LXXV The Anti–Wal-Mart Jihad
we got all the fools in town on our side? And
ain’t that a big enough majority in any town?"
Mark Twain, Adventures
of Huckleberry Finn
Americans would find it difficult to make a choice between an all-out
victory by American forces in Iraq, and the extinction of Wal-Mart.
In some parts of the country, neo-Luddites have descended upon city
halls to demand that zoning laws, or other restrictions on property
ownership, be employed to prevent Wal-Mart from building stores.
The frenzied, irrational dimensions of this campaign were encapsulated
by a relative of mine – himself a successful businessman
who said: "Wal-Mart shouldn’t be allowed here because nobody
wants them!" His remark was reminiscent of Yogi Berra’s comment
that nobody went to a particular restaurant anymore "because
it’s too crowded."
it were true that "nobody wants Wal-Mart" in their community,
corporate officials should either be condemned for making
a decision that will prove unprofitable to the company, or praised
for being able to become a very successful retailer in spite
of no one wanting to be their customers! The antiWal-Mart
campaign reflects the kind of economic illiteracy one finds in a
Michael Moore film. I am surprised he hasn’t joined in this anti-capitalistic
jihad, perhaps with a movie to be titled Bowling for Low Prices!
has been successful because people want to shop in their
stores. If this were not the case, it would take no zoning ordinance
to keep them out: customers would either lose interest – or not
patronize Wal-Mart in the first place – and the company would fail.
For the same reason that drive-in movie theaters, circuses, and
barnstorming air shows are no longer the attractions they once were,
the failure of a business to adapt to the changing preferences of
its customers is a formula for failure.
Wal-Mart people have remembered an axiom lost on many recent college
graduates: remaining in business is dependent upon the long-term
profitability of the firm which, in turn, depends upon satisfying
customers with an acceptable mix of high quality and low prices.
Example: my wife was visiting relatives in a town in the Midwest.
She needed to purchase an item and, preferring to deal with small
businesses, she went to three or four locally-owned stores looking
for it. None of them carried the item. She then drove to the local
Wal-Mart store where she was not only able to purchase what she
needed, but had a choice in brands of the product. Contrary to popular
thinking, Wal-Mart does not drive other retailers out of business:
customers do by choosing to patronize a store that does a
better job of supplying their wants than do their established competitors.
purposes of full disclosure, I must tell you that, when I was in
law practice, Wal-Mart was one of the firm’s major clients. I met
Sam Walton, an entrepreneur who took a small-town variety store
and turned it into a national success story. He was a modern-day
Horatio Alger, one of those people who we like to imagine the "American
way of life" is destined to encourage. But having achieved
success, the "American way of envy" began to course through
the veins of those whose accomplishments were more prosaic.
resentment at the success of others does not explain the core of
the frenzied attacks against Wal-Mart. Explanations for this well-orchestrated
campaign are to be found in the economic self-interest motivations
of labor unions and Wal-Mart’s retail competitors. Wal-Mart has
managed to succeed without too much interference from labor unions.
Like political systems which, in America, provide government
certified unions with coercive, monopoly status over the workforce
– labor unions depend upon creating conflict between "employees"
and "employers." To the degree they are successful, unions
also generate conflict between "union" and "non-union"
workers. By maintaining employment practices that minimize management/employee
conflict, Wal-Mart has made it difficult for unions to solicit their
employees for membership.
campaign against Wal-Mart also has roots in the ancient resentment
that arises among business competitors. One can see the continuing
efforts of business interests to curtail the advantages enjoyed
by a more profitable competitor. Nowhere has this tendency been
more apparent than in retailing. In my book In
Restraint of Trade: The Business Campaign Against Competition, 19181938,
I devoted much attention to the attempts by retailers to keep competitive
practices within parameters that would not pose significant threats
to other firms. When voluntary, trade association efforts to create
a "cooperative competition" failed, major business interests
turned to the state for the coercive enforcement that the marketplace
would not provide.
of the relative ease and low cost of entry, retailing has long been
a highly competitive trade. The cost of a horse, wagon, and merchandise
was the only price one had to incur to become a traveling salesman,
whose door-to-door competition with established retailers made him
the object of restrictive legislation as well as the butt of jokes.
