Archives For corporate social responsibility

Last week, the Internet Association (“IA”) — a trade group representing some of America’s most dynamic and fastest growing tech companies, including the likes of Google, Facebook, Amazon, and eBay — presented the incoming Trump Administration with a ten page policy paper entitled “Policy Roadmap for New Administration, Congress.”

The document’s content is not surprising, given its source: It is, in essence, a summary of the trade association’s members’ preferred policy positions, none of which is new or newly relevant. Which is fine, in principle; lobbying on behalf of members is what trade associations do — although we should be somewhat skeptical of a policy document that purports to represent the broader social welfare while it advocates for members’ preferred policies.

Indeed, despite being labeled a “roadmap,” the paper is backward-looking in certain key respects — a fact that leads to some strange syntax: “[the document is a] roadmap of key policy areas that have allowed the internet to grow, thrive, and ensure its continued success and ability to create jobs throughout our economy” (emphasis added). Since when is a “roadmap” needed to identify past policies? Indeed, as Bloomberg News reporter, Joshua Brustein, wrote:

The document released Monday is notable in that the same list of priorities could have been sent to a President-elect Hillary Clinton, or written two years ago.

As a wishlist of industry preferences, this would also be fine, in principle. But as an ostensibly forward-looking document, aimed at guiding policy transition, the IA paper is disappointingly un-self-aware. Rather than delineating an agenda aimed at improving policies to promote productivity, economic development and social cohesion throughout the economy, the document is overly focused on preserving certain regulations adopted at the dawn of the Internet age (when the internet was capitalized). Even more disappointing given the IA member companies’ central role in our contemporary lives, the document evinces no consideration of how Internet platforms themselves should strive to balance rights and responsibilities in new ways that promote meaningful internet freedom.

In short, the IA’s Roadmap constitutes a policy framework dutifully constructed to enable its members to maintain the status quo. While that might also serve to further some broader social aims, it’s difficult to see in the approach anything other than a defense of what got us here — not where we go from here.

To take one important example, the document reiterates the IA’s longstanding advocacy for the preservation of the online-intermediary safe harbors of the 20 year-old Digital Millennium Copyright Act (“DMCA”) — which were adopted during the era of dial-up, and before any of the principal members of the Internet Association even existed. At the same time, however, it proposes to reform one piece of legislation — the Electronic Communications Privacy Act (“ECPA”) — precisely because, at 30 years old, it has long since become hopelessly out of date. But surely if outdatedness is a justification for asserting the inappropriateness of existing privacy/surveillance legislation — as seems proper, given the massive technological and social changes surrounding privacy — the same concern should apply to copyright legislation with equal force, given the arguably even-more-substantial upheavals in the economic and social role of creative content in society today.

Of course there “is more certainty in reselling the past, than inventing the future,” but a truly valuable roadmap for the future from some of the most powerful and visionary companies in America should begin to tackle some of the most complicated and nuanced questions facing our country. It would be nice to see a Roadmap premised upon a well-articulated theory of accountability across all of the Internet ecosystem in ways that protect property, integrity, choice and other essential aspects of modern civil society.

Each of IA’s companies was principally founded on a vision of improving some aspect of the human condition; in many respects they have succeeded. But as society changes, even past successes may later become inconsistent with evolving social mores and economic conditions, necessitating thoughtful introspection and, often, policy revision. The IA can do better than pick and choose from among existing policies based on unilateral advantage and a convenient repudiation of responsibility.

Like most libertarians I’m concerned about government abuse of power. Certainly the secrecy and seeming reach of the NSA’s information gathering programs is worrying. But we can’t and shouldn’t pretend like there are no countervailing concerns (as Gordon Crovitz points out). And we certainly shouldn’t allow the fervent ire of the most radical voices — those who view the issue solely from one side — to impel technology companies to take matters into their own hands. At least not yet.

Rather, the issue is inherently political. And while the political process is far from perfect, I’m almost as uncomfortable with the radical voices calling for corporations to “do something,” without evincing any nuanced understanding of the issues involved.

