I was channel surfing tonight while and caught a little segment on O’Reilly where Wayne Rogers and Jay Nordlinger (Impromptus — National Review) were discussing Walmart with O’Reilly. Rogers, who is a frequent guest on the money shows, was taking Walmart to task, not for being a poorly run business and not because he had proof that it was doing anything wrong, but because it was too successful. As a result of its success it drives mom and pop stores out of business in small towns. Rogers didn’t seem to have any particular compassion for the small store owners, but was upset that the ultimate effect was a negative impact on the culture. He alluded to the trust busting years and how big conglomerates in those days had to be broken up. He said he wasn’t suggesting that the government yet do that to Walmart, or even regulate it, but that day might come. Then later in the show he did seem to suggest that regulation was possible. This really bothers me.
I do happen to have sympathy for the mom and pop stores who are forced to close as a result of big stores like Walmart but I think it’s very dangerous, anti-capitalistic, and anti-American to start talking about regulating companies whose only crime is that they were too successful. That’s always been the paradox of antitrust. Or at least it seems to be. In the name of promoting competition we punish the competitor that was too successful. Granted, usually antitrust activity is reserved for those entities who engage in some unlawful practice beyond just cornering the market. But sometimes the lines can be blurred. If a company acquires a corner of the market through acquisitions, as opposed to real competition, it could run afoul of the antitrust laws — but I better stop talking about this before I get way over my head on this technical subject on which I’m not an expert.
What is often missing from these discussions, just as it is from many discussions between free traders and protectionists, is that the consumer is usually the beneficiary. Rogers was talking about Walmart’s ability to get discounts with its suppliers because of its buying power as if that was all bad. Yes, it’s bad in the sense that smaller companies can’t compete. But it’s ultimately great for the consumer if those cost savings are passed on to him. It’s a tough issue, but I am strongly against the government interfering with our economic freedom whether through regulating successful businesses or putting caps on people’s salaries, which is sometimes discussed. On what basis would Rogers have Walmart and similar companies regulated? It’s a scary thought.
Update: Here’s the relevant part of the transcript:
WAYNE ROGERS, INVESTMENT STRATEGY: Well, all due respect to Jay, he used the word “good.” That’s a moral judgment. I think — I disagree in the following sense. I think that Wal-Mart is a wonderful economic model, and, if you want to talk about unbridled capitalism, yes, Wal-Mart is a great example of that.
Are they a responsible citizen? And I say that in the following way: Smalltown America — and I’m talking about, you know, towns 25,000 plus or minus. Wal-Mart, when they move into a town like that, destroys that town in the following sense.
They destroy the economic base. The basis of America, Mr. Nordlinger, all due respect, is competition. When Wal-Mart moves in, they remove that competition, and those people in that town who represent a middle-class entrepreneurial segment — that destroys the community because the community depends on them.
You won’t have libraries. You won’t have charitable organizations. You won’t have museums. You won’t have those things that make part of America the culture…
O’REILLY: Yes, but — wait.
ROGERS: … and they’re exactly the opposite, accusing them of being America, they are anti-American in their practices.
O’REILLY: But wait. Here’s the deal, though. I mean, we are a country that thrives on competition.
Now I know what you’re saying. You get the big Wal-Mart out in the suburbs, people don’t go downtown to shop. They go out to Wal-Mart. And then the little mom-and-pop stores that sell hardware or groceries or whatever go out of business.
But you can’t regulate that kind of stuff in a capitalistic society. What the mom-and-pops have to do is either give service that Wal-Mart doesn’t or have products that Wal-Mart doesn’t to compete with that because if you start to regulate big department stores, then you no longer have a free economy.
You’re saying, well, because you’re cheaper, you can’t be here. Isn’t that anti-capitalistic?
ROGERS: I disagree with that in the following sense. We know at the turn of the century that we had those same problems with some of the major cartels. Take Standard Oil, for example, which had to be broken up under the antitrust laws.
I am not suggesting yet that Wal-Mart is in that position, but I am saying that that trend is bad. Bigness is bad. They can buy cheaper because they buy volume. They can pass that along, yes…
O’REILLY: Yes, but that’s everybody.
ROGERS: … to the customer. By the way, that’s good. But in the same time, when they destroy competition in that town, they destroy the culture. That’s what’s bad.
O’REILLY: Yes, but you can’t — you’re almost getting into a socialistic area.
OK. Go ahead.
NORDLINGER: Well, if Wal-Mart destroys competition in a certain town, it could be that competition deserves to be destroyed. It could be that they weren’t providing the right kinds of services or the right prices.
This is the way the market works, and, of course, it’s bruising. It’s dislocating. A lot of people don’t like it, and I don’t really blame them.
This dynamic kind of capitalism is a little bit frightening for people…
O’REILLY: All right. Look, I want…
NORDLINGER: …but on the whole, it’s good.
O’REILLY: I want a fair capitalism. So let’s get into that area.
Now, Mr. Rogers, McDonald’s, Burger King and all these, they sell burgers pretty cheap, all right. Louie’s Diner — I’ve got a Louie’s Diner in my town. I like Louie. He’s a good guy. He works like an animal. I mean, he works all the time. I go to his place and buy his burger, which is twice as expensive as the Burger King deal, because I like Louie. I think his burger’s better and Louie knows my name, and it’s a better experience.
That’s what we are talking about here. Competition, right?
ROGERS: Not totally, no, because you’re thinking that Louie’s burger is a different — that’s a totally different thing because you’re saying — you’re taking a margin on an item that is not that great. You’ll pay a little more for that because you’re going to pay, you know, 50 cents more or something like that.
That’s not as meaningful as somebody who goes into Wal-Mart who’s going to spend a couple of hundred dollars on an item, and, because Wal- Mart has great buying power — by the way, I’m not arguing the economics of it. It’s a great model. It’s a terrific model.
I’m arguing against the fact that they’re taking advantage of a massive capitalistic economy, which I’m in favor of, don’t misunderstand me…
O’REILLY: I can’t — I’m not…
ROGERS: … but — but…
O’REILLY: You know, you’re in favor of it, but you don’t like Wal- Mart. Look — and the other thing is…
ROGERS: That’s true because Wal-Mart does not compete properly. In other words, that guy — if you wipe out the middle class in a small town, you wipe out the community. That’s what’s wrong.
O’REILLY: Well, why aren’t they competing properly? What are they doing…
O’REILLY: … that’s wrong in their competition model?
ROGERS: They are not doing anything wrong. It’s we who — the citizens are not regulating that appropriately.
O’REILLY: All right.
ROGERS: That’s what I’m saying. By the way…
O’REILLY: All right, but how about this?
ROGERS: … this industry that we’re in — the one we’re in right now…
ROGERS: I’m talking about the broadcast industry. It’s regulated. Slightly, but regulated. If that regulation goes away, you will have less competition, and the news will be managed, and that’s what you complain about now.
O’REILLY: But it’s a different situation. You acknowledge Wal-Mart’s not doing anything wrong, OK. They’re operating within the law.
ROGERS: Well, I don’t know that they’re doing anything wrong. They may be.
O’REILLY: All right. Well, if they are, they should be punished. But you — we don’t know.
ROGERS: Yes, correct.
O’REILLY: But, anyway, the guy working can’t get the big-screen TV unless he gets the Wal-Mart price. So, if Wal-Mart’s not there, you’re going to have working Americans, poor Americans not being able to have what you and I have. How about that?
ROGERS: I disagree with that because there would be more competition. There won’t be Wal-Mart that’s wiped out three stores. The three stores will be competing with each other.
And it’s not that big a margin to pay for a community when you’re paying for something that is part of your community where, otherwise, you’re going to destroy the culture of that community, and I’m talking about the entrepreneur who supports his local community.
O’REILLY: I don’t know. I think the entrepreneur has got to be nimble and give a better price.
I’m going to give you the last word, Mr. Nordlinger.
NORDLINGER: I think Mr. Rogers makes some good points, but I’ll tell you in my experience — and this is just a generalization — those who are most critical of Wal-Mart are those who can afford not to shop there. They don’t have to shop there. They have a little more money. They can go to the boutiques or whatever. Wal-Mart is a Godsend for people of little income.
O’REILLY: All right. I can’t wait to see the mail on that. Gentlemen, very interesting discussion. We appreciate it. Merry Christmas to everybody.