Home Depot, Amazon, Walmart and UPS or FEMA: Who Is the Real Cavalry?

August 31, 2011

On Tuesday morning, Jim Cantore of the Weather Channel was reporting on the devastation to Vermont from Hurricane Irene. He ended his report by saying the cavalry is finally on its way in the form of thirty large FEMA (Federal Emergency Management Agency) trucks with food, water, and generators.

Indeed, parts of New England have suffered from devastating floods, and some families have lost their homes. But who is the real cavalry? Are Vermonters really dependent on FEMA for food and water? (Notice, that not FEMA but the Vermont National Guard is flying helicopters into towns stranded by washed-out roads.)

Last Wednesday the news reports about Hurricane Irene became very alarming. The potential devastation from the storm over a wide area was terrifying. Living in a sparsely populated rural area as I do, I understood that if our power went out, along with millions of others, we would likely be at the end of the queue for power restoration. My family was simply not prepared for a power outage that had the potential to last for a week or two.

So, on Wednesday, the first thing I did was shop at Amazon. I’m an Amazon Prime customer and anything I ordered would arrive by Friday at no shipping charge. I ordered LED lanterns, a portable battery powered phone charger, cases of canned, natural foods, and five gallon water containers. (We are on well water; if the power goes out we have no water pump.)  This bounty was available at prices equal to or less than the prices in retail stores.

On Thursday, I shopped at Walmart, loading our van with ten cases of water and an ample supply of batteries. No one had to tell the Walmart team that batteries and water were going to be in demand. I could hear the walkie-talkies of Walmart associates crackle as they diligently worked to place supplies strategically all over the store.

On Friday, UPS arrived and unloaded all of my Amazon merchandise. My wife and I then turned our attention to securing our property. Fortunately, we suffered nothing more than a 24-hour power outage, tree damage, and erosion as fast flowing water washed over the road and found its channel in our yard.

It was not just Walmart, Amazon, and UPS that worked heroically to prepare Americans for Irene. Watch this short video about Home Depot’s command center as they stocked their stores in preparation. Indeed, all through New England, Walmart and Home Depot stores were fully stocked and ready sources of needed supplies. Admittedly, this is small comfort to those who suffered the biggest losses; but FEMA has already announced that it has no available funds for rebuilding flooded roads, damaged schools, etc.

To those who believe that government is the entity that will solve their problems, it is counterintuitive that, compared to FEMA,  Walmart, Home Depot, Amazon and UPS do a better job in preparing for a disaster as well as the aftermath of a disaster. Walmart, Home Depot, Amazon, and UPS are driven by profits, while it is said that FEMA employees are motivated by public service. Some might reason that those motivated by public service must be more caring and responsive than those motivated by profits.

Indeed, many FEMA employees may be motivated to serve their fellow Americans; but clearly, others among FEMA’s ranks are not. They are motivated by career advancement, power, and money. The image of the incompetent and shallow Michael Brown, director of FEMA, bumbling during Hurricane Katrina is a lasting one.

But can any director of FEMA be competent? Of course, a person in that position may be competent and caring. But, even then, would he or she be have the motivation, knowledge, or capacity to balance all of the competing human needs that arise in face of a disaster?

During the Nazi siege of Leningrad, the population of the city endured hell on earth. In 1941, as the Nazi’s closed their circle around the city, what did Communist Party chief of the city, Andrei Zhdanov, do? Did he work tirelessly around the clock to bring in needed food supplies before the circle closed? No. He worked tirelessly around the clock to arrest “spys.” A spy was defined as anyone who spoke a foreign language or had a foreign connection. Spies were often harmless senior citizens, but Zhdanov was doing the job that seemed important to him, rather than the job that was needed. And, he was very efficient at performing this terrible deed.

Admittedly, this is an extreme example; but it illustrates a point. What a bureaucracy thinks is needed and what is really needed can be two different things. In contrast, the goal of earning profits in a competitive market is what compels Walmart, Home Depot, Amazon, and UPS to deploy the energy of their employees towards what is really needed. Walmart, Home Depot, Amazon, and UPS earn money only when customers voluntarily purchase goods and services from them. Thus, their employees are benevolent towards people they have never met because it is in the self-interest of their organizations. And, it is also true that self-interest is joined by genuine feelings of goodwill as two parties interact in non-coercive trades.

In contrast, FEMA exists in a coercive relationship with American citizens. They earn their revenue in a political way; and FEMA’s success does not depend on pleasing American citizens. Indeed, like the public school system, the more their efforts fall short or outright fail, the more FEMA can argue it needs more tax revenue.

In short, no matter how efficiently FEMA uses tax money, no matter how caring FEMA employees are as a hand out water off the back of a truck to long lines of people, because FEMA is not subject to the discipline of the market, they will never match the operational efficiency and genuine caring of the employees of Home Depot, Amazon, Walmart and UPS.