Frankly, I see this as of a piece with much of the privacy debate that points the finger at corporations for collecting data (and ignores the value of their collection of data) while identifying government use of the data they collect as the actual problem. Typically most of my cyber-libertarian friends are with me on this: If the problem is the government’s use of data, then attack that problem; don’t hamstring corporations and the benefits they confer on consumers for the sake of a problem that is not of their making and without regard to the enormous costs such a solution imposes.

Verizon, unlike just about every other technology company, seems to get this. In a recent speech, John Stratton, head of Verizon’s Enterprise Solutions unit, had this to say:

“This is not a question that will be answered by a telecom executive, this is not a question that will be answered by an IT executive. This is a question that must be answered by societies themselves.”

“I believe this is a bigger issue, and press releases and fizzy statements don’t get at the issue; it needs to be solved by society.

Stratton said that as a company, Verizon follows the law, and those laws are set by governments.

“The laws are not set by Verizon, they are set by the governments in which we operate. I think its important for us to recognise that we participate in debate, as citizens, but as a company I have obligations that I am going to follow.

I completely agree. There may be a problem, but before we deputize corporations in the service of even well-meaning activism, shouldn’t we address this as the political issue it is first?

I’ve been making a version of this point for a long time. As I said back in 2006:

I find it interesting that the “blame” for privacy incursions by the government is being laid at Google’s feet. Google isn’t doing the . . . incursioning, and we wouldn’t have to saddle Google with any costs of protection (perhaps even lessening functionality) if we just nipped the problem in the bud. Importantly, the implication here is that government should not have access to the information in question–a decision that sounds inherently political to me. I’m just a little surprised to hear anyone (other than me) saying that corporations should take it upon themselves to “fix” government policy by, in effect, destroying records.

But at the same time, it makes some sense to look to Google to ameliorate these costs. Google is, after all, responsive to market forces, and (once in a while) I’m sure markets respond to consumer preferences more quickly and effectively than politicians do. And if Google perceives that offering more protection for its customers can be more cheaply done by restraining the government than by curtailing its own practices, then Dan [Solove]’s suggestion that Google take the lead in lobbying for greater legislative protections of personal information may come to pass. Of course we’re still left with the problem of Google and not the politicians bearing the cost of their folly (if it is folly).

As I said then, there may be a role for tech companies to take the lead in lobbying for changes. And perhaps that’s what’s happening. But the impetus behind it — the implicit threats from civil liberties groups, the position that there can be no countervailing benefits from the government’s use of this data, the consistent view that corporations should be forced to deal with these political problems, and the predictable capitulation (and subsequent grandstanding, as Stratton calls it) by these companies is not the right way to go.

I applaud Verizon’s stance here. Perhaps as a society we should come out against some or all of the NSA’s programs. But ideological moralizing and corporate bludgeoning aren’t the way to get there.

Hating Capitalism

Paul H. Rubin —  13 May 2012

One topic that has long interested me is the source of dislike or hatred of capitalism; my Southern Economics Journal article “Folk Economics” (ungated version)  dealt in part with this topic. Today’s New York Times has an op-ed, “Capitalists and Other Psychopaths” by William Deresiewicz, who has taught English at Yale and Columbia, that both illustrates and explains this hatred.  What is interesting about this column is that it is entirely about the character and behavior of “the rich” including entrepreneurs.  The job creating function of business is briefly mentioned but most of the article focuses on “fraud, tax evasion, toxic dumping, product safety violations, bid rigging, overbilling, perjury.”

What is nowhere mentioned is anything to do with the goods and services produced by business.  This is a common attitude of critics of capitalism.  In many cases, capitalists may suffer the same personality defects as the rest of us.  And, as Mr. Deresiewicz points out, scientists, artists and scholars may also be hard working and smart.  But capitalism does not reward moral worth or hard work.  Capitalism rewards providing stuff  that other people are willing to pay for.  While is is easy to point out the stupidity of the critique (Mr. Deresiewicz has written and seems proud of his book, published by a capitalist publisher and available from various capitalist booksellers) that is not my point.  Rather, this column is interesting in that it is a pristine example of a totally irrelevant critique of capitalism, written by what is a smart person.  He does cite Adam Smith, but seems to misunderstand the basic functioning of markets.  Markets reward what one does, not what one is.

