Sebastian Mallaby's obtuse column about anti-Wal-Mart sentiment among Democrats offers me a welcome opportunity to expand on some comments I made last week. Then, referring to a Jonah Goldberg column on the same subject, I said that "how to handle Wal-Mart is among the two or three most important issues facing the country." A lot of folks ceased reading right there, dashed to their blogspot pages, and penned silly posts accusing me of not taking "Islamofascism" and health care seriously enough. Yes, if only I paid more attention to health care.
Nevertheless, the fault was mine: It was the sort of assertion I should have stuck at the argument's close, not its introduction. But here's the point: It's not about Wal-Mart. Many on the left and the right make is to believe this is primarily about how much H. Lee Scott pays his cashiers. It isn't. Rather, Wal-Mart is setting the norms and standards for the coming service economy. Where GM and Ford played this role for the manufacturing sector -- and the unions forced them to use their power to create the American middle class -- Wal-Mart is assuming primacy for manufacturing's successor, and doing so without the union involvement or commitment to high wages that their predecessors exhibited.
That's a serious concern, and it reaches into every corner of the economy. Take health care. Wal-Mart's paltry offerings -- far beneath what Costco or Target (we'll come back to them) have traditionally offered -- offer them a massive competitive advantage against the competition. So let's say you're a midsize retailer with national ambitions. You essentially can't offer a decent benefits package because Wal-Mart doesn't, and you can't allow their prices to remain substantially below yours (where they'll already rest thanks to Wal-Mart's economy of scale).
Target is a great example here: They used to offer terrific benefits, but have now resolved to move entirely to HSA's. They couldn't compete against Wal-Mart by offering comprehensive insurance, so they stopped. Or take the supermarket chains. A couple years back, Southern California saw a massive grocery strike, as the three major chains colluded to destroy benefits and lower wages in order to compete with Wal-Mart's low labor costs. The striker's lost, the supermarket's were too afraid of Wal-Mart's advantage to give in.
