wal mart

Who’s Afraid of Walmart?

by Ivan Osorio on May 11, 2011

in Economy, Employment, Labor, Regulation

As surely as summer follows spring, it seems like every new Walmart store opening announcement in a major city is now followed by protests.  The nation’s capital is no exception.

Walmart announced late last year that it plans to open four stores in the District of Columbia. Predictably, the local union of the United Food and Commercial Workers was not enthused. UFCW Local 400 President Thomas McNutt went so far as to call Walmart “a wolf in sheep’s clothing,” because it’s nonunion. In reality, UFCW doesn’t want greater competition for its own employers.

However, union self-interest isn’t the only motivation that animates some Walmart critics. Self-styled community activists decry Walmart for … well, changing things. A typical such critique is a Washington Post letter to the editor by D.C. restaurateur Andy Shallal, who raises the alarm that Walmart would change the “character” of neighborhoods and add to a pattern of “destroying” local businesses, while preemptively dismissing “any academic research” that would contradict his assertions.

Try as Shallal might, he cannot dismiss research that contradict his opinions so easily. As a CEI study that analyzes the history and economics behind the anti-Walmart hysteria notes, the cant about Walmart killing downtowns is just that. Its author, Zachary Courses, says:

A handful of academic studies have analyzed the impact of Wal-Mart and other large discount retailers’ effects on the communities they enter. One of the ? rst studies, by John Ozment of the University of Arkansas and Greg Martin of the University of Wisconsin, used U.S. Economic Census data to determine the effects of what they called discount retail chains (DRCs) on rural business environments in three southern states. Looking at the period 1977–1982, and looking at county level data, they determined that overall DRCs bene?ted the communities they entered by increasing wages and employment, and strengthening other businesses that did not compete directly with the new DRC. Counties that did not have a DRC experienced an overall decline in per capita retail sales and payroll. And while counties with DRCs experiences a 3.5 percent reduction in the number of retail establishments over five years, counties without a DRC experienced a much greater loss of 10.9 percent. The authors conclude that the presence of DRCs “may create alternative opportunities for businesses that are unable to compete with large discount retail chains,” and “new businesses emerge that provide either services or products that complement the DRC’s offerings.” The picture of rural business implied by their research is a much more adaptable one, in which rather than shutting down retail activity, the presence of DRCs actually stimulates dynamic local retail growth.

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Supreme Court to Hear Wal-Mart v. Dukes

by Hans Bader on December 8, 2010

in Economy, Employment, Labor, Legal

The Supreme Court voted to hear Wal-Mart v. Dukes, granting Wal-Mart’s petition for certiorari.  The Supreme Court will decide whether a class-action rule designed to allow people to bring claims for injunctive relief based on a uniform policy by a defendant can be twisted into a weapon for demanding billions of dollars in damages over conduct at thousands of different Wal-Mart stores by thousands of different managers.

The Wall Street Journal earlier criticized the 6-to-5 ruling by the Ninth Circuit that the Supreme Court is reviewing. That controversial ruling, Dukes v. Wal-Mart, available here, allowed just six employees to bring a multibillion dollar class action lawsuit against Wal-Mart in the name of 1.5 million other Wal-Mart employees they had little in common with. As the dissenting opinion written by Judge Sandra Ikuta noted, the lawsuit was based on junk science that violated the Supreme Court’s Daubert decision, and let a few employees whose situation was anything but typical sue in the name of countless employees they shared nothing with but gender. The plaintiffs’ lawyers originally sought $450 billion.

The Ninth Circuit’s disingenuous ruling rubber-stamped a national class-action even though Wal-Mart’s hiring and promotions are decentralized and not done on a company-wide basis, and Federal Rule of Civil Procedure 23 says that national class-actions are supposed to challenge a company-wide practice. The Ninth Circuit essentially treated the absence of a company policy (one limiting managers’ individual discretion) as itself being a company policy, twisting the language of the rule inside out.  Its ruling against Wal-Mart flouted longstanding legal rules and principles.

