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Thesis & Antithesis

A critical perspective on energy, international politics & current affairs

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Location: Washington, D.C.

greekdefaultwatch@gmail.com Natural gas consultant by day, blogger on the Greek economy by night. Trained as an economist and political scientist. I believe in common sense and in data, and my aim is to offer insight written in language that is clear and convincing.

28 November 2005

Defending Wal-Mart

Sebastian Mallaby in today’s Washington Post on Wal-Mart:

“There's a comic side to the anti-Wal-Mart campaign brewing in Maryland and across the country. Only by summoning up the most naive view of corporate behavior can the critics be shocked -- shocked! -- by the giant retailer's machinations. Wal-Mart is plotting to contain health costs! But isn't that what every company does in the face of medical inflation? Wal-Mart has a war room to defend its image! Well, yeah, it's up against a hostile campaign featuring billboards, newspaper ads and a critical documentary movie. Wal-Mart aims to enrich shareholders and put rivals out of business! Hello? What business doesn't do that?”

Beyond the rhetorical opening, Mr. Mallaby raises serious issues about Wal-Mart, what it does and what it represents. In my mind, the message is two fold: first, that the gains from trade are not restricted to the wage people earn—their money’s purchasing power is just as important. As Mr. Mallaby writes, the gains from the lower prices that people pay at Wal-Mart offset the lower wages that can be attributed to Wal-Mart’s business practices. This means that Wal-Mart represents a net gain.

The second message is a derivative of the first: the conventional wisdom (I am tempted to use the word “hysteria”) suggests that high-tech innovation is the sole guarantor of living standards in developed countries. Wal-Mart’s story should make us think again: it is impossible to judge living standards by looking only at what people earn rather than what they spend their money on. Even a reduction in wages can make someone better off if the things they buy are proportionately cheaper than they were in the past. This doesn’t mean that earning less money is good—it just suggests that it is insufficient to look at wages alone to tell the tale of globalization.

References:
Sebastian Mallaby, “Progressive Wal-Mart. Really.” Washington Post, 28 Nov 05 (link)

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