·  Legal News, Analysis, & Commentary


Walmart’s Continuing Externality Problem

— August 30, 2016

For years, Walmart has been able to offer customers low prices. These low prices are often criticized as being unsustainable, as the costs are foisted off onto any entity that doesn’t run away fast enough. Walmart’s suppliers are squeezed for pennies by economically coercing them into signing deals that they can’t refuse, because to be shut out of the Walmart Machine is to lose the business opportunity of being included on the shelves of the world’s largest retailer. Employees are paid wages that require many of them to go begging at food pantries or accept public assistance like SNAP benefits to make ends meet for their families, and attempts by the workers to unionize in order to better their lot are routinely crushed. Profits from these unsavory practices are relentlessly sucked upward into the coffers of the Walton family, who use tax tricks and loopholes to avoid paying back into the economy that made them rich. And now, Walmart has found another way to cut corners, by having the (other) taxpayers foot the bill for their store security. We are all subsidizing Walmart’s continuing externality problem.

In any economic transaction, there are costs and liabilities involved. If this were a perfect world, the costs would be taken on by the parties that also benefit from the transaction, with their full knowledge and consent. Likewise, any benefits from the transaction would generally accrue to the parties paying the costs. This is not a perfect world, though, and economic transactions usually involve externalities, which are costs or benefits which involve people or other entities which are not part of the original transaction, often without their knowledge or consent. For example, if a Walmart employee must accept SNAP benefits, this is externalizing part of the cost of their employment onto taxpayers, in order to subsidize Walton family profits and a low price on cheap goods at the cash register. So many taxpayers are also Walmart customers that this transaction might form a small circle, with the customer subsidizing their own purchase through a higher tax bill. On the other hand, there are still plenty of people that choose not to shop at Walmart who also pay into the system, who are pulled unwillingly into the transaction by forces that are too big for any one person to fight effectively.

Walmart now has an average of 19% more floor area for each employee to mind, compared to a decade ago. Photo courtesy of Clean Wal-Mart on Flickr.
Walmart now has an average of 19% more floor area for each employee to mind, compared to a decade ago. Photo courtesy of Clean Wal-Mart on Flickr.

At the same time that Walmart has been busy cutting employees and reducing their security costs, an increasingly troubled and impoverished slice of America has been spreading mayhem at, and thieving from, Walmart stores. Nowadays, Walmart employs one worker for every 524 feet of retail space, a 19% increase in space per employee from ten years ago. This means each employee is more or less responsible for watching more territory, in addition to the job they were hired to do. Getting rid of the cashiers and greeters means that there are more opportunities for thieves to take off unnoticed, and would-be thieves are undeterred when they realize that no one is watching. Because the store is so ubiquitous, it has become almost a commons in many communities, a place where daily life is lived, which means more domestic disputes, violence, and general chaos, in addition to petty shoplifting. This means that in some cities, a significant portion of the local constabulary is tied up keeping the local Walmart stores safe, with some jurisdictions needing a van to take away all the people arrested at Walmart each day. In 2015, police were called to Walmart’s four stores in Tulsa, Oklahoma almost 2000 times. For comparison, the four Target stores in Tulsa called the cops only about 300 times.

In a way, that is the job we pay the police to do: patrol the area and control crime for citizens and businesses alike. But when a company takes egregious and undue advantage of the security services provided by their towns in lieu of stepping up their own security efforts, is that particularly fair to the town, which must pay for Walmart’s security and thereby subsidize the low prices for Walmart shoppers and profits for the owners? Is it fair to victims of crimes elsewhere in town, when the resources needed to protect them are pulled away to be used as private mercenaries by the world’s largest corporation?

Whether you choose to spend money at Walmart or not, are you personally happy about underwriting so many of their costs, without necessarily receiving benefits? If you don’t think subsidizing the local Walmart is a great thing for your town, perhaps we ought to find ways to help them internalize the costs that they’d rather have us all pay on their behalf.


Walmart’s Out-of-Control Crime Problem Is Driving Police Crazy
Wal-Mart’s Crime Problem Overwhelms Police Across U.S.
How Wal-Mart’s Waltons Maintain Their Billionaire Fortune: Taxes
Wal-Mart Has $76 Billion in Undisclosed Overseas Tax Havens
Walmart benefits from billions in government subsidies: Study
The Wal-Mart You Don’t Know

Join the conversation!