Advocatus Diaboli

Fazil Mihlar has an article in the Vancouver Sun titled Saint Wal-Mart?. (Conical hat tip to LRC.) The question mark is superfluous – it’s the usual right-libertarian hagiography of Wal-Mart.

He includes his e-mail at the end of the article, so I wrote him the following note:

I read your article on Wal-Mart with interest. But I think you’ve left out one important source of Wal-Mart’s low prices – government intervention.

WaltchmartWal-Mart stores frequently acquire their land by eminent domain; in other words, they get to acquire land at lower prices than those at which the owners would be willing to sell voluntarily.

Once in business, such stores further benefit from various sorts of corporate welfare, both the direct kind and such indirect forms as the mass of regulations that have the indirect effect of making it harder for small companies to compete with big ones. As companies grow, diseconomies of scale eventually surpass economies of scale, placing a natural curb on their growth; but government regulation, by stalling competition, allows companies to continue growing past this point by externalising their costs.

Moreover, Wal-Mart’s entire business model depends heavily on federal transportation subsidies; so its competition with local businesses doesn’t exactly occur on a level playing field.

Both Wal-Mart’s critics and its defenders usually see it as an embodiment of the free market. But to me Wal-Mart looks like just one more special interest feeding at the taxpayers’ trough.

I’m opposed to Wal-Mart because I like the free market.

If others want to mail him, he’s at fmihlar@png.canwest.com.

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71 Responses to Advocatus Diaboli

  1. Mike March 31, 2009 at 2:50 pm #

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    I predict a well thought out, cordial response from Stephan Kinsella.

  2. J. H. Huebert March 31, 2009 at 4:41 pm #

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    Walter Block and I address the transportation issue here:

    http://www.jhhuebert.com/articles/corporations2.html

  3. Stephan Kinsella March 31, 2009 at 4:50 pm #

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    “Wal-Mart stores frequently acquire their land by eminent domain; in other words, they get to acquire land at lower prices than those at which the owners would be willing to sell voluntarily.”

    Roderick, I have no reason to think that this is an appreciable reason for Walmart’s success. How many of their stores have been bought with eminent domain? And for those, what was their savings compared to other locations they could have bought instead? I predict the overall effect of this is fairly trivial. But where’s the data?

    “Once in business, such stores further benefit from various sorts of corporate welfare, both the direct kind and such indirect forms as the mass of regulations that have the indirect effect of making it harder for small companies to compete with big ones. As companies grow, diseconomies of scale eventually surpass economies of scale, placing a natural curb on their growth; but government regulation, by stalling competition, allows companies to continue growing past this point by externalising their costs.”

    I am not sure what corporate welfare you mean. But I seriously doubt it exceeds or even compensates for the harmful effect of state regulations and taxes that are applied to the company.

    “Moreover, Wal-Mart’s entire business model depends heavily on federal transportation subsidies; so its competition with local businesses doesn’t exactly occur on a level playing field.”

    Why do the subsidies help Walmart more than local mom and pop competitors? They all get goods shipped from far away. Further, Walmart and its employees, shareholders, customers, and suppliers are all penalized (taxed) to pay for the roads. I find it hard to believe Walmart is a net beneficiary of inefficient socialized roads.

    “Both Wal-Mart’s critics and its defenders usually see it as an embodiment of the free market. But to me Wal-Mart looks like just one more special interest feeding at the taxpayers’ trough.”

    All libertarians agree that the various non-market policies, subsidies, regulations, as well as penalties and taxes, ought to be abolished. But I honestly have never seen a coherent argument that shows that Walmart would be anything but bigger and even more prosperous in a real free market.

  4. Mike March 31, 2009 at 5:00 pm #

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    “Walter Block and I address the transportation issue here:

    http://www.jhhuebert.com/articles/corporations2.html

    There’s a difference between addressing something and refuting it. I just addressed your address. Do I win?

    As for you, Stephan, don’t make me come after your windowz.

