May 23, 2006

GOAT ROPE OF THE WEEK: PAYING WAL-MART TWICE FOR THE SAME BAD DEAL



Caption: Ethel Fuzzy Chicken says, "Fight poverty: buy union or buy local."

The winner of this week’s prestigious Goat Rope of the Week Award is Wal-Mart. To be more exact, the winners are the governments that spend public resources to subsidize the retail giant and clean up its messes.

As an example of the latter, state and local governments often provide public benefits for the families of low wage workers. Some have suggested that Wal-Mart is contributing to poverty in other ways.

The St. Louis Business Journal recently reported on a study that “found that an estimated 20,000 families nationwide have fallen below the poverty line as a result of the chain’s expansion.”

The study was written by Stephen Goetz of Pennsylvania State University and Hema Swaminathan of the International Center for Research on Women and was published in the latest Social Science Quarterly.

According to the Journal, “During the last decade, dependence on the food stamp program nationwide increased by 8 percent, while in counties with Wal-Mart stores the increase was almost twice as large at 15.3 percent, according to the study.”

Not having read the academic journal article, El Cabrero is unsure where the 20,000 figure came from. One would think it would be higher. But more interesting is the interpretation of the damage done to small communities due to Wal-Mart penetration.

It’s long been known that Wal-Mart can drive local employers out of business, but the study’s authors also suggest that “by displacing local class of entrepreneurs, the Wal-Mart chain also destroys local leadership capacity.”

Further, the Journal reports that:
The demise of mom-and-pop stores leads to the closing of local businesses that supplied those stores, such as wholesalers, transporters, logistics providers, accountants, lawyers and others. Many of these are higher-paying jobs. The study concludes that it is likely that these more highly-educated individuals depart from the rural community in pursuit of better opportunities elsewhere, contributing to the rural-to-urban exodus over the last decade, leaving behind those with fewer opportunities and raising the poverty rate by reducing the number of nonpoor households in the denominator.


Unfortunately, that’s just one side of the picture. Not only do taxpayers and state and local services have to deal with the consequences of poverty, but the public often subsidizes Wal-Mart for doing so.

A 2004 study by Good Jobs First titled "Shopping for Subsidies: How Wal-Mart Uses Taxpayer Money to Finance Its Never-Ending Growth" found that the company has received more than $1 billion from state and local governments in economic development subsidies.

Talk about welfare queens…There’s nothing like paying twice for the same bad deal.

GOAT ROPE ADVISORY LEVEL: ELEVATED

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