In my article, Accountability and Responsibility in Corporate Governance, I explored the complex relationship between social responsibility and markets. I noted among other things that social responsibility is a way to sell products, so it’s hard to untangle whether success let’s firms be “good,” or whether “goodness” causes firms to be successful. 

A new article by Kubik, Schenkman and Hong, Financial Constraints on Corporate Goodness suggests that the latter is at least part of the story.  Here’s the abstract:  

We model the firm’s optimal choice of capital and goodness subject to financial constraints. Managers and shareholders derive benefits over profits and social responsibility. Goodness is costly and its marginal benefit is finite; as a result, less-constrained firms spend more on goodness. We verify that less-constrained firms do indeed have higher social responsibility scores. Our empirical analysis addresses identification issues that have long plagued the corporate social responsibility literature, establishing the causality of this relationship using a natural experiment. During the technology bubble, previously constrained firms experienced a temporary relaxation of their constraints and their goodness scores also temporarily increased relative to their previously unconstrained peers. This temporary convergence applies to all components of the goodness scores such as community and employee relations and environmental responsibility but not governance.

The tech bubble provided a kind of natural experiment that helped untangle causation.  Firms could indulge their urge to be “good” because markets let them.  When the bubble popped, they had to get back to business. This supports my general story that, although the law lets managers be good, they are ultimately constrained by markets.

SKS Microfinance, India’s largest microfinance lender, did a $354 million IPO Wednesday. This may encourage others to do likewise. The result would be much more money for very small loans. Sounds good, but it’s meeting objections:

A publicly traded company’s traditional obligation is to make money for its shareholders, while the mission of microfinance — loans typically under $200 for starting businesses that banks won’t make — is to lift people out of poverty. Some say those are irreconcilable objectives.

* * *

“This is pushing microfinance in the loansharking direction,” Muhammad Yunus, who was awarded the Nobel Peace Prize for his work at established microfinance lender Grameen Bank, told The Associated Press. “It’s not mission drift. It’s endangering the whole mission. “By offering an I.P.O., you are sending a message to the people buying the IPO there is an exciting chance of making money out of poor people. This is an idea that is repulsive to me,” he said. “Microfinance is in the direction of helping the poor retain their money rather than redirecting it in the direction of rich people.”

The for-profit and non-profit models would compete for business. The question is whether poor people should be able to decide whether to borrow money on the terms that capitalists want to loan it (assuming consumer credit regulation allows this) or on the terms that non-profits want to loan it. Chances are there will be more money available to poorer borrowers but on more onerous terms, reflecting the greater risk of the new borrowers that are brought into the market.

Who should get to decide whether poorer borrowers get their opportunities to become entrepreneurs: charitable donors, government regulators or markets? I have contributed to Grameen because I think it’s a worthy cause, but I would also buy SKS stock if it looks like it could succeed in the market. Where is the conflict?

That’s the punchline of a recent paper by Pierre Desrochers (U Toronto). Pierre has written some interesting papers on a range of topics related to economic development, technological innovation, and the intersection of business and the environment.   He argues that it is governmental (regulatory) failures that distort the environmental consequences of corporate behavior, not market failures. Should be an interesting read.

The environmental responsibility of business is to increase its profits (by creating value within the bounds of private property rights).” Industrial and Corporate Change, vol. 19, no 1 (February 2010), pp. 161-204.

