Thinking Inside the Box
Wednesday, November 29, 2006
A "fair trade" critic of Wal-Mart ought to focus on keeping markets free—in part by fighting the rents that Wal-Mart extracts from local governments.
Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America's Independent Businesses
Most of Stacy Mitchell's complaints are old hat by now. We’ve all heard that big-box retailers don’t pay high wages, an observation that gets most of its bite from a convenient disregard for the commensurately low skill levels of the workforce these enterprises employ. We all know that big American stores are opening around the globe, which is, we are told, a bad thing, though it is unclear why anyone would want to deprive the average European consumer of the bewildering experience of shopping at a Best Buy if he so chooses. And we all know that mega-retailers are only concerned with the bottom line.
The fact that this last observation gets framed as a shock tells you much about how Stacy Mitchell views the world. Writing of Wal-Mart, she notes “the chains’ allegiance is not to shoppers, but to stockholders.” Their “primary enterprise” is “hitting growth and profit projections.” Much of her indignation, ultimately, is directed at the market system Wal-Mart embodies rather than at the company as such.
Though Wal-Mart is the big villain of her book, it seems for Mitchell that any large, successful company providing goods and services to the public is fair game. Some of her targets, such as Home Depot or Costco, are fairly obvious. Others, including Starbucks and McDonald's, really stretch the notion of “big-box.” One particularly curious target of Mitchell’s ire is the Swedish furniture store IKEA, which, with only 28 American stores, is hardly an unstoppable juggernaut. Mitchell takes Netflix to task for threatening local video rental franchises—apparently unfamiliar with the environmentalist argument that Netflix actually reduces carbon-emitting trips to the store and cuts down on the number of discs that have to be manufactured.
She is at her best detailing the subsidies large retailers extract from local governments. Just as fantastically rich sports teams receive gobs of public money to build stadiums and arenas, even richer corporations are given all sorts of incentives and subsidies to built stores in various locales. For instance, city officials in Brookings, South Dakota gave Lowe’s nearly $3 million in public subsidies to build a store in their town. Eighty-four of Wal-Mart’s 91 distribution centers received government subsidies, many of which were over $10 million. These range, the author tells us, from property tax breaks and sales tax rebates to public infrastructure commitments and low-interest, tax-free loans. Usually these handouts are given in the hopes of increasing tax revenue or in the name of “urban renewal.” As long as these companies are on the public dole, a candid believer in free markets cannot wholeheartedly defend them as exemplars of capitalist success.
It’s also easy to be sympathetic to Mitchell’s arguments regarding small, local businesses, especially when considering that these independent operators receive nowhere near the government support of the big boys. A community without its own unique shops and restaurants is indeed a drearier place. (It may also, as Mitchell is not the first to point out, undermine the business model of city newspapers in which competing local retailers advertise the same products.) However, not all independent businesses are doomed when a mega-retailer moves in. Some carve out their own niche and thrive. Think of the video store specializing in classic or foreign films (as opposed to Blockbuster dreck) or the bookstore stocked with out-of-print obscurities. These little operations often do just fine for themselves, and would probably fare even better on a truly level playing field where the local government wasn’t boosting big corporations with public money.
Mitchell concludes her book with recommendations on how to fight the big-boxes and help independent businesses. The latter is commendable, the former less so. The government actions she recommends against large retailers—size limits, antitrust actions, special taxes, outright bans—are just as bad and anti-free market as the government actions taken to assist these same companies. Neutrality seems a better approach than a suite of countervailing subsidies and penalties. Mitchell and her sympathizers might be best off, in fact, making common cause against pork with allies on the libertarian right.
Brandon Bosworth is a writer based in Honolulu.