Dohiyi Mir
    In Which NTodd Says His Peace

Monday, January 05, 2004
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The Invisible Hand Of Sauron

Stef read the latest Fast Company this weekend in front of a roaring fire. While I was struggling with PC issues, she read some passages from this article out loud to me:

Wal-Mart wields its power for just one purpose: to bring the lowest possible prices to its customers. At Wal-Mart, that goal is never reached. The retailer has a clear policy for suppliers: On basic products that don't change, the price Wal-Mart will pay, and will charge shoppers, must drop year after year. But what almost no one outside the world of Wal-Mart and its 21,000 suppliers knows is the high cost of those low prices. Wal-Mart has the power to squeeze profit-killing concessions from vendors. To survive in the face of its pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of outsourcing products from overseas.
"How can it be bad to have a bargain at Wal-Mart?' Sure, it's held inflation down, and it's great to have bargains," says [Carolina Mills president and CEO, Steve Dobbins]. "But you can't buy anything if you're not employed. We are shopping ourselves out of jobs."

I like capitalism, and I like getting good deals. The fundamental question I've often asked is: what is a good deal?

I don't have time to give this the treatment I'd like, and my mind is a jumble with thoughts about our eternal pursuit of the lowest price, the cult of the profit motive, rampant corporatism, media consolidation, and how all of this is bleeding over and corrupting our democracy. My biggest concern is that people focus so much on Adam Smith's "invisible hand" (the role of which the article says Wal-Mart is playing), they miss a lot of his warnings*:

[The rate of profit] is naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin...As [merchants and master manufacturers'] thoughts...are commonly exercised rather about the interest of their own particular branch of business, than about that of the society, their judgment, even when given with the greatest candour (which it has not been upon every occasion) is much more to be depended upon with regard to the former of those two objects than with regard to the latter.

So here we have Wal-Mart, who according to Smith can't be depended to think about society, claiming to know what's best for the consumer. Is it really in our interest to have Wal-Mart wielding its power solely to reduce our prices at the checkout counter?

And speaking of not getting the greatest candor from the merchants, it's interesting that the Fast Company article also notes:

There is very little academic and statistical study of Wal-Mart's impact on the health of its suppliers and virtually nothing in the last decade, when Wal-Mart's size has increased by a factor of five. This while the retail industry has become much more concentrated. In large part, that's because it's nearly impossible to get meaningful data that would allow researchers to track the influence of Wal-Mart's business on companies over time. You'd need cooperation from the vendor companies or Wal-Mart or both--and neither Wal-Mart nor its suppliers are interested in sharing such intimate detail.

We can't even easily study Wal-Mart's impact on its vendors, which means we don't really know how the company's practices will ripple out to the rest of our economy. That said, it's pretty damn clear that we're exporting jobs and exploiting workers overseas to save a couple bucks, and that's likely to have some nasty consequences in the long run.

As the article observes:

In the end, of course, it is we as shoppers who have the power, and who have given that power to Wal-Mart. Part of Wal-Mart's dominance, part of its insight, and part of its arrogance, is that it presumes to speak for American shoppers.
Wal-Mart has also lulled shoppers into ignoring the difference between the price of something and the cost. Its unending focus on price underscores something that Americans are only starting to realize about globalization: Ever-cheaper prices have consequences. Says Steve Dobbins, president of thread maker Carolina Mills: "We want clean air, clear water, good living conditions, the best health care in the world--yet we aren't willing to pay for anything manufactured under those restrictions."

Globalization isn't inherently evil as the WTO protesters some anti-globalization folks** seem to believe, and it ain't the magic wand Tommy Friedman likes to pretend it is. I'm fairly sure it's inevitable and we're in the painful, nascent stages right now. I'd like to think that we can globalize in such a way that it doesn't hurt workers at home and abroad.

I don't know how to do that, but I'm certain that avoiding Wal-Mart is a part of the solution. Dave Pollard has a list of companies you might consider boycotting as well. As Howard Dean says, we do have the power, and voting with our wallets will have some influence--that is, if we stop focusing on simply getting the lowest price.

We also must stop electing corporatist candidates. That's effectively handing the government over to companies whose only interest in society's needs is how they influence profits. Perhaps that sounds harsh, but corporations are not people. Their goal is unfettered pursuit of profit, and that is not a universal or fundamental element of the human condition.

In America maybe this means ultimately voting Green, though I do see there's more than a dime's worth of difference between the GOP and Dems, and the Greens still need to work harder to prove themselves worthy of my vote. Some meaningful public campaign financing probably is also a part of the equation. Beyond that, I'm open to other suggestions.


* [Update: I can't take you directly to the page in question at Bibliomania, but this selection is from Wealth of Nations, Book 1, Chapter 11, Page 54.]

**[Update: three readers have already gotten on my case for my painting WTO protesters with such a broad brush. How 'bout I just say "the dude dressed up in a jester suit holding an anti-McDonald's sign who was at the Friedman talk I went to a couple years ago"? :-) ] 

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