Abstract:

Proponents of corporate social responsibility (CSR) typically consider “business as usual” unsustainable. Building on historical evidence that long predates the modern environmental movement, the contrary case is made that the interplay of voluntary exchange, private property rights, and self-interest has generally resulted in the so-called “triple bottom line” (economic, social, and environmental) through more efficient use of materials and the continual creation of higher quality resources. However, because market processes continually eliminate less competitive firms and tend to concentrate business activities geographically, political pressure brought to bear by adversely affected vested interests often results in the creation of policies that cause greater environmental harm than would otherwise be evident. Environmental CSR proponents often misinterpret these government failures as market failures, and characteristically advocate policies that further distract firms from their core objective and resulting triple bottom line. The article concludes by arguing that the most promising path toward truly sustainable development lies in the unwavering pursuit of profitability within the bounds of well-defined and enforced private property rights.

I’m delighted to report that the Liberty Fund has produced a three-volume collection of my dad’s oeuvre.  Fred McChesney edits, Jon Macey writes a new biography and Henry Butler, Steve Bainbridge and Jon Macey write introductions.  The collection can be ordered here.

Here’s the description:

As the founder of the Center for Law and Economics at George Mason University and dean emeritus of the George Mason School of Law, Henry G. Manne is one of the founding scholars of law and economics as a discipline. This three-volume collection includes articles, reviews, and books from more than four decades, featuring Wall Street in Transition, which redefined the commonly held view of the corporate firm.

Volume 1, The Economics of Corporations and Corporate Law, includes Manne’s seminal writings on corporate law and his landmark blend of economics and law that is today accepted as a standard discipline, showing how Manne developed a comprehensive theory of the modern corporation that has provided a framework for legal, economic, and financial analysis of the corporate firm.

Volume 2, Insider Trading, uses Manne’s ground-breaking Insider Trading and the Stock Market as a framework for many of Manne’s innovative contributions to the field, as well as a fresh context for understanding the complex world of corporate law and securities regulation.

Volume 3, Liberty and Freedom in the Economic Ordering of Society, includes selections exploring Manne’s thoughts on corporate social responsibility, on the regulation of capital markets and securities offerings, especially as examined in Wall Street in Transition, on the role of the modern university, and on the relationship among law, regulation, and the free market.

Manne’s most auspicious work in corporate law began with the two pieces from the Columbia Law Review that appear in volume 1, says general editor Fred S. McChesney. Editor Henry Butler adds: “Henry Manne was an innovator challenging the very foundations of the current learning.” “The ‘Higher Criticism’ of the Modern Corporation” was Manne’s first attempt at refuting the all too common notion that corporations were merely devices that allowed managers to plunder shareholders. Manne saw that such a view of corporations was inconsistent with the basic economic assumption that individuals either understand or soon will understand the costs and benefits of their own situations and that they respond according to rational self-interest.

My dad tells me the sample copies have arrived at his house, and I expect my review copy any day now.  But I can already tell you that the content is excellent.  Now-under-cited-but-essential-nonetheless corporate law classics like Some Theoretical Aspects of Share Voting and Our Two Corporation Systems: Law and Economics (two of his best, IMHO) should get some new life.  Among his non-corporations works, the classic and fun Parable of the Parking Lots (showing a humorous side of Henry that unfortunately rarely comes through in the innumerable joke emails he passes along to those of us lucky enough to be on “the list”) and the truly-excellent The Political Economy of Modern Universities (an updating of which forms a large part of a long-unfinished manuscript by my dad and me) are standouts.  And the content in the third volume from Wall Street in Transition has particular relevance today, and we would all do well to re-learn the lessons of those important contributions.

The full table of contents is below the fold.  Get it while it’s hot! Continue Reading…

Much discussion of corporate governance in the last few years has centered on reforms advocated by ISS and CII and indices of good corporate governance practice created and maintained by such groups. A new study by Roberta Romano, Sanjai Baghat, and Brian J. Bolton, however, concludes that there is “no consistent relation between governance indices and measures of corporate performance.” The authors continue,

[T]here is no one “best” measure of corporate governance: the most effective governance institution appears to depend on context, and on firms’ specific circumstances. It would therefore be difficult for an index, or any one variable, to capture critical nuances for making informed decisions. As a consequence, we conclude that governance indices are highly imperfect instruments for determining how to vote corporate proxies, let alone for portfolio investment decisions, and that investors and policymakers should exercise caution in attempting to draw inferences regarding a firm’s quality or future stock market performance from its ranking on any particular corporate governance measure. Most important, the implication of our analysis is that corporate governance is an area where a regulatory regime of ample flexible variation across firms that eschews governance mandates is particularly desirable, because there is considerable variation in the relation between the indices and measures of corporate performance.

