I recently watched a short presentation by Mark Hendrickson from Grove City College about the free market and Walmart. In the presentation Hendrickson covers in short, but informative detail, how free market mechanisms work. Firms that offer better prices in the market draw away customers from other firms, and the end result is that new businesses occupy the place of the old. While this can result in dislocation due to a company closing down, ultimately this is a good thing because both workers and consumers reap rewards from better jobs and better prices. In the case of Walmart, according to Hendrickson, this is exactly what has taken place.
But is it fair to argue that Walmart is a result of free market mechanisms? No.
Three important factors to look at when arguing about whether Walmart, or any business for that matter, is a result of the free market are eminent domain laws, government subsidies and wage controls, all of which Walmart has exploited for profit. In 2005 the Supreme Court ruled that private land could be taken, by force if necessary, and used for private and public economic development. Such development includes the building of Walmart locations. Put simply, private property is stolen by the state and for all intents and purposes handed over to corporate interests. All of this is framed, of course, as “economic development.”
Stolen property is just the icing on the cake, however. A 2004 report showed that Walmart had received over $1 billion in government subsidies “in the form of free or reduced-priced land, job training funds, sales tax rebates, tax credits and infrastructure assistance, including investment in roads.”
Finally, there is a reason why Walmart has supported higher minimum wages in the past. Naturally, they claim their reasons are because it helps lower income workers (such as the ones who work at Walmart). But there is a very important aspect of state-mandated wage controls to consider: They help eliminate competition. Smaller firms have a harder time paying enforced higher wages that don’t reflect the real economy and big companies such as Walmart are likely very aware of this fact. They can afford the wage hikes, but in many cases their competition can’t.
To return to Hendrickson’s presentation, one of the arguments he makes in support of Walmart is that consumers have voted with their dollars by choosing Walmart over smaller businesses. In a sense, this is true. But the point he is missing is why exactly Walmart has such low prices. Stolen land, massive subsidies and wage controls. None of these sound like free market mechanisms to me.
If we were to place Walmart in a truly free market context, in which they paid all of their own overhead, had to acquire property justly and had no control over wage prices, the question isn’t whether or not they could prosper, but whether they would even exist in the first place.
Translations for this article:
Citations to this article:
- Travis Eby, Walmart has nothing to do with free markets, Gary, Indiana Tribune, 11/08/13
- Travis Eby, What About Walmart … Has Anything to do With Free Markets?, Before It’s News, 11/07/13
Walmart had a gross profit of $126.54 in 2004. Government subsidies, then, accounted for less than 1% (leaving out whether you should even consider tax relief a subsidy). It's plausible, I suppose, that that tiny percentage happens to be the integral piece of the Walmart business plan, and that Walmart would collapse without it, but I find it unlikely.
Is it wrong when Walmart uses coercion to achieve their economic ends? Yes. Is that what defines them as a company? It would seem not.
Walmart had a gross profit of $126.54 in 2004. Government subsidies, then, accounted for less than 1% (leaving out whether you should even consider tax relief a subsidy). It's plausible, I suppose, that that tiny percentage happens to be the integral piece of the Walmart business plan, and that Walmart would collapse without it, but I find it unlikely.
What about Walmart is free market? Maybe over 99%.
1. "Accumulation by dispossession" as practiced through eminent domain is actually incredibly important to understanding the historical development of the company and of many others like it. The fact that they have however much in annual profits nowadays is irrelevant to the fact that their "success" is based largely on theft and market distortion. And likewise, the problem is compounded as the capital acquired from theft is perpetually cycled back through the process of capital accumulation.
2. I would argue that these are only some of the subsidies and other benefits that Walmart and others of its ilk receive from the government. Some other major ones are zoning, transportation funding and policy, and other labor laws of various kinds.
Zoning: Not only is Walmart given land at free or reduced price, but zoning restrictions also prohibit locally owned stores from competing through artificial limitations on size/scale and location. Secondly, zoning restrictions that basically mandate an automobile-centered (and automobile-dependent) lifestyle disproportionately favor big box stores like Walmart.
