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What Andrew Young Should Have Said

Young resigned, in the uproar that ensued, after he was asked in an interview with a newspaper if he was concerned that Wal-Mart might drive small mom-and-pop stores out of business and force them to close. He replied as follows:

‘Well, I think they should; they ran the ’mom and pop’ stores out of my neighborhood,’ the paper quoted Young as saying. ‘But you see, those are the people who have been overcharging us, selling us stale bread and bad meat and wilted vegetables. And they sold out and moved to Florida. I think they’ve ripped off our communities enough. First it was Jews, then it was Koreans and now it’s Arabs; very few black people own these stores.’

Much attention has been paid to the obvious racism of these remarks. In uttering them, he reveals himself not to have been this great champion of human rights but more to have been a simple partisan for his own group. Knowing that he harbors this kind of animosity against other groups of people will, and should, permanently reduce his stature in the eyes of the world.

To me, however, the more interesting part of this story is the ignorance of both business and economics that the quote reveals.

And, of course, it is ignorance of both that is at the root of Wal-Mart’s many PR problems.

If Andrew Young wanted to tell the truth about Wal-Mart, this is what he would have said:

“Every time a way is developed to do things better, more efficiently, less expensively, offering better service or variety… anytime there is ever an improvement in commerce, those individuals that were doing things in another way get hurt.

So, when supermarkets rolled out across America, lots of little grocery stores, butchers, bakers and produce stands couldn’t compete. And when mighty department stores rolled across America, lots of little clothing stores couldn’t compete. And when people learned that they liked to shop in safe, air-conditioned, enclosed shopping malls, lots of main streets didn’t make it.

More recently, many a hardware store couldn’t compete when a Home Depot or Lowes rolled into town, and many a toy store closed when Toys R’ Us came to town

Independent bookstores closed in the wake of Barnes and Noble, Borders and Books a Million, and who knows what businesses yet will close in the wake of and E-Bay?

But there is no political way to determine if it is better for consumers to buy books in little bookstores, in chain superstores or on-line. This is a decision best made by millions of people acting in their own self-interest.

Just because a Home Depot, a Barnes & Noble or… or for that matter a Whole Foods store… opens for business, this doesn’t force anyone to change their shopping habits. If they change, and they have, it is because they perceive a better value in the new alternative than in the old. It might be price, it might be selection, it might be convenience, service or some other attribute, known or unknown.

There are many things Wal-Mart offers to minority groups: One-stop shopping, which is a special value to a community that doesn’t have as many cars per household as more affluent ethnic groups. Facilities that are generally kept safe and well lit with security guards when shops in our own neighborhoods may be dangerous, and better prices, a crucial attribute to a community where money is not as plentiful as in other ethnic communities.

Of course it is sad if hard-working people lose their jobs or their businesses but, if Wal-Mart is offering a better deal, then people in our community will save money on their purchases. That extra money in every pocket is available to buy other things. That means that, in time, those small businesses will be replaced with other businesses.

And, politically, that is the problem. If a new concept comes into a community and cuts prices 20% and a bunch of competitors can’t compete, the 10 O’Clock News interviews them and everyone has the name and address of people hurt by a new innovation. But nobody has the name of the computer store that will open in two years because that real estate is available, nobody has the phone number of the people who get jobs at a factory because people can afford to buy more of something, nobody ever interviews the little child who goes to Disney World because the family reduced its expenditures enough to save up the money.”

Andrew Young’s words especially demean the efforts of those in the perishable food business. By the time I started working in the produce business in New York, the age of the Jewish and Italian greengrocer was fast coming to an end. Those families that stayed in the business, including my own, went on to dominate the wholesale trade.

But the Korean families I knew, and I knew many, were scarcely “overcharging” or selling “stale bread and bad meat and wilted vegetables”. In fact, most of the families I knew struggled to make a living, often with everyone in the family working long shifts as they kept the stores open 24 hours a day.

And the product was usually very fresh. One reason perishable food is typically a portal of opportunity for America’s immigrants is that they could set up a store with minimal inventory cost.

Most opened up and came down to the market every day, buying only what they absolutely needed. They sold all day for cash and came back the next day ready to buy again.

Besides, the one thing we know is that those immigrant groups provided their neighborhoods with a better value than what the people who elected to shop there could get elsewhere. Maybe it was price, maybe it was a selection geared to what that particular neighborhood wanted, maybe it was convenient location thus saving on transportation costs. Maybe it was convenience in hours of operation.

But our economy is so competitive that, in the absence of specific laws to allow it, it is virtually impossible to abuse a consumer group for an extended period of time. In fact, prejudice and ignorance always create a window of opportunity for someone else.

Amadeo Peter Giannini was the stepson of a small produce wholesaler whose business was located on the wharf in San Francisco. He built the business into the largest produce wholesaler in the West. He sold his stake at 31 years of age and opened The Bank of Italy in North Beach, which was one of the very largest communities of Italian immigrants in the Western US. He launched the bank and gave it that name because America’s bankers wouldn’t lend to Italian immigrants. In their racism, they failed to see a viable market.

After the San Francisco earthquake in 1906, Giannini salvaged the depositors’ money out of the bank and walked through the streets of San Francisco by dressing as a humble fruit peddler and burying cash, gold and silver worth $80,000 under a load of oranges. With the money intact, when other banks were closed he set up a desk on two barrels with a board and started lending money to common people, mostly Italian immigrants to rebuild their lives and their businesses.

Those Italians turned out to be far better credit risks than the establishment bankers in their ignorance perceived. So today, Amadeo Peter Giannini’s bank is called Bank of America.

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