WAL-MART IS GOOD FOR AMERICA

November 22, 2004

The main beneficiaries of Wal-Mart's low-price policy are the poor, who can now afford products that would be out of their reach but not for Wal-Mart, improving their lives and raising their standard of living, says Bruce Bartlett.

Wal-Mart, all by itself, was responsible for a significant amount of the productivity miracle we have seen in this country over the last decade. In a 2001 report, the McKinsey Global Institute, a respected think tank, concluded that Wal-Mart's managerial innovations had increased overall productivity by more than all the investments in computers and information technology of recent years:

  • Wal-Mart's innovations include large-scale (big box) stores, economies of scale in warehouse logistics and purchasing, electronic data interchange, and wireless barcode scanning.
  • These gave Wal-Mart a 48 percent productivity advantage over its competitors, forcing them to innovate as well, thus pushing up their productivity.
  • The McKinsey study found that productivity improvements in wholesale and retail trade alone accounted over half of the increase in national productivity between 1995 and 1999.

A new study from the prestigious National Bureau of Economic Research found that Wal-Mart has a substantial effect on reducing the rate of inflation. For example:

  • It typically sells food for 15 percent to 25 percent less than competing supermarkets. Interestingly, this effect is not captured in official government data.
  • Fully accounting for it would reduce the published inflation rate by as much as 0.42 percentage points or 15 percent per year.

Ignoring these beneficial macroeconomic effects, critics focus almost exclusively on the loss of jobs allegedly caused by Wal-Mart. However, , academic research by economist Emek Basker of the University of Missouri contradicts this point, finding that Wal-Mart permanently raises local employment, says Bartlett.

Source: Bruce Bartlett, "Wal-Mart is Good for America," National Center for Policy Analysis, November 22, 2004.

 

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