Let Markets Decide Where Wal-Mart Goes

Published July 1, 2004

How would you like to be penalized because you do your work too well–for example, running your business so effectively that it attracts hordes of happy customers? Well, this is what is happening more and more frequently to Wal-Mart.

Recently the West Covina, California City Council voted to deny the sale of land to developers who were going to build a Wal-Mart store on the site. The Chicago City Council decided to allow Wal-Mart to build one of two stores on Chicago’s West and South Sides.

Wal-Mart is one of the most impressive success stories in the history of business. Founded some 50 years ago as a single five-and-dime store in a small Arkansas town, it has grown into a worldwide behemoth. It is the largest corporation in America in terms of sales, $245 billion in 2003. Wal-Mart has 3,586 stores in the U.S. and employs 1.2 million U.S. workers, 42,000 in Illinois.

It is true that Wal-Mart has been successful in out-competing other stores that sell the same products, such as toys, clothing, and groceries. But how has it been able to do this? By discovering new ways of using computer systems and other technology to better manage its inventory and costs and reap the benefits of economy of scale.

Wal-Mart is popular among low-income shoppers who cannot afford the prices of the more upscale stores. It has put other stores out of business, but that is the way capitalism works. The automobile replaced the horse and buggy. Sound motion picture replaced the silents. No one has a “right” to business success or a “right” to be protected from competitors through government intervention. One only has a right to try to compete through voluntary trade. In a free economy, companies that offer the best value for the dollar win and the losers invest their money elsewhere.

It is also true that Wal-Mart pays lower wages than many unionized stores. But it must offer a market wage or risk its employees going elsewhere, and it deals with employees on a voluntary basis. Those who do not like its terms are free to do business elsewhere. This makes the company especially hated by organized labor, such as the grocery unions. By coercively restricting the supply of labor, these unions, backed by government laws and regulations, have been able to extort wages and benefits far above those that would exist in a truly free labor market. In a free market, how many people doing relatively unskilled work would get $17 to $19 per hour plus full medical benefits? Unions, of course, have the right to organize and picket … but not to benefit from government regulations that give them special favors. No one has the right to dictate what a company offers to pay others.

There is only one morally proper way to keep Wal-Mart out of any community: Don’t patronize its stores. If Wal-Mart cannot make money in a given location, it will either not move there or it will close the store. So far, however, it makes money everywhere it opens a store for one simple reason: People want to shop there. The low prices Wal-Mart offers make people wealthier. They can buy a wide range of goods that they could not otherwise afford and they can use the money they save for other purposes.

Local government officials should not be allowed to abuse their power by keeping out stores that people want to shop in. Nor, of course, should Wal-Mart be allowed to use eminent domain laws, as it is trying to do in several states, to force property owners to sell their land. But provided it refrains from using eminent domain, we should welcome every store that Wal-Mart builds. We should thank Wal-Mart for being so good at giving people what they want that Wal-Mart can make huge profits, which enables the company to build more stores, hire more employees, give more profit opportunities to suppliers, and make even more customers happy.

Wal-Mart should not be feared but should be admired as an American ideal–a classic rags-to-riches story. Trying to stop Wal-Mart is not only morally wrong, it is un-American.

Edwin A. Locke is a senior writer for the Ayn Rand Institute. He can be reached at http://www.edwinlocke.com/. This essay was first published on May 25, 2004 by the Chicago Sun-Times.