Presented with the kind permission of The Independent Institute
Ken Jacobs, Chair, U.C. Berkeley Labor Center – versus – Richard Vedder, Professor of Economics, Ohio University
Excerpt of introduction to this debate given by David Theroux, President of The Independent Institute …
As everyone here knows, the entry and operations of big-box retailers has become a major controversy in various communities. But in the history of economic development, many of the issues being debated are really not new ones. Instead, the same questions were raised when people first began to specialize from what were considered changes that were different from the norm many years ago.
Once upon a time, most communities were based on a subsistence, self-reliant kind of existence. That essentially changed into economies based on division of labor, where skills were divided up as far as production and trade, in both farming and manufacturing. The previous self-sufficient “starvation” of subsistence, essentially, was replaced by markets of craftspeople, who would sell their products directly to consumers.
Craftspeople then found that specialized vendors could expand their markets, their sales reach, and would enable them to cut costs and specialize further. Specialty vendors in turn reduced their cost and risk by becoming middlemen and women for dry goods and other general stores, which was a significant innovation in the history of retailing. Which then, in turn, reduced the time and cost of shopping for consumers.
General stores eventually faced the economies of scale from dime stores and department stores, like Sears and Macys. And supermarkets, like Safeway and Lucky’s. The shopping center arose after World War II, and with new technologies and techniques, the discount department store, or big-box stores, came into being via Costco, Wal-Mart, Target, K-Mart and others.
The most successful of these big-box retailers is, of course, Wal-Mart stores, which was founded in 1962 by Sam Walton, who incidentally, started his career in retailing by working as a clerk in a penny store in Des Moines, Iowa. So to set the stage of this night’s debate, here are some numbers that I drew from Wikipedia this afternoon, and PBS’ program Frontline.
Today Wal-Mart is the world’s largest retailer, as well as the largest corporation, with 6,700 stores, 3,400 of which are in the United States. Annual revenues of $356 billion, and 1.5 million employees worldwide, 1.2 million of whom are in the United States. As such, it is the largest private employer in the United States and Mexico, and hires 600,000 new employees each year, reflecting a company turnover of about 44 percent, which is pretty much close to the industry average, I should mention. Wal-Mart is also the largest grocery retailer in the United States, with an estimated 20 percent of retail grocery and consumable business, and the largest toy seller in the United States, with an estimated 45 percent of the retail toy business.
Some people of course argue that Wal-Mart reduces living standards, hurts retail trade, disrupts communities, and relies on government programs to provide healthcare for many of its workers. Others argue that Wal-Mart has improved America’s standards of living, with lower cost for consumers, greater employment opportunities, and healthier communities, especially for the least affluent.
So, we’re here tonight to try and sort this all out. And, as I said, we’re delighted to have two experts who have looked at many of these questions.