  5. Anon73 March 31, 2009 at 6:27 pm #

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    Yeah to be honest I’m not comfortable hurling bricks at Walmart windows because they really might exist in a free market, maybe not as rich as they are now but still I’m not 100% convinced that retail chain stores are incompatible with freedom.

  6. rbk March 31, 2009 at 6:55 pm #

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    You know this Vancouver Sun piece was from February 2008, right?

  7. Mike March 31, 2009 at 7:35 pm #

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    I was going to ask to see your cource for the claim that Wal-Mart benefits frequently from emeinent domain, but that’s already been asked.

    Apart from that, many of these “subsidies” Wal-Mart allegedly benefits from are indirect, available to any other player in the market and were never lobbied for by Wal-Mart. The interstate highway system, for instance, was begun before Wal-Mart was even founded.

    Really? What was Sam Walton supposed to do. Have his goods shipped only be railroad? Oh, wait a minute, the railroads had plenty of government involvement, too.

    In short,

  8. Kevin Carson March 31, 2009 at 10:00 pm #

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    Mihlar’s claim that also bears some looking into. You’d think it would raise some flags at LewRockwell.Com, considering all the Gary North pieces they run warning people to prepare for a lifetime of frequent job losses in the face of creative destruction.

    Re Mike’s comments on highways, I’m less interested in moral culpability in transportation subsidies than in their implications for the net efficiencies of present business models (or lack thereof). Wal-Mart, and all the other big box retailers, follow a high-volume, high-speed pipeline, “warehouses on wheels” business model that is piggybacked on artificially low long-distance transportation costs. Arguably, absent such government subsidies to economic centralization and mass production for the national market, the American economy would have seized on the decentralizing potential of electrical power by developing into a hundred Emilia-Romagnas.

    What Sam Walton would likely have done, in that scenario, would have been to develop a retail model in Benton County based on short regional distribution chains linking small-scale local industry to Main Street retail outlets. Absent the centralized, high-volume transportation system created by the railroad land grants, there probably wouldn’t have been a national wholesale and retail market, or national manufacturers piggybacked on it.

  9. Kevin Carson March 31, 2009 at 10:03 pm #

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    Oops. The first paragraph is incomplete. It should read:

    Mihlar’s claim that “the best defence against poverty is a job” also bears some looking into. You’d think it would raise some flags at LewRockwell.Com, considering all the Gary North pieces they run warning people to prepare for a lifetime of frequent job losses in the face of creative destruction. The best defense against poverty is a secure means of providing directly for as many of one’s consumption needs as possible, as directly as possible, without depending on the goodwill of an employer for ongoing wage employment.

  10. Roderick March 31, 2009 at 10:28 pm #

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    Stephan,

    I am not sure what corporate welfare you mean.

    Wal-Mart is a frequent lobbier for, and recipient of, subsidies. See this study, along with follow-up discussion here.

    Why do the subsidies help Walmart more than local mom and pop competitors? They all get goods shipped from far away.

    That is what is seen. What is not seen is that in the absence of transportation subsidies, local retailers would carry more locally-produced merchandise, and Wal-Mart’s business plan would thereby be less competitive.

    Further, Walmart and its employees, shareholders, customers, and suppliers are all penalized (taxed) to pay for the roads.

    But so are its competitors. If Wal-Mart receives a burden and a benefit, and its competitors receive the same burden but not the benefit, how is Wal-Mart not thereby privileged vis-à-vis its competitors?

    Anon73,

    I’m not 100% convinced that retail chain stores are incompatible with freedom.

    Okay. But when did I ever claim that retail chain stores are incompatible with freedom?

    rbk,

    You know this Vancouver Sun piece was from February 2008, right?

    Um, no, I didn’t notice that. Heh.

    J. H. Huebert,

    The link you provided goes to an error message.

