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Monday, August 28, 2006

Expensive Wal-Mart Flip-Flops

Sebastian Mallaby wonders why centrist Democrats have shifted their stance on globalization:

Shopping for Support Down the Wrong Aisle, by Sebastian Mallaby, Commentary, Washington Post: Once upon a time, smart Democrats defended globalization, open trade and the companies that thrive within this system. ... Then dot-bombs and Enron punctured corporate America's prestige, and Democrats bolted. Rather than hammer legitimately on real instances of corporate malfeasance -- accounting scandals, out-of-control executive compensation and the like -- Democrats swallowed the whole anti-corporate playbook.

To see the difference between then and now, just look at the Clintons. In the late 1980s and early 1990s, Hillary Clinton sat on Wal-Mart's board; and when Sam Walton died in 1992, Bill Clinton lauded him as "a wonderful family man and one of the greatest citizens in the history of the state of Arkansas.'' Campaigning in the New Hampshire primary that year, Bill Clinton came proudly to the rescue of a local company called American Brush Co. by helping it become a Wal-Mart supplier.

Times change. Last year Hillary Clinton returned a campaign contribution from Wal-Mart... The nation's most successful retailer, which has seized the opportunities created by globalization ... is now seen as too toxic to touch. ... Clinton is not alone... Joe Lieberman, who holds fast to his principles on the Iraq war, recently abandoned his centrist economic credentials by appearing at an anti-Wal-Mart rally. No matter that Lieberman once served as chairman of the business-friendly Democratic Leadership Council. ...

After Lieberman ... stepped down as chairman of the DLC, he was succeeded by Sen. Evan Bayh of Indiana. Well, Bayh recently showed up at an anti-Wal-Mart rally, too, as has Iowa Gov. Tom Vilsack, who is the current DLC chairman. ... Harry Reid, the Democrats' Senate leader, appeared at an anti-Wal-Mart event on Saturday, and Sen. Joe Biden and Gov. Bill Richardson popped up at earlier stops. ...

How can supposedly centrist Democrats defend this betrayal of their principles? Some claim that their beliefs are consistent, but that the company has changed: The Wal-Mart of the early 1990s mainly bought American, whereas today's irresponsible monster buys cheap stuff from China. But this argument merely illustrates how far Democrats have come. Since when did the party's centrists believe that trading with China is evil? It was the Clinton administration that brought China into the World Trade Organization.

Other Democrats reaffirm their centrist credentials while calling upon Wal-Mart to pay workers more. ... But the idea that Wal-Mart pays below-market wages is false. Otherwise nobody would work there. Hillary Clinton and Sen. John Kerry have attacked Wal-Mart for offering health coverage to too few workers. But Kerry's former economic adviser, Jason Furman of New York University, concluded in a paper ... that Wal-Mart's health benefits are about as generous as those of comparable employers. Moreover, Clinton and Kerry know perfectly well that market pressures limit the health coverage that companies can provide. After all, both senators have proposed expansions in government health provision precisely on the premise that the private sector can't pay for all of it.

The truth is that none of these Democrats can resist dumb economic populism. ...[T]he DLC crowd is pandering shamelessly to the left of the party... For a party that needs the votes of Wal-Mart's customers, this is a questionable strategy. But there is more than politics at stake. According to a paper for the National Bureau of Economic Research by Jerry Hausman and Ephraim Leibtag, neither of whom received funding from Wal-Mart, big-box stores led by Wal-Mart reduce families' food bills by one-fourth. Because Wal-Mart's price-cutting also has a big impact on the non-food stuff it peddles, it saves U.S. consumers upward of $200 billion a year, making it a larger booster of family welfare than the federal government's $33 billion food-stamp program.

How can centrist Democrats respond to that? By beating up Wal-Mart and forcing it to focus on public relations rather than opening new stores, Democrats are harming the poor Americans they claim to speak for.

I think the answer to the question of why centrist Democrats have shifted their stance on globalization is straightforward - the gains from globalization have not been shared equally. The claims made in the 1990s about the benefits of globalization have not been realized and it's no longer wise politically to assert that globalization will benefit typical households. With stagnant real wages and other economic problems such as declining health care coverage, Wal-Mart is an obvious and glaring symbol to many of the failed promises of globalization, and lower priced imported goods do not overcome the failed promises the symbol represents.

I continue to support global economic integration, I am not a Wal-Mart basher, and I think the anti Wal-Mart campaign is misplaced (though I do have concerns about the extent to which it exploits its market power in input markets). But I also think it is important for Democrats to acknowledge their role in pushing for globalization in the past, and show they understand that the very unequal benefits that globalization has brought about requires us to rethink how to protect the most vulnerable from its effects.

    Posted by on Monday, August 28, 2006 at 03:06 AM in Economics, International Trade, Politics | Permalink  TrackBack (0)  Comments (34)

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