TCS Daily


Our Town

By John Radzilowski - May 3, 2005 12:00 AM

Wal-Mart is the world largest retailer and the most criticized. Critics contend that the company destroys competition or that it is too successful a competitor. It is criticized for outsourcing and labor and hiring practices. Perhaps the most persistent criticism is that it destroys businesses and communities in small-town America.

When Wal-Mart began to move into small communities in the Midwest progressive activists were outraged. The popular rant went like this: Wal-Mart "is wiping out small business everywhere, and with it the distinctiveness of local cultures... If a town declines to welcome GodzillaMart, the next town over will take it, pulling trade and tax dollars out of local coffers. The town has no choice - the terms are dictated by the retail giant from afar. ... No more mom and pop stores .... Money spent in a chain store leaves town on the next electronic transfer, while money spent in a local store circulates in the community seven more times before leaving. In other words, chains use local workers and consumers as a colony, extracting their wealth and exporting to the mother country."

The problem was that the critics based their notions on a mythic version of small-town life. Oddly, a lot of them seemed to live in cities and had only a vague connection to real small towns.

Most small towns, especially in the farming regions of the Midwest, were founded by railroads and were in some sense company towns. (This is why so many of them are evenly spaced 5-7 miles apart and tend to look alike.) They existed to serve distant markets. Farmers shipped out raw material (grain and livestock) and local merchants -- who were often recruited by the railroad -- brought in finished goods to sell to farmers.

The quasi-colonial relationship between small towns and distant markets existed long before Sam Walton was born. Businesses purchased goods made in urban factories, shipped them in on the railroad, and sold them to farmers. Many small businesses did provide great personalized service and allowed customers to buy on credit but just as many treated their customers like dirt.

The problem was always that local businesses were never large enough to fully supply the locals with an expanding range of consumer products. There was always a precarious balance between failing to stock a wide enough array of products (causing customers to look elsewhere) and taking on too much inventory. From the beginning, smaller towns lost out to bigger towns which could offer more products and better prices. Competition between towns was fierce. This only intensified with the coming of mail-order catalogue stores and the automobile, which allowed rural consumers the freedom to take their business elsewhere.

By the time Wal-Mart arrived on the scene, most "Main Streets" in the smallest communities were either in terminal decline or gone. As farms expanded, there were fewer farmers and rural populations were aging as young people chose white collar careers in the city over the hard work and small profit of family farming. Only in regional trade centers (towns over about 5,000 people) did local businesses hang on.

What Wal-Mart did was fundamentally no different than what small town businesses had always done -- bring in products from distant markets and sell them locally. The difference of course was economy of scale. As a very large company, Wal-Mart could afford to stock a much wider array of products and sell them at lower prices. Most Wal-Marts were sited in regional trade centers and to be sure, they did attract business from surrounding towns. But this is exactly what these towns had always wanted -- to beat out their competitors in the next county.

The criticism of Wal-Mart's role in small towns often turns on a conception of small town life as it never really existed. It is unclear why small communities should not enjoy equal access to the benefits of market competition, especially as they have long been subject to its negative consequences.

John Radzilowski, Ph.D., is the author or co-author of 11 books including Community of Strangers: Change, Turnover, Turbulence and the Transformation of a Midwestern Country Town (1999) and a forthcoming history of Minnesota. He can be contacted at jradzilow@aol.com

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