Over in the drifts of the far left where Alexandria Ocasio Cortez and the like reside in their democratic socialism there’s the view that Walmart is something that has impoverished the average American. Whereas it’s actually contributed, massively, to the increase in living standards of the average person. To grasp this you need to be able to understand the concept of real wages. Not a terribly difficult one, to be sure, but one that seems to puzzle all too many.
Leave aside money, inflation, all those complicating matters. The real wage is what you can get for an hour of your labour. Say that your money wage goes up but prices rise further? Your real wage has fallen. Say your wage stays static and prices do too – as was common for centuries of civilisation. Then your real wage hasn’t changed. Say that your wage even falls but prices fall even more? Then your real wage has just gone up.
This matters when considering Walmart. As the Chief of Staff to Ocasio Cortez seems not to grasp:
Here’s one counterpoint to your article, Glenn – https://t.co/dLtaSMC19i.
This doesn’t even go into the validity of the economic theory itself that you cite. ‘Wal-Mart: A Progressive Success Story” is not an unbiased review of facts, it’s trying to push a view.
— Saikat Chakrabarti (@saikatc) 25 January 2019
That paper is here. The important concept being this:[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Productivity is the principal driver of economic progress. It is the only force that can
make everyone better off: workers, consumers, and owners of capital. Wal-Mart has
indisputably made a tremendous contribution to productivity. From its sophisticated inventory
systems to its pricing innovations, Wal-Mart has blazed a path that numerous other retailers are
now following, many of them vigorously competing with Wal-Mart. Today, Wal-Mart is the
largest private employer in the country, the largest grocery store in the country, and the third
largest pharmacy. Eight in ten Americans shop at Wal-Mart.
There is little dispute that Wal-Mart’s price reductions have benefited the 120 million
American workers employed outside of the retail sector. Plausible estimates of the magnitude of
the savings from Wal-Mart are enormous – a total of $263 billion in 2004, or $2,329 per
Even if you grant that Wal-Mart hurts workers in the retail sector – and the evidence
for this is far from clear – the magnitude of any potential harm is small in comparison. One
study, for example, found that the “Wal-Mart effect” lowered retail wages by $4.7 billion in
That isn’t the amount that American save by shopping at Walmart, it’s the amount saved from the fact of Walmart’s existence. That Walmart drives more expensive Mom and Pops out of business means that people save on their shopping bills. That Walmart competes using those low prices means that every other retailer also has to lower their prices or similarly risk going bust.
And $250 billion a year is getting into real money territory as well.
There is one truth being put forward by that tail end of the Democratic Socialists. That Jason Furman’s paper is pushing a view. It also pushes it very well. The thing is the view is true. Americans are richer, vastly so, because of the existence of Walmart. Just as they’re being made richer by the retail irruption of this generation, Amazon. The economists even write papers about how Amazon is keeping the inflation rate perhaps 0.5% lower than it would be in the absence of Amazon.
Why is it that these people are complaining about something that makes us all richer?