Walmart: Too Big to Fail
Many in the planning profession love to hate Walmart. But Walmart, and other big box stores, is really a symptom of a larger disease. And sadly, many of our places have become co-dependent on that business model, making Walmart, in many ways, too-big-to-fail. So should we be worried when their complex and fragile business model shows signs of strain?
I've been asked on a few occasions to come and speak to city councils or other official bodies about to make a decision on a Walmart or other big-box store. The people inviting me to come are generally desperate to keep a new store out of their community and view me (right or wrong) as an eloquent advocate for a different way of developing. Their hope is that I can ride in at the last minute, flap a silver tongue, and life will go on, sans Walmart.
Even if I were so rhetorically gifted (and I'm not), I always decline these requests. While I'm not pro-Walmart, I'm not anti-Walmart either.
I'm not anti-Walmart...
Walmart's low prices. Image from Wikipedia
I've never hated Walmart, the business. I loath their stores and do everything I can to avoid going to one, but that is for an entirely consumer set of reasons. I admit that I appreciate low prices. I do own some gadgets. I have lots of imported kitchen spatulas, scrapers and spoons. Of course, I eat food. On the other hand, I do hate walking through the parking lot, dodging fast-moving cars driven by people seemingly too eager to arrive or leave. I also hate being treated like cattle being lead to slaughter within the store. And I hate the smell. But most of all, I hate the way the place feels sterile and void of life—or at least life worth living.
For those of you that are fans of the Richard Adams book Watership Down (one of my favorites as a youth), to me Walmart feels a little like it would feel to be at Cowslip's warren, the warren of the snares. If you choose to remain ignorant, you can kind of pretend that things are going well. In fact, the superficial outward signs suggest that everything is going really well. But if you stop and ponder the situation, you can't help but perceive the underlying rot. Hazel and his band did not hate the rabbits of Cowslip's warren. In fact, they took pity on them. How do we look at someone standing in line at Walmart, trying to save a couple of bucks so they can fit their groceries on their maxed-out credit card, or indulging in the temporary adrenaline of a trifle of needless consumption, and not feel kind of sad.
So I don't hate the business model of Walmart, or any other big box, nor am I predisposed to spend my energy fighting them. When I look at a Walmart, I don't feel anger towards a company that exploits American workers, not to mention its farmers, manufacturers and consumers. I don't get angry about all of the small towns that have been gutted on their behalf. The ongoing environmental destruction caused by Walmart does not get me riled up. The reason is simple.
Walmart is a symptom, not a disease.
Unfortunately, most of us likely know someone who has gone through treatment for cancer. As they progress, we see them experience all of the difficult symptoms of chemotherapy. (If you needed more reason to feel compassion for people in this position, check out this excruciatingly long list of symptoms.) For each side effect, we try and develop treatments to lesson the overall impact, but the underlying problem is not weight loss, lack of immune system response or kidney failure. The underlying problem is cancer, and the symptoms will not fully go away until the cancer is gone.
A Walmart Supoercenter. Photo from Wikimedia Commons
So if our societal cancer is not Walmart, big box retail or suburban sprawl in general, what is it? Long-time readers of this blog might suggest it is our development pattern, but I think that too is a symptom. Cheap energy? Yes, except there are other parts of the world that trade on the same energy markets as us that have not evolved culturally to make "conservation" a negatively-stigmatize word. Government spending? Too easy, as if all of the spending were somehow not responding to constituent demands. The automobile? Again, visit anywhere outside of the United States. The use of the automobile does not have to equal bad development.
I think that James Kunstler has the seminal insight on the real underlying cancer infecting our society, and that is this: the notion that we can get something for nothing.
It is odd because this mentality is really not prevalent in our history. The original Europeans to settle North America did not come here thinking they didn't have to work hard. That things would be easy. Quite the opposite: America was a land of opportunity where, by the sheer power of your efforts and skill, you could better yourself. With the Homestead Act, a family could get some land, but they had to work and improve it. Even those that partook in the Gold Rush, a true something-for-nothing dream, had to work their tails off. Few actually did well.