    Mike,

    Apart from that, many of these “subsidies” Wal-Mart allegedly benefits from are indirect, available to any other player in the market

    So let’s say there’s a race in which everyone competes on a free and equal basis. But once the race is over, everyone who didn’t win it is forced to wear shackles that make it even harder for them to win in future races. So maybe the winner’s first win was on a level playing field — but its subsequent wins aren’t.

    and were never lobbied for by Wal-Mart

    Actually Wal-Mart does lobby for tax-funded roads to its stores. But suppose it didn’t. So what? If I benefit because the government hamstrings my competitors, whether I’m to blame for it or not, one can hardly point to my consequent success as a basis for acclaiming me as a hero of the free market.

  11. Roderick March 31, 2009 at 10:32 pm #

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    Wal-Mart also campaigns in favour of minimum wage laws — another means of driving smaller competitors out of biz.

  12. Roderick March 31, 2009 at 10:43 pm #

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    How many of their stores have been bought with eminent domain?

    I haven’t found those figures. (Lots of individual instances, though; I found this, this, this, this, this, and this until I got tired.) But it’s not just eminent domain by itself but eminent domain as part of the whole corp-welfare package.

  13. Roderick March 31, 2009 at 10:48 pm #

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    Hey, my Mihlar link went to the second page; here’s the first.

  14. J. H. Huebert March 31, 2009 at 11:13 pm #

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    How does the existence of government roads hamstring Wal-Mart’s competitors? Anyone can use the roads.

    Wal-Mart started small and therefore faced all the disadvantages that newcomers to the market face in our mixed economy. Despite these hurdles, Wal-Mart succeeded, primarily by serving consumers — that is, it succeeded despite government’s best efforts to quash entrepreneurship, etc. Why does Wal-Mart not deserve praise for this? Does no one deserve praise for business success in our economy?

  15. Kevin Carson March 31, 2009 at 11:19 pm #

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    J.H. Huebert: That’s a bit like saying that the law in its majesty forbids rich and poor alike from stealing bread.

    The existence of subisidized government roads benefits those whose business model is most heavily reliant on subsidized roads, at the expense of those whose business model is not.

    Wal-Mart’s business model is heavily reliant on susidized roads. It supplanted competitors which had local supply chains.

    What would you think of the “argument,” in response to claims that welfare recipients benefit at the expense of the industrious, that the industrious could pursue the welfare recipient’s “business model” and go on welfare also?

  16. Anon73 March 31, 2009 at 11:27 pm #

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    Okay. But when did I ever claim that retail chain stores are incompatible with freedom?

    Well you’ve never claimed big-box retailers are logically incompatible with freedom, but the basic claim you and Kevin have been repeatedly arguing for over the past few years is that a truly free society will have less big-box retailers or none at all. I’m just not 100% convinced of that is what I meant to say.

  17. Stephan Kinsella March 31, 2009 at 11:45 pm #

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    Kevin Carson:

    “Wal-Mart, and all the other big box retailers, follow a high-volume, high-speed pipeline, “warehouses on wheels” business model that is piggybacked on artificially low long-distance transportation costs. Arguably, absent such government subsidies to economic centralization and mass production for the national market, the American economy would have seized on the decentralizing potential of electrical power by developing into a hundred Emilia-Romagnas.”

    Kevin, this may seem obvious to you, but to others, it seems like just assertions or WAGs. “Arguably”–sure. But anything is arguable. I haven’t seen you guys establish this.

    The problem is to establish this requires, IMHO, a very deep understanding of business practice, and lots of facts and statistics. Not just “arguablies”.

    “What Sam Walton would likely have done, in that scenario, would have been to develop a retail model in Benton County based on short regional distribution chains linking small-scale local industry to Main Street retail outlets. Absent the centralized, high-volume transportation system created by the railroad land grants, there probably wouldn’t have been a national wholesale and retail market, or national manufacturers piggybacked on it.”

    Ditto my last comment.

    “Mihlar’s claim that also bears some looking into. You’d think it would raise some flags at LewRockwell.Com, considering all the Gary North pieces they run warning people to prepare for a lifetime of frequent job losses in the face of creative destruction.”

    Flags? Lew runs tons of stuff there–some he agrees with, some he obviously does not. What a

    Roderick:

    “Wal-Mart is a frequent lobbier for, and recipient of, subsidies. See this study, along with follow-up discussion here.”

    Sure–as are most other companies–and most Americans…and most American leftists. They should not. I do not see this as evidence for the claim that this actually benefits them–surely Walmart (not “Wal-Mart,” guys) would be better off if you removed their purported “subsidies” and their penalties (taxes and regulations).

    “‘Why do the subsidies help Walmart more than local mom and pop competitors? They all get goods shipped from far away.’

    “That is what is seen. What is not seen is that in the absence of transportation subsidies, local retailers would carry more locally-produced merchandise, and Wal-Mart’s business plan would thereby be less competitive.”

    I do not see what is the evidence or reason for this claim–why do you have to be a chain to carry stuff from far away?

    “‘Further, Walmart and its employees, shareholders, customers, and suppliers are all penalized (taxed) to pay for the roads.’

    “But so are its competitors. If Wal-Mart receives a burden and a benefit, and its competitors receive the same burden but not the benefit, how is Wal-Mart not thereby privileged vis-à-vis its competitors?”

    But Walmart, being bigger and more prosperous, receives even more burdern. As for the claim that they receive benefits that local companies don’t–again, I have not seen this claim proven. Again: are you saying it’s not possible to sell goods shipped in from afar, if you are a local store? I don’t understand why this would be the case.

  18. Roderick April 1, 2009 at 1:04 am #

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    Walmart (not “Wal-Mart,” guys)

    The company itself began as Wal-Mart and currently seems to spell it both ways on their website; their Wikipedia page says they started using the unhyphenated version in summer of ’08 in domestic markets but are still using the hyphenated version in foreign markets. Maybe I’ll start calling it W’a L’ma R’t (which must be somewhere near R’lin K’ren A’a).

    I’ll respond to more substantive points later; me sleepy now.

  19. Alexanka April 1, 2009 at 5:33 am #

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    Dear Dr. Long!
    Excuse me but for me ideas of your opponents are more convincing than yours. Where your evidences are? Have you any data proving that Wal-Mart is a net gainer not a net loser of this chaotic social-democratic system? You can’t say it without solid facts and figures, abstract reasoning is not enough in this case. We can say a priori that Lockheed Martin, Chase Manhattan, Blackwater etc are real parasites. But we can’t say the same about Pepsico, Dell, Burger King, Caltex, De Walt, Intel, Disney, Harley-Davidson, Nike… and Wal-Mart.
    I like de Jasey’s idea about “churning” and tend to think that even many big corporations are rather victims than winners of this crazy political game of infinite rules, regulations, lobbying and redistributions..
    Even if I’m wrong, we need real evidences, facts, numbers, balance sheets. Again, it is not the case where abstract theories trump facts.
    Call me a naïve kid and vulgar libertarian, but unless the case has been proven, Wal-Mart’s money are earned, not stolen.

    ( to Kevin Carson. Why the hell did you mention Saint Gary? I hate him not less, maybe more than you ( because it’s private. my little bro is gay and the man who’s drooling to stone him to death is not my best friend, definitely) but he has no relations to the matter.
    Everything you say about transportation “subsidies” is just ridiculous. It seems you ( as well as your comrade-in-faith Herr Hoppe) think that in absence of govt’s ruling there would be less highways and railroads and they would be much more expensive. Why, for Wotan’s sake? It’s like to say that in absence of govt’s schooling there would be less education and it would be more expensive! Total bullshit.)

    • Brandon April 1, 2009 at 9:47 am #

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      To be fair, although North is a religious fanatic, and his book “Victims Rights” does call for community stonings of unruly people, I don’t think it calls for stoning homosexuals.

  20. Sheldon Richman April 1, 2009 at 6:04 am #

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    Given the constellation of implicit subsidies to big enterprises, I’m sympathetic to Roderick’s and Kevin’s thesis. We don’t need to engage in “arguablies.” We know big companies can bear burdens more easily than small companies. (See Sarbanes-Oxley.) We know the history of government involvement in transportation, especially long-distance transportation. We can’t wave these things away as though they don’t exist. It stands to reason that the “U.S. economy” would look different without these things, though how exactly it would look we can’t say. It is irrelevant to say that Walmart would look the same under the laissez faire. What matters is that it looks as it does today because of government intervention.

