Wal-Mart, Innovation, and Access
July 17, 2008
Last week, Wal-Mart’s revised application to build a new store in Cordova, a suburb of Memphis, Tennessee, was accepted by the local Land Use Control Board. After controversy ignited over the company’s original plan—which involved developing more than a quarter-million square feet of experimental, upscale, sustainable retail space—it made significant compromises before resubmitting last Thursday. Wal-Mart’s proposal illustrates important facts about economic development, and in an area that has been home to countless entrepreneurial and cultural innovations, the city should take some of these lessons to heart. This is a great opportunity for the Memphis region—the home of FedEx and Holiday Inn—to build on a strong tradition of innovation.
One of the most innovative firms in the world, Wal-Mart’s ability to move goods from place to place at low cost is unparalleled. Now, the company that has made it possible for us to do much more with much less is reconsidering its strategy for delivering goods and attempting to do so in a more sustainable way. Wal-Mart has plans to test these changes at a prototype upscale “green” store in Cordova, Tennessee, but it will have to win over the citizens of the Memphis suburb first.
Wal-Mart’s original development application was rejected by Memphis and Shelby County officials due to traditional complaints about local impact, lower property values, and traffic risks. Opponents of the project also argued that it was not in line with the “Sustainable Shelby” initiative. However, sustainable is only vaguely defined in the initiative’s language, which makes this claim difficult to support. One might also think that those interested in sustainability would be especially interested in a prototype “green” store that would place Cordova and greater Memphis at the cutting edge of market research in sustainable retail.
Wal-Mart made a number of changes to its original business plan in order to accommodate the wishes of community leaders. To ease fears of traffic congestion due to insufficient infrastructure, the proposed store size was cut almost in half, from 267,000 to 151,908 square feet, and the number of parking spaces on-site were reduced from one thousand to 765. Several strategic design changes were also made, including substantial improvements to the landscaping plan.
Last week, Wal-Mart’s revised application was formally approved by the Memphis and Shelby County Land Use Control Board. This sounds like a step in the right direction, but Wal-Mart still has to wait six to eight weeks before the Shelby County Commission reconsiders its proposal. During the upcoming weeks, opponents of the project would do well to remember that this is a matter of private property. Wal-Mart does not plan to build a facility in anyone’s actual backyard; and the land that it owns was not obtained forcefully through eminent domain.
Private property rights are essential to economic development. Allowing the majority to exercise veto power over others’ private plans runs completely counter to progress and simply creates a “tragedy of the anti-commons.” An inversion of the “tragedy of the commons” whereby people over-utilize resources that are not privately owned, the “tragedy of the anti-commons” occurs when too many people have “rights” over privately-owned resources. Ultimately, this means the resources in question will be under-utilized.
If community leaders are interested in a more prosperous Mid-South, preventing Wal-Mart from building its own store on its own land according to its own specifications is a mistake. Red tape will only suffocate business, destroy jobs, and stifle innovation.
Years ago, Memphis businessman Clarence Saunders founded Piggly Wiggly and revolutionized self-serve shopping. Subsequent local entrepreneurs have followed suit, paving the way for unprecedented prosperity in the region. An innovative new Wal-Mart store in Memphis would bring new jobs, lower prices, and new retail technologies. Community leaders should not only allow this kind of innovation, but support it.
Art Carden is an Adjunct Fellow at the Independent Institute in Oakland, California, and an assistant professor at Rhodes College (Department of Economics and Business).