Friday, July 03, 2009

It's the economy (of scale), stupid!


Megan McArdle:

I find it hard to believe that none of the liberal commentators breathlessly celebrating Wal-Mart's "capitulation" on national health care have even entertained the most parsimonious explanation: that Wal-Mart is in favor of this because it raises the barriers to entry in the retail market, and hammers Wal-Mart's competition.


You can say that again, sister!

I find it hard to believe that none of the liberal commentators breathlessly celebrating Wal-Mart's "capitulation" on national health care have even entertained the most parsimonious explanation: that Wal-Mart is in favor of this because it raises the barriers to entry in the retail market, and hammers Wal-Mart's competition.


(h/t -- Little Miss Attila)

Not rocket science, folks.

First, Wal-Mart is legendary for manipulating hours so as to keep most of its employees below the threshold for most benefits. The company will likely only be on board with a "national health care" plan so long as that plan maintains a distinction between "full-time" and and "part-time" employees which allows it to avoid most of the burden of the mandate entirely.

Secondly, to the extent that it does fall under the mandate, Wal-Mart is the biggest employer on Earth. It will get the best group rate on the planet, or it will "self-insure" to the bare minimum requirement of the mandate.

Every company has to pass its operating costs on to the consumer as part of the price of the product. Wal-Mart is positioned to keep the increase in operating costs represented by ObamaCare to a minimum. Its prices will go up, but they won't go up as dramatically as other stores' prices will. It will retain, perhaps even enhance, its competitive advantage on price.

Startups generally are not big enough at birth to maintain the kind of "human resources management" overhead required to either administer all these mandates or shuffle operations around to avoid them. ObamaCare is like putting up a big "DON'T BOTHER -- JUST BUY WAL-MART STOCK INSTEAD" sign in the path of would-be new entrants into the retail business sector.

Wal-Mart is playing this masterfully: Cutting the legs from beneath its existing competitors, aborting its would-be competitors in the womb ... and getting cookies and milk for "corporate social responsibility" in the process!

Nothing new under the sun, of course -- from anti-trust to utilities to you name it, "big business" has always been the moving force behind the "progressive" initiatives supposedly intended to bring it to its knees. Big Government and Big Business are symbiotes.

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