Wal-Mart Helps the Poor

Frontier Centre, Globalization, Uncategorized, Worth A Look

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