Stand Up For Wal Mart - Road to the Middle Class

SO NOW WE know. About 56 percent of Americans “believe that Wal-Mart is bad for America,”according to a Zogby poll conducted on behalf of wakeupwalmart.com, an activist group that is “working to change Wal-Mart.” Liberals can take heart that their years-long campaign against Wal-Mart is having an effect.

You can see why liberals hate Wal-Mart. Wal-Mart believes in “everyday low prices.” Everyday low prices means everyday low costs. That means lowering costs in the two critical areas that are presently putting unionized companies out of business nationwide: sky-high health care and pension costs. Wal-Mart offers its employees high-deductible health plans and no pension plan. Instead it offers profit-sharing and 401(k) plans. Obviously Wal-Mart is a missile aimed at every unionized retail establishment in America.

For generations Americans have been taught a nostalgic narrative about labor unions. But now, according to political columnist E.J. Dionne in the Washington Post, conservatives have succeeded in selling a different story to America, a story about Schumpeterian “creative destruction,” producer groups losing their monopolies and capacity for “rent-seeking.” Meanwhile the liberal story is a muddle. “Much of the left accepts a certain amount of creative destruction because, in Margaret Thatcher’s famous phrase, there is no alternative.”

Capitalism, all by itself, would never have achieved the rising living standards that were the pride of the United States in [the] 1950s and still are today. The rules enforced by the National Labor Relations Board made it possible for [unions] to organize by protecting workers’ rights.

That’s your story, E.J. But did you ever wonder why unions don’t ever appear at the founding of a company, eager to participate in a bright idea? Unions only appear on the scene after the bright idea has become money in the bank.

Capitalism, all by itself, creates the product. Then unions and governments come along with talk of workers’ rights. Government labor laws can help some workers obtain above-market wages and benefits for a while. But we’ve seen what happens in the long term. We’ve seen that unionized companies can’t adapt and compete. The unions won’t let them.

In the United States capitalism, all by itself, grew our remarkable and productive economy. The U.S. is No. 1 in global competitiveness, according to The Economist Pocket World in Figures for 2006. Of course, it competes head to head globally in all the sexy sectors like software and semiconductors. But there are only a few people working in the sexy sectors—less than one percent of the labor force. It is in the non-sexy sectors that the U.S. really shines. When American retail workers are twice as productive as Japanese retail workers, that makes a big difference. Retail employs 11 percent of the workforce.

Wal-Mart is America’s economic secret weapon. During the so-called tech boom of the 1990s half of the productivity increase was in retail. The tech boom was really a retail boom, and the retail boom was triggered by Wal-Mart. The old line retailers like Sears and K-Mart and the unionized supermarket chains like Safeway found that they had to match Wal-Mart’s innovations in efficiency and supply-chain management or go out of business. By 1999 they had achieved the productivity of Wal-Mart—in 1990.

It is good that E.J. Dionne is learning the language of public-choice economics and learning to be half ashamed of rent-seeking. In the old days left-wingers didn’t equivocate about rent. They were four-square against it. In the first chapter of Fabian Essays in Socialism George Bernard Shaw constructed a likely story about Rent, how the first landowner, “the original Adam,” got the best land and how he got thereby to collect unearned “economic rent” from the less fortunate. If the left’s message sounds muddled to Dionne it is because the left that once recoiled in horror from the outrage of rent now celebrates it when it delivers above market wages, inflexible work rules, and 30-and-out pension plans to the rank-and-file Adam of the union shop. Pity all that stuff drives corporations into bankruptcy.

Privilege and subsidy create rent for the few and poverty for the many. That goes not just for feudal aristocrats of the land and robber barons of monopoly capital, but also for labor aristocrats of the shop floor. And no artfully worded Zogby poll can change it.

The reason that the United States is No. 1 is that, riddled with privilege and subsidy and rent-seeking as it is, it still has less of it than anywhere else in the world.

Christopher Chantrill blogs at www.roadtothemiddleclass.com. His Road to the Middle Class is forthcoming.

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