    That said, note that the title of this post is “Advocatus Diaboli.”

    • Brandon April 1, 2009 at 9:50 am #

      Firefox 9.04jauntyShiretoko Linux

      When I worked at Dell, the legal department had a training course on how to comply with Sarbanes-Oxley.

  21. Stephan Kinsella April 1, 2009 at 7:40 am #

    Safari MacIntosh

    Sheldon, “Given the constellation of implicit subsidies to big enterprises, I’m sympathetic to Roderick’s and Kevin’s thesis. We don’t need to engage in “arguablies.” We know big companies can bear burdens more easily than small companies. (See Sarbanes-Oxley.) We know the history of government involvement in transportation, especially long-distance transportation. We can’t wave these things away as though they don’t exist. It stands to reason that the “U.S. economy” would look different without these things, though how exactly it would look we can’t say. It is irrelevant to say that Walmart would look the same under the laissez faire. What matters is that it looks as it does today because of government intervention.”

    I don’t disagree with most of this–but in this case, how does the critique differ from a standard libertarian one that opposes subsidies and regulations? How does it get the conclusion (that some left-libs have) that walmart is therefore not the owner of its property, and is subject to vandalism or “worker sitins” and the like?

  22. Sheldon Richman April 1, 2009 at 8:07 am #

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    Stephan, did Roderick say the sort of things you mention in your last sentence? What I get from my analysis is a caution against rhapsodizing about Walmart as some sort of hero of the free-market revolution. Identifying the moral status of a corporate-state creature is easier than determining what action toward it is legitimate.

  23. Brad Spangler April 1, 2009 at 8:37 am #

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    @Stephan – re: “How does it get the conclusion (that some left-libs have) that walmart is therefore not the owner of its property…”

    You’re here asking Sheldon to advocate a position that might not necessarily be his own. We’re not a monolithic bloc marching in lockstep.

    You may recall that I previously asked you to articulate a libertarian standard of guilt that you specifically subscribe to which recognizes a point at which the nominally private enterprise is in fact the actually statist appendage of the state. Without which, one could (for example) perhaps incorrectly say Lech Walesa was not being virtuous when he hopped that first fence to lead a Solidarnosc strike against the Polish state owned shipyard that was not necessarily *identical* to the Polish state (in the eyes of Polish law, anyway).

    You refused to articulate such a standard, apparently opting to confuse the matter of the burden of proof lying with Walmart’s accusers with the matter of simply inquiring as to whether or not you already agree with the existing Rothbardian standard (which one ought to be able to suppose you’ve been exposed to previously). That standard was most explicitly stated in “Confiscation and the Homestead Principle”, but was basically illustrated in principle in “For A New Liberty” and “Ethics of Liberty”.

    Rothbard drew the line at half of enterprise revenue coming from statist privilege / favors / subsidies. That standard by itself, and especially inthe context of Konkin’s counter-economic theory of revolution, puts market anarchism sq

  24. Brad Spangler April 1, 2009 at 8:42 am #

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    [continued]

    …puts Rothbardian market anarchism squarely in favor of a selective but none the less breathtakingly revolutionary and undeniably “socialist” redistribution of property — but as affirmation of property rights rather than their negation.

    As it happens, though, I think there’s a lot to be said for Carson’s post-Rothbardian revised standard of not looking at subsidy compared to gross revenue, but looking at it in comparison to the much smaller margin of profit a nominally private enterprise might have.

  25. Brad Spangler April 1, 2009 at 8:58 am #

    Firefox 3.0.8 Ubuntu 8.10

    As an addendum, I should add that I favor the Carsonian standard over the original Rothbardian standard because enterprises fail or succeed (and thus, ultimately, exist or don’t exist) based on their margin of profit.

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