However, before you chuckle too hard at the idea, remember that this is the same argument people use to rail against Walmart, auto-companies, and other firms that cause the displacement of workers due to changing trade patterns. We have a number of social science and humanities classes here on campus that show videos, in class, about how evil Walmart is – and ask the question, “Is Walmart Good for America?” Of course, the question presumes the answer. I pity our economics students who are brave enough to ask hard economic questions in those classes – I bet they are laughed out of the classroom. In those classes, you would often hear the (incorrect, or incomplete) claim that Walmart outsourcing jobs costs Americans jobs here. The anti-Walmart folks never actually offer a “solution” … I’d like to see them say, “ban Walmart” but they are not even honest enough to say that. They typically just wring their hands about how evil it is, not recognizing that by reducing options for low income workers and customers, you would be making them worse off. In any case, they claim that when customers choose to shop at Walmart, we are making it harder for mom and pop stores to stay in business, and we are making it harder for American manufacturing workers to find jobs – and surely they would want to do something to preserve those jobs. We even offer compensation programs for these things – in almost every “trade agreement” you see funds allocated for job retraining or education credits and so forth.
So, if the claims that the Saudis are making is so ridiculous (and I agree that it is) then why are not the claims made by the anti-Walmarters viewed with equal disdain?

The analog would be to think about how new technology affects existing companies. Would we have taken seriously the claims of NCR and other typewriter companies that they ought to be compensated because consumers choosing to use word processors and PCs seriously dented or eliminated their profits?

Extra credit: why do economists NOT consider that last example a “remediable” externality?

 After 40 years in Dublin, the Hogans left the town in June 1921 for Fort Worth. It is uncertain if the Hogan children had ever been to the big city before, although Cowtown had a new attraction that was drawing people from many miles away – the Leonard Brothers Department Store. The Leonard brothers, Marvin and Obie, had invented the superstore – everything for the home, farm or ranch under one roof…

Of course, Leonards is now in the history books. Notice how mammoth this store in Fort Worth was – it takes up over an entire city block, and is organized almost like the modern day Walmart. Notice the car traffic.  Did Leonard’s, itself a Mom and Pop, not displace other mom and pop stores? Why was it so popular and why is Walmart so disliked today? As I understand it, Leonards and Walmart were part of a suburbanization trend, each offered products at varieties and prices unmatched by its competitors, each encouraged use of the automobile, each dramatically changed the look of “Main Street” … and I am positive that Leonards did not offer any of its employees health insurance or pay all of them above the minimum wage (neither existed at the time) … but now places like Leonards are celebrated in museums? What an odd world. I have my theories as to why the different treatment. It would make a nice project to examine the history and development of establishments like this one or Orbach’s or Sears Robuck or JC Penney or Woolworth, etc. as they compare to Walmart. Any takers?

He argues, correctly, that the actions of corporations often have undesirable consequences on local communities (e.g. outsourcing may devastate a one-company town). Many in the economics profession do not gloss this over, nor do we glorify it, nor do we just call this “unfortunate” – much to the disagreement of Mr. Marglin. He suggests one step toward improvement in this situation: give local citizens and governments a “voice” in these corporations.

Now I have no idea what Marglin means or how he envisions it will happen (he admirably talks about how difficult it is to find any hard “solutions” to many problems) but I have three thoughts.

1. The large majority of these corporations are publicly held, no? If persons in a community want to have a vested interest and a voice in how the company operates, why are they not purchasing up the shares in said companies? You cannot argue that it is because they wish to diversify their investments – because by living and working in towns that are “dependent” upon this corporation, they have already been unwilling to diversify some of this risk away. It is far easier to tell corporations what to do with other people’s money than it is to actually do it yourself with your own money on the line. To wit, why have the local employees of such companies not taken more aggressive steps to purchase ownership stakes in such companies?
2. The potential loss of a company from a town is no doubt difficult. But to prevent it is to ignore two important points: first, what was the force that led to the creation and location of that company in your town in the first place? Are you ready to throw away the process that led to decades of prosperity for you at the expense of other towns and locations? Second, suppose the issue is outsourcing of jobs to rural Mexico. Are the communities in Mexico, which stand to be enriched in both the monetary and community sense, not worthy of these opportunities? And for all of the discussion of the corruption of community, why does such a strong focus on corporations and economics become necessary for continuing strong communities? The point of such books seems to be that our economic way of thinking and the corporate culture undermine community … then why should we even want such things in our communities? To argue that we need businesses to consider “staying” for the sake of community seems to be having your cake and eating it too.
3. If having a company remain located in your city is such an obvious and wonderful idea, what is preventing other entrepreneurs, or even the local governments, from opening up similar or other businesses and doing exactly what it is that you want Kenmore or GM to do?