by Barry A. Liebling
Wal-Mart, the prodigiously successful retailer, has long been a target of leftists who portray the company as standing in the way of their socialist agenda. One might conclude that Wal-Mart is an advocate of free markets, but that would be a mistake. In October 2005 the CEO of Wal-Mart gave a speech calling for an increase in the federal minimum wage. This is a clear signal that Wal-Mart does not endorse capitalism, is in favor of using government force to achieve its objectives, and is contemptuous of the principle of dealing by mutual consent.
Classical economists have repeatedly documented and explained how minimum wage laws lead to undesirable consequences, including making it harder for the least skilled workers to get employment. However, the ethical – as distinct from the economical – reason to shun minimum wage laws is that business dealings are moral only if both parties agree to the terms voluntarily. This means the employee and the employer must agree on wages of their own free wills – without outside coercion.
The speech of the Wal-Mart CEO was regarded as newsworthy because most commentators did not expect a company that is a free market success story to take this position. What might be inciting Wal-Mart top management? Three possible motives come to mind.
First, consider the rationale offered by the CEO himself – a keen desire to assure that potential customers can afford to shop at Wal-Mart. He asserted that many are “struggling to get by” and “don’t have the money to buy basic necessities.” To benefit those with modest assets he wants Congress to “look at the minimum wage and other legislation that may help working families.”
If you take the CEO at his word, that his objective is to make it easier for people with lower incomes to buy Wal-Mart merchandise, numerous actions are open to him that are ethical. For example, he can lower the prices of Wal-Mart products that he wants to make available to less affluent customers. Alternatively, if increasing wages is his desire he can substantially raise the pay of all employees within Wal-Mart. Going a step further, Wal-Mart management could have a policy to buy goods and services only from companies that pay employees well. Notice that these actions are voluntary on Wal-Mart’s part, are not coercive, and are qualitatively distinctive from the government mandating an increase in wages.
Second, think of Wal-Mart’s rivals. Some journalists have speculated that the real reason the Wal-Mart CEO is pushing for an increase in the minimum wage is belligerence against Wal-Mart’s competitors, rather than good will toward Wal-Mart’s shoppers. Reportedly, Wal-Mart already pays its own employees far more than the minimum wage. Legislating higher wages may have little effect on Wal-Mart’s payroll but would increase the costs for other retailers who employ lower paid workers. Thus, Wal-Mart can realize a competitive advantage if the law requires a higher minimum wage.
Competing against other retailers is acceptable, and there are numerous ways for Wal-Mart to do so ethically. For example, it can lower its prices, improve its product offerings and services, or advertise more. Each of these moves are legitimate actions for a business. Each are attempts at persuasion and do not make use of coercive force.
If Wal-Mart were to send armed thugs to its competitors demanding that they pay more for labor, a fair-minded observer would recognize the villainy. If instead of sending its own thugs Wal-Mart finds a way to use the government as a surrogate, Wal-Mart is guilty of the same transgression.
Third, it is possible that the CEO of Wal-Mart has been worn down by the constant attacks and criticisms left-wing activists have launched against his company. He may believe that his best response is appeasement – give public lip service to selective “progressive causes” and hope this satisfies Wal-Mart’s antagonists. Historically, the problem with appeasement is that it does not work. If Wal-Mart capitulates, leftist adversaries will know that their haranguing has paid off, will be encouraged to increase their efforts, and will demand additional concessions.
There is something even worse than appeasement – taking the side of the menacing assailant. It is possible that Wal-Mart’s CEO has developed a fondness for leftist ideology. He may fail to recognize that capitalism is the moral system. Instead, perhaps he wants a business world where individual free choices count for little and success depends on government force. If this attitude prevails at Wal-Mart, the company’s prodigious success will be eclipsed by the consequences of its blunder.
*** See other entries at AlertMindPublishing.com in “Monthly Columns.” ***