8.06.2008

Wal-Mart in Honduras: A Capitalist Success Story

The criticism of American big business, and its supposed detrimental impact on everything from small-town America to developing countries, is a constant thread through most of the mainstream media, such that it doesn't usually rise above the white noise. American companies are bad, bad, bad, we are told, and we're treated to sob stories meant to play on our emotional reactions, to guilt us into agreeing. One way these critics are scrambling for attention amid a glut of such sentiment is by making ever more blatant remarks. Gus Van Horn observed recently, in reference to Starbucks' downturn and the leftists' reaction, that "Apparently, they're so happy about Starbucks contracting that they're indifferent to (or even gleeful about) the fact that thousands of its employees are losing their jobs."

The more passive critics simply bemoan how big American chain stores "push out" small businesses in the Midwest, or "take advantage of" low-wage factory workers in the Third World. The most common target is Wal-Mart, and at the mere mention of the name in the news, one can reasonably expect an anti-free market, "big business is bad" argument to ensue.

Imagine my surprise when I read a story transcript on NPR, "The Supermarket Revolution Moves Into Honduras," that was glowingly positive about how Wal-Mart has moved into the supermarket business in Honduras and owns two large chains there. Contrary to popularly held beliefs, this has not destroyed their native culture or oppressed the people. Instead, it has sparked innovation, jobs and stability throughout the food supply chain, all the way down to the local growers, and provided consumers with pristine stores and food that isn't rotten and unsafe.
With food prices soaring and more people going hungry, many developing countries are trying to boost their food production. But it's not enough to grow more food; farmers also need better ways to sell it. Small farmer, meet Wal-Mart.

If somebody says "developing-world food market," what comes to mind? Maybe a street filled with fruit, vegetable and meat stands, {rotting in the hot sun, the stench overwhelming --ed} like one in Tegucigalpa, the capital of Honduras. But another kind of market is taking over in Honduras: the supermarket.

Paiz, one of two supermarket chains in Honduras owned by Wal-Mart, is as bright and clean as any in the U.S. The number of Paiz stores is growing fast. Supermarket sales in Honduras have been increasing by about 20 percent a year.

Luis Alfonso Andino, who's in charge of vegetable shipments at one Paiz store in Tegucigalpa, says the growth is because customers know the food from the supermarkets won't make them sick. {bold added}

This is a fascinating and not at all surprising example of capitalism and American business practices having real, tangible, and far-reaching benefits, even in developing countries. It explodes the myth and disinformation that American big business is inherently exploitative of "oppressed" peoples. Of course critics might point to the pristine Paiz supermarkets in the big cities and state that only the rich elite of the country could afford to shop there. That may or may not be true -- I simply don't have any information about that (and these fictional critics likely wouldn't either, but that wouldn't stop them).

What this ignores, however, is that Wal-Mart is not skimming money off the top of some fixed amount of national wealth, leaving less for the "little guy". It is raising the standard of living for everyone. People who can afford it can now buy food that is safe from a clean store -- and knowing Wal-Mart, they will likely drive down prices, making it possible for greater numbers of Hondurans to become customers.

And as an example that should (but won't) appeal to the leftists, the small local growers are greatly benefitting too!

Increasingly, the key for small farmers' success is to sell to supermarkets. But this means that farmers have to meet some tough new standards.

High in the hills, near the town of Lepaterique, Vicente Sanchez ticks off the crops that his farmers cooperative grows: carrots, lettuce, cauliflower, cilantro. They all go straight to Wal-Mart....

"Whatever we plant, we know that it's already sold before we plant it," he says. "Before, we'd plant things without knowing whether we had a buyer, and we used to lose out."

The small farmers have to be careful, because Wal-Mart rejects vegetables that test positive for bacteria or high levels of pesticides. {bold added}

The standards set by Wal-Mart coupled with a contractual guarantee that the produce will be purchased if it meets those standards, provides incentive to the farmers to improve, a return on investment if they do, previously unheard of stability and the chance to plan long term, and what will surely translate into better lives for those farmers who take advantage of the opportunity.

This is an inspiring example of the power of capitalism. Of course, it's a narrowly defined situation in what is an otherwise badly mixed, if not socialist economy that is one of the poorest in the Western Hemisphere; but that context only serves to make it a more powerful story.
Edward Bresnyan, an agricultural economist at the World Bank office in Honduras, says the deals between farmers and supermarkets help fuel the economy. That translates to better roads and cell phones, so that farmers can find out where they can get the best prices.