Local businessmen were quick to get city councils to enact so-called
"Green River ordinances," making it a misdemeanor for
a merchant to peddle his goods in residential neighborhoods unless
he had first registered with the local police and secured prior
approval of the homeowners. In the words of Godfrey Lebhar, writing
in 1963, "[t]he history of retailing reveals that every innovation
in distribution methods has been opposed by those fearful of its
impact on the existing order. Department stores, mail-order houses,
house-to-house sellers and, most recently, the supermarkets, each
in turn ran into more or less organized opposition."
the most blatant attempt by local retailers to use state power to
destroy competition was found in a 1938 congressional bill, introduced
by Congressman Wright Patman. Popularly known as the chain store
"death sentence" bill, the proposed legislation made use
of John Marshall’s classic observation that "[t]he power to
tax involves the power to destroy." The bill would have used
Congress’ taxing powers to legally confiscate chain stores. The
tax would have cost a chain $50 per store for a chain of ten stores,
to $1,000 per store for chains with over five hundred stores. Such
taxes would then have been multiplied by the number of states in
which such chains operated! Had the measure become law, the A &
P chain, which had earnings of just over $9 million in 1938, would
have paid a federal tax of over $471 million! J.C. Penney, with
1938 earnings of over $13 million, would have paid over $63 million
under this taxing measure. Woolworth’s with over $28 million in
earnings, would have paid a tax of $81 million. The combined impact
of this tax would have meant that the twenty-four largest chains
would have accounted for almost 13% of the federal budget for 1938
while, at the same time, driving most of them out of business!
associations representing independent retailers eagerly lined up
to support this measure. Sunday closing laws, fair-trade laws, and
antiprice-discrimination laws have also been endorsed by many
retailers anxious to use state power to rid themselves of more efficient
competitors. Legislation was also proposed, in 1922, by the National
Association of Retail Grocers, to limit the number of chain stores
that could do business in any community.
retailing has evolved from downtown business districts to direct
selling by manufacturers, then into suburban shopping malls, free-standing
stores, mail-order businesses, and now Internet retailing; various
retailing interests have endeavored to deprive upstart firms of
their competitive advantages not by innovating new methods
that would lower prices or increase the quality of their products
or services, but by resorting to the powers of the state. One of
the keenest observers of the incestuous relationship of business
and government, John T. Flynn, stated, in 1928, that "most
of the laws that control or hamper business have been passed – surprising
as it may seem to those who clamor for ‘less government in business’
– at the demand of business itself." A Kansas farmer was more
succinct in commenting upon the role business organizations have
played in fostering government regulation: "I have heard more
socialism preached at meetings of commercial bodies than in socialistic
are others who, having no direct economic interests at stake, still
enlist in the crusade against Wal-Mart. I suspect that many of these
people have business friends who are unable to maintain the competitive
pace and are easily persuaded that Wal-Mart represents an unwholesome
threat. I recall, as a youngster, my father lamenting the occasional
"gas wars" among service stations, arguing that they were
harmful to the public. When I asked him how people – such as himself
– were harmed by being able to buy gasoline at lower prices, he
dismissed my question with the "you’ll understand when you
grow up" response for which parents are well known. Upon later
reflection, I recalled that one of his close friends owned a service
station, and I suspect that he was echoing his friend’s complaints.
is a common ignorance in the world with which those of us who favor
free market economic systems must continually contend. It is a point
of view that cannot distinguish between legally unrestrained economic
behavior in which people voluntarily choose to trade (or not) with
one another, and a system in which economic life is regulated, licensed,
taxed, or prohibited by the state. Such ignorance finds expression
in the unfocused sentiment that "competition" for legally-defined
business favors and restraints is just another manifestation of
history of government regulation of economic activity is replete
with evidence of various interests – be they businesses, labor unions,
or consumer groups – resorting to the coercive power of the state
to obtain what they cannot obtain through the voluntary choices
of others. The antiWal-Mart jihad is just the latest chapter
in this sordid effort to convert the marketplace into a public
utility. That the costs of such endeavors are to be paid
by customers who will be "protected" by getting to shop
at higher-priced stores, or by employees whose jobs might be eliminated
by the demands of higher-priced workers, is of little import to
the practitioners of neo-mercantilism.
self-interest motivations of those who use state power to restrict
the free choices of others – and the response rational minds ought
to make to these sanctimonious campaigns – was well-illustrated
in a report, many years ago, of a traveling photographer who was
prosecuted, at the behest of local photographers, for violating
a Wisconsin city’s "Green River" ordinance. As the local
photographers sat in the courtroom to watch justice meted out to
this interloper, the judge declared to them: "Here is a man
with ambition enough to go out and try to get business. You ask
me to fine him for it. You want the law to protect you while you
sit around waiting for business to come your way. If I had the power,
I would fine every one of you instead."
that’s a judicial opinion that would be worth reading!
© 2004 LewRockwell.com