Wal-Mart's effect on the economics of local communities

Wal-Mart is both revered and grilled every day in the media here in the U.S. It wears many faces and has many identities. Here's a list: discriminating employer, eco-conscious citizen, small business destroyer, consumer choice champion, cheap quality marketer, economic inflation controller. Examine those six descriptions and find out which mean the most to you when you look at Wal-Mart from your personal perspective.

After you do that, it's easy to see why there is such a splintering of opinion when it comes to Wal-Mart. The company does so much good for many and does so much bad for everyone else. Is Wal-Mart the corporate incarnation of Dr. Jeckyll and Mr. Hyde? There's a strong argument towards the word 'yes' to answer that question.

Does Wal-Mart, though, effect the basic economic opportunities of the citizens surrounding the areas where it operates retail locations? It's hard to not find an area in the U.S. without a Wal-Mart nearby, similar to how McDonald's restaurants seem to be located on every third street corner.

The question remains, though: does Wal-Mart take a local economy and turn it into a lower-paying slum with more poverty when it comes to town and sets up shop? Fedgazette reports that communities without Wal-Mart stores have overall higher employee benefits and lower poverty levels. In effect, Wal-Mart is said to be a mini-government in the areas where it operates stores. Is that one of the powers the world's largest retailers?

Wal-Mart's effect on smaller competitors through direct and indirect methods

Fedgazette's analysis hints quite heavily at the fact that Wal-Mart has little to no effect on smaller employers and related business enterprises in the cities and counties where it operates stores. This would seem to be surprising to many, since it's the most common complaint I hear about Wal-Mart from friends and business associates. Of course, objective evidence is never supplied, and opinions always remain that... just opinions.

What the fedgazette analysis does not take into effect are behind-the-scenes operational scenarios that in fact do have an effect on companies in the areas where it has locations. Wal-Mart's recent beef with a $33.5 million tax bill in North Carolina brings up some pretty interesting issues: does Wal-Mart get away with tax breaks that other businesses don't receive, for example?

The effect on tax subsidies that Wal-Mart receives (PDF link) also comes into play here (among other things). Just because the retailer doesn't seem to be affecting local businesses in the communities where it operates doesn't mean that it's not gaming something. What is it gaming? Take a look here, do some reading, and see what you think. Consider both sides of the coin here and then ask yourself: does Wal-Mart play fair and does it design its store strategy to provide a community service that destroys smaller, more local competitors? If so, what means does it use to do that?

Also, does Wal-Mart really finance its expansion itself, or does it use taxpayer subsidies to entrench itself into any community that makes business sense?

Do you consider Wal-Mart to be friendly to American business and U.S. communities?

From reading this analysis top to bottom, it would appear that much of the media attention and public policy put in place to demonize Wal-Mart is at least partially misplaced. Do communities and their economies really suffer when Wal-Mart comes to town? From one angle, no. From another angle, yes. Both are rife with supporting documentation and it's up to each individual to draw their own conclusions.

In my experience, it's the personal effect of having a Wal-Mart nearby that many people use to describe their feelings about the retailer. Not communal, universal feelings -- but personal ones. It's universally true that Wal-Mart customers do save money at the cash register when shopping at Wal-Mart. Only looking at the retailer through that perspective is highly limiting, though.

As they say, the devil is in the details. Once one digs into how Wal-Mart finances its store openings, where it sources products from and how it handles tax accounting issues, one could make the argument of Wal-Mart putting on one public face while covertly having another one. In one way, Wal-Mart is a stalemate: the company does good in many ways from controlling inflation to conserving energy and resources, but has plenty to hang its head in shame with regarding effects on the communities it operates in.

Have a great weekend and stay tuned for another edition of The Wal-Mart Weekly right here next week.