To Mr. Cantore, I say, if New Englanders were truly dependent on FEMA, the cavalry would have been too little and too late.


Once Again, Walmart Shows the Way

August 3, 2011

From June to October, the fruits and vegetables my family eats are supplied almost exclusively by a local organic farmer. His bounty is enormous; we enjoy everything from kale to blueberries, all picked the same day.

Given the climatic zone we live in, I’m under no illusions that local farming could sustain us all year round. For much of the year, our choices would be limited to stored cabbage, carrots, onions, turnips potatoes, and apples. If that sounds like the produce choices our ancestors faced a century ago, you’re right. I’m very grateful for our modern agricultural system that supplies reasonably high quality produce all year round.

At the same time, I occasionally worry about disruptions to the food supply chain as it has become far too centralized.  This centralization is due, in large part, to Federal government agricultural and water subsidies.

In recent years, consumers have become interested in locally grown food and most are not fortunate enough to live nearby an organic famer. Walmart is ready to help fill the void.

According to the Wall Street Journal, “the largest grocer in United States [Walmart] encourages its managers to buy produce grown within 450 miles of its distribution centers,” even if the locally grown produce costs more than California produce. True, Walmart is responding to shifting consumer preferences, but also, the big box giant has determined that locally grown produce reduces spoilage and saves on transportation costs.

Notice there was no government commission necessary to encourage Walmart to switch to locally grown produce. Congress is not subsidizing Walmart to switch to a locally grown produce. Walmart, motivated to serve the best interests of its consumers, has begun to switch quietly and efficiently.

Of course, in the eyes of many, Walmart can do nothing right; critics insist that Walmart is simply recognizing a marketing opportunity rather than doing anything different.  If you are a Walmart cynic or a Walmart basher, you might find Corby Kummer’s piece in The Atlantic to be an eye-opener: The Great Grocery Smackdown: Will Walmart, not Whole Foods, Save Small Farms and Make U.S. Healthy? Here is an excerpt:

Buy my food at Walmart? No thanks. Until recently, I had been to exactly one Walmart in my life, at the insistence of a friend I was visiting in Natchez, Mississippi, about 10 years ago. It was one of the sights, she said. Up and down the aisles we went, properly impressed by the endless rows and endless abundance. Not the produce section. I saw rows of prepackaged, plastic-trapped fruits and vegetables. I would never think of shopping there.

Not even if I could get environmentally correct food. Walmart’s move into organics was then getting under way, but it just seemed cynical — a way to grab market share while driving small stores and farmers out of business. Then, last year, the market for organic milk started to go down along with the economy, and dairy farmers in Vermont and other states, who had made big investments in organic certification, began losing contracts and selling their farms. A guaranteed large buyer of organic milk began to look more attractive. And friends started telling me I needed to look seriously at Walmart’s efforts to sell sustainably raised food.

Really? Wasn’t this greenwashing? I called Charles Fishman, the author of The Wal-Mart Effect, which entertainingly documents the market-changing (and company-destroying) effects of Walmart’s decisions. He reiterated that whatever Walmart decides to do has large repercussions — and told me that what it had decided to do since my Natchez foray was to compete with high-end supermarkets. “You won’t recognize the grocery section of a supercenter,” he said. He ordered me to get in my car and find one.

Indeed, if locally grown and organic food is to reach those struggling on a tight budget, it will be Walmart, not Whole Foods, that shows the way.

Consider, too, Walmart’s low prices on clothing. All over the country this fall, children of families who are financially strapped will go off to school with clean, new, inexpensive clothes purchased from Walmart. And if you think this is trivial, put yourself in the place of parents working hard to feed and clothe their children. The savings Walmart provides over department store clothes is enormous; and for some children, it’s the difference between being adequately clothed and being teased or bullied for being shabbily dressed. It is Walmart, not its critics, who is clothing these children at risk.

Next, consider Walmart’s employment practices. Contrary to popular belief, Walmart raises the wages of low skilled workers. Why?  When Walmart comes to town, it is an instant source of demand for workers who have minimal skills. Far more jobs are created then are lost for these workers; and since Walmart increases demand for these workers, wages go up too. Again, it is Walmart, not its critics, who employs those workers who have few other employment opportunities.

If that was all Walmart did, well, we would have much for which to be grateful. But perhaps the most important thing that Walmart does well is to be one of the biggest instruments of peace in the world. While governments build armaments and start wars, Walmart trades and buys goods from all over the world. In the process of buying goods from all over the world, Walmart creates employment opportunities and helps grow wealth in previously impoverished countries. Nations with fast growing economies have little incentive to wage war, especially with their trading partners.

This blog piece may be ludicrous to many who claim to fight for the social good and whose heroes are in Congress and in academia. To them, Walmart is a terrible scourge. Reality points us in another direction—but the reality of the marketplace means little to those who think our salvation lies in centrally-planned solutions to our very real economic problems.


%d bloggers like this: