Tuesday, November 29, 2005

The High Benefit of Low Prices

As I have commented before, WalMart has become the limousine left's favorite whipping boy, responsible for all of society's ills (well except for those caused by Halliburton). Cafe Hayek addresses this, commenting on a Washington Post article. One thing the left doesn't quite seem to understand is it isn't the cocktail circuit crowd that benefits from WalMarts low prices, it is the poor people that they claim to want to help. If the government gives poor people 10% more money, that is good in their eyes, but if WalMart allows them to buy goods at 15% lower prices, they are indifferent to the benefits. This isn't about economics, it is about control.

Wal-Mart's critics allege that the retailer is bad for poor Americans. This claim is backward: As Jason Furman of New York University puts it, Wal-Mart is "a progressive success story." Furman advised John "Benedict Arnold" Kerry in the 2004 campaign and has never received any payment from Wal-Mart; he is no corporate apologist. But he points out that Wal-Mart's discounting on food alone boosts the welfare of American shoppers by at least $50 billion a year. The savings are possibly five times that much if you count all of Wal-Mart's products.

These gains are especially important to poor and moderate-income families. The average Wal-Mart customer earns $35,000 a year, compared with $50,000 at Target and $74,000 at Costco. Moreover, Wal-Mart's "every day low prices" make the biggest difference to the poor, since they spend a higher proportion of income on food and other basics. As a force for poverty relief, Wal-Mart's $200 billion-plus assistance to consumers may rival many federal programs. Those programs are better targeted at the needy, but they are dramatically smaller. Food stamps were worth $33 billion in 2005, and the earned-income tax credit was worth $40 billion.