Harper’s Magazine: Break Up Wal-Mart

The July issue of Harper’s Magazine includes an essay on Wal-Mart by Barry Lynn, senior fellow at the New America Foundation. Lynn lays out a short history of American antitrust law and argues that Wal-Mart’s market dominance constitutes a monopsony that merits the attention of state and federal lawmakers. Excerpts below.

Examples of monopsony can be difficult to pin down, but we are in luck in that today we have one of the best illustrations of monopsony pricing power in economic history: Wal-Mart. There is little need to recount at any length the retailer’s power over America’s marketplace. For our purposes, a few facts will suffice – that one in every five retail sales in America is recorded at Wal-Mart’s cash registers; that the firm’s revenue nearly equals that of the next six retailers combined; that for many goods, Wal-Mart accounts for upward of 30 percent of U.S. sales, and plans to more than double its sales within the next five years…

The idea that Wal-Mart’s power actually subverts the functioning of the free market will seem shocking to some. After all, the firm rose to dominance in the same way that many thousands of other companies before it did – through smart innovation, a unique culture, and a focus on serving the customer. Even a decade ago, Americans could fairly conclude that, in most respects, Wal-Mart’s rise had been good for the nation. But the issue before us is not how Wal-Mart grew to scale but how Wal-Mart uses its power today and will use it tomorrow. The problem is that Wal-Mart, like other monopsonists, does not participate in the market so much as use its power to micromanage the market, carefully coordinating the actions of thousands of firms from a position above the market…

In essence, Wal-Mart has grown so powerful that it can turn even its largest suppliers, and entire oliogopolized industries, into extensions of itself. The effects of this practice are most obvious in Wal-Mart’s horizontal competition against other retailers…

As we make our case, we should be sure to call one expert witness in particular. Last year, Wal-Mart CEO Lee Scott called on the British government to take antitrust action against the U.K. grocery chain Tesco. Whenever a firm nears a 30 percent share of any market, Scott said, “there is a point where the government is compelled to intervene.” Now, Wal-Mart has never been shy about using antitrust for its own purposes. In addition to the Toys R Us case, the firm was also the instigator of a Sherman Act suit against Visa and MasterCard. And so such a statement, by the CEO of a firm that already controls upward of 30 percent of many markets and has announced plans to more than double its sales, sets a new standard for hubris. It also sets a simple goal for us – elect representatives who will take Citizen Scott at his word.

Posted by Nu Wexler on Tuesday, June 20, 2006

COMMENTS

The government has an obligiation to protect the economy as a whole for those who would manipulate it for their own gain.  The tight relationship between Walmart and many of its suppliers needs to be scrutinized and most likely severed.

No Walmart in the world loves you
Tuesday, June 20 at 04:14 PM

I quote just one reason for Wal Mart’s success........."they always look up in life”.
.........apart they are very well at organising, marketing strategies and employees and customer satisfaction. That’s why they are here today.

Andrewgates in AR
Wednesday, June 21 at 01:37 AM

The same could be said for cockroaches ...

No Walmart in the world loves you
Wednesday, June 21 at 10:55 AM

Andrew, I don’t know which scenario is scarier - the idea that you work for Wal-Mart or the idea that you don’t.  If you don’t work for Wal-Mart (I do), then how would you know about the employees satisfaction?

Generic Wal-Mart Wageslave in Michigan
Wednesday, June 21 at 12:00 PM

So Generic, why do you work for Wal-Mart if you loathe it so?

Inquiring Mind in Florida
Wednesday, June 21 at 01:54 PM

I want a Wal-Mart build in the Bronx.

ramona pina in bronx
Wednesday, June 21 at 05:53 PM

I work for Wal Mart and have so for 3 years.  In those 3 years I’ve rose from an hourly position to management through hard work.  I was an intern through my Junior and Senior year of college and discovered I wanted a career with the retail giant.  I feel that change is necessary to grow, but I am worried that those same basic beliefs that built this great company years ago may become lost in the pressure to change.  I have already seen a lot of restructuring at the store level that will help Wal-Mart be more competitive.  I know the number one focus is on the customer, but lets not forget about our associates and management which control the day to day operations at the store level.  I have a newborn son and a college degree, and want to continue to move up with the company, I have a lot to offer, and hope that when the time comes I still can advance to store mgr, district mgr, or even regional manager.  Wal-Mart has always believed in promoting from within, and I am hoping this does not change with the times.  “Wal Mart is a success story all to its own, but there are thousands of individual success stories rooted deep within its past and present.”

