Tuesday, June 07, 2005

Wal-Mart Debate Post Mortem

A couple of readers have requested a play-by-play of Saturday’s Wal-Mart debate, so here goes. Ted makes some brief comments and links to a Daily Bruin article here.

When I arrived at the UCLA campus, I saw numerous “Wal-Mart Conference” signs with arrows pointing to the venue. On every single sign, someone had written “Stop” above “Wal-Mart.” As Ted later said in the debate, one could mistakenly have read the signs as saying, “Stop, Wal-Mart Conference.” But alas, that comma was missing, and so the signs pointed to the “Stop Wal-Mart Conference.”

That might have been a more accurate name for the event, given the general perspective of most attendees and presenters. I had expected to find very few Wal-Mart supporters, and I was not disappointed. Still, in all fairness, most participants were very welcoming to both me and Ted. The organizers seemed genuinely interested in having the pro-Wal-Mart position represented, and they thanked us repeatedly for our bravery (their word!) in showing up.

After arriving, I sat in on a presentation about the evils of Wal-Mart around the world – in Canada, Mexico, China, etc. Most of the speakers were union reps, and I can say without hyperbole that the event played like a union rally.

The speaker from Mexico told a story that nicely illustrated how different the same facts can look when viewed through divergent lenses. He held up a Mexican Wal-Mart employee’s pay stub and pointed out the shockingly low (by American standards) wages. Then he observed that the pay period was only 12 days long. Why only 12, when the standard pay period is 14 or 15 days long? Because, he said, under Mexican law a worker becomes a “permanent employee” after 28 days of work. So Wal-Mart officially fires people after 26 or 27 days, and then rehires them a couple of days later under a new contract. To my astonishment, this was presented as evidence of the perfidy of Wal-Mart, rather than the stupidity of Mexican labor law! (I plan to incorporate this little story into my lectures on why incentives matter.)

The debate itself went very well. I think the audience was 300 to 400 people, but I’m lousy at estimating crowd sizes. A handful of people jeered and hissed a couple of times, but the rest of the audience was very respectful and gave us a fair hearing, and we even got our share of laughter and applause. So overall, we were quite pleased.

To our surprise, our opponents didn’t make the “killing the Mom & Pop stores” argument. I was less surprised than Ted, since Nelson Lichtenstein (the first speaker for the other side) had told me earlier that he was unsympathetic to that argument – he appreciates the efficiencies that come with big-box economies of scale. His main focus was on getting Wal-Mart to raise wages and benefits and to allow unionized workers.

In response, Ted argued that Wal-Mart’s low prices raise the effective incomes of low- and middle-class people by raising their purchasing power. Ted’s back-of-the-envelope calculations showed that a typical L.A. family would save around $800/year by buying groceries at Wal-Mart instead of Ralphs or Vons. He also emphasized that money saved on groceries, soap, paper goods, etc., will be spent on other goods and services, leading to expansion of other sectors of the economy. Anything that tends to raise Wal-Mart’s cost of business – including forcing them to pay higher wages and compensation – will squeeze out these gains, as well as induce Wal-Mart to restrict its hiring. (Both of us continued to hammer these points for the remainder of the debate.)

Lichtenstein’s debate partner, Jonathan Tasini, echoed Lichtenstein’s points in more dramatic form, beating the drum about a “social compact” in which working people get full health coverage, enough compensation to support their entire families, etc. As I said in my next speech, this is a fantasy world. Wouldn’t it be nice to have Wal-Mart’s low prices, with lots of well-paid jobs, full health coverage for everyone, rainbows and lollipops, and a free puppy for every child? Sadly, any attempt to mandate these things creates perverse incentives. For instance, I said, what if we passed a law requiring Wal-Mart to provide every employee high enough wages to cover his entire family’s cost of living? (A big cheer rose from the audience when I suggested this.) Well, it sounds great – until you realize the incentive it would give Wal-Mart to only hire single people, because the workers with families are too darn expensive. (The cheering died down considerably.)

Tasini also made a big deal about Wal-Mart’s buying much of its merchandise from China. He emphasized China’s repressive labor policies, which hold down the wages paid to its workers. In response, I fully agreed that repression is terrible and slavery worse; but has Wal-Mart contributed to them? On the contrary, Wal-Mart and its suppliers’ presence in China is indicative of how much less repressive China is now than it was 30+ years ago. Chinese workers who once could only work for the state now have the opportunity to work for private firms connected to the world economy, and they are better off as a result.

So those were the main lines of argument. I’ll pick up the odds and ends in Part 2.


Anonymous said...

You made some good points in the debate in a humorous way. It's good to make your audience laugh if you can. You relate the jist of the debate very well. I almost feel like I was there. I'm looking forward to part two. Thank you!

P.S. You and Ted are brave.

Anonymous said...

Oops! That should have been 'gist'.

Steven Horwitz said...