The paper is entitled The Promise and Peril of Corporate Governance Indices and the full text is available on SSRN.

Radiohead revisited

Geoffrey Manne —  1 October 2007

I started writing this as a comment to Josh’s last post, but it got so long I figured I’d make a post out of it.  Thanks for the inspiraiton, Josh.

I really hope Radiohead releases the data on its little experiment!  My prediction: They will receive an average price of $2 and a median price of $0. 

And I think Radiohead has a better chance of succeeding than that coffeeshop Josh wrote about (which is somewhere near here, right?  I should really go grab some free coffee).  Their fans are rabid, and they feel an emotional connection to the band unlike I imagine anyone has to a coffeeshop.  There are people out there who believe that Radiohead changed their lives.  Incidentally, these people are also anti-capitalists.  And yet they will find themselves throwing money at the band, completely unnecessarily, simply because, well, it’s a whole new zeitgeist, man. 

For the rest of us–the more rational Radiohead fans (it’s hard to deny the quality of this band.  It’s hard to believe that the same public that loves Britney could also love something as good as Radiohead, but there it is)–views will be split.  Some will feel an obligation to compensate the band for their work, although they will find it hard to explain exactly why they feel obligated if the band itself is not obligating them.  Others will think it’s cool, and it’s an awesome slap in the face to the paleolithic record labels, and will contribute to the cause.  And most will know that they would probably have just burned the CD from a friend anyway, and entering credit card information is such a pain, and, well, why should I pay if they don’t make me?  And these people will pay nothing.  A large subset of them will claim to have paid $5.

So what does the band get?  For starters, some good press (although they hardly need that).  They also get to satisfy their moral desire to bring down the (putatively) evil record labels (to say nothing of DRM!) and to demonstrate their disdain for capitalism and consumer culture.  Consider it a form of charity. 

Or competitive advantage.  I can assure you that in a post-record-label/post-DRM world, where revenue comes from live performances and t-shirts, Radiohead will be in a considerably better position than the 4 million bands trying to make it on MySpace.

Here’s what else they get:  An excellent mailing and e-mail list.  To buy (or receive gratis) the album from the website one must enter name, email (and no cheating, since download codes are sent via email), address, cell phone number (but not home number.  Anyone see mass text messaging in Radiohead’s future?), etc.  For Radiohead, this is a valuable list, I imagine.  It may also be valuable to any number of direct marketers and online advertising companies. 

Mostly, though, I think Radiohead is leaving money on the table.  And I also think that the band will not release the data, and we won’t know the extent to which this experiment fails.

I, for one, have already pre-ordered my copy.  And of course I paid $5.

UPDATE:  Steve Levitt wants to crunch the data.  Note also the colorful quote from Thom Yorke (Radiohead’s front man) about the music industry’s “decaying business model.”

I’ve previously discussed the voluntary pricing strategy taken by restaurants and cafes in a handful of states to offer food and drink for free and allow customers to decide whether and how much they would pay.   I was rather skeptical about the profitability of this strategy in the retail setting.  But it looks like we may soon have another datapoint from another industry as the WSJ reports that Radiohead will sell its new album (“In Rainbows”) only as a digital download from its website and allowing fans to choose how much they will pay.  From the WSJ article:

By letting consumers dictate what they will pay for a digital copy of the album, the band will test theories of online pricing that have been the subject of much speculation in recent years — most notably, the notion that fans will pay a fair price for downloads if given the freedom to do so on their own terms.

