Ask the Libertarian

Why do libertarians love Wal-mart? Is a giant, faceless company that pays low wages the best the free market has to offer? If so, I’ll take my mixed economy any day.

Paul Sinnot

San Diego, CA

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Perhaps instead of asking “why” you should have asked “do.” That is, “do libertarians love Wal-mart?” I think the answer to that question gets closer to the heart of the matter.

There is a cottage industry that celebrates Walmart as a free market success story, peddling books with titles like The Wal-Mart Revolution: How Big Box Stores Benefit Consumers, Workers, and the Economy. And the apparent benefits and virtues of the company seem to be many: thrift is practiced at the top as well as the bottom, the company leverages unprecedented economies of scale, and it remains a text book case study for its management.

However, not all of Wal-Mart’s actions resemble free market behavior. Like many other big box retailers, in some regions, Wal-Mart is known for effectively charging local governments for the opportunity to have a store built in their city. Retailers leverage expected revenues in return for tax breaks and other incentives, benefits that aren’t available to mom ‘n pop shops or entrepreneurs. Stephen Bainbridge makes the point well:

…much of Wal-Mart’s success comes from special deals it cuts with government: “even if the subsidies given Wal-Mart by many local communities to encourage opening a store are not as large as Wal-Mart’s critics claim, does anyone seriously doubt that Wal-Mart often gets breaks on things like zoning, property or sales taxes, and other regulatory issues that small business competitors don’t receive?” The myth that Sam Walton did it on his own is just that – a myth. At every step, he had huge help from government.

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On the one hand, government should not legislate against Wal-Mart and its ilk. On the other hand, government should not subsidize Wal-Mart either through zoning or tax breaks. Wal-Mart’s a big boy, so to speak, who can take care of itself. We ought to let it compete in a free market. And those of us with a bully pulpit out to use it to encourage Wal-Mart to become a better neighbor and citizen.

Absolutely.

Roderick Long in a recent essay for Cato Unbound, dealt with the perception of libertarians as hacks for corporatism:

Defenders of the free market are often accused of being apologists for big business and shills for the corporate elite. Is this a fair charge?

No and yes. Emphatically no—because corporate power and the free market are actually antithetical; genuine competition is big business’s worst nightmare. But also, in all too many cases, yes —because although liberty and plutocracy cannot coexist, simultaneous advocacy of both is all too possible.

First, the no. Corporations tend to fear competition, because competition exerts downward pressure on prices and upward pressure on salaries; moreover, success on the market comes with no guarantee of permanency, depending as it does on outdoing other firms at correctly figuring out how best to satisfy forever-changing consumer preferences, and that kind of vulnerability to loss is no picnic. It is no surprise, then, that throughout U.S. history corporations have been overwhelmingly hostile to the free market. Indeed, most of the existing regulatory apparatus—including those regulations widely misperceived as restraints on corporate power—were vigorously supported, lobbied for, and in some cases even drafted by the corporate elite.[1]

Corporate power depends crucially on government intervention in the marketplace.[2] This is obvious enough in the case of the more overt forms of government favoritism such as subsidies, bailouts,[3] and other forms of corporate welfare; protectionist tariffs; explicit grants of monopoly privilege; and the seizing of private property for corporate use via eminent domain (as in Kelo v. New London). But these direct forms of pro-business intervention are supplemented by a swarm of indirect forms whose impact is arguably greater still.

After admitting that it’s perfectly understandable why libertarians are tarred as corporate shills, Long concludes, convincingly,

In a free market, firms would be smaller and less hierarchical, more local and more numerous (and many would probably be employee-owned); prices would be lower and wages higher; and corporate power would be in shambles. Small wonder that big business, despite often paying lip service to free market ideals, tends to systematically oppose them in practice.

So, revisiting your original question, I think Wal-Mart is equal parts ruthless competitor (as the market demands) and abuser of governmental favors, and deserve equal shares of praise and condemnation.

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