“Why is cheap energy and cheap food seen as an American birthright?”
What have those of us that bought homes and/or cashed out our equity over the past two decades been doing if not speculating? What did we do to improve the value of our homes and enjoy such appreciation? How about the collateralized debt obligations (CDO's) and collapse of lending standards that gave us the appreciation—how hard did we work to get all of the foreign banks and pension funds to buy our cheap debt? What was the dot.com bubble? Why do we deserve reserve currency status and the massive borrowing power it gives us? Why is cheap energy and cheap food seen as an American birthright?
Closer to home, what were we telling ourselves would happen when we extended that sewer and water line? Subsidized that new business? Approved that new housing development? Widened that street? You know what we said: It will create growth. We do nothing except allow our good fortune to be an 21st Century American city to attract growth and thus, painlessly and near effortlessly, make us wealthy.
Everything comes at a cost
But, as my grandparents used to tell me, everything comes at a cost. There is nothing that is free. I have been pondering this line of thinking more heavily in recent weeks because of an article I read about Walmart's most-recent earnings report. The business article (Wal-Mart says needs more time to fix U.S. missteps) talked about how the retailer has seen slowing earnings at many of its existing stores and how it is being out-Walmarted (my term) by dollar stores and other discount, discount retailers. The article also contained this interesting observation:
Dollar stores, so named because they traditionally sold all their goods for a dollar or less, are rapidly opening more locations and already have a stronger presence in urban areas that Wal-Mart is trying to enter. Shoppers must often drive further to Wal-Mart, an issue that is more pressing as gas prices rise.
"We are seeing the worst consumer reaction to gas inflation since 2006," said Richard Hastings, consumer strategist at Global Hunter Securities, whose firm found that Wal-Mart shoppers were more likely than those surveyed at 11 other chains to cut back on driving due to higher gas prices.
And this "reaction" was for the past seven quarters ending December 31, 2010, well before the recent escalation in gas prices.
Everything comes at a cost. In this case, the brief moments of hyper-prosperity we experienced over the past two to three decades (and more generally, since WW II) were gained in exchange for a more fragile, less-resilient America. We now have a supply chain that extends across the globe, but it is susceptible to swings in energy prices, which we don't control. We have little domestic capacity to fall back on.
We all have a chance to live like European royalty on our suburban estates, but again, we are dependent on cheap energy, a massively complex and fragile supply chain and an easy, stable money supply. We have no energy program. Period. No backup plan. We've spent ourselves in the public sector, but especially in the private sector, so far into debt that we have no reasonable chance of paying it back. We've not borrowed primarily to create things of value, just to consume. Again, no Plan B.
We can build millions and millions of dollars worth of infrastructure for the near-term growth it provides, finance it with cheap borrowing or subsidies from higher levels of government, but now we have to maintain it all with returns well short of what is needed. Didn't anyone ponder this as we went?
Too-big-to-fail
Fresh food at Walmart. Photo from Wikipedia
The odd thing about Walmart is that, for many places—especially small towns and suburban areas—it is too-big-to-fail. Literally, without Walmart, what would people in some places eat? There are no local bakeries anymore - they've all been put out of business. Same with the butcher, traditional clothiers, shoe salesman, repair shops, printers, etc... They are all gone, replaced by the magic prosperity-boxes.
Here's a little insight about Walmart that is important to grasp as well; Their business model, like everything else American, relies on ever-increasing rates of growth. Is seven consecutive quarters of declining sales a momentary blip on the radar or a harbinger of the failure of a complex and fragile model?
For places that have bet on Walmart and their related big-box cousins, the time to start hedging your bets by adopting a Strong Towns approach is now.
Related Reading
- Passe Frugalism (June 21, 2010)
- Recycling and Buying Local (December 16, 2009)
- Understanding Downtown (October 5, 2009)
- Rethinking Economic Development (November 25, 2009)