Speaking of experiments in online behavior and “voluntary pricing,” Stan Liebowitz has posted a paper to SSRN critiquing the empirical claims in the highly publicized JPE Oberholzer-Gee and Strumpf paper on file-sharing which found little, if any, impact of file sharing on music sales.  Unfortunately for the economics profession, one aspect of the critique is that the authors of the JPE study have not been willing to share data with Liebowitz so that their findings can be replicated. 

Frankly, I thought the movie, The Corporation, was unabashedly abysmal.  It was a childish caricature, exhibiting no understanding by the filmmakers (or most of the interviewees) of the law, economics, or nature of corporations–to say nothing of capitalism.  The movie is unsophisticated, anti-capitalist tripe.  See Seth Weinberger’s review of the movie from the journal Political Communication for the longer version of this analysis. 

That said, the filmmakers have just provided me–and now you–with one of the most remarkable three minutes of video footage I’ve ever seen:  The Milton Friedman Choir. 

Milton Friedman on corporations says,
Corporations have no social duty
Except to those who own their stock.

Hat tip:  Henry Manne.

At his new and excellent blog Hodak Value, frequent TOTM commentor Marc Hodak offers the following in response to a post at the Daily Kos implying that Wal-Mart’s treatment of its workers should give rise to a level of concern similar to that of the Rwandan genocide:

My standard for concern about an organization is somewhat different. If an organization has people beating down the doors to get in, it’s probably not a problem how they’re treating their workers. If an institution has people risking their lives to flee, that’s probably an institution that needs some outside monitoring.

Hodak’s blog is up and running and has lots of great stuff. Check it out.

But back to Wal-Mart for a minute. Hodak’s post got me thinking about some of much milder Wal-Mart rhetoric that has started to fly around since the campaign has started to heat up. The most recent example is presidential hopeful Hillary Clinton’s answer to the “Wal-Mart Question” in the recent debate where she describes Wal-Mart as “a mixed blessing.” Here’s the whole thing:

Well because when Wal-Mart started, it brought goods into rural areas, like rural Arkansas where I was happy to live for 18 years. And it gave people a chance to stretch their dollar further. But as they grew much bigger, though, they have raised serious questions about the responsibility of corporations and how they need to be a leader when it comes to providing health care and having safe working conditions and not discriminating on the basis of sex or race or any other category. Brian, this is all part, though, of how this Administration and corporate America today don’t see middle class and working Americans. They are invisible. They don’t understand that if you’re a family that can’t get health care, you’re really hurting. But to the corporate elite and to the Administration and the White House, you’re invisible.

Clinton starts with the sensible and obvious proposition that Wal-Mart does do at least some good. But notice how the benefits are trivialized: A handful of rural consumers get goods that could not have otherwise and folks can have a “chance to stretch the dollar further.” But the downside is not so trivial, Clinton tells us, because it is “serious problem” that is part of a plot between the Administration and Corporate America to leave middle American behind. Of course it is!!! By the way, Wal-Mart causes crime too.

Luckily, the market provides ample data to test these assertions and distinguish the hand-waving proclamations from the truth.  But who needs evidence when one can rely on the the tried and true causal relationship between firm size and evil: “as they grew much bigger, though, they have raised serious questions about the responsibility of corporations and how they need to be a leader when it comes to providing health care and having safe working conditions and not discriminating on the basis of sex or race or any other category.”

You see, Wal-Mart was all good in its nascent stages when it was not so big  — Guilt-free low prices for families for low and moderate income families!  But those, you see, were the good ol’ days before it grew.  You know, the days when Clinton sat on Wal-Mart’s board, a.k.a. the days when an attack on Wal-Mart and free trade weren’t in the compulsory portion of the campaigning program.  I don’t mean to just pick on Clinton.  Obama has taken the bait to engage in a little Wal-Mart bashing as well at least once.

Here’s a quote from Hillary Clinton from a 1996 interview on C-Span just after endorsing the proposition that ” the unfettered free market has been the most radically disruptive force in American life in the last generation,” where she discusses the good ol’ days of Wal-Mart:

One of the things that Sam Walton believed in was profit sharing. I mean, part of the reason that I appreciated his business philosophy is that the workers at Wal-Mart were able to share in the profits, and the executives, when I was on the board, were very careful to keep their perks down — the kind of offices they had, the way that they lived and the way that they treated their fellow associates at every level in the business. I thought that was a good example.