Josh Kimbrough in
Wednesday, June 21 at 10:53 PM

Sorry Josh
You need to send your resume to Wal-Mart, not to us.
We think Wal-Mart sucks.

JM in USA
Thursday, June 22 at 04:07 PM

Inquiring Mind, it’s out of necessity (I’m trying to get out), Josh, my advice is to look elsewhere.  Don’t trust this company as far as you can throw them.

Generic Wal-Mart Wageslave in Michigan
Thursday, June 22 at 10:21 PM

So Generic, what you’re saying is, “If I could find another job, I would go there.” But you can’t.  So isn’t Wal-Mart better than the alternative (no job)?  I don’t mean to be rude, but people typically work at the best job they can get.  Most of the people that are working at Wal-Mart are working there, like you, out of necessity.  Isn’t it better to have that job than none at all?  If you were qualified for a better job, I daresay you’d take it.  Again, I don’t mean to offend, but it’s really not Wal-Mart’s fault that you’re not qualified for a better job…

Inquiring Mind in Florida
Friday, June 23 at 07:46 AM

No offense taken.  I do understand your point that I’m lucky to have a job at all (things are rough in Michigan).  However, you’re making assumptions and one of those assumptions is that I’m not qualified for anything else and have never had a better job and that this applies to others who work at Wal-Mart as well.  Also, I’m not blaming Wal-Mart for my particular situation.  I hope this clears things up.

Generic Wal-Mart Wageslave in Michigan
Friday, June 23 at 09:45 AM

Well, unfortunately, I have to make assumptions because I don’t know you.  If you can get a better job, that’s great.  The problem I have is people who sit and whine and complain about how Wal-Mart should pay a higher wage, better benefits, etc, etc, etc.  The problem with that is, by and large, the employees at Wal-Mart are not “worth” that amount of money.  That may sound harsh, but what I mean is we all make economic choices everyday and assign dollar values to everything around us.  If these people could get someone else to assign a higher dollar value to their labor, I’m sure they would go work for those people.  But the fact is, they can’t.  So why should we force Wal-Mart to pay them an artificially inflated wage?  They won’t suddenly become more useful, so all we’re going to do is drive up costs for consumers and reduce the amount of people employed by Wal-Mart.

Inquiring Mind in Florida
Friday, June 23 at 10:00 AM

Well, that’s where you and me disagree.  I happen to believe that all people have worth and that all work has worth.  I don’t feel that it’s okay to treat people like crap and pay them crap wages so that they live crap lives.  Usually, people who can do better will but many are basically limited in what they can do.  Not everyone can be a Doctor, Lawyer, etc., or own their own business.  Not everyone has the same capabilities and some people (not a lot) might WANT to do that form of work.  Some people COULD have done something else but, because of circumstances, can’t or couldn’t.  The decision of what a particular job is “worth” is made by those with the power to do so.

Generic Wal-Mart Wageslave in Michigan
Friday, June 23 at 10:42 AM

“I happen to believe that all people have worth and that all work has worth.”

That’s probably true. Everyone has some worth, but that does not automatically entitle them to a set income.

“I don’t feel that it’s okay to treat people like crap and pay them crap wages so that they live crap lives.”

That’s subjective. Has Wal-Mart violated your rights as a worker?

“Usually, people who can do better will”

True.

“but many are basically limited in what they can do.”

Define “limited.” Are the limits self-imposed?

“Not everyone can be a Doctor, Lawyer, etc., or own their own business.”

If everyone could and did, they wouldn’t be high-paying options.

“Not everyone has the same capabilities”

Thus some people make more money than others.

“and some people (not a lot) might WANT to do that form of work.”

In doing so, they accept the wage. That is the price of their choice.

“Some people COULD have done something else but, because of circumstances, can’t or couldn’t.”

Again, what kind of circumstances are we talking about? 

“The decision of what a particular job is “worth” is made by those with the power to do so.”

The worker has the right to refuse to work for that pay. If all the workers feel the same way, then the value of the work will go up because no one will work for that wage.

Someone in USA
Friday, June 23 at 12:22 PM

Hey Someone
You bore us with your commentary.

JM in USA
Friday, June 23 at 04:33 PM

First off, I must compliment you.  You are the first person I’ve seen on here that can have an actual discussion without just going nuts… Thanks for that.