Although the lawsuit will affect employees across the country (and the ultimate verdict may reduce the value of your retirement plan, since the mutual funds in your 401(k) probably own Wal-Mart stock), a verdict will be rendered by a left-leaning jury drawn from the San Francisco Bay Area, since the plaintiffs sued Wal-Mart in one of the most anti-employer judicial districts in America, the Northern District of California.

The Ninth Circuit judges were split largely along ideological lines, with only hard-core liberal judges in the majority, and a dissent joined in by all the moderate and conservative judges (as well as one Democratic appointee, Judge Silverman).

Radical Law Professor Goodwin Liu Approved as High-Ranking Judge by Senate Judiciary Committee, on Party-Line Vote

by Hans Bader on May 14, 2010 · 1 comment

in Economy, Employment, Labor, Legal, Personal Liberty, Politics as Usual, Regulation, Sanctimony, Zeitgeist

Radical law professor Goodwin Liu was approved to sit on the federal appeals court for the Ninth Circuit in a party-line, 12-to-7 vote, by the Senate Judiciary Committee.  His nomination now heads to the full Senate, which will confirm him unless there is a successful filibuster by Republicans.

Liu, a left-wing ideologue, is now poised to sit on the nation’s largest federal appeals court, the Ninth Circuit.  Many Ninth Circuit rulings are decided by narrow majorities, like the recent 6-to-5 ruling against Wal-Mart in a multi-billion dollar lawsuit.

Liu has been suggested by left-wing racial lobbies as a possible Supreme Court nominee, because he believes that racial preferences are not merely permitted by the Constitution (as liberal justices argued in the Bakke case), but required by it.   Liu believes that race-based busing should be required not merely within school districts, but across school district lines to create what are effectively region-wide racial quotas, a radical claim rejected by the Supreme Court long ago (the Supreme Court rejects busing across district lines even in desegregation cases).  (The slippery Liu claims to oppose racial quotas, but he supports mandating fixed racial percentages and ratios, which is exactly what racial quotas are, under a dictionary definition of “quota.”)  Racial quotas are often implemented at the urging of left-wing academics who harbor divisive and offensive racial stereotypes, such as “diversity” trainers who claim that whites are coldly “impersonal” and “intellectual” and thus need to be racially balanced with minorities who are “emotional” and “personal.”

Liu is hostile to “’free enterprise, private ownership of property, and limited government.’ According to Liu, these are ‘code words for an ideological agenda hostile to environmental, workplace, and consumer protections.’”

Liu also believes in “a constitutional right to welfare.“   Liu is also a big user of politically-correct psychobabble designed to hide judicial activism, writing that a judge is supposed to be a “culturally situated interpreter of social meaning” rather than an impartial umpire who interprets the law in accord with its plain meaning or its framers’ intent.

Bar association standards say lawyers are supposed to have practiced law for at least 12 years before being nominated to a judgeship, and should also have “substantial courtroom and trial experience.“  Liu has no trial experience, and had not even been out of law school for 12 years when he was nominated, meaning he was by definition unqualified under ABA standards.  But a liberal ABA committee, showing ideological bias, quickly rubberstamped his nomination anyway, ignoring his lack of the required qualifications, since the committee members shared his extreme political views.

The Ninth Circuit, to which Liu was nominated, already contained a lot of leftist judges.  The Wall Street Journal criticized a recent 6-to-5 ruling by the Ninth Circuit allowing six employees to bring a  multibillion dollar class action lawsuit against Wal-Mart in the name of 1.5 million other Wal-Mart employees they had little in common with.  As the dissenting opinion, written by Judge Sandra Ikuta, noted, the lawsuit was based on junk science that violated the Supreme Court’s Daubert decision, and let a few employees whose situation was anything but typical sue in the name of countless employees they shared nothing with but gender.  The plaintiffs’ lawyers sought at least $450 billion!  The intellectually dishonest ruling in Dukes v. Wal-Mart allowed just six employees to bring a national class-action even though Wal-Mart’s hiring and promotions are decentralized and not done on a company-wide basis, and Federal Rules of Procedure say that national class-actions are supposed to challenge a company-wide practice.  The Ninth Circuit’s earlier ruling against Wal-Mart was likewise an abuse of basic legal principles.

