A free market defense of Walmart? Not so fast.

In his November 27, 2013 Forbes article, Doug Altner asks the question, “Why do 1.4 million Americans work at walmart?” His answer, presumed to be along free market lines, is that walmart and its employees voluntarily trade value for value to mutual benefit and satisfaction. “So, let’s stop attacking Walmart for paying market wages,“ Altner urges readers. Since Walmart and its business model exist in the context of a mixed economy, and depends fundamentally on state interference into the economy on their behalf, or that, at the very least, give rise to a business model that could not exist unsubsidized (even nominally) it cannot be said that Walmart operates according to free market principles .

Part of that business model is the need for a cheap, disposable source of labor, which is exactly what arises when large firms lobby the government to write laws that create a regulatory environment that artificially restricts the options available to workers. By enacting regulations that unaturally restrict a person’s ability to pursue self employment, business start-up, cottage industry and artificially limit access to credit, the government and crony firms create an increase in the supply of labor. This inflation puts workers in a government created disadvantageous position from which to negotiate pay, benefits, working conditions and other usual terms of employment. The imbalance of power is so extreme that workers are often subject to intrusions into their personal lives by the corporation. This poor terms are still often only viable because of further government subsidy in the form of low-income housing, food stamps, and medicare.

The most direct of Walmart’s cronyism are two-fold. First, Walmart’s push for a raise in minimum wage to push competition out of business, since Walmart can afford to pay the higher minimum wage, but smaller competitors may not be able. Using legislation to destroy competition for customers, also destroys competition for employees and furthers the effect of labor supply inflation that allows Walmart to have the terms of employment it sets be accepted by the labor market. Secondly, the corporation has engaged in the abuse of eminent domain to misappropriate land from private owners by the force, which stops any resistance by a community to the abuses cited above.

Walmart has spent $35 million in lobbying in the last 6 years alone in an effort to extend and maintain these conditions, conditions that do not resemble a free market at all. So when Altner and the Ayn Rand Institute ask “Why do 1.4 million Americans work at Walmart,” the answer is not that they trade value for value in a free market, but rather that these perverse arrangements are created by government intervention in the economy and should be condemned by authentic advocates of the free market as such.

Suggested Reading:

http://aaeblog.com/2009/03/31/advocatus-diaboli/

http://c4ss.org/content/14925

http://c4ss.org/content/22385

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2 Responses to A free market defense of Walmart? Not so fast.

  1. Journalist Charles Platt briefly went to work for Walmart and discussed his experience in an hour-long EconTalk podcast. He paints a very different picture from those who demonize Walmart as a monopoly exploiting its workers. If interested, you can listen to the podcast here: econtalk.org/archives/2009/06/platt_on_workin.html

    Personally, I think attacking a company for not sacrificing its competitiveness out of some kind of allegiance to the free market is misguided. The company is only responding to incentives, like all of its major retail competitors, who are doing the exact same things.

  2. Rollo McFloogle says:

    I certainly don’t disagree with the article here, but let us remember that if the state weren’t imposing taxes on Walmart, the consumers, the employees, and everyone else involved, we probably wouldn’t be talking about the “need” for Walmart to raise its wages.

    Walmart will use whatever avenues it can to make money, so when there’s an environment created where this can occur most easily through lobbying for regulations, it should not be a surprise at all.

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