long carrer I never saw a decent engineer who'd run to a patent office rather than tell anyone who'd care to listen about his latest ideas.
Every piece of hardware out there violates dozens of patents. Heck, if I still had titles to my patents and decided to exercise them, the Internet would have to be shut down. No, it is not a joke, this is a simple statement of fact. In fact I'm kind of glad that my old indiscretions are safely lost in the murky waters of liquidations and corporate turf wars. I stopped patenting anything when I realized that my own old patents are coming back to bite me - and when I grew older and wiser and got interested in the ways of the world beyond chips and code.
Companies accumulate patent portfolios to raise barriers to entry against potential competitors and to use them as a mutual-assured-destruction option against overly litigous competitors. Every time there's some kind of disagreement between large corporations regarding some business practices which boils over to the legal realm, the patents are dragged in. It never failed to force a settlement. Defending against claims of violating few hundred patents can ruin financially any company short of IBM-Cisco-Microsoft league, even if these claims are totally without merit.
As for VCs... oh, they do want patents, as well as your firstborn and the liquidation preferences, too. They also have f*cking up the technical founders (who are suspected of being unreceptive to the idea of turning a business of product development into a pump-and-dump scam) as modus operandi. Been there. Any inventor is well advised to stay clear of VCs until he has built his own business and can take VC money without giving them abiliy to fire him.
Published: March 28, 2006 5:04 AM
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Published: March 14, 2007 2:55 AM