Kevin Drum assures conservatives that there are three methods Wal-Mart uses for keeping their prices down.
1) A spectacularly efficient supply chain and logistics system that's the envy of the industry.
2) A willingness — in fact, an almost palpable enthusiasm — for using their enormous size to beat the lowest possible prices out of their suppliers.
3) A scorched-earth campaign to prevent unions from organizing at Wal-Mart sites, thus keeping wages and benefits as low as possible.
Progressives, he says, merrily embrace #1 and #2, but oppose #3. Well, uncomfortable as it is to wreck a consensus, I've got to cop to some concerns over #2 as well.
My guess is that Wal-Mart's size and might is having much more profound effects on our economy through the demands and strains it places on suppliers than through their lowish wages and benefits for direct employees (although those labor standards give them a competitive advantage over chains with higher standards, and so we race to the bottom...). So much as I want the latter to go up and unionization to rush across the land, I'm more worried that Wal-Mart's size and status as the indispensable outlet for products, when coupled with their virtually maniacal (though fully understandable) demands for lower pricing, are pushing down wages and work conditions all throughout the land and, for that matter, the world. Suppliers simply can't pay better and push the marginal cost to consumers -- Wal-Mart will drop them faster than you can say "Always low prices."
What that means is that suppliers simply can't pay better. And if they already do, Wal-Mart will make them stop. High labor costs translate to higher product costs, and if that's what the producers value, Wal-Mart, by far the largest retailer in the world, will simply promote an in-store brand or a competitor, pushing the high-paying producer out of business. It's a real problem, and one folks aren't giving enough thought to. As I've said before, I'm relatively unsure what the appropriate solution is, but it's long past time to recognize that Wal-Mart's demands are literally shaping and planning our economy, and we must decide whether the economic norms they're setting are ones we want. As the economist Rashi Fein likes to say, we live in a society, not an economy. And we need to think about how Wal-Mart's actions comport with the sort of society we inhabit. For more on this argument, do see that piece I'm always recommending by Barry Lynn. I think it really is essential to understanding the dynamics of the coming economy.
