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By What Right?

Michael Graham describes the apoplexy of Boston’s Mayor Menino in regard to Walmart’s proposed entry into downtown:

Wal-Mart does not suit the clientele we have in the city of Boston,” Menino said. “I don’t need employers like that in our city.

Read the whole piece. Menino’s position is nothing short of hateful and tyrannical. Graham is absolutely right to skewer Menino’s anti-poor sentiment. But let’s ignore the massive benefit consumers would be getting by having Walmart come to Boston and let’s consider Menino’s reasoning for not permitting Walmart within the walls of the cradle of liberty on his own terms. Then, let’s consider the elephant in the room.

First, on the economics. Menino objects to the way Walmart compensates its employees.

I want to make sure they are good jobs, that their employees get health insurance, retirement plans — all the benefits everyone else gets.

Suppose he is right and that this matters. If it is true that Walmart can come into the city and manage to attract workers and not have to pay them insurance, retirement plans, etc. that is an indictment not of Walmart, but of the awful labor market conditions in Boston. And it is an indictment of Menino’s economic intuition. First, whether Walmart pays health insurance or offers retirement is of no consequence. What matters to an employer is the total compensation costs of hiring an employee. If Walmart provided health insurance and retirement benefits, but did so at lower wages, would Mr. Menino still disapprove? Yes. Because he believes in unicorns. You see, any employer should pay both high wages and offer large non-wage benefit packages. It’s Boston after all! Never mind the independent taxi-drivers, lunch-cart workers, newspaper delivery jobs, and the thousands of other jobs that pay low wages and offer low benefits. They for some reason are allowed to respect the laws of supply and demand but not Walmart. Second, if Walmart can enter the city and pay some dismal compensation packages, then that is true of any employer that comes into the city, at least for those willing and able to turn the skills of the low-skilled population into something economically productive. Right now, the people that would potentially working at Walmart must either be working for worse compensation elsewhere or not working at all. Third, and this is the major point, even if Menino’s claims are right, and that Walmart will come in and pay low wages and offer little to nothing in the way of benefits, the labor market conditions for workers in Boston has to be improved by their entry. If Walmart “mops” up some of the labor supply that is out there in Boston right now, this means that other firms now have a smaller pool of workers to choose from when filling positions. In order to compete and attract workers in that environment, they will have to offer more competitive pay packages than they did before Walmart entered. The research on Walmart’s impacts certainly does not show deleterious effects of Walmart’s entry on the labor markets in general, so even if we ignore the enormous benefits poor consumers are going to get from the new shopping experience, it’s not clear at all that Menino’s supposition is true.

He follows up with another typical complaint:

Wal-Mart makes their money and runs to the Midwest and deposits it in the bank

I’m not sure Menino actually said that. However, Walmart’s headquarters are in Arkansas. The idea here is that a worker in Boston produces something of value, for which he is paid cash, and then uses the cash to buy a product from Walmart, and since Walmart is a foreign entity, the cash is then deposited outside of Boston. Imagine the thing produced is a pair of eyeglasses. So, our Bostonian makes a pair of eyeglasses, which ends up on the nose of another Bostonian, for which he is paid cash. He then takes the cash and uses it to buy some clothes from Walmart, who takes the cash off to the Midwest and it will never be seen again. Let’s net out this transaction. Boston ends up with clothes and eyeglasses, but less green paper. Walmart ends up with more green paper but less clothes. Seems like a good deal. I’m not much in the mood for a trade lecture, but this would be a good place to start.

The foregoing is really not what is interesting to me about this episode. Economic illiteracy and scare tactics are as old as dirt. It’s the incredible hubris and utter disregard for property rights that the mayor exhibits that is astonishing. Reread the passages from the article:

I don’t need employers like that in our city.”

Mr. Menino, HE, HIMSELF, does not need employers like that. It is no place for him to say. I don’t care if you are the Mayor of the entire planet, under a society where several property is protected and respected, and where the Rule of Law still matters, the establishment and location of businesses is not a political decision. You’ll notice that Mr. Menino cannot be bothered to present even cursory economic evidence for why the Mayor ought to have a say (such as informational issues or externality issues). Nope. He just doesn’t like it. And some of his cronies do not like it. That is no grounds to run a classroom, much less a city. Let’s put it another way, Walmart and Walmart alone (and the property owners who stand to deal with them) stands to lose by making a decision about entering the city that “no one” wants them in. If Menino’s sentiment was widely shared, then Walmart would be losing a ton of money and reputation by opening a loser in downtown Boston. This is exactly how the market process of trial and error works. Notice that Mr. Menino cannot even bear to bring himself to say that he thinks they will fail. Nope. He is angry because he thinks they will succeed. And he doesn’t even try to claim that the other citizens of Boston do not want them around. Nope, just him, the mayor.

But even if the other citizens of Boston did not want Walmart around, there is still no legitimate grounds for keeping them out. I, for example, do not like the idea that I live next to a bunch of plundering progressives. Does that give me the right to bar them from moving to my neighborhood? Does that give my town supervisor the right to prevent them from coming here?  Or take the case of Boston. Mr. Menino seems to have the interests of the poor in mind. Does he not think the poor find it offensive that high-powered lawyers and bankers run around the city spending their money like it came from a game of monopoly? Isn’t that offensive to the hard working low-income families of Boston. Why not keep those businesses out of downtown Boston too? On what grounds could you bar Walmart and not JP Morgan? I am sure that some of the clerical workers at JP Morgan don’t receive health benefits either.  Or is it the job of the mayor to make sure that anything that happens inside “his” city gains the approval of every single resident inside the city? That standard cannot even fly within a family at dinner. If we followed that doctrine, all civilization would come to a screetching and horrific halt.

Mr. Menino, you don’t get to determine what businesses choose to set up shop so long as those businesses play by the rules of the game that have evolved in Boston. Those rules are not the particular rules you think of regarding what particular wages firms decide to pay workers. No. The rules I am referring to are abstract and general. Is Walmart violating the property of others? No. Is Walmart using other human beings against their will? No. Is Walmart violating your sense of goodness. Perhaps. But that does not constitute a legal (or moral) reason for doing anything about it.

Never mind that the poor in Boston might hold a different view of the Walmart affair, even if they did not it is still none of your business.

4 Responses to “By What Right?”

  1. Greg says:

    “But let’s ignore the massive benefit consumers would be getting by having Walmart come to Boston”

    Let’s NOT ignore this! I would LOVE if Walmart came to Boston and I know it would bring noticeable benefits. Perhaps my local Stop-and-Shop would have to compete a little, which maybe would bring it up from it’s current rating of 5% of what Wegmans offers to maybe 15%!
    Wouldn’t that be great!

  2. Speedmaster says:

    One of your best pieces in a while!

  3. Harry says:

    By what right, indeed?

    Putting aside convoluted arguments against WalMart’s business decisions, which are none of Marino’s business, this story illustrates the hazards of putting power in the hands of public officials who fancy themselves socialist planners. As long as the enterprise is in his watershed, he thinks he owns everything, or a piece of it.

  4. A Tuesday Buffet of Goodness…

    The Institute for Humane Studies has a great new website, featuring such useful videos as the one above. (h/t Cafe Hayek)Add me to the list of people who, along with Robert Koehler of The Marmot’s Hol……

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