Do you want to know which video clip will soon be scaring the daylights out of policymakers throughout the world? In a scenario that looks uncannily like the spread of a global pandemic, the economist Thomas Holmes has prepared a dynamic map simulation showing the spread of Wal-Mart stores throughout the US. Starting at the epicenter in Bentonville, Arkansas, where Sam Walton opened his first store in 1962, giant boxy Wal-Mart stores have now multiplied to the point where the average American lives less than 7km from an outlet.
Interestingly, the video shows how the stores spread out like petals of a flower, ever thickening and expanding. Rather than jumping out to the coasts -- 80 percent of all Americans live within 80km of the Pacific or Atlantic oceans -- Wal-Marts have spread organically through an ever-expanding supply chain. Even though each new store takes away business from Wal-Mart stores established nearby, ever-improving supply efficiencies help maintain the chain's overall growth.
Love them or hate them, what is undeniable is that Wal-Mart is the quintessential example of the costs and benefits of modern globalization. Consumers pay significantly less than at traditional outlets. For example, economists estimate that the food section of Wal-Mart charges 25 percent less than a typical large supermarket chain. The differences in price for many other consumer goods is even larger.
Consider the following stunning fact: Together with a few sister "big-box" stores (Target, Best Buy and Home Depot), Wal-Mart accounts for roughly 50 percent of the US' much vaunted productivity growth edge over Europe during the last decade. Fifty percent! Similar advances in wholesaling supply chains account for another 25 percent. The notion that the US has gotten better at everything while other rich countries have stood still is thus wildly misleading. The US productivity miracle and the emergence of Wal-Mart-style retailing are virtually synonymous.
I have nothing against big-box stores. They are an enormous boon to low-income consumers, partly compensating for the tepid wage growth that many of them have suffered during the past two decades. And I don't agree with friends of mine who turn their noses down at Wal-Mart stores, and claim never to have visited one. As a consumer, I think big-box stores are great. They have certainly been great for America's trading partners; Wal-Mart alone accounts for over 10 percent of all US imports from China.
But I do have some reservations about the Wal-Mart model as a blueprint for global growth. First, there is the matter of its effect on low-wage workers and smaller-scale retailers. While completely legal, studies suggest that Wal-Mart's labor policies exploit regulatory loopholes that, for example, allow it to sidestep the burden of healthcare costs for many workers (Wal-Mart provides healthcare coverage to less than half its workers). And the entry of big-box stores into a community crushes long-established retailers, often traumatically transforming their character.
Yes, to some extent, such is the price of progress. But the loss of aesthetics and community is not easily captured in simple income and price statistics. Big-box stores are not exactly attractive -- hence their name. If they continue their explosive growth over the next 20 years, will Americans someday come to regard their proliferation as a spectacular example of the failure to adopt region-wide blueprints for balanced growth?
Indeed, many Europeans, and others, will view Holmes' video simulation of Wal-Mart's spread as a horror film. The French may have invented the hypermart -- the forerunner of the big-box store -- but they never intended to let their growth go unchecked. The big question for Europeans is whether they can find ways to exploit some of the efficiency gains embodied by the Wal-Mart model without being overrun by it.
For the US, there is the additional question of what to do when the big-box store phenomenon has run its course. If so much of the US productivity edge really amounts to letting Wal-Mart and its big-box cousins run amok, what will happen after this source of growth tapers off? The US economy has many other strengths, including its superior financial system and leading position in high-tech capital goods, but the fact remains that the US' advantage in these areas has so far not been nearly as striking as the Wal-Mart phenomenon. It is curious how many people seem to think that the US will grow faster than Europe and Japan over the next 10 years simply because it has done so for the past 10 years.
Wal-Mart and its ilk are a central feature of the modern era of globalization. They are not quite the pandemic that their explosive growth pattern resembles, but nor is their emergence completely benign. Those who would aim to emulate US productivity trends must come to grips with how they feel about big-box stores sprouting across their countryside, driving down wages and plowing under smaller-scale retailers. The US, in turn, must think about where the proper balance lies between aesthetics, community and low prices.
Kenneth Rogoff is professor of economics and public policy at Harvard University, and was formerly chief economist at the IMF.
Copyright: Project Syndicate
Concerns that the US might abandon Taiwan are often overstated. While US President Donald Trump’s handling of Ukraine raised unease in Taiwan, it is crucial to recognize that Taiwan is not Ukraine. Under Trump, the US views Ukraine largely as a European problem, whereas the Indo-Pacific region remains its primary geopolitical focus. Taipei holds immense strategic value for Washington and is unlikely to be treated as a bargaining chip in US-China relations. Trump’s vision of “making America great again” would be directly undermined by any move to abandon Taiwan. Despite the rhetoric of “America First,” the Trump administration understands the necessity of
US President Donald Trump’s challenge to domestic American economic-political priorities, and abroad to the global balance of power, are not a threat to the security of Taiwan. Trump’s success can go far to contain the real threat — the Chinese Communist Party’s (CCP) surge to hegemony — while offering expanded defensive opportunities for Taiwan. In a stunning affirmation of the CCP policy of “forceful reunification,” an obscene euphemism for the invasion of Taiwan and the destruction of its democracy, on March 13, 2024, the People’s Liberation Army’s (PLA) used Chinese social media platforms to show the first-time linkage of three new
If you had a vision of the future where China did not dominate the global car industry, you can kiss those dreams goodbye. That is because US President Donald Trump’s promised 25 percent tariff on auto imports takes an ax to the only bits of the emerging electric vehicle (EV) supply chain that are not already dominated by Beijing. The biggest losers when the levies take effect this week would be Japan and South Korea. They account for one-third of the cars imported into the US, and as much as two-thirds of those imported from outside North America. (Mexico and Canada, while
The military is conducting its annual Han Kuang exercises in phases. The minister of national defense recently said that this year’s scenarios would simulate defending the nation against possible actions the Chinese People’s Liberation Army (PLA) might take in an invasion of Taiwan, making the threat of a speculated Chinese invasion in 2027 a heated agenda item again. That year, also referred to as the “Davidson window,” is named after then-US Indo-Pacific Command Admiral Philip Davidson, who in 2021 warned that Chinese President Xi Jinping (習近平) had instructed the PLA to be ready to invade Taiwan by 2027. Xi in 2017
RSS