Transportation: The hundreds of billions of dollars spent on building and maintaining the nationwide transportation infrastructure are also a disproportionate benefit for large corporations. They disproportionately benefit from the artificially reduced cost of transcontinental transportation, and that reduced cost of course means artificially lower prices than locally-based stores that have no need to ship goods across the continent or around the world.
Labor: Walmart and other corporations of its ilk are notoriously anti-labor and they (like all major corporations) disproportionately benefit from and disproportionately contribute to the regulation of the labor market (immigration laws, laws aimed at burdening and prohibiting unionization, changes in laws around workplace health safety, etc.).
You need to think historically and systemically about the development of not just Walmart specifically but of capitalism more broadly. Walmart, like all other big business, have theft ("accumulation by dispossession") in their origin as well as continuously throughout the life of their operation. The capital acquired from theft is compounded over time with normal accumulation as well as through other capital from the various subsidies and beneficial regulations (some of which I have mentioned) given to them by governments. Simply put, it is not a matter of saying whether they would continue to exist if all subsidies, beneficial regulations, and theft were ended (by the way, I would say that Walmart would probably not survive this over time as their business model requires perpetual stimulation by governments). The point is that if theft had never occurred and if these favorable market distortions (like subsidies and regulations) never existed in the first place it would be unlikely that Walmart would have ever acquired the vast sums of capital necessary to have expanded into such a massive business. Yes coercion and artificial market distortion are what define Walmart and all other major corporations. A genuine free market with genuine free competition would subvert the possibility of the concentration of capital.
Guys, you are leaving behind the ports, airports, highways, canals, and all the subsidized infrastructure and machinery that benefits the corporate/capitalist class as a whole over other business models. Without that, it is very dificult to grow capital into a Walmart sort of enterprise.
So Walmart did not rise up on a partially free market system, but it is the monstrous child of capitalism (as in actual corporate oligopoly/monopoly statist capitalism) and the exploitaition of labor on countries with less "democratic" and "free" market policies than the USS.
Trying to find any free market sign on Walmart is a big bad joke.
Agreed. But, in “our” defense, this is an op-ed submitted to media outlets around the world with a sweet-spot word range between 500 and 600 words. Hopefully the audience that is interested in this type of commentary will visit and peruse our features and, especially, Kevin Carson’s case studies of modern day capitalism in all of its MOLOCH horror.
Yes, it is true that Walmart chisels from the tax payer. But Ayrton is correct, and Travis Eby and yehvh are wrong. Walmart is the successful company it is today almost entirely due to free market mechanisms. They started out and still predominate in rural areas, where zoning is virtually a non-issue. Its distribution system is the most innovative and lowest cost in the world. Their cost control is fanatical, bordering on the insane. They work closely with manufacturers to assist new vendors in controlling THEIR costs. They are leaders in retail IT. In short, Walmart is successful because they give their customers what they want, and they do it by making (just about) everyone involved better off.
All political action is based on stealing. To the extent that Walmart gets anything from the state, it is a receiver of stolen property. Anyone who receives a check or other property from the state (other than a refund) is a receiver of stolen property.
To WalMart's credit it is one of the most successful retail companies the world has ever known. To the extent that it takes from the state, property the state has stolen from its producers, it diminishes it's stature.
Exactly how often has eminent domain been used to benefit WalMart? Not disputing the point, but it's an often-used accusation with usually no backing evidence.
Well, I knew of two times it was used in the St. Louis Missouri area in a period of 10 years or so (both times to seize entire neighborhoods that happened to front on arterial roads — the argument in both cases was that "economic development" of those areas called for major retail, not houses, and if the owners didn't want to sell, too bad).
Here are some other cases:
Denver, Colorado 2003
Ogden, Utah 2005
Economy, Pennsylvania 2010
Gettysburg, Pennsylvania 2012
OK, so that's only four cases in ten years … but then again, I only spent about five minutes researching the subject. I'd say those four cases popping up so quickly and easily is a good indicator of a long-term pattern of behavior.