Wal-Mart's Free Market Fallacy
April 21, 2005
Jonathan Tasini is president of the Economic Future Group and writes his "Working In America" columns for TomPaine.com on an occasional basis.
Conservatives run around singing the praises of Wal-Mart, proclaiming it an American success story. None other than Dick Cheney calls the Beast of Bentonville his favorite company. But what I love about Wal-Mart is the way the company highlights the phoniness of two centerpieces of the conservative movement’s sloganeering propaganda: the so-called “free market” and “local control.”
In the mythical world of the free market—for which Wal-Mart supposedly serves as a shining example—prices for goods and labor should rise and fall based on the magic of the “invisible hand” of market supply and demand. In the nirvana of the so-called free market, workers can sell themselves for whatever the market can bear.
So let me introduce you to a place called China. Wal-Mart—in its never-ending quest to promote its heartland, Arkansan family values—is a willing customer of the Chinese labor system, where people work 12- to 18-hour days, earn meager wages and have no days of rest—all for the honor of laboring inside factories full of chemical toxins and hazardous machines, leading to sickness and death at the highest rates in world history. Wal-Mart says its business with China is just a virtue of the free market.
Putting aside the morality of forcing people to work in slave-like conditions, the so-called free market does not exist in China when it comes to wages. China artificially suppresses wages by anywhere from 47 to 85 percent below what they should be,according to the AFL-CIO's complaint about China's labor policies filed with the United States Trade Representative last year. With Wal-Mart as its willing customer, an authoritarian regime ruthlessly warps the market for wages by enforcing a system that controls where people can work and imprisons and tortures people who attempt to organize real unions or strike. Maybe the rock-bottom labor costs are really behind Wal-Mart’s slogan “always low prices,” but the company is certainly not an example of how to win in a free market economy.
It’s easy to see why Wal-Mart and its conservative defenders discard ideology: money. By ignoring free market principles, the left-wing Harvard Business School estimates that Wal-Mart reduces its procurement costs by 10-20 percent, primarily by taking advantage of the artificially suppressed labor market in China. One can’t help note the delicious irony that Wal-Mart’s “free market” leadership is powered by an authoritarian regime that still refers to itself as communist.
Back at home, Wal-Mart’s free market mantra stops at the water’s edge of the public till. By one estimate, Wal-Mart has pulled in $1.5 billion dollars in taxpayer funded subsidies (see www.walmartwatch.com) . And that's at the low end, because subsidies are sometimes hard to track based on the lack of public reporting requirements. Wal-Mart is happy to cash in on government largess like property tax abatements, infrastructure support, free land and just straight-out cold cash—all of which are the antithesis of “free market” ideology.
Here’s a way to get rich, if you could collect the dough: How many of you wish you had a dollar every time you heard some conservative rant first about the evils of the federal government and, then, call for denuding the federal government and handing more control over decision making to local communities? We’d all be rich, no? Well, an odd thing has happened. Conservatives appear to be against local control.
Conservatives and their allies in the press have been bent out of shape over recent campaigns to keep Wal-Mart from opening stores. These campaigns were spearheaded by community groups nationwide from Los Angeles to Chicago to New York. Recently, The Economist , the international organ for the so-called “free market,” railed against the opposition to Wal-Mart’s entry into the New York City area. Writing in its April 2nd edition about local legislation aimed at requiring standards for workers’ pay and health care, the magazine opined that, “Municipal socialism may seem an odd strategy for the world’s capital of capitalism to embrace.”
Oh, I get it: Local control is only a lofty principle when the goal is to destroy the government’s ability to implement basic community values like fairness, equality and justice. But when people rise up to challenge the idea that a corporation shouldn’t do what it chooses with local community resources like workers, water, air and soil—oh my God, we’re teetering on the brink of rampant radicalism and a titanic battle between socialism and the free market.
Truth is, Wal-Mart could not survive in a real free market: It would, for example, have to pay Chinese workers more (which would ruin its low-wage business model) and spurn any offers of government subsidies. Indeed, it’s fitting that Wal-Mart, the business model fawned over by free-marketeers, exposes the so-called “free market” as a lie, no more than a crude—albeit effective—marketing phrase. By offering the seductive promise of prosperity through something “free,” we’re told we have to hand over control of our communities to some mystical “market” force. But that’s just an illusion conjured up to hide from us real-life actors who exploit the sweat of our brows, deplete our natural resources to make huge profits and take handouts funded by our hard-earned incomes.
Ironically, Wal-Mart’s behavior does have one redeeming factor. By puncturing the Wal-Mart-generated myths that it is good for America, by showing that its low-prices come with a heavy cost, and by revealing how the company is a leech on communities, we may begin to pull back the curtain hiding the true nature of the so-called “free market.”