Friday, May 13, 2005

Conservative Case Against Wal-Mart in NYC

Many Wal-Mart supporters focus on the “left-wing” nature of the opposition to the mega-retailer. The common rant usually attacks labor and drags out all of the standard anti-union stereotypes, none of which are particularly applicable to the locals of the United Food and Commercial Workers. After the attack on labor, however, the Wal-Mart partisans, particularly Steve Malanga of the Manhattan Institute, next go on to assail the “anti-development” ethos of Wal-Mart’s opponents. This line of attack is generally made by critics who characterize themselves as conservative.

These self-described conservatives are missing some fundamental aspects of the opposition to Wal-Mart in particular and box stores in general. On his blog, Stephen Bainbridge, a professor of Corporate Law at UCLA and backer of President Bush, brought this discussion to the forefront by enumerating a number of conservative arguments against Wal-Mart. We think it’s necessary to both localize and elaborate on Bainbridge's general thesis, one that we were reminded of after a recent visit with Republican New York State Senator Marty Golden who represents Bay Ridge and other generally conservative parts of Brooklyn.

We first became acquainted with Marty when, as president of the Fifth Avenue Merchants Association (he owned the Bay Ridge Manor at the time) we were involved in efforts to block suburban style shopping centers. The relationship grew when a plan was floated, circa 1996-97, to build a mega-retail project called “Brooklyn Junction” over the railroad tracks at 60th Street in Bay Ridge. Marty led the opposition, organized the community and successfully recruited Governor Pataki to veto the whole idea. He did so in what is arguably the most conservative electoral district in New York City (An interesting footnote is that Rudy Giuliani, the megastore cheerleader par excellence, was dragged along in opposition to the project).

What this points out is that there is a strong conservative undercurrent, one that we believe will also manifest itself on Staten Island, against over-development and mega-development. Pundits like Malanga, Richard Schwartz of the Daily News and Greg David of Crain’s underplay the importance of small business, particularly neighborhood retail, to the quality of life in a community and as a result fail to grasp the true nature of opposition to companies like Wal-Mart. This type of opposition manifested itself in the Alliance’s first effort (circa 1981) where the communities of Zarega, Morris Park, Throggs Neck and Pelham Bay joined forces with their merchants to defeat a suburban mall project promoted by Arnold Spellum of the Westchester Creek Development Corporation.

In the twenty five years since, we have seen Forest Hills, Mill Basin,
Canarsie, Astoria and Laurelton, which is comprised primarily of middle class African-Americans, rise up in (mostly successful) opposition to the malling of New York City. This city is one of distinct neighborhoods and the people who
live in them are deeply concerned with preserving the kind of quality
of life that Wal-Martization would kill forever.

The “neighborhood character” argument may seem unduly quixotic but for those who grew up and currently reside in one of the city’s many neighborhoods this line of reasoning is anything but misguided. For conservative Wal-Mart supporters who have never lived in an urban atmosphere it is difficult to comprehend the importance of walk-to-shop commercial strips, “mom and pop” shops, and the general aversion to suburban-style developments. Unlike in other parts of the country where malls and box stores are generally located in separate, far away commercial centers, in New York most large developments will, de facto, be located in close proximity to a number of residential neighborhoods. Thus, due to New York’s unique urban nature, New Yorkers like Senator Golden, City Councilman Denis Gallagher, and mayoral candidate and former councilman Tom Ognibene – people we term “Neighborhood Conservatives” – oppose large developments like Wal-Mart because of a traditionally conservative emphasis on a local community’s economic and social vitality.

Specifics of the “Neighborhood Conservative” Argument


The Neighborhood Retail Alliance and our many supporters who identify with this preservationist perspective understand that neighborhood retail is more than just friendly, personalized service (though this is certainly important). The argument that is often overlooked by big box proponents, is the fact that locally-owned businesses are generally of greater overall value to a municipality than national chain stores. As we have commented on earlier, studies by groups like Civic Economics and the Institute for Local Self Reliance have constantly proved that locally-owned retail provide more of an economic multiplier effect to an area than comparable chain stores. For example, a study in Andersonville, a neighborhood in northern Chicago, showed:
- For every $100 in consumer spending with a local firm, $68 remains in the Chicago economy.
- For every $100 in consumer spending with a chain firm, $43 remains in the Chicago economy.
- For every square foot occupied by a local firm, local economic impact is $179.
- For every square foot occupied by a chain firm, local economic impact is $105.

