Monday, August 28

Screw the Consumer

...there is enormous economic evidence that Wal-Mart's has helped poor and middle class consumers -- in fact, more than anybody else...

University of Missouri economist Emek Basker shows Wal-Mart's presence tends to lower prices by varying amounts, perhaps nearly 10 percent in the long run.

Respected Massachusetts Institute of Technology economist Jerry Hausman argues that consumer welfare gains are even larger than those estimated by Mr. Basker, probably in excess of 20 percent of sales. Jason Furman, former director of economic policy for John Kerry's presidential campaign, claims Wal-Mart's discounting on food alone boosts the welfare of American shoppers by at least $50 billion a year. These savings help poor and middle-class consumers disproportionately since they spend a greater percentage of their disposable income on food products. Wal-Mart's ability to help poor and middle-class consumers led Mr. Furman to dub the retailer a "progressive success story."
Richard Vedder and Bryan O'Keefe argue that criticism by Democratic presidential hopefuls is going to alienate voters. Not necessarily. This is just talk to excite the anti-business base, like Republican Bible-thumping. Of course the danger is they'll get in and start actually screwing with Walmart and hence, the middle- and lower-class consumer.

And Sebastian Mallaby agrees:
...the DLC crowd is pandering shamelessly to the left of the party -- perhaps in the knowledge that the grocery workers union, which launched the anti-Wal-Mart campaign, is strong in the key state of Iowa.

For a party that needs the votes of Wal-Mart's customers, this is a questionable strategy. But there is more than politics at stake. According to a paper for the National Bureau of Economic Research by Jerry Hausman and Ephraim Leibtag, neither of whom received funding from Wal-Mart, big-box stores led by Wal-Mart reduce families' food bills by one-fourth. Because Wal-Mart's price-cutting also has a big impact on the non-food stuff it peddles, it saves U.S. consumers upward of $200 billion a year, making it a larger booster of family welfare than the federal government's $33 billion food-stamp program.

How can centrist Democrats respond to that? By beating up Wal-Mart and forcing it to focus on public relations rather than opening new stores, Democrats are harming the poor Americans they claim to speak for.

1 comment:

pkd said...

I'm not sure there's much Walmart can do. (Partly it's a target just because it's so big: if there were numerous smaller businesses doing something similar, they wouldn't impinge on the popular consciousness so much. Or would they be attacked as petty-bourgeois parasites?) When they do try to do something, that will inevitably be criticized.

As to the Depression, I'm no expert, but don't some argue that this was not primarily because of trade friction? I may be overly optimistic, but I don't think a full-blown trade war will erupt, just minor skirmishes that will stand in the way of freer trade that could make things better than they are.

And as for the Chinese peasant, I don't believe there's much he can do at all.