The Metaphysical Status of the Free Lunch

Wednesday, August 03, 2005

For some time, I've thought off and on about discussing the attacks on Wal-Mart coming from the left, but have not gotten to it for one reason or another. Today, there is a piece in the New York Times on this topic which brings up some interesting points of fact and allows me to bring up a point I've been wanting to for awhile.

... Wal-Mart's headquarters in Bentonville, Ark., must feel less like a hotbed of retailing than like a war room. The company faces a groundswell of criticism, largely focused on its treatment of workers. From low wages to limited health care coverage, Wal-Mart has some issues to tackle, and it has mostly responded with feel-good television advertisements and denial. But to chalk up Wal-Mart's success simply to the exploitation of its work force, as many of the company's most ferocious critics do, is simply wrong, for two reasons.

First, Wal-Mart hasn't just sliced up the economic pie in a way that favors one group over another. Rather, it has made the total pie bigger. ...

Second, most of the value created by the company is actually pocketed by its customers in the form of lower prices. ...
Read the article for elaborations upon these two points. One weakness in the article leads directly to a larger point I've been wanting to make concerning certain criticisms of Wal-Mart as a welfare-state beneficiary. This kind of criticism is worth noting because it pops up all the time, with regard to what some would prima facie regard as totally unrelated issues. But one common thread unites them all, as you will see.

Consider this statement, which alludes to complaints that Wal-Mart takes advantage of the welfare state.
These kinds of savings to customers far exceed the costs that Wal-Mart supposedly imposes on society by securing subsidies, destroying jobs in competing stores, driving employees toward public welfare systems and creating urban sprawl. Even if these offenses could all be ascribed to Wal-Mart, their costs wouldn't add up to anything like $16 billion.
Within the scope of an article like this, it is fine to note as a point of fact that Wal-Mart is putting more into the economy than it is "taking out" in terms of, say, Medicare. However, the authors commit a fundamental philosophical error in how they approach this point.
... Wal-Mart's customers tend to be the Americans who need the most help. Our research shows that Wal-Mart operates two-and-a-half times as much selling space per inhabitant in the poorest third of states as in the richest third. And within that poorest third of states, 80 percent of Wal-Mart's square footage is in the 25 percent of ZIP codes with the greatest number of poor households. Without the much-maligned Wal-Mart, the rural poor, in particular, would pay several percentage points more for the food and other merchandise that after housing is their largest household expense.
If you reached this passage and then said, "Ah! In other words, Wal-Mart's purpose is to help the poor, not to make money for its shareholders? Bloody altruists!" You have already zoomed right past the error I am talking about. I don't think the authors argue this point so much as make it to show that, even by the standards of those who do accept that notion, Wal-Mart is aiding the poor. (Whether this is the right way to defend Wal-Mart is a separate issue.) In any case, it is neither here nor there whether these authors would agree with that notion.

What I find more interesting is that in the public debate over Wal-Mart, the existence of the welfare state is being taken for granted. As Ayn Rand might put it, man-made has acquired the status of the metaphysically given in the minds of far too many people.

In the great Wal-Mart debate, I have so far seen no one point out that the costs (in taxation) of Wal-Mart in terms of its employees' reliance on Medicare are not Wal-Mart's fault. Its workers, after all, are free to seek other employers and other medical plans. It is the government, by guaranteeing medical coverage to certain income groups, that is in fact, adding to the "cost" of Wal-Mart to the public. Worse still, it does this not just to customers of Wal-Mart, who would (and should) be the only ones affected were Wal-Mart to offer comparable medical coverage to workers currently accepting Medicaid, but to every non-customer taxed to support Medicaid.

The fact that the welfare state is taken for granted thus leads to a corporation being blamed for what is beyond its control -- and the real culprit, the government, being curiously absent from the list of suspects! Wal-Mart can't threaten someone who resists paying taxes to support Medicaid with jail or fines or confiscation of property. Only the government can do that. In a free economy, Wal-Mart would not be compelled to offer medical coverage to all its workers, but it might, to attract or avoid losing them. It may or may not have to raise prices to do so. But taxes would be out of the question.

While I do not admire Wal-Mart for counseling its employees to take Medicare, its current practice is made possible entirely by the government's intervention in the economy. This isn't the cost of Wal-Mart. It's a tiny portion of the cost of the welfare state! The Times article is good for what it does point out in Wal-Mart's favor, but this more important point would have been nice to see mentioned, even in passing.

And so it is that after decades of a bloated welfare state and two feeble attempts to reverse its growth (the Reagan "revolution" and the congressional elections of 1994), the welfare state is once again widely accepted as a condition of human existence which circumscribes public debate in many areas.

It is very interesting to consider how taking government interference for granted affects nearly every issue in the public debate, and all sides. Some who might be opposed to its expansion, as the writers above seem to be in the case of Wal-Mart, miss very important points as I have already mentioned. Others happily leverage this common mistake for their own ends. Yesterday, I touched on these three aspects of this problem. I will review each here.

(1) On the pervasive acceptance of government interference in many areas of our lives.
The very idea of the government not owning most parks and war memorials is inconceivable to most people. Ditto for a wholly private educational system. Or complete abolition of the welfare state. (Since when did religious charities not receiving funds from the state become persecution?)
(2) On how some will leverage this acceptance to further their quest for more government interference when it suits them.
But Krauthammer is no capitalist, as evidenced by his glee over the fact that student religious groups and religious charities can -- at long last -- suckle at the government teat.
(3) On how their own acceptance of the bloated state as a given hamstrings some when they attempt to argue for more freedom.
"If you believe that science is reason?" What if you don't? Or what if you think that reason is subordinate to faith as a means of learning about the world? ... And suppose you're a government official as well, say a member of a school board? ...You will vote to have creationism taught alongside or even instead of evolution. ... The only way to achieve Krauthammer's nightmare scenario of creationism being taught in [most] schools is to compound the illegitimate institution of public education with a failure to prohibit the state from promoting religion.
So we have just seen how the Wal-Mart debate as well as that over creationism are warped by the idea that government force is a part of the human condition. This same kind of confusion is also very prevalent in the immigration debate, when appeals like the following are made.
More than 33.1 million immigrants live in the United States, a number unprecedented in U.S. history. Poverty rates for immigrants and their U.S.-born children are two-thirds higher than for native-born Americans and their children and account for approximately 25 percent of those now living in poverty in this country. Twenty-four of the southernmost U.S. states have accrued almost $1 billion in unpaid medical care - all attributed to illegal immigration.
While I am not arguing against some immigration reform (primarily with the end of keeping terrorists out of the country), I wish to indicate that this kind of thinking distorts the debate. The problem lies with the "safety net" of the welfare state, not with immigrants per se. Andrew Lewis elaborates upon this point further here.

As one who agrees with of the moral defense of laissez-faire capitalism offered by Ayn Rand, I have often in the past focused, when advocating capitalism, on its moral justification. While I have always been aware that many people will regard privatization of, say, education, as radical or borderline insane, I am not sure that I fully grasped the magnitude of the problem. I suspect that many who favor smaller government fall into this trap, even if by failing to notice when this assumption is being made. After all, I did this myself when I first read the Times article. My first thought, after all, was, "This is good!" It should have been, "Since when did Wal-Mart start collecting taxes?"

-- CAV


8-4-05: Corrected Andrew Lewis's name. The hazards of dashed-off tripe!


Vigilis said...

Interesting blog, GVH.

Gus Van Horn said...

Thanks, Vigilis. Good to see you here.