Consumers surveyed on the streets of Andersonville strongly prefer the neighborhood retailers over the proliferation of common chain stores.

- Over 70% prefer to patronize locally-owned businesses.
- Over 80% prefer traditional urban business districts.
- Over 10% of respondents reside outside the City of Chicago.
The Chicago study – replicated in Austin, Texas and in Maine – only confirms what common sense dictates: local stores stretch the dollar by utilizing other local businesses (banks, graphic designers, wholesalers, accountants, etc…) while also giving to local charities and advertising in local newspapers. Furthermore, the owners of these independent businesses are often homeowners in the community, pay a variety of additional taxes, and in general strengthen the foundation of a neighborhood. This multiplier effect does not occur with out-of-state chains that rely on suppliers and service providers from outside the community and run operations from a national company headquarters.

Tom Ognibene, the aforementioned Republican mayoral candidate, sums up the fiscal importance of local business during an interview with a Slant Point, conservative NYC blog:

QUESTION 9: You said you are against big-box stores like Wal-Mart coming to NYC. Why?

TOM OGNIBENE: As counsel to State Senator Maltese in the late 1980's and as a Council Member in the 1990's, I recognized how important it was for the continued viability of our neighborhoods to have accessible, varied and full service "mom and pop" stores along our commercial strips.

In 1988, Mayor Dinkins changed the tax class for most mom and pop stores from tax class 1 to tax class 4, causing massive tax increases, abandonment and store closings became prevalent.

Fresh Pond Road in my community, between Myrtle Avenue and Metropolitan Avenue saw 31 stores closed. We saw only "roll down" gates covered with graffiti. The economic and social impact was devastating.

Senator Maltese and Assemblyman Friedman of the Bronx were able to reverse the process and the revival brought a new level of stability and revitalization to our communities.

While big box stores like Wal-Mart may offer an initial economic benefit to consumers, once they have eliminated their "mom and pop" competition their prices move upward to "market value". This kind of predatory pricing has devastated communities in other states. Our outer borough communities are held together by the combination of suburban style residential living together with immediate access (in most cases, walking distance) to local retail outlets. It is at the core of our community oriented lifestyle and I'd like to preserve it.
Quality of Life (Traffic, Crime, Transiency, Property Values)

While crucial, economics is not the only factor in the Neighborhood Conservative’s argument against Wal-Mart and other big boxes. As Ognibene mentions, these mega-retailers are also a threat to a highly valued “community-oriented lifestyle.” This threat is more than the potential loss of smaller, neighborhood retailers; it also includes the numerous negative side effects associated with suburban-style developments that can exceed 500,000 sq. ft.

Travel through most of New York City’s neighborhoods occurs on 1 or 2 lane main streets that are often unable able to accommodate the type of traffic generated by big box stores like Wal-Mart. The city’s roadways are already at capacity and perpetually gridlocked. The addition of 50,000 weekly car trips to a big box destination has the potential to exacerbate this problem further, making travel within a neighborhood nearly impossible.

This situation can already be seen in the overdeveloped south shore of Staten Island where, according to the Staten Island Chamber of Commerce, roadways are currently at or near capacity. This is the same area where Wal-Mart is proposing to build a 150,000 + sq. ft. store! It must be remembered that immobility due to an overburdened road system is not only annoying but comes with a number of attendant social costs such as decreased productivity due to vehicle congestion and higher levels of traffic mishaps, increased pollution and asthma, and lowered emergency vehicle response time.

Another consequence of large, sprawling development is an increase in transiency and crime. Big box stores draw large populations from outside a neighborhood (they are unable to turn a profit from local shoppers alone) which inevitably means unfamiliar motorists navigating residential streets and posing a danger to pedestrians. These outside-the-neighborhood consumers also are drawn to the “one-stop shopping” nature of the big box and therefore rarely frequent other community businesses.

More important, perhaps, is that in addition to being a magnet for shoppers, Wal-Mart and other big boxes also attract numerous shoplifters and other criminals. As articles from all around the country have demonstrated, when a Wal-Mart is built, the crime rate goes up due to increased shoplifting prosecutions and the higher likelihood of other, more serious crimes. It should be no surprise that residents of a neighborhood where a big box wants to site are predictably unsettled by the potential influx of both out-of-the-neighborhood shoppers and criminal elements.

