Exclusive: Jonathan Rees Reviews “The Wal-Mart Revolution” - Part 1

Dr. Jonathan Rees of Colorado State University, Pueblo, reviews the new book ”The Wal-Mart Revolution.” Here’s the first of two parts:

On September 8, 2006, the New York Times ran an article entitled, “Conservatives Help Wal-Mart, and Vice Versa.” The premise of the story was that the Walton Family Foundation, the charitable vehicle now controlled by Sam Walton’s children, was giving money to conservative institutions in order to produce research and policy statements favorable to Wal-Mart.

One of the authors of that Wal-Mart-friendly work quoted in the story was the Ohio University economist Richard Vedder. Vedder expressed surprise that the American Enterprise Institute, which was publishing his then-forthcoming book on Wal-Mart, had received money from the Waltons and he promised to reveal that fact upon publication.

Well, the book is out and Vedder, along with his co-author, Wendell Cox, have done what Vedder promised. They write in their preface, “AEI goes to great lengths to separate its fund raising efforts from its scholarly and editorial mission, and any suggestion that this book has been influenced in any way by Wal-Mart’s support for AEI is entirely false.”

I, for one, believe them. Any organization with a name like “The American Enterprise Institute” is bound to be friendly to a company like Wal-Mart. Conservatives and libertarians have been holding up Wal-Mart as a paragon of American capitalism from the very moment that Wal-Mart became an object of intense public scrutiny. A book on Wal-Mart from the American Enterprise Institute would undoubtedly be favorable to Wal-Mart whether the think-tank took money from the Waltons or not.

For this reason, to dismiss the The Wal-Mart Revolution: How Big-Box Stores Benefit Consumers, Workers and the Economy out of hand as being bought and paid for is a terrible mistake. The problem with Vedder and Cox’s book is not their publisher, but the assumptions from which they make their arguments. To see the book solely as a work of paid advocacy wastes a perfect opportunity to unpack the ideology that makes unbridled support for Wal-Mart possible.

In this two-part review of Vedder and Cox’s work, I’m going to try to do precisely that. For this first part, I’ll talk about the reasons that Vedder and Cox support Wal-Mart and examine what this tells us about Wal-Mart defenders in general. In the second essay I want to focus specifically on Vedder and Cox’s criticism of Wal-Mart critics.

Near the beginning of their book, Vedder and Cox write, “It is a basic proposition in economics that utility-maximizing individuals prefer consuming more to consuming less, as additional consumption provides additional satisfaction (“marginal utility”). Anything or anyone that allows people to buy more DVD players or some other gadget is contributing to human welfare or well-being by increasing individual satisfaction.” They are absolutely right. This way of thinking is “a basic proposition in economics.” But do we want to base our public policy entirely on this assumption?

There are two basic problems with this notion. First, there are costs to the environment, the stability of society and, ultimately, our values if we measure utility solely on the basis of the amount of our material possessions. Second, it is also a basic assumption of economics that the 100th DVD player someone buys will make them much less happy than the first. How do we decide when the costs of cheap material goods outweigh these diminishing returns?

Much to Vedder and Cox’s credit, they do mention the economic concept that underlies both of these concerns: externalities, or “spillover effects.” Unfortunately, they refuse to take the notion that Wal-Mart might cause negative externalities at all seriously. Rather than try to balance the benefits of Wal-Mart against its costs, Vedder and Cox look at the company through rose-colored glasses.

“In theory,” they write:

It is possible that negative spillover effects...could have a dollar value greater than that of the gains associated with consumer surplus and greater customer choice. Yet Wal-Mart (and Target and Home Depot) can have positive externalities as well. For every Wal-Mart built on a pristine meadow, we suspect there is at least one built on land that formerly held an old dilapidated strip mall, junkyard, or other unsightly thing.

Frankly, I doubt it. But that is not the point I want to make. The most important point apparent from the above paragraph is that Vedder and Cox only choose to consider the effects of Wal-Mart that can be translated into dollar values. How much money does Wal-Mart save consumers? How many jobs does Wal-Mart create or destroy overall?

These kinds of questions mask the effects of Wal-Mart that Vedder and Cox refuse to acknowledge. How much money do I save at Wal-Mart if I refuse to shop there or buy the kind of low-quality merchandise in which that store specializes? Nothing. How many jobs does Wal-Mart create destroy? If I work at a competing grocery chain that went under trying to compete with Wal-Mart, that company destroyed the only job that really matters to me – my own.

Vedder and Cox refuse to believe that Wal-Mart shortchanges its workers because they think that Wal-Mart’s wages and benefits are competitive with the rest of the retail industry. Ask a Wal-Mart worker when their supervisor isn’t watching and I’ll bet you they won’t find that argument at all convincing, whether it’s true or not.

Like the New York Times as well as Wal-Mart itself, Vedder and Cox attack people who bring up the “negative externalities” that they gloss over as paid critics, even if they don’t exactly use those words. Their assumption is that the arguments of anybody with an interest in the fight over Wal-Mart are by definition wrong, while they themselves were “extremely careful...not to become overly biased by propaganda from either side.” I believe that statement too. Vedder and Cox’s biases existed long before they decided to write about Wal-Mart.

In the second part of my review, I’ll look at their criticism of Wal-Mart’s critics more closely and strongly suggest that what their attacking is really a straw man rather than the Wal-Mart critics’ actual arguments.

• Click here to read Dr. Jonathan Rees’s review of Charles Fishman’s “The Wal-Mart Effect.”
• Click here to read Dr. Jonathan Rees’s review of Anthony Anthony Bianco’s “The Bully of Bentonville.”
• Click here to read The Writing on the Wal.

Posted by Russ Fagaly on Monday, February 12, 2007

Click Here for a Printer-Friendly Version