New research suggests that the company makes the communities it operates in poorer—even taking into account its famous low prices.
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The most direct upshot of the new research is that Walmart isn’t the bargain for American communities that it appears to be. (When I reached out to Furman about the new research, he said he wasn’t sure what to make of it and suggested I talk with labor economists.) More broadly, the findings call into question the legal and conceptual shift that allowed Walmart and other behemoths to get so huge in the first place. In the late 1970s, antitrust regulators and courts adopted the so-called consumer-welfare standard, which held that the proper benchmark of whether a company had gotten too big or whether a merger would undermine competition was if it would raise consumer prices or reduce sellers’ output. In other words, the purpose of competition law was redefined as the most stuff possible, as cheaply as possible. But as the new Walmart research suggests, that formula does not always guarantee the maximum welfare for the American consumer.
The outgoing Biden administration, with its focus on reviving antitrust, recognized this. Its most recent enforcement guidelines, for example, direct the government to take into account a merger’s effect on workers, not just consumers, and the antitrust agencies have included such claims in multiple lawsuits. The question is whether the incoming Trump administration, which has sent mixed messages on corporate consolidation, will follow the same path.
Recent history shows the political danger in threatening low consumer prices. The public’s reaction to the inflation of the past few years suggests that many Americans would rather be slightly poorer but have price stability than be richer but with more inflation. That will tempt policy makers to prioritize low prices above all else and embrace the companies that offer them. But if Walmart’s example reveals anything, it is that, in the long term, low prices can have costs of their own.
