Monday, April 11, 2005

For all you Wal-Mart haters out there
Max Borders offers a great column at Tech Central Station "Understanding the Wal-Mart Effect," in which he explains what really goes on after Wal-Mart moves in and gobbles up all of the Mom and Pop businesses:

Boone, North Carolina (named for the famous Dan'l) is a college town nestled in the rustic mountains of Appalachia. The population is divided roughly among groups of students, locals, and the academic elite. Such a microcosm of American diversity works in its own way. The locals realize how much money the university brings in. The students love the Smoky Mountain amenities and the bluegrass music. Academics find the local folkways charming and complementary to their status as, well, elites. But when Wal-Mart decided to come along in the 90s, locals, students, and academics also had a common purpose to bind them: to keep Wal-Mart out.

As it often does, Wal-Mart won. And since then, Boone has experienced the Wal-Mart effect. First, some Mom-n-Pop shops in Boone may have gone out of business due to the intense competition. But something interesting has happened: many new businesses have sprung up and they're cooler, more interesting, and more highly specialized than most of the old ones were. Mom-n-Pop have decided to move into more boutique-style businesses -- and not even Wal-Mart can compete with that.
Since I seem to be getting a lot of hits from the Kossacks today, I thought I'd offer up that bit of information.

As often happens with trade and economic policy from the left, the focus is too much on the immediate future. Cycles like this Wal-Mart effect are known as creative destruction. Yes, a few people will lose out in the short term (as with globalization), but more opportunities are created as well. The success of a local Wal-Mart will never destroy the surrounding area, or Wal-Mart would have gone out of business long ago. Yes, it forces the prices on many common items so low that inefficient, expensive local stores cannot compete. But by providing a sufficient supply of these goods while saving their consumers money, it allows for more specialized products to be offered in other storefronts.

And those poor, non-unionized Wal-Mart laborers? Find me an example where Wal-Mart has moved in and lowered employment in the surrounding communities and I'd love to discuss it with you. In the meantime, enjoy your cheaper shaving cream, and that little extra money you can spend on your environmentally friendly coffee.

UPDATE [4/18/2005 - 11:17]: Dave Justus comments on the same story, and has a poster who actually owned a small retail store that had to deal with an incoming Wal-Mart store. Take a look.

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