Nice job Glen. I did a similar forum here a few months ago, with WM on their way to opening a supercenter in the next town over (10 miles away). Interesting to note that in this area, the poorest county in NY and totally rural, the crowd was 2:1 PRO Wal-Mart. In fact, there were and are more lawn signs that are PRO W-M than anti right now.

Our panel was 3 pro and 3 anti, then an open mike session. In the latter, not only did my fellow residents correctly identify that W-M meant jobs for them, they more correctly noted that the lower prices meant a better standard of living for them, especially those who are currently a long drive from the two existing W-Ms in the county. The passion with which my poorer fellow citizens told their "betters" to stop trying to protect them from a store that will make their lives better was truly inspiring.

I also had the once-in-a-lifetime opportunity to take down an obnoxious lefty clergywoman on the panel. :) After her third insipid condescending comment about the evils of consumerism and how she buys her clothes at the local thrift store, I could stand no more. I don't remember my exact words but it was something like "if you want to persuade your parishoners that shopping at Wal-Mart is sinful, go right ahead, but when you try to use the force of the law to prevent the rest of us from shopping there, you've crossed the line of church and state." Got a HUGE round of applause.

Is there anything more satisfying that being able to come up with responses like those in those situations? ;)

Caliban said...

Good work! I often argue pro-WalMart points, but rarely in an official setting. :) I think you made some of the best points.

To Steven:

"the poorest county in NY and totally rural, the crowd was 2:1 PRO Wal-Mart."

I live in Arkansas (native of Cleveland) and can definitely say this is true. If you tell a middle/upper class person they'll save 800 a year on necessities, they aren't very impressed. (although I shop there for that very reason)

But if you tell poor rural families that, they're thrilled. To me, it's ironic that WalMart exemplifies the exact virtues that welfare supposedly does -- leveraging the wealth/size of WalMart to effectively "subsidize" the prices of necessities for the less wealthy, making them better off.

Yet, so many left-wing people love welfare and hate WalMart. :)

Anonymous said...

interesting...your industry, academia, just seem to be anit-walmart and anti any privatization. Because around here, you'll find scores of people who will defend the walmart case. i mentioned this to my boss in passing, and he mentioned how he'd loooove to debate this topic in a public forum with any liberal.
nevertheless, it's great that you can still debate heartily when there are so many non-supporters. it'd be hard for me to not to just want to "preach to the choir."


Anonymous said...

You are extremely ignorant. I really don't know how you sleep at night. Wal-Mart being the largest and richest company in the world could in some way try and help the poor people that are forced to work in their factories. They could spend some money on making sure that these people worked under humane conditions. Rather, these extremely rich and greedy people take great measures to make sure that their goods can be manufactured and shipped at the lowest costs possible, even if that means having to impose strict 24 hour shifts, with locked exit doors all around. Why don't you try working in one of these sweat shops, under these same conditions? Don't even spew your bullshit about how their wages and conditions in these places are good relative to those nations - it's just ridiculous that these people are exploited in such a way. Wal Mart may provide low prices all the time, but this is because all of the leaders of this company have a total lack of any sort of conscience, morals, or any remote sense of ethics. You will probably continue to support this organization, because you can save a buck or two every time you buy your cheetos and your hand lotion, but I would rather go to sleep at night knowing that I am not supporting the enslavement of millions of people by such an evil and greedy corporation.

Unknown said...

I have to say, that I'm no overly impressed with your arguments.

Of course it's unreasonable to ask Wal*Mart to pay wages to cover every employee's family. That's ridiculous, and I agree. However, it is not ridiculous to ask that employees be paid wages comparable to those earned at other retailers.

Ok, so you helped China out of its "Slave Labor" problem. That's fantastic, really. I'm not being sarcastic, China is growing an an unprecedented rate, and that's great. However, what have you done to help jobs here? Sure, those out of work factory workers can come work at Wal*Mart for 1/3 the wages they were making at Rubbermaid, or some other factory that was driven out of business due to outsourcing to China, but that's hardly enough for him/her to live on, now is it?

Additionally, you blame Mexico for their labor laws!? That's the most ridiculous statement I read. If you really cared about the welfare of your employees, you'd pay them (and hire them) fairly even if there is a convenient loophole for you to wiggle around. You're manipulating the system for your own gain, and your employees are the ones feeling the pain. Go work down there for a few weeks if you think they're being treated fairly.

Oh, and increasing the job marked in rural areas is great, but paying them so little that they can only afford to shop at Wal*Mart is...well, practically a monopoly on their rural economy. People won't shop at the stores that are already in those areas, and as a result, those shops will most likely fail or be forced to scale back. What will happen to the people that own these shops? Well, they'll take a significant hit on their financial situation, and most likely end up moving, commuting to another community to work, or working at Wal*Mart

So, my question is, while you're helping people in China, what are you doing here?

I agree that you're brave for showing up to the conference though, and I am impressed that you stand your ground despite so many negative voices, but I'm still unconvinced.