Opinion and Economic Analysis

HICKS: Bloomington's chain store debate a tough sell

January 2, 2010

Bloomington is wrestling with an old problem—what to do about chain stores downtown. I am enormously sympathetic to the issue.

Mayor Mark Kruzan wants to nurture an attractive downtown, something that is far more important to the health of a community than most folks suppose. When I wrote a book about Wal-Mart’s local economic impact, I uncovered an eye-opening account about a war on chain stores almost 70 years ago. It certainly doesn’t lead to easy local policies or politics.

Let me begin by noting that an outright ban on chain stores is unconstitutional. We have this little thing called an equal protection clause that prevents us singling out so clearly a chain store. The signature case dates back to 1928 during the heyday of the anti-chain-store movement. This is presumably why Kruzan has appointed a board to look at other measures to protect the downtown’s distinctiveness.

It is worth noting that much of the criticism heaped on chain stores is both true and irrelevant. Successful chain stores (a small minority) do buy goods cheaply, often from overseas, and squeeze supplier profits. This is also irrelevant to the debate, since these firms do so at the beckoning of consumers. It isn’t Wal-Mart that ultimately buys goods from China, we do. Wal-Mart merely listened to the murmurings of consumer demand while K-Mart tinkered with its spinning blue lights.

Kruzan could rightfully take from this lesson that a leader (and like it or not, that is what mayors are) has the responsibility to guide his constituents’ choices. Here though, the lesson isn’t all so clear. Chain stores in general and Wal-Mart in particular also result in a lot of good. One thing everyone who has studied the issue agrees on is that prices for food and goods are lower when Wal-Mart is around. My published studies estimate the price difference of a Wal-Mart to be about one month of groceries annually for an average family. In the Hicks household, that ain’t nothing to sneeze at.

It is worth noting that the presence of Wal-Mart reduces prices at other local stores. But of course, you knew that, else why would local merchants fight to keep chain stores away? Monopoly power doesn’t always hide in big businesses.

More to the point, Bloomington’s official poverty rate is north of 40 percent, and while that is mostly because of college students, the price difference Wal-Mart brings will certainly help the poor. Interestingly, two recent studies have found that obesity rates drop in communities with a local Wal-Mart. The reason of course, is that the poor in America suffer an epidemic of obesity because healthful foods are more expensive than the things that make you fat. Cheaper prices at Wal-Mart do more to fix that than any public policy, including food stamps.

So where does this leave Bloomington? Of course, officials will do what they can to nurture the downtown. But a downtown with an attractive, appropriately scaled chain store might be just fine.•

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Hicks is director of the Bureau of Business Research at Ball State University. His column appears weekly. He can be reached at bbr@bsu.edu.

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