This article is more than 1 year old

The Walton kids are ABSURDLY wealthy – and you're benefitting

That's the Waltons of Walmart, not John-Boy and family

What is wealth, anyway?

There's also the point I mentioned around here before, that our definitions of wealth are a bit screwy. Equity in your house is wealth, but a lifelong below-market-rent tenancy is not (as in a council house). Private pensions savings are wealth and public pensions are not. Cash to pay for a medical emergency is wealth, living in a country with free medical care is not. Sure, there's reasonable technical issues here making that a useful distinction, but we do still have to remember them when considering this wealth gap.

And finally, in this part, we should note that if you've got a £10 note and no debts you are richer than 30 per cent or so of all Britons. Than 30 per cent of all Britons put together. Wealth distributions just are different from income ones.

Which brings us to the Walton family – Sam's kids, not John-Boy and the like. They've got around 50 per cent of the equity of Walmart and Dear God that makes them rich. Call it $100bn among friends. This is indeed a serious concentration of wealth and maybe something ought to be done about it? My suggestion being that perhaps we should applaud it.

As I mentioned back here, one of the great economic papers of recent times is on Schumpeterian profits in the US economy. What they tried to measure was, well, these entrepreneurs. Of the value that they create, how much ends up sticking to their sweaty little mitts and how much goes elsewhere?

The finding was that the entrepreneurs manage to hold on to just under 3 per cent of the total value created by their activities. A bit goes to finance capital, but the vast majority flows to consumers in the form of the consumer surplus. That is, of the value created almost all of it is in our being able to use these new whatevers, not simply creating a mountain of gold coins for plutocrats to swim down, a la Scrouge McDuck. If this result is true, then we might well want to encourage more of this entrepreneuring.

At which point we can examine Walmart itself. This (PDF) is from Jason Furman:

There is little dispute that Walmart’s price reductions have benefited the 120 million American workers employed outside of the retail sector. Plausible estimates of the magnitude of the savings from Walmart are enormous – a total of $263 bn in 2004, or $2,329 per household.

Even if you grant that Walmart hurts workers in the retail sector – and the evidence for this is far from clear – the magnitude of any potential harm is small in comparison. One study, for example, found that the “Walmart effect” lowered retail wages by $4.7bn in 2000.

Furman's name won't mean all that much this side of the pond, but he's currently Chair of the Council of Economic Advisers. In the Obama Administration. And yes, that is a political appointment. It's entirely possible that he's wrong in that above statement, but he's not some rabid right-wing capitalist pig lackey like myself. Very definitely a left-of-centre technocrat, in fact. So that consumer saving is not being bandied about as a glorification of retail capitalism, rather as a reasonable estimate of the actual effect.

Next page: Household spending

More about

TIP US OFF

Send us news


Other stories you might like