Tuesday, November 28, 2006

Wal-Mart Helps the Poor. Again.

Wal-Mart has announced plans to begin doing consumer item level banking in Mexico, a country whose poor are extremely underserved by banks. In so doing they promise to substantially increase the ability of those poor to save for their own futures, and hence to expand their possibilities. When Wal-Mart announced plans to expand into only one sector of the commercial banking industry in the US recently, they drew opposition from all the usual suspects – not just their self-interested opponents in the banking industry, but those in self-appointed, equally self-interested "community groups" who are congenitally prone to opposing anything a large corporation might do to make someone's life better.

Wal-Mart is quite possibly the most effective anti-poverty program not just in the United States, but throughout the world. People are more prosperous not just when their incomes go up, when the prices they pay go down. And one of Wal-Mart's primary accomplishments is invariably to break up uncompetitive, cloistered cartels of traditional vendors and allow consumers to benefit from the famously efficient Wal-Mart supply chain. This is why these stores are mobbed every time a new one is opened in a developing country. While Wal-Mart does not succeed everywhere, with South Korea and Germany being two recent spectacular failures, they are a major hit in China and in Mexico. Unsurprisingly, anticorporate activists in Mexico several years ago greeted the opening of one of their stores in the historic city of Teotihuacán with a hysterical – in both senses – campaign accusing them of cultural rape. But the store is packed with customers every day, and the only people harmed other than self-important intellectuals are the traditional vendors there who now have to compete harder for business.

There is some truth to the argument that many businesses are reluctant to serve the poor. This is not because the people who manage the businesses that would otherwise serve them are cruel but because information is costly. Lending to poor customers raises the problem of which ones are most likely to pay their loans back. Someone with a long-established credit history, significant wealth and high income is a better credit risk, but poor customers typically have few of these things, even though in a world of better information it would be clear that many of them are good credit risks. This is where Wal-Mart does so much good. Apart from its low prices, its incredible efficiencies allow it to serve markets that don't profit less efficient producers, whether they are retail vendors are lenders. That the city of Chicago recently almost banned Wal-Mart from opening stores there unless they paid a wage substantially above the federal minimum is nothing short of disgraceful. The primary victims of such a policy would not be idle rich folks with what the comic genius Iowahawk once called "solid gold yachts and mink spats" but those most vulnerable who are denied the benefits of effective competition by activist-driven cartels.

Globalization, of which Wal-Mart is a famous symbol, is liberation for the world's poor, liberation from the choking hand of government and its rent-seeking co-conspirators in particular. Opposition to Wal-Marts into globalization is similarly, a deathstroke for those least among us. Fortunately, as Wal-Mart's global expansion attests, their opponents are fighting a losing battle.


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