For the farmers in Lepaterique, it's working pretty well so far.

Some of them arrived at the Wal-Mart supply center in the outskirts of Tegucigalpa driving a pickup truck loaded with broccoli, green beans and carrots. Wal-Mart manager Gabriel Chiriboga looked pleased.

Within 24 hours, shoppers will see those vegetables on supermarket shelves. And some of the money that they spend will flow back to the small — but well-connected — village. {bold added}

If they were listening, if they were open to reason, Wal-Mart's critics and self-declared defenders of the defenseless would see this example and realize their mistake. They would stop asking for more regulations, more unionizations, more zoning restrictions and protests and boycotts, and instead would advocate for a fully free market as the only salvation for the "defenseless." They would cheer Wal-Mart's success and ask for more.

Of course, they are blind to reason and evidence, and anything that contradicts their fanciful views. But the rest of us can look at this example of Wal-Mart's success in Honduras as a much-needed inspiration, and as intellectual ammunition.

17 comments:

Liriodendron said...

I agree. I blogged about an article on WalMart awhile back that reported that even in the US, WalMart has REDUCED prices on so many items this year by reducing packing size and sourcing locally -- which reduces their transportation costs, obviously.

I do grocery shopping at WalMart whenever possible. Why pay $1 more for the same damn bottle of olive oil at the regular grocery store?

Clay said...

So while I'm generally pro-business I don't know quite what to make of the fact that a big part of the reason that Wal-mart is so successful is that they get (temporary) tax exemptions in various communities that they move into which gives them a playing field that is substantially skewed to their advantage.

I have also read that Walmart is sometimes the recipient of some sort of tax rebates which amounts to them taking taxes from me and not passing them on to the government. Essentially serving in the roll of a mafia debt collector keeping a percentage for themselves.

C. August said...

Clay, I haven't done any looking into how Wal-Mart works in the U.S. If they are true mixed economy players, working the system of pull and force, seeking out government hand outs of our money, that's certainly a bad thing.

But point of the post wasn't to extol the virtues of Wal-Mart per se. The point was that leftists and anti-capitalists commonly point to American big business as the exploiter of the weak and the Third World, and use that to claim capitalism itself is bad. Yet this particular case, presented by NPR no less, shows in stark and simple terms how wrong this view is.

That was my point. Not that Wal-Mart is some perfect capitalist ideal.

Liriodendron said...

Clay, your comment raises some issues I've been thinking about lately. In short, just how much is it OK to soak the system? It disappoints me to see businesses acting in an Orren Boyle manner, but tax breaks seem to be a relatively minor infringement of rights compared to the tactics some companies use -- like trying to silence the free speech of their competitors through lawsuits.

More to the point regarding this issue, I ask myself how I should behave. Particularly, I'm wondering whether it would be acceptable for ME to take federal funding for some purpose, such as an NSF grant. Federal grants are available to small businesses. Are these businesses immoral for taking that money? Would I be immoral for taking that money? Further, should one keep a record of what one has paid in federal taxes and only try to take that amount back? Or should one go for as much as possible? I honestly don't know the answer to that question. Ideally, I'd like to fund a business or research through completely private investment. But is it wrong to take government money in the kind of system we live in? Also, is it wrong to take more than we've paid in taxes? That's not just some hypothetical moral question, but a crucial question to me as I'm thinking of applying for a federal grant. I want to do the right thing, but I'm not sure what that is.

Perhaps this isn't the right place for such an exchange but I am interested in these questions.

Clay said...

point taken.

Michael M said...

Liriodendron,

Apply the same principle that underlies the morality of one's right to self-defense and the principle that allocates guilt to an accessory to a crime and you will be clear on the subject of receiving government handouts.

Every man has a right to his life - to be free from coercion. Implicit in claiming that right is the obligation to grant it to all other men. No one may violate the right of any other man and still claim the same right for himself - that is a self-contradiction. And any accessory to such a violation shares in the perpetrator's guilt and forfeits his rights as well.

Taxation constitutes an act of force for gain initiated by the government and those who support such actions. Anyone who supports taxation is an accessory to that crime. Anyone who opposes taxation is an innocent victim of that crime.

No accessory to a crime has any right to receive the benefits of the crime committed. Innocent victims of crimes do have the right to restitution.

Therefore, here is the rule:

The only persons who have a right to receive the benefits of taxation are those who oppose all taxation.

Don't worry about trying to measure how much you have lost in your life to taxation. It is immeasurable, not just in actual funds paid in, but in the loss to your life of the opportunities that you would have had in your life from the added efficiency, productivity, and wealth of the nation as a whole if that crime was never committed.

So only parents who oppose public education have the right to make use of it. And only the business owners who oppose government grants of any kind have the right to receive them etc., etc., etc..

But to claim this right, your opposition to taxation (and all initiated force for gain) must be unequivocal. Libertarians who cling to excise taxes or other taxes they can't imagine doing without, do not qualify. On the other hand, you would not forfeit the right by voting for some person who supports taxation, because your vote can be in spite of that position.

C. August said...

Great points, Mike.

A quick look at the Ayn Rand Lexicon supports this view, and Rand's own words (last entry on this page) speak directly to L's concerns:
------------------
//Quoting from Rand's essay, “The Question of Scholarships,” The Objectivist, June 1966, 11.//

“Is it morally proper for an advocate of capitalism to accept a government research grant or a government job?”

I shall hasten to answer: “Yes”—then proceed to explain and qualify it. There are many confusions on these issues, created by the influence and implications of the altruist morality. ...

The recipient of a public scholarship is morally justified only so long as he regards it as restitution and opposes all forms of welfare statism. Those who advocate public scholarships, have no right to them; those who oppose them, have. If this sounds like a paradox, the fault lies in the moral contradictions of welfare statism, not in its victims.
...
The same moral principles and considerations apply to the issue of government research grants.

The growth of the welfare state is approaching the stage where virtually the only money available for scientific research will be government money. (The disastrous effects of this situation and the disgraceful state of government-sponsored science are apparent already, but that is a different subject. We are concerned here only with the moral dilemma of scientists.) Taxation is destroying private resources, while government money is flooding and taking over the field of research.

In these conditions, a scientist is morally justified in accepting government grants—so long as he opposes all forms of welfare statism. As in the case of scholarship-recipients, a scientist does not have to add self-martyrdom to the injustices he suffers.

Clay said...

Just to be clear... I wasn't merely pointing out tax breaks.. though to the extent that this slants the playing field by means of arbitrary gov't fiat in favor of large corporations... I was also pointing out that apparently Wal-Mart (and apparently some other big box type stores) are actually allowed to keep some or all of the sales taxes that they collect from their customers while acting as a proxy for the government. So these companies are literally stealing from their customers and using their government pull to exempt themselves from prosecution.

Liriodendron said...

That is interesting, Clay. I did not know that. There was also some hub-bub over them importing goods and labeling them as "made in America" years ago. I don't doubt that. Of course, there is no way a small business would be able to do such a thing without the government jumping all over them. If all businesses were prosecuted equally, that would be one thing, but in fact, a small business owner doing this will get a swat team at their door and get them handcuffed and landed in jail. Seriously. (I've written about this re: food isseues many times on my blog, the most blatant examples here: http://sparkasynapse.blogspot.com/2008/02/your-pork-is-busted.html and here: http://sparkasynapse.blogspot.com/2008/05/and-now-farmers-rights.html) Imagine that happening to the CEO of WalMart for fraudulent activity. I don't think so.

Nevertheless, I'm still a big WalMart shopper. Just dropped over $200 there last night.

Clay, I'll personally have to think more about Wal Mart in light of this information. If every company was doing this, I would not have a choice in where I shop... but I don't want to support Orren Boyles. Do you have more information on this? If so, please email me at monicabeth10AtgmailDOTcom. It's one thing to take advantage of tax breaks, as taxes affect us all. It's quite another to try to avoid free market competition or get special favors for oneself through pull. Unfortunately, there are companies that do that, and I refuse to support them out of principle... I didn't realize WalMart might be one of them. *sigh*

Michael M said...

Not so fast! I don't see the moral distinctions yet among the multitudinous methods governments dream up to rebate and subsidize. In my state, every business gets to keep a $30 sales tax collection allowance. Yes, it's a miserly pittance of value only to the smallest business on earth, but is it immoral to keep that yet moral to accept other government handouts? When you stop shopping at Wal-Mart will you also stop watching major sports performing in those subsidized arenas?

