Is WalMart Too Big to Fail, Too?

Communities across America woke up to the bad news yesterday that WalMart is closing 269 stores worldwide–including 154 stores and 10,000 jobs in the United States:

The company said the stores it plans to close are generally poor performers, and most are within 10 miles of another Walmart. 154 of the locations are in the United States, two-thirds of which are the smaller “Walmart Express” stores. Only 12 U.S. Walmart Supercenters will close, along with four Sam’s Club stores.

This is more of a minor retrenchment than a system shock. But it should give us pause about retail consolidation in the U.S. We’re already well aware of the dangers of too-big-to-fail monopolization in the financial industry, though the problem has only gotten worse since the Great Recession. But too-big-to-fail in retail, particularly in small towns and communities, is a big but lesser-known problem.

WalMart likes to claim that it is good for small business overall, but the preponderance of the evidence says it’s not actually true. WalMart asks for big tax breaks from local communities and squeezes local micro and small businesses out of the area–often leaving them the only viable center for groceries and other necessities. There’s a fairness, distribution and social justice problem there, but it’s also a redundancy problem: if WalMart decides to leave or simply has a serious financial problem in its business, the affected communities can be placed in serious danger. Contra libertarian theories, effective marketplaces don’t just spontaneously generate of their own accord, and food deserts are a significant problem not just in inner cities but in rural America as well. And when WalMart is the primary employer in a single town, the sudden absence of the location can have effects just as devastating as Rust Belt factory closures.

Just as we shouldn’t be leaving the health of financial markets in the hands of a few companies that are too big to fail, we shouldn’t be leaving the availability of jobs and basic goods for communities all across America in the hands of a single company. Just as a good financial portfolio requires diversification for safety reasons, a healthy economy and a healthy society need a certain level of redundancy and inefficiency to weather unforeseen shocks.