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Commentary

Does Wal-Mart Reduce Social Capital?


     
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A new Wal-Mart in a community is a lightning rod for local criticism and controversy; the company’s entry has been considered a Faustian bargain whereby communities trade their souls for low prices. Does Wal-Mart reduce social capital, which is to say the networks and norms that improve community life and make trade easier?

According to our recent study published in the journal Public Choice, Wal-Mart does not systematically reduce a community’s social capital, which we measure in part with indicators like participation in team sports, card games, attendance at worship services, club meetings, dinner parties, frequent family dinners, voting, and volunteering.

In 2000, Harvard political scientist Robert Putnam published Bowling Alone, in which he documented what he called “the collapse and revival of American community.” Many activities we associate with strong communities have been on the decline since the 1950s. Putnam attributes part of this decline to the diffusion of television. Our study asks whether we can say the same thing about the rise of big-box retail as measured by the diffusion and penetration of Wal-Mart in the 1980s and 1990s.

Wal-Mart is the world’s largest company, and scholars from various disciplines have argued that the company exerts pressure on society that exceeds its impact on prices. Even beyond the narrow literature about Wal-Mart’s relationship to jobs, wages, and poverty, some have studied how Wal-Mart affects the quality of community life. In our study, we show that the data do not support the thesis that there is a systematic relationship between Wal-Mart’s penetration and social capital.

Obviously, there is much more to life than stuff and money. Indeed, in reflecting on money, Edgar Allan Poe noted that he was impressed with “the love which money cannot buy, the baubles that it may,” and William Wordsworth once criticized the drive for material betterment by saying that “in getting and spending we lay waste our powers.” Critics of modernity and prosperity echo these sentiments, claiming that Wal-Mart’s low prices have a “high cost,” to adopt the title of a successful documentary that criticized the company. Our study suggests that people are not systematically reducing their participation in social-capital producing activities when Wal-Mart penetration increases.

Empirical studies suggest that Wal-Mart increases employment, reduces prices, and exerts no statistically significant, discernable impact on small businesses over the long run. We can add to these conclusions the postulate that Wal-Mart exerts at best a trivial impact on the quality of community life.

Using data on Wal-Mart locations by county over a long period of time and data on various measures of social capital, we find very few statistically significant effects of increased Wal-Mart penetration on social capital. For the most part, the data suggest that if Wal-Mart affects social capital, the effect is positive. Even for situations in which the estimated effect of Wal-Mart on social capital is negative and statistically significant, the effect is extremely small.

Wal-Mart’s motto used to be “always low prices.” Today, their motto is “Save money. Live better.” The data suggest that people are saving money and living better when Wal-Mart increases its penetration. Empirical studies suggest that Wal-Mart lowers prices, provides jobs, and exerts at best a negligible impact on the quality of community life. People are correct to point out that Wal-Mart accepts subsidies from governments, but apart from this, the case against Wal-Mart hasn’t a leg to stand on.

There is an important takeaway point for community leaders and activists. Fighting Wal-Mart won’t improve the quality of community life. Nor, for that matter, will subsidizing the company produce beneficial spillovers. For those who don’t take our word for it so far, the paper is available on the Social Science Research Network’s website.


Art Carden is a Research Fellow at the Independent Institute in Oakland, California, and Assistant Professor of Economics at Samford University.
Full Biography and Recent Publications

Charles Courtemanche is an assistant Professor of Economics at UNC-Greensboro.






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