The moral issue is not decided by what they take, but by whether they oppose the system as a whole. Measuring the status of that in a mega-corporation is all but impossible, but if any business would be glad to give up their subsidies in exchange for a taxless society, my bet is Wal-Mart would be one of the first to sign on.

Also in a company that big, there will from time to time be an array of executives who push irrational policies into place. Since Sam left the scene some of those have already come and gone. But keep your eye on the ball. The concept and its execution by Sam Walton is the shining example that validates the Randian principle that the pursuit of productivity and rational self-interest is the greatest source of genuine benefits to man.

On issues like this I reach for the moral measuring stick I use to set the hierarchy of my friendships and associations in an irrational world. I call it "because of - in spite of". As long as 1) the first outnumber the second (which may not include chosen evil), 2) I am fully cognizant of the nature of my "in spite of's", and 3) I make them known at every appropriate opportunity, I can engage with others, my principles intact.

Boycott and shunning are a primary means of managing a laissez-faire society of the Objectivist kind. But the magnitude of the task of defining a systematic code of values for invoking them could qualify it for a whole sub-category of ethics all its own. In the meantime, use it wisely with a watchful eye on the potential pitfalls of self-contradiction.

Liriodendron said...

"The moral issue is not decided by what they take, but by whether they oppose the system as a whole. Measuring the status of that in a mega-corporation is all but impossible,"

"Exactly" on the first sentence. "Nonsense" on the second. I can think of at least one mega-corporation who don't oppose this type of system, but loves it. I can objectively show that, but I'm not going to go into it here on someone else's property because that's not the topic of this thread. All I'm asking is whether Clay can do the same for WalMart.

C. August said...

Hey L, don't worry about going off on a topic tangential to the original post. I'm interested in the discussion as it has evolved.

Michael M said...

liriodendron, ... and on that note, it is not how much your big bad corporation loves government subsidies, it is whether they would give them up in exchange for a taxless society. Can you objectively show that?

Let's take one step back and look at the bigger picture. The reason corporations do what they do is because they are populated with your neighbors -- those same friends who regard your ethics and politics as freakish. In the light of their willingness to rob and be robbed to fund the welfare state, lapping up government subsidies at their place of work is just more modus operandi.

If I had to bet real money, I would place it on an expectation that neither they nor their corporate entities would opt for a taxless society in droves. But that is the very thing that is all but impossible to determine with any degree of certainty.

Now I do recognize that a corporation is only a legal entity that enables a group to be treated as an individual, And if you want to take a hardline approach and condemn the corporation et al as an individual when their executives chase benefits from the government, that would not be unjust.

In that case, however, you would have to apply the same standard you apply to the corporation qua legal individual to every individual you encounter in your life. And if you would then boycott the corporation, you would have to shun all those parents who are advocates in principle of public education, not to mention all advocates of the rest of the welfare state programs. That would not be unjust either. But that is clearly not the solution to this dilemma.

So it's back to my because-of-in-spite-of moral measuring stick with the caveat that any individual or corporation who deliberately enlists the government to take from others deserves to be shunned or boycotted. But I still do not see the receipt of rebates or incentives as qualifying. Rather I would be quickest to condemn companies that file anti-trust suits against their competitors or one that enlists the powers of imminent domain to obtain property.

Liriodendron said...

I'm not talking about tax breaks, Michael. I'm talking about trying to silence competitors' free speech or sue competitors for things that any reasonable individual would never do and any person with an ounce of common sense would realize was wrong. See my blog for more information.

I haven't made up my mind about WalMart. I'm still waiting for more information. Obviously, their engagement in some minor fraudulent activity in the past hasn't stopped me from shopping there. So stop jumping all over me, OK?

I agree, bringing suit with anti-trust is a big problem. I couldn't respect any company that does such a thing. That's my point -- it is possible to objectively determine whether a company is run by moral people. Not a near impossibility as you said.

Clay said...

Ok..

I listened to a really good podcast a few weeks ago where the speaker was addressing this issue.. specifically in relation to Wal-mart... I will see if I can figure out where it came from... oh the perils of waaay too many feeds.

:)

Jim May said...

How sad it is that I find this post today, when Honduras is trying to throw off a socialist president and Walmart is coming out for socialized medicine.

C. August said...

No kidding, Jim. Pretty much any time I hear about Honduras or Wal-Mart, I think of this post. And with the particular confluence of events right now...