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.
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