Examining Economic 'Power'

“Is Wal-Mart Good for America?”

That is the headline on a New York Times story about the country’s largest retailer. The very idea that third parties should be deciding whether a particular business is good for the whole country shows incredible chutzpa.

The people who shop at Wal-Mart can decide whether that is good for them or not. But the intelligentsia are worried about something called Wal-Mart’s “market power.”

Apparently this giant chain sells 30 percent of all the disposable diapers in the country and the Times reporter refers to the prospect of “Wal-Mart amassing even more market power.”

Just what “power” does a sales percentage represent? Not one of the people who bought their disposable diapers at Wal-Mart was forced to do so. I can’t remember ever having bought anything from Wal-Mart and there is not the slightest thing that they can do to make me.

The misleading use of words constitutes a large part of what is called anti-trust law. “Market power” is just one of those misleading terms. In anti-trust lingo, a company that sells 30 percent of the disposable diapers is said to “control” 30 percent of the market for that product. But they control nothing.

Let them jack up their prices and they will find themselves lucky to sell 3 percent of the disposable diapers. They will discover that they are just as disposable as their diapers.

Much is made of the fact that Wal-Mart has 3,000 stores in the United States and is planning to add 1,000 more. At one time, the A & P grocery chain had 15,000 stores but now they have shrunk so drastically that there are probably millions of people — especially in the younger generation — who don’t even know that they exist.

An anti-trust lawsuit back in the 1940s claimed that A & P “controlled” a large share of the market for groceries. But they controlled nothing. As the society around them changed in the 1950s, A & P began losing millions of dollars a year, being forced to close thousands of stores and become a shadow of its former self.

Let the people who run Wal-Mart start believing the talk about how they “control” the market and, a few years down the road, people will be saying “Wal-Who?”

With Wal-Mart, as with A & P before them, the big bugaboo is that their low prices put competing stores out of business. Could anyone ever have doubted that low-cost stores win customers away from higher-cost stores?

It is one of the painful signs of the immaturity and lack of realism among the intelligentsia that many of them regard this as a “problem” to be “solved.” Trade-offs have been with us ever since the late unpleasantness in the Garden of Eden.

How could industries have found all the millions of workers required to create the vast increase in output that raised American standards of living over the past hundred years, except by taking them away from the farms?

Historians have lamented the plight of the hand-loom weavers after power looms began replacing them in England. But how could the poor have been able to afford to buy adequate new clothing unless the price was brought down to their income level by mass production machinery?

Judge Robert Bork once said that somebody always gets hurt in a court room. Somebody always gets hurt in an economy that is growing. You can’t keep on doing things the old way and still get the benefits of the new way.

This is not rocket science. But apparently some people just refuse to accept its logical implications. Unfortunately, some of those people are in Congress or in courtrooms practicing anti-trust law. And then there are the intelligentsia, perpetuating the mushy mindset that enables this counterproductive farce to go on.

This refusal to accept the fact that benefits have costs is especially prevalent in discussions of international trade. President Bush’s ill-advised tariff on foreign steel was a classic example of trying to “save jobs” in one industry by policies which cost far more jobs in other industries making products with artificially expensive steel. Fortunately, he reversed himself.

Is it still news that there is no free lunch?