Now, to address your post.  I actually don’t think this is where we disagree, it’s more of a symptom of where we disagree… See, here’s the deal.  Wal-Mart doesn’t set their employee’s wages; the Market sets their wages.  And who is “The Market”?  That’s us; consumers and employees like you and me.  See, like Someone said, employees decide the worth of their labor.  As a worker, I have a product to sell.  My product is my labor.  I, as a worker, set the value of my labor.  If you meet my price, I will work for you.  If you don’t, I will not work for you.  So, by coming to work everyday, I make an economic choice and I CHOOSE to sell my labor for what you’re paying me.  Now, I can invest in myself and raise my value (education, training, experience) and then raise the selling price for my “goods and services”.  Is this necessarily easy?  No.  However, you can’t tell me it can’t be done.  There are limitations and circumstances, but as Someone indicated, these limitations are usually self-imposed.  As for people who “want that form of work”, that’s great.  But the market will only bear the wages that are being paid.  I used to have a job at UPS.  I worked overnight shift in the unload.  I absolutely loved that job.  Hands down, the best job I ever had, work-wise.  But, the market would only bear a wage of $8.50 an hour.  I couldn’t do what I wanted to do on this type of wage.  So, did I complain about what UPS was paying me and demand they pay me more?  No, I continued getting my education and now have a better paying job.  I made an investment in myself and raised the market value of my labor.  And it wasn’t easy.  I was married and had two kids while I put myself through college and supported my family.  It was worth it to me to raise the value of my labor.  Others can do the same.

Inquiring Mind in Florida
Monday, June 26 at 11:12 AM

Dear Inquiring Mind
All one has to do is read the first 5 sentences of your second paragraph to realize that it is not worth reading.
What a load of rubbish.

JM in USA
Monday, June 26 at 06:55 PM

You mind explaining how it’s a “load of rubbish” or is a wave of the hand and an ad hominem argument all you need?

Inquiring Mind in Florida
Tuesday, June 27 at 09:29 AM

Sharecroppers have no right to complain.  The market sets their wages.  If they don’t like being a sharecropper, then they can just quit.  Go to college.  Hey, I did.  Then they can just get a good-paying job.  Hey, I did.  Otherwise, they should just learn to like the sharecroppin’ life and quit whinin’ and complainin’ ‘cause they got no one to blame but themselves.  (Btw, ever read *The Grapes of Wrath* about those damn lazy whinin’ Okies?)

wildwest in Michigan
Tuesday, June 27 at 10:38 AM

I agree 100% with Inquiring Mind. I’ve never understood the anti-Walmart rationale, and if anything, I’m more inclined to think that opening new Walmarts in areas with a less robust economy actually increases opportunities for other firms to enter (i.e. they can more easily target customers who also go to Walmart).

And if Walmart is so evil and awful, perhaps it is the fault of the customers who enable the company’s ongoing existence.

kid mercury in
Friday, June 30 at 03:01 PM

kid mercury-

“I’ve never understood the anti-Walmart rationale...”

I don’t think any of us ever have.

Someone in USA
Friday, June 30 at 10:44 PM

Inquiring Mind, Someone:  The argument that Walmart is just another participant in the free-market (in this case, the labour market) would be fine, except that you don’t address the issue of monopoly (surprisingly, since that’s what the article was about.)

The issue is not really one of fairness - Walmart doesn’t treat their entry-level employees unfairly (they all get crappy wages.) The issue is that Walmart puts businesses that pay their employees better out of business.  In the long run, this can actually hurt the economy, because it can create a downward spiral: the poorest members of our society work at Walmart (or a company that has to compete with Walmart), and get paid very low wages, which decreases the amount they can spend.  Such a downward spiral not only increases the gap between the rich and poor (which, if it becomes too large, can be damaging to society: just look at the Middle East), it also can damage the economy as a whole.  By reducing the value of labour, companies that compete by driving wages down hurt productivity (it becomes cheaper to hire another worker than invest in machinery or training to increase productivity.)

In other words, the value of labour is determined by the market, but the policies of corporations and government can affect that value, and it is in our best interest to see it rise (because the more our labour is worth, the higher our standard of living will become.)

The only time it makes sense for the value of labour to fall is if income disparity is rising, or the economy is in a serious recession.  Companies or industries in which the value of labour is being reduced in absolute terms, rather than fluctuating with the strength of the economy, are either obselete (hardly true of the retail sector), or harmful to the economy.

Walmart’s wage practices are parasitic on our economy, taking advantage of our collective wealth while damaging our long-term standard of living.  The damage they do to our culture by destroying small businesses and reducing the diversity of retail in our communities is a whole other argument…

Liam Doherty

Liam Doherty in
Sunday, July 02 at 04:17 PM

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