Although the lawsuit will affect employees and managers across the country (and probably reduce the value of your retirement plan, since the mutual funds in your 401(k) probably own Wal-Mart stock), a verdict will be rendered solely by a left-leaning jury drawn from the San Francisco Bay Area, since the plaintiffs sued Wal-Mart in one of the most anti-employer judicial districts in America, the Northern District of California.

In the ruling against Wal-Mart, the Ninth Circuit was split along ideological lines, with only hard-core liberal judges in the majority, and a dissent joined in by all the moderate and conservative judges (as well as a mainstream liberal Democrat Barry Silverman).

The Economics of Black Friday

by Ryan Young on November 27, 2009 · 1 comment

in Culture, Economy, Odds & Ends, Precaution & Risk, Zeitgeist

This year’s Black Friday was much more peaceful than last year’s. No tramplings were reported. There was a fight at a Wal-Mart in the wee hours, unfortunately. The store was temporarily closed, which led to this lovely scene:

[P]eople began “yelling and screaming,” pounding on the glass doors and trying to sneak into the store through the lawn and garden section. Store managers had to be sent outside to try to calm the crowd, workers said.

Which brings us to Black Friday’s most important economics lesson: not all costs are measured in money. Yes, the discounts to be had can be great. But you pay a price for them. The price can be waiting outside in the cold. It could be the crowds, the parking, or the long checkout lines. In rare cases like today’s Wal-Mart near-riot, safety becomes an issue.

Here’s an example of what I mean. Suppose the people who camp out all night end up saving $40 on their purchases. If they spend eight hours suffering in the cold, that’s a savings of only $5 per hour. Less than minimum wage. Some people don’t place much value on their time, it seems.

Or, for some people, Black Friday’s pomp, circumstance, and sales are a cultural experience. They’re worth all the trouble. For other people, they’re not. Wherever you stand, non-price costs should be factored into your shopping habits. Otherwise you just might be getting ripped off.

LibertyWeek 51: Watch for Falling Rupees

by Richard Morrison on July 14, 2009

in CEI Projects, Podcast

Your host Richard Morrison brings you Episode 51 of the LibertyWeek podcast, along with special guest co-host Jeremy Lott and Fellow in Regulatory Studies Ryan Young. We start with Judge Sotomayor in the Senate hot seat, a privacy threat from “smart” passports and why Rep. Dan Lipinski has decided your suitcase is too big. The discussion continues with Rep. John Murtha’s expanding corruption scandal, beer news from the Beaver State and the arrival of Wal-Mart in India. We wrap up with this week’s dose of brothel-themed Olympic News.

Springsteen clashes with Obama advisor on Wal-Mart

by John Berlau on February 2, 2009 · 1 comment

in Bailout Watch, Healthcare, Labor, Nanny State, Politics as Usual, Sanctimony

In between playing at the Lincoln Memorial for Barack Obama’s inaugural concert and performing the half-time show last night at the Super Bowl, Bruce Springsteen got caught in a policy controversy over a promotional deal he made. Springsteen had inked an agreement for Wal-Mart to exclusively sell and promote his new album, “Working on a Dream.” This made good business sense, given that a similar arrangement last year with Wal-Mart and hard rock bank AC/DC led to a surprise chart-topping album.

But the very mention of the name of Wal-Mart still raises the hackles of some activists, particularly those affiliated with Big Labor. They called on Springsteen to renounce the deal, and he caved, telling the New York Times, “we dropped the ball.” Springsteen said that “given its labor history, it was something that if we’d thought about it a little longer, we’d have done something different.”

But a major player on the economic team of Obama, for whom Springsteen campaigned so strongly on behalf of, disagrees strongly with Springsteen and the activists on Wal-Mart’s “labor history.” Jason Furman was a top economist on the Obama campaign, and President Obama recently named him deputy director of the National Economic Council at the White House. He is pushing strongly for the stimulus bill and other liberal fiscal priorities of the administration.

