Who's Afraid of Wal-Mart?

The most readily accepted myth propagated by the enemies of Wal-Mart is that the superstore drives out mom and pop grocers when it moves into a new town. It's a myth that plays well with anti-corporate leftism, as well as America's general romance with small business over "the big guy." Even those who consider themselves "pro-business" often lament the destruction of a scrappy David at the hands of the smiley-faced Goliath of Bentonville. Yet, as economist Russ Roberts has noted, it's not the mom and pops who suffer when a new Wal-Mart opens -- it's other Goliaths, namely large supermarket chains.

The WSJ has an illuminating article that reveals the extent to which these large chains use feel-good populist channels to keep out competition:

As Wal-Mart Stores Inc. has grown into the largest grocery seller in the U.S., similar battles have played out in hundreds of towns like Mundelein. Local activists and union groups have been the public face of much of the resistance. But in scores of cases, large supermarket chains including Supervalu Inc., Safeway Inc. and Ahold NV have retained Saint Consulting to block Wal-Mart, according to hundreds of pages of Saint documents reviewed by The Wall Street Journal and interviews with former employees.

Saint has jokingly called its staff the "Wal-Mart killers." P. Michael Saint, the company's founder, declines to discuss specific clients or campaigns. When read a partial list of the company's supermarket clients, he responds that "if those names are true, I would say I was proud that some of the largest, most sophisticated companies were so pleased with our success and discretion that they hired us over the years."

Supermarkets that have funded campaigns to stop Wal-Mart are concerned about having to match the retailing giant's low prices lest they lose market share. Although they have managed to stop some projects, they haven't put much of a dent in Wal-Mart's growth in the U.S., where it has more than 2,700 supercenters—large stores that sell groceries and general merchandise. Last year, 51% of Wal-Mart's $258 billion in U.S. revenue came from grocery sales.

This phenomenon of economically interested parties hiding behind a more politically palatable cause is not new. Clemson economist Bruce Yandle famously named this tactic "Bootleggers and Baptists" in his 1983 article in Regulation Magazine. The name comes from his example of criminal bootleggers who quietly support religious groups in the enactment of blue laws, which increase the demand for their services by restricting the legal sale of liquor. What's fascinating (and disheartening) about the WSJ article is the emergence of firms, in this case the oh-so-perfectly-named Saint Consulting Group, who facilitate and profit from the maneuver:

Mr. Saint, a former newspaper reporter and political press secretary, founded his firm 26 years ago. It specializes in using political-campaign tactics—petition drives, phone banks, websites—to build support for or against controversial projects, from oil refineries and shopping centers to quarries and landfills. Over the years, it has conducted about 1,500 campaigns in 44 states. Mr. Saint says about 500 have involved trying to block a development, and most of those have been clandestine.

For the typical anti-Wal-Mart assignment, a Saint manager will drop into town using an assumed name to create or take control of local opposition, according to former Saint employees. They flood local politicians with calls, using multiple phones to make it appear that the calls are coming from different people, the former employees say.

They hire lawyers and traffic experts to help derail the project or stall it as long as possible, in hopes that the developer will pull the plug or Wal-Mart will find another location.

"Usually, clients in defense campaigns do not want their identities disclosed because it opens them up to adverse publicity and the potential for lawsuits," Mr. Saint wrote in a book published by his firm.

No doubt they don't. The type of person who makes opposition to Wal-Mart a badge of moral virtue would find it awkward to discover his bedfellow is actually a big bad corporation like Safeway, Giant, or Supervalu -- not the lovable corner grocer.