Yesterday’s rally against WalMart and Richard Green’s commentary

In his June 30, 2012 post Why are liberals so romantic about small business? Richard Green argues that the claim that WalMart hurts small business is misplaced because wages and working conditions at small businesses are worse than at larger businesses.  He also claims that liberals “love to extol the virtue of small business”.

There are a few problems with this. First, I’m not sure where he got the idea that liberals love extolling the virtues of small business. This attitude is pervasive in U.S. mainstream political culture and is continually echoed by Democratic and Republican politicians as well as TV talking heads. It’s the political code used in this culture to show support and empathy for those who lift themselves up by their own bootstraps. Claiming that this or that policy will hurt or help small business is a way of signalling agreement with a strongly held cultural norm, regardless of whether the norm is true or if the policy actually works.  It’s a way of saying that “small business” owners embody the system’s cultural norms. As such it’s not a position that’s confined to “liberals”.

Second, those who are fighting against WalMart often use the claim that WalMart will have the effect of eliminating local small businesses. This argument is used to garner the support of small businesses in the broader struggle to prevent a WalMart from opening up in a new area, such as Chinatown in L.A.  This is not an unreasonable position.  After all, WalMart’s enormous economic power does provide it with the capacity to destroy local businesses.

Third, the argument isn’t that WalMart pays worse wages than small businesses, it’s rather that WalMart’s power adds more muscle to small businesses’ incessant fight against minimum wages (at the political-legislative level) while simultaneously creating a local monoposonistic environment that will increase the exploitation of labor.

Whether or not WalMart is a net provider of jobs is somewhat beside the point, if the wages offered by such jobs are close to subsistence. Creating a low wage environment is clearly good for WalMart’s profits and provides struggling consumers with the opportunity to purchase low-priced goods.  But creating such an environment in a culturally rich setting, such as Chinatown, is not a good example of redevelopment; unless one’s definition of redevelopment includes the creation of a large pool of poorly paid workers and cultural blight.

About Mayo Toruño

Professor of Economics, Emeritus California State University San Bernardino
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