Wal-Mart
Slate has an article on Wal-Mart that speculates whether Wal-Mart should be considered representative of the US economy, much as GM was thought to be in the 1950s.
Wal-Mart is scary big: it had almost $250bn in sales last year, an amount equal to nearly 2.5% of US GDP (no need to compare this figure to some collection of sub-Saharan countries and noting how large it is; why not compare it to, say, Hong Kong, which has a GDP of $180bn at PPP). It has 1.38 million employees, making the company the world’s largest private employer. Wal-Mart is the largest category seller of DVDs, groceries, toys, sporting goods, clothing, and so on. It has magnificently leveraged technology into retail services and logistics; through competitive pressure on other retailers, Wal-Mart’s best practices may account for a quarter of US productivity growth in the late 1990s.
The article doesn’t note this, but the logistical best practices of private companies such as Wal-Mart and FedEx have been adopted by the US military. Hey, if, in the 1950s, what’s good for GM is good for the US and vice-versa, certainly American commercial practices in the 21st Century have enhanced American power projection, and perhaps vice-versa.
The problems with using Wal-Mart’s sales figures as an index of overall economic health is that Wal-Mart isn’t that representative. While it has expanded and diversified greatly from its rural base since the early 1990s, the company still is concentrated in the great middle of America, with less representation on the affluent coasts. In terms of goods sold, Wal-Mart doesn’t sell cars, which can account for 10-20% of retail sales. And the Slate article focuses on retail sales; services are not included, naturally.
The article concludes with noting that Wal-Mart’s sales figures may best be used as a negative indicator: if its sales are declining, what’s happening to the rest of consumer spending?
Another interesting thing to think about (interesting at least to me) is how services productivity growth — retail productivity growth apparently tripling in the 1990s implicitly because of Wal-Mart — was historically used in Baumol’s Paradox: with a two-sector model, one sector accruing productivity gains (manufacturing) and the other not (services), you get relative price increases in the “services” sector. Maybe it’s not that interesting a thing to think about: there’s nothing conceptually wrong with retail productivity being affected by technological change. Look at Amazon.com, after all.