One final concern of neighborhood residents close to a proposed big box site is that lower prices are not worth the decline in both business and residential property values. There are two reasons for their worry. First, because Wal-Mart leads to the closure of surrounding businesses the property values on those commercial strips decrease (Q4 and Q5) as more and more establishments remain vacant and boarded up. Second, it has been shown that when a Wal-Mart is built close to a residential neighborhood, the property values of those homes are put in danger and people are more apt to move. Large box stores do not complement residential spaces and have, due to their unsightliness, traffic draw, and 24 hour operation, made the adjoining neighborhood less desirable to live in.

Both of these impacts will be aggravated in New York City due to the contiguity of potential big box sites to our residential neighborhoods and commercial strips. If the city’s walk-to-shop business districts atrophy because of the impact of box stores, the property values of residences will inevitably decline along with the nearby commercial blight.

This commercial/residential proximity also means that big boxes in the city are much more likely to be built close to people’s houses, contributing to the residential property value declines cited above. For example, the proposed Wal-Mart in Richmond Valley is extremely close to a middle class housing development. We have spoken to community residents who have said they would consider selling their homes if a Wal-Mart was built nearby.

The Neighborhood Conservative would argue that lower prices are certainly not worth the potential erosion of the vitality of residential neighborhoods and the attendant loss of an important tax base. New York should learn from the research and experiences of other cities that point to how overdevelopment of commercial property can simultaneously harm the housing market and disrupt valued community lifestyles.


An unencumbered free enterprise system is a fundamental tenet of conservative ideology. Within the parameters of this system it is expected that the development of successful businesses will lead to greater wealth and individual self-sufficiency. The use of government subsidies, in this world view, is only justified if it can be demonstrated that the public largesse is actually stimulating additional economic growth and is not being used in an unfair and anti-competitive manner.

It has been demonstrated, however, that questionable subsidies – in various forms – are an integral companion to big box construction. This is an issue that should concern all free market conservatives, and the presence of subsidies in a development package should undermine conservative support (or at least enthusiasm), for any project. Multi-billion dollar companies should not need millions of dollars of government incentives in order to build their stores.

According to a comprehensive analysis done by Good Jobs First, Wal-Mart has received over $1 billion dollars in tax breaks, infrastructure improvements and other incentives for 250 stores and distribution centers. Imagine what the total dollar value is for the chain’s 3500 U.S. locations! These subsidies are not only unfairly distributed – small business is rarely offered proportionately similar deals – but their impact is rarely analyzed by the municipalities doling out the money. When an analysis is done, however, all signs point to the fact that the subsidies rarely deliver the benefits that are initially ballyhooed.

These pre-construction instances of largesse are compounded when we examine how companies like Wal-Mart disproportionately burden public safety net programs such as Medicaid. Some conservatives, failing to see past ideological blinders, may argue that the chain’s low wages are strictly a business matter. This argument is weakened, however, when we consider the impact these low wage/low benefit workers have on the taxpayer.

In 14 states across the country, Wal-Mart employees and their families are the largest (not proportionally as spokespeople suggest) users of the public health care system. In Georgia for example, over 10,000 children of Wal-Mart associates utilize the PeachCare program. The costs of paying for the health care of corporate employees, not to mention subsidizing additional low-income benefits such as free and reduced lunches, housing assistance, and energy assistance, profoundly troubles Neighborhood Conservatives. Remember, it’s not that these programs are unnecessary but we should be doing everything we can to get people out of them and into lifestyles that are self-sustaining.

Before moving on to a third way that the taxpayer supports Wal-Mart it is important to note that one criticism of the health care point is that these workers were unemployed and already using public assistance prior to being hired. Even if one assumes that the critics are right, and we’ve never seen the evidence to prove it, there is still a major flaw in the argumentation.

Job creation is markedly less valuable if the position being created doesn't completely remove a person from the government dole. It is even less so if the job that is “created” is done so at the expense of higher quality work lost when a Wal-Mart competitor is put out of business. As an editorial in the St. Petersburg Times pointed out, why should taxpayers support Wal-Mart when the jobs it creates requires even more taxpayer assistance? Instead of defending Wal-Mart’s reliance on public health care by saying new hires were already using it (or by saying “it’s retail, what do you expect”) conservatives should be encouraging the creation of jobs that will completely end a person’s reliance on public subsidization.

Lastly, Wal-Mart’s drain on public infrastructure (roads, police, health services), though not necessarily direct subsidