by T. Norman Van Cott
T. Norman Van Cott is professor of economics at Ball State University and an adjunct scholar with the Indiana Policy Review Foundation.
It seems like it was only a few weeks ago that opinion makers were obsessing about Wal-Mart's negative impact on the United States. Wal-Mart's offense? Low prices! Wal-Mart’s marketing technology, including its access to low-cost foreign suppliers, was chipping away at our nation’s fabric, at least according to our opinion makers.
Indeed, Wal-Mart crisis-mongering saturated the nation's media culture, college classrooms, and mainline church pulpits. Pundits, professors, and preachers alike intoned about how Wal-Mart disfigured America. Secular and sacred merged to decry those always low prices.
Then the drum-beat stopped. This coincided with the concern about rising gasoline prices. The new song was that high gasoline prices are sapping our national strength. Whereas Wal-Mart selling cheap Chinese shirts hurt Americans, now it’s Exxon selling expensive Arab oil that hurts us. Low prices, high prices — it’s all the same, and it's all bad, as far as our pundits, professors, and preachers are concerned.
Is there an alternative interpretation? You bet. It’s that our opinion makers are knee-deep in contradiction. Never mind their seemingly seamless transition between price crises. They can’t have it both ways. Either high gasoline prices or low Wal-Mart prices hurt Americans. One or the other, not both. That means if high gasoline prices hurt Americans, then those always low prices at Wal-Mart help Americans. Alternatively, if Wal-Mart's low prices hurt Americans, then high gasoline prices help us. Like it or not, two plus two always equals four. Not just sometimes.
Only the oil/gasoline-price scenario has credibility. Crisis-mongering about Wal-Mart is bogus. Higher gas prices trace to oil's increased scarcity for Americans. Wal-Mart's lower prices for, say, shirts indicate increased shirt abundance. Unless you're a throwback to a 1970s less is more advocate, increased scarcity signifies lower living standards. Increased abundance is what higher living standards are all about.
Interestingly, the marketplace uses prices to minimize the reduction in living standards associated with increased scarcity. A higher price of gasoline, for example, encourages consumers to eliminate the lesser valued consumption uses to which they put gasoline. Higher valued consumption uses remain. Higher gasoline prices also provide incentives for additional production from suppliers who otherwise would not produce, mitigating the increased scarcity.
At the same time, lower prices following increased abundance maximize the increase in living standards. Lower prices for those Chinese shirts induce Americans to purchase shirts for uses not deemed economic before the increased abundance. Abundance transforms the uneconomic into the economic. Likewise, American shirt producers with income-earning alternatives that are more lucrative than competing with the Chinese opt out of shirt production. That means, in effect, that Americans get shirts at a smaller sacrifice. And that means higher living standards. A free lunch? No, just bigger helpings.
Political Expediency
It should go without saying, but I’ll say it anyway, that politicians who suggest substituting government price edicts for the marketplace are sacrificing our living standards to the gods of political expediency. Not letting the price of gasoline reflect its increased scarcity prevents the price system from performing its ameliorating effects on our living standards. Ditto for not letting the price of shirts reflect their Wal-Mart-related abundance. The same politicians who would never opt for lower living standards for their own households nevertheless suggest exactly that for the nation's households.
The only bright spot in the contradiction is that the gasoline scenario trumped the Wal-Mart crisis-mongering. The accurate swamped the bogus. Nevertheless, that the contradiction would go unnoted by our pundits, professors, and preachers is a sad commentary on their lack of insight. It does little to assure us they’ll get things right next time.