Yet when it comes to Wal-Mart, Furman doesn’t view it to be the threat to workers that many other liberals do. In fact, he has found it to have greatly improved the lives of the poor and working class Americans. In a 2005 paper entitled “Wal-Mart: A Progressive Success Story,” which he wrote as a visiting scholar at New York University’s Wagner Graduate School of Public Service, Furman concludes, “By acting in the interests of its shareholders, Wal-Mart has innovated and expanded competition, resulting in huge benefits for the American middle class and even proportionately larger benefits for moderate-income Americans.”

Furman finds that even if Wal-Mart’s had lowered wages for the retail sector — “and the evidence for this is far from clear,” he notes — “the magnitude of any potential harm is small in comparison” to the savings gain to workers as consumers from Wal-Mart lowering of prices of products. “Plausible estimates of the magnitude of the savings from Wal-Mart are enormous — a total of $263 billion in 2004, or $2,329 per household.”

Furman further dispells myths about Wal-Mart on wages, benefits, and health care. “Wal-Mart workers, like other workers in the retail sector, are paid less than the economywide average wage,” he writes, and its “health benefits are similar to or better than benefits at comparable employers.”

He also invalidates comparisons to higher-end warehouse clubs like Costco, noting that “as a result of higher margin goods and larger volumes, sales per employee are considerably larger at Costco. … Telling Wal-Mart to ape Costco’s wages is like telling Best Buy to pay its employees as much as the high-end boutique plasma television dealer across the street.” Similar points about Wal-Mart’s wages and benefits were made in a Competitive Enterprise Institute study by our adjunct scholar Zachary Courser.

But lest anyone accuse Furman of taking the libertarian line in his paper, he also fills the study with liberal policy ideas that he argues will improve the lives of Wal-Mart employees and other workers. These include expansion of the Earned Income Tax Credit and Medicaid, things that the Obama administration and congressional Democrats are fighting for in the stimulus. He even calls for Wal-Mart to join in the fight to “push to expand these public programs.”

Whatever the merits of these “progressive” ideas (and you can find plenty on them, as well as alternative free-market health care solutions, in other entries at Open Market), Furman is right to call for systemic public policy changes to improve workers lives rather than destructive attempts to force an individual business to change it wage structure.

One beneficial public policy change Furman could push for in the Obama administration is reversal of the Bush’s administration’s deeply flawed moratorium on retailers like Wal-Mart starting their own limited banking operations. If the government can promote a General Motors subsidiary to a bank holding company by virtues of its failure, then businesses like Wal-Mart not applying for bailouts should not be held back because of their success. Letting Wal-Mart and other firms expand into banking could expand the supply of credit and lead to reduced costs and more benefits for consumers on their savings and checking accounts.

As Americans are tightening their belts and looking for bargains, more are finding attractive the discounts at Wal-Mart and other “big box” stores. Bruce Springsteen sings about the working class, but it’s been a long time since he’s been one of them. He may want to get back to his roots by visiting a Wal-Mart, or at least taking these words from Furman’s study to heart: “To the degree the anti-Wal-Mart campaign slows or halts the spread of Wal-Mart to new areas, it will lead to higher prices that disproportionately harm lower-income families.”

While President Obama can respect Springsteen as a fine musician, as many other Americans do, he should recognize that when it comes to public policy relating to Wal-Mart and workers, Jason Furman is the true “Boss.”

(Full disclosure: Like millions of other Americans, I shop at Wal-Mart, and I also own shares of stock in the company. I have never hesitated, however, to criticize Wal-Mart when I thought the company was in error, such as on its misguided “green” initiatives.)

Why Not a Wal-Mart Bank?

by John Berlau on December 15, 2008 · 2 comments

in Bailout Watch, Economy, Legal, Politics as Usual, Precaution & Risk, Regulation

Seems like every business these days is becoming what’s called a “bank holding company” — seeking the shelter of the federal government’s deposit insurance and the ability to balance risks with more diversified lending and consumer deposits. Firms quickly granted “bank holding company” approval from authorities over the past few months range from the brokerages Goldman Sachs and Morgan Stanley to credit card company American Express.