But then Wal-Mart grew, became evil, and became a serious problem. Never mind the giant consumer benefits that flow from Wal-Mart’s competitive pricing. For example, low generic drug prices. Or how about Hausman and Leibtag’s estimate of consumer benefits from big box retailers that amounts to approximately 20.2% of the average food expenditures. For consumers in the bottom income quintile, this amounts to a welfare increase of approximately 6.5% (and 1.5% averaged across all consumers).  We should all be so lucky to have mixed blessings like this.

But I should be fair to Clinton’s case against Wal-Mart.  Here goes.   Clinton points to three things: (1) health care; (2) working conditions; and (3) discrimination. Oddly, she seems to believe that there is some lcausal link between Wal-Mart’s growth and this trio. I’m fairly certain there is no evidence of that but would love to see it if it is out there. As far as (2) and (3) go, I don’t think any Wal-Mart supporters have argued that Wal-Mart should be immune from labor or discrimination laws. But the public policy debate seems to focus on whether Wal-Mart has some special obligation on these issues because of its size. As Hodak points out, the fact that there appears to be a significant demand for jobs at Wal-Mart is certainly relevant to this analysis, e.g. 15,000 applicants for 400 jobs at the new Chicago Wal-Mart.

So, how about that evidence about Wal-Mart any health care? Jason Furman (NYU, and former economic adviser to John Kerry) offers a thorough review of the available evidence on health care and concludes that “Wal-Mart’s health benefits are similar to or better than benefits at comparable employers.”

Being election season and all, I know I am barking up the wrong tree for wanting more than soundbite treatment of these issues from politicans, e.g. Clinton’s plea that Brian Williams and America see the Wal-Mart issue has part of a conspiracy by the “Administration and corporate America” to ignore and exploit middle class and working Americans. A welfare increase of 6.5% for the lowest income quintile is enormous. How many government programs create that kind of welfare benefit? Can you name one? If there are serious arguments to be launched against Wal-Mart, and surely some of these politicians are serious (right?), they must embrace the reality that Wal-Mart has produced enormous benefits for Americans as a whole and especially lower and middle-lower class Americans.

Furman addresses this issue head on:

Well-intentioned Wal-Mart critics are sincerely interested in an America where workers are better off. They understandably want higher wages and higher benefits for everyone. Wal-Mart’s low prices help to increase real wages for the 120 million Americans employed in other sectors of the economy. And the company itself does not appear to pay lower wages or benefits than similar companies, or to cause substantially lower wages in the retail sector. Although there may be a dispute about the magnitude of the cost savings for consumers, no one disputes that they are large. In contrast, the effect on workers is relatively smaller and far from obviously negative.

There is relatively little scope to pressure Wal-Mart – and almost no scope to pressure other smaller and less visible companies – into paying higher compensation. Even if the campaign resulted in, say, some expansion of health benefits to placate one of Wal-Mart’s most visible public relations problems, the result could well be lower wages. At worst, to the degree the anti-Wal-Mart campaign slows or halts the spread of Wal-Mart to new areas, it will lead to higher prices that disproportionately harm lower-income families.

In the process, some of the campaign’s rhetoric risks undermining public support for making work pay, and in particular for publicly provided health benefits for less-skilled and less experienced workers who earn lower wages. A much better strategy would be to recognize that Wal-Mart is a progressive success story. By acting in the interests of its shareholders, Wal-Mart has innovated and expanded competition, resulting in huge benefits for the American middle class and even proportionately larger benefits for moderate-income Americans.

Obama’s lead economic adviser is Austan Goolsbee — which gives me hope that this is some sort of election rhetoric from Obama that he doesn’t really mean because he gets basic economics.  Maybe Clinton should hire Jason Furman?