– October 26, 2020 Reading Time: 4 minutes

Walmart takes a lot of heat, especially from the left. Their staunch opposition to labor unions has won them no favors in the labor movement, their sheer size has earned them the skepticism of people who look on bigness per se with suspicion, and stories abound of how they’re destroying Main Street or wiping out “mom and pop” stores. A lot of my work has looked into these stories and found them wanting: Walmart Supercenters fight food insecurity, for example, and while there’s some evidence Walmart Supercenters increase BMI and the probability of being obese, the additional health costs are a tiny fraction of what Walmart saves its customers. I agree with Jason Furman, former chair of President Obama’s Council of Economic Advisers: Walmart is a “progressive success story” in that it disproportionately benefits the poor.

That’s not to say that everything they do deserves applause. As one of their “Global Responsibility” initiatives, Walmart is “investing in American jobs” “by supporting more American manufacturing.” I can’t fault them for “believ(ing) in making a difference on the issues our customers and communities care about.” They have committed “to purchase approximately $250 billion in products that support the creation of American jobs” by 2023. They plan to do this by sourcing more manufactured goods from the US. Even if they create new American jobs by sourcing manufactured goods from American suppliers, they aren’t going to increase American prosperity generally.

Why not? Many economists have pointed out that jobs are the cost of prosperity, not the benefit. A lot of jobs (like mine) have a lot of satisfaction attached to them, but generally, people don’t buy, sell, and work for their own sake. They buy, sell, and work so that they can have the goods, services, and security that make their lives pleasant. As much as I love teaching, research, and writing, I wouldn’t do these things if, at the end of the day, it prevented me from feeding, clothing, and sheltering my family. I don’t do right by them (or by anyone) by intentionally and systematically using more resources than are necessary to get something done.

Similarly, you don’t spread prosperity by wasting resources. That’s exactly what Walmart is doing by paying extra for stuff just because it is produced in the United States. There might be good reasons to “buy American” if it means higher quality, for example. We buy a lot of locally-sourced meat and produce because we value quality and convenience. That’s not what Walmart is doing here. They are going to pay extra for goods just because they are produced on the US side of a border. They are, therefore, moving labor and capital out of higher-value uses and into lower-value uses.

Some people will read the preceding paragraph and get indignant at the very idea that producing more goods in the United States wastes resources. This is because we tend not to look or think beyond what is right in front of our faces. You can see a square-jawed, hard-hat-wearing American heading off to the factory swinging his lunch box. You can see his wife and kids and the (presumably) better life they’re able to have because Dad was able to get a good job at the widget factory. You can put them in front of a camera and watch them testify about how great it was that Walmart decided to buy more from Americans and less from foreigners because it meant Dad could get a better job and Billy could get braces.

It’s a lot harder to see and appreciate how a plan like this wastes resources. People might pay a little bit more at Walmart, but so what? You’ve probably heard a popular refrain from people saying they would gladly pay an extra twenty-five cents for a Big Mac or an extra dollar for a pair of jeans if it means Walmart’s workers and suppliers can earn decent livings. What, though, about the low-income customers who are now stuck with higher prices? What about the entrepreneurs who cannot hire the labor and capital Walmart and its suppliers have bid into manufacturing by overpaying? What about the loans that aren’t being made because the money we would have saved had Walmart stuck to everyday low prices is being used to buy American manufactured goods? 

The effect on the family from a couple of paragraphs ago is pretty obvious. The effect on the broader society is ambiguous and almost certainly negative. When we use more resources than necessary to produce toasters and vegetables, we are able to enjoy, on net, fewer toasters and vegetables–or less of a whole variety of goods and services. Walmart’s $250 billion commitment comes to about $757 per American. Even if only 1% of this is wasted, it’s $2.5 billion over a few years–or basically one fast-food meal per American that no one gets to eat.

In its almost sixty years of existence, Walmart has revolutionized American retail and raised American standards of living by innovating in shipping, selling, and shopping. They certainly have the potential to continue doing so–but paying extra for stuff just because it was produced in the United States won’t help them or their customers in the long run.

Art Carden

Art Carden

Art Carden is a Senior Fellow at the American Institute for Economic Research. He is also an Associate Professor of Economics at Samford University in Birmingham, Alabama and a Research Fellow at the Independent Institute.

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