So many businesses are suddenly getting BHC approval that columnist and blogger Michelle Malkin has joked: “MichelleMalkin.com is no longer a blog. I am putting in an application to the Fed to become a bank holding company, too.”

But ironically, many barriers still exist to legitimate retailers starting their own banking operations. Ever since Wal-Mart Stores Inc. filed an application a few years back seeking approval to form a limited banking facility to process its own credit and debit card transactions, the anti-Wal-Mart forces and much of the established banking industry led a revolt against not just Wal-Mart but any retailer forming its own bank.

House Financial Services Committee Chairman Barney Frank sponsored a bill that would have curtailed the abiility of retailers to form industrial loan corporations (ILCs), specialized banks that had existed in the retail industry since the ’80s. The bill didn’t clear Congress but in reaction, The Federal Deposit Insurance corporation put a moratorium on new and pending ILC application for more than a year, and has been slow-walking ILC approvals ever since. Wal-Mart withdrew its application in 2007.

But the recent financial upheaval and lingering recession have thrown many of the arguments against a Wal-Mart bank — even a full-service one — out the window. In fact in his column today in the financial forum Minyanville, Jordan Stein predicts that “by 2018, we’ll be banking at Wal-Mart (WMT), investing with Wal-Mart financial advisors, and applying to Wal-Mart for our mortgages.”

There have been two main arguments against a Wal-Mart bank. One is that allowing retailers like Wal-Mart to have their own banking operations would greatly add systemic risk to the deposit insurance fund and financial system in general. The other is that allowing Wal-Mart to get into banking would mean ruinous competition for Mom-and-Pop community banks.

Let’s look at these arguments in the context of the financial crisis. It’s now kind of hard to argue that a Wal-Mart bank would add any significant systemic risk to the banking system, given the incredibly stupid risks that many of the biggest established banks have taken.

Wal-Mart, by contrast, looks like an especially prudent company. Not only are consumers flocking there for bargains, but so are investors, as the company’s stock price hasn’t tumbled nearly as much as other firms of its size. (Full disclosure, like millions of other Americans, I shop at Wal-Mart and also own shares of its stock). As Stein writes in Minyanville, “as we enter the Age of Austerity, where prudent spending replaces conspicuous consumption, Wal-Mart’s latest slogan — ‘Save money. Live better.’ — will be adopted in practice by vast swaths of the population.”

As an industrial loan corporation, Wal-Mart would be covered by deposit insurance, and the deposit insurance system, as CEI has long argued, needs overall reform. But retailer-owned banks would be paying premiums that would shore up the insurance fund and, according to experts, would not be adding any significant risk.

As American Enterprise Institute scholar Peter Wallison has written: “If there is any risk to a bank’s solvency, it is greater when a bank is affiliated with a securities firm–a permitted affiliation under GLBA [the Gramm-Leach-Bliley Act passed in 1999]–than when it is affiliated with nonfinancial firms such as retailers or manufacturers. … They are subject to the risk of loss, of course, but in the absence of fraud, they are not subject to the kinds of quick implosions that occur in the financial industry when there is a loss of market confidence.”

As for the populist argument, would allowing a Wal-Mart bank any more of a threat to community banks than allowing Wall Street behemoths Goldman and Morgan to open branches and take deposits, as the Federal Reserve recently did when it granted them BHC status? And the most important populist argument for policy makers should be the consumers and small businesses that would benefit from the choice and competition in banks for their saving and borrowing.

As MSN money coumnist Liz Pulliam Weston wrote a few years back: “Imagine for a moment if the world’s biggest retailer put the pricing squeeze on one of the world’s more profitable businesses: financial services. Who would pay the price? Perhaps: Mortgage lenders who surprise their borrowers with last-minute junk fees. Banks that nickel and dime their small account holders to death.”

Over the years, CEI certainly hasn’t been crazy about everything Wal-Mart has done, particularly some of its so-called green initiaives. But there’s no doubt that a Wal-Mart bank would make the open market that much more “open.”