Wednesday, September 12, 2007

The Wal-Mart Revolution by Richard Vedder and Wendell Cox

Richard Vedder and Wendell Cox.
The Wal-Mart Revolution: How Big-Box Stores Benefit Consumers, Workers and the Economy.
Washington, DC: The AEI Press, 2006.
Softcover. $20.

Richard Vedder's and Wendell Cox'sWal-Mart Revolution: How Big-Box Stores Benefit Consumers, Workers and the Economy is a solid piece of work. I have previously blogged a review of Charles Fishman's Wal-Mart Effect in which I note that Fishman's book lacks balance. I also note that Fishman fails to competently interpret research that he quotes at length, and that several of his criticisms of Wal-Mart are misguided. Despite these drawbacks to Fishman's work, I note that Fishman's Wal-Mart Effect "is likely the best that will be written in the near future about Wal-Mart's supposed ill effects." That statement is probably true. But while Fishman's is still the best book about Wal-Mart's ill effects, Vedder's and Cox's is clearly the only competent book that has been written about Wal-Mart. All the others, including Fishman's, are so much worse.

The reason may in part lie in the authors' credentials. Richard Vedder is a labor economist who is a distinguished professor at Ohio University. Vedder and Cox are able to analyze studies intelligently. In contrast, Fishman is a journalist who lacks Vedder's technical background. Moreover, Vedder does not carry the ideological biases that characterize the popular press and academic discussions about Wal-Mart, much of which (outside the economics literature) involves spilling from emptiness into the ideological void.

Vedder's and Cox's book is well worth reading from cover to cover. The authors explain somewhat technical material in very clear English. The authors present a fascinating overview of the history of retailing, and show that each generation's innovations are subjected to the same reactionary, left-wing criticisms as previous ones. The attacks on Wal-Mart that appear in a variety of websites, films, newspapers and academic conferences echo similar attacks on A&P, Standard Oil and the automobile industry.

Vedder and Cox show that Wal-Mart's contribution to American and global economic progress has been enormous and that the chief beneficiaries are the poor. In the 1970s and 1980s, it was a commonplace that productivity in the manufacturing sector grew at a faster pace than productivity in the services sector, to include retail. As Wal-Mart has grown, because of the brilliant management insights that Sam Walton pioneered, productivity growth in retail has outstripped manufacturing's. In some analyses, the productivity growth due to Wal-Mart and other big box retailers (see chart on p. 134) seems to have been an astonishing three times (300 percent) greater than in other sectors of retail and in other sectors of the economy. This implies enormous welfare gains to the American public.

Using intuitive, clear explanations, Vedder and Cox dispose of the arguments that factories in the third world make workers poorer and that because third world factories are not able to meet first world standards they should be closed. Vedder and Cox use basic economics to prove otherwise.

In recent years, the left has become increasingly indifferent to the plight of the poor, to include the poor both domestically and internationally. Vedder and Cox argue that Wal-Mart's contribution to consumer surplus in America alone is likely around five percent of gross domestic product, which they state is comparable to the contribution of the entire railroad industry during the 19th century. Yet, the left is eager to destroy Wal-Mart. Wal-Mart's raising of prices would have a maleficent effect on the poor, not only in America but throughout the third world. Wal-Mart's opponents might be viewed as advocates of starvation and deprivation.

The Wal-Mart Revolution should be read by all Americans interested in protecting progress and management innovation.

No comments: