You may remember that back in November, the firm Global Insight released a big study that claimed "total cumulative savings to consumers" by shopping at Wal-Mart and taking advantage of its alleged low prices "amounted to $263 billion by 2004, or $895 per person." This was the basis of claims by various conservatives (and a former Kerry advisor named Jason Furman) that Wal-Mart is really a progressive force that liberals should embrace.
My first inclination upon hearing this was "what does Wal-Mart do for me if I don't shop there?" In fact, Global Insight argues that Wal-Mart has indirect effects on other grocers by forcing them to bring their prices down:
Anecdotal evidence suggests that when Wal-Mart enters a market, its everyday low prices are anywhere from 5% to 25% lower for identical goods. In addition, Wal-Mart's presence in a market has led its competitors to lower their prices.
This leads me to ask a few obvious questions:
- If Wal-Mart's prices start lower, do they stay lower? Global Insight based its conclusions on the Dallas/Fort Worth area. Last time I checked, there was still competition Dallas/Fort Worth. What about those little towns in Texas where all the other grocers are gone now? Are you trying to tell me that Wal-Mart will never raise its prices on anything, even after its competition has disappeared?
- How many identical items does Wal-Mart have with other grocers? Sure there are some big name brands, but are they assuming that an apple is an apple even if one is brusied or older because it was imported from a low wage South American country with no pesticide regulations? If I only buy organic food, does that mean that Wal-Mart doesn't save me a cent? Are the conservatives and DLC Democrats who now tout Wal-Mart's virtues as an anti-poverty tool condemning the poor to eat crap?