Attention Wal-Mart Shoppers!

Wal-Mart has become the anti-capitalist and pro-union left's favorite whipping boy, and cities far and wide have started active campaigns to keep the discount retailer out of their back yards. I personally shop at Wal-Mart very, very rarely. I don't mean to sound elitist or anything, it's just that I can usually find better stuff at Target or Costco, and everytime I walk into a Wal-Mart I feel like I'm losing brain cells. The last time I was there I had to leave quickly before I lost long division.

However, Wal-Mart does provide a very valuable service to those patrons who choose to shop there, and today in the New York Times (of all places) there was an article defending Wal-Mart and the impact it has on local communties. I thought it was worth repeating here.

NOWADAYS, mighty Wal-Mart's headquarters in Bentonville, Ark., must feel less like a hotbed of retailing than like a war room. The company faces a groundswell of criticism, largely focused on its treatment of workers. From low wages to limited health care coverage, Wal-Mart has some issues to tackle, and it has mostly responded with feel-good television advertisements and denial. But to chalk up Wal-Mart's success simply to the exploitation of its work force, as many of the company's most ferocious critics do, is simply wrong, for two reasons.

First, Wal-Mart hasn't just sliced up the economic pie in a way that favors one group over another. Rather, it has made the total pie bigger. Consider, for example, the conclusions of the McKinsey Global Institute's study of United States labor productivity growth from 1995 to 2000. Robert Solow, a Nobel laureate in economics and an adviser on the study, noted that the most important factor in the growth of productivity was Wal-Mart. And because the study measured productivity per man hour rather than per payroll dollar, low hourly wages cannot explain the increase.

Second, most of the value created by the company is actually pocketed by its customers in the form of lower prices. According to one recent academic study, when Wal-Mart enters a market, prices decrease by 8 percent in rural areas and 5 percent in urban areas. With two-thirds of Wal-Mart stores in rural areas, this means that Wal-Mart saves its consumers something like $16 billion a year. And because Wal-Mart's presence forces the store's competitors to charge lower prices as well, this $16 billion figure understates the company's real impact by at least half.

These kinds of savings to customers far exceed the costs that Wal-Mart supposedly imposes on society by securing subsidies, destroying jobs in competing stores, driving employees toward public welfare systems and creating urban sprawl. Even if these offenses could all be ascribed to Wal-Mart, their costs wouldn't add up to anything like $16 billion.

Similarly, the savings to customers also exceed the total surplus the company generates for its shareholders- a surplus that would be wiped out if Wal-Mart's million-plus employees were to receive a $2-per-hour pay increase, modest though that sounds. Such a possibility would be unacceptable to Wal-Mart's shareholders, who include not only Sam Walton's heirs but also the millions of Americans who invest in mutual funds and pension plans. Instead, the more than 100 million Americans who shop at Wal-Mart would most likely just end up paying higher prices.

This last point suggests that the debate around Wal-Mart isn't really about a Marxist conflict between capital and labor. Instead, it is a conflict pitting consumers and efficiency-oriented intermediaries like Wal-Mart against a combination of labor unions, traditional retailers and community groups. Particularly in retailing, American policies favor consumers and offer fewer protections to other interests than is typical elsewhere in the world. Is such pro-consumerism a good thing?

The answer depends on who these consumers are, and Wal-Mart's customers tend to be the Americans who need the most help. Our research shows that Wal-Mart operates two-and-a-half times as much selling space per inhabitant in the poorest third of states as in the richest third. And within that poorest third of states, 80 percent of Wal-Mart's square footage is in the 25 percent of ZIP codes with the greatest number of poor households. Without the much-maligned Wal-Mart, the rural poor, in particular, would pay several percentage points more for the food and other merchandise that after housing is their largest household expense.

So in thinking about Wal-Mart, let's keep in mind who's reaping the benefits of those "everyday low prices" - and, by extension, where the real conflict lies.