One of the regular complaints about the effect of Walmart on small town America has been that it kills jobs when its stores turn up. Mom-and-pop retailers close down, and Walmart itself requires fewer workers than the smaller joints it replaces. This is entirely true, and it’s also entirely fine, even desirable and admirable. The aim, point, and process of economic advance is to kill jobs— to get the task done with the use of less human labor.
India is just starting to see protests against that first stage of the same process, which is unfolding as Walmart swallows Flipkart, a locally grown cross between Amazon and e-Bay. The people protesting are the millions of independent traders who currently make up India’s retail landscape. They’re entirely justified in protesting as a larger and more efficient online behemoth will indeed put many of them out of business and kill off their jobs and employment.
It will also “force prices down,” which is something we should applaud, of course. It’s good if prices for everyone in the country fall— that’s a sign all are getting richer. We should even be in favor of “predatory pricing, deep discounting, and loss funding” because, again, those practices make consumers richer.
But who should we be supporting here? Clearly, our innate prejudices are in favor of the small operator, that struggling family business, as opposed to some monster of late-stage capitalism. We could further believe that a thriving community of sturdy independents is more valuable to us than some mere reduction in the prices of diapers or milk.
But that’s not the point here, nor is it what makes us richer. Economic advance is about using less labor to do any one task. This is why we obsess over productivity. It’s not so that we can gain more from the same amount of labor either. It’s so that some labor is freed up to go and do something else, which is the important matter.
Imagine it takes 100 people to supply retail services. Now we invent some new technology— supermarkets, big box stores, Internet delivery— and we find we can gain the same retail services with the labor of only 50 people. One way to look at that advancement is to see 50 jobs destroyed. Sure, but that can be a good thing, even though it’s what the mom-and-pop stores in both the U.S. and India complain about. For the rest of us it means that we now only have 50 people in retail, and 50 people producing something else. Maybe it’s child care, libraries or ballet, but we’re richer by the existence of whatever those 50 people are producing now that they’re not doing retail.
We cannot say there’s nothing for people to do either. We’ve been automating and killing jobs for 250 years now and there are more jobs than ever. It’s also true that there are unmet human desires and wants out there, so there’s no theoretical reason why people shouldn’t find something else to do. There are good, technical reasons as to why it might take a little time, sure. There’s friction in the system. But killing jobs so those laborers can go do something else to make us all richer is the point of the system, not an error in it.
Modern retail uses less labor than earlier forms of it. Excellent, now let’s go kill some more retail jobs, whatever the people shouting in the streets have to say about it.
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at The Continental Telegraph.
