For once in the capitalistic, greed-driven, morally bereft Western world we live in today, a business is standing up for the environment. For once, social consciousness overcomes the evil influence of money to help save our children’s futures. For once, a Gulag is not necessary to compel the tyrants that promote economic anarchy into selfless harmonizers. Progressive activists are finally forcing the national chains to take responsibility for the damage they inflict on our world and now perhaps the small (socially responsible) businesses that are the true soul of our communities may flourish. What company would take the unorthodox step of imposing this cost on itself in the name of the environment?
The social saint is ac tu ally the often-demonized capitalistic genius that is Wal-Mart. In April, Wal-Mart joined a group of energy conservation leaders in a public outcry for higher environmental standards. Wal-Mart’s CEO H. Lee Scott even went as far as to promise that Wal-Mart would eventually be one-hundred percent green-friendly, running entirely on renewable resources and producing no waste. With the breadth of power and influence to rival the Roman Empire , any initiative Wal-Mart undertakes will become the standard to which all other companies will be forced to aspire. This modern day Caesar has suddenly become Gaia’s greatest ally and will undoubtedly help prolong the life of our planet. But before Wal-Mart is championed for its caring indifference to profit in favor of the environment, the full implications of this initiative must be explored.
The cost of becoming green-friendly is enormous. Wal-Mart is investing five-hundred million dollars each year to increase its energy efficiency. Why? The illusion Wal-Mart is creating is that it would rather protect the environment than make money. The illusion seems extremely costly to create in lieu of a stock price that has fallen 21% since April of 2004 and a current profit margin of a scrawny 3.6% (consider that the average yield on a 6-month certificate of deposit is 4.25%). However, we have yet to find Target, Costco, Kmart and a host of would-be ruthless competitors salivating at Wal-Mart’s newfound disdain for profits. Nor have we found any green pronouncements from them as well.
Competitors realize that they have been hit with a one-two punch. First, given the foregoing financial position, the only way Wal-Mart would be willing to make such an investment is if it augmented its future bottom line. Higher Wal-Mart profits would result in improved worker productivity at Wal-Mart (from technology and capital accumulation) and hence higher wages as well as even lower prices for its customers. Second, Wal-Mart’s famed supply chain and ability to take advantage of economies of scale in purchasing, building and distribution enable it to pursue a green agenda at a fraction of the cost of its competitors. Even if greening Wal-Mart would not directly increase profits, if it curries the favor of persnickety consumers who desire organic foods and other “green-friendly” business practices, the humble general stores and supermarkets will be utterly crushed by the pressure of Wal-Mart’s seemingly green thumb. However, this movement away from cost-intensive to cost-effective retailing is to be celebrated, for it frees up valuable capital and labor resources to be unleashed more productively elsewhere in the economy – further improving American standards of living.
The greening of Wal-Mart comes on the heels of it’s calls for a hike in the federal minimum wage in October and its enormous response to the Katrina disaster (in the days leading up to and after Hurricane Katrina, it donated an unrivaled $20 million of cash, 1,500 truckloads of free merchandise, food for 100,000 meals and the promise of a job for every one of its displaced workers). None of these actions prove that Wal-Mart is a caring, responsible, benevolent steward of society’s interests. What they do demonstrate is the important role that profits play in a society. It is cool on college campuses to denounce greed. But does Wal-Mart buy fuel efficient trucks because it cares about us? Does Wal-Mart give away $20 million because it loves people? Our two cents is that they couldn’t care less about us. Rather, Wal-Mart does these “socially responsible” things because its managers, workers and shareholders want more for themselves. Similarly Steve Jobs, Henry Ford and Cornelius Vanderbilt each accumulated enormous for tu nes by delivering low-cost, productivity enhancing products to the “exploited masses.” Future tycoons will similarly accumulate for tu nes not by appealing to the conscience and pocketbooks of the elites in America , but by competitively attending to the wants of the millions of Americans such as you and us. Sophisticated thinkers have long understood that the unintended consequence of individuals’ pursuit of their self-interest more often than not results in the greatest social benefits being achieved. We say give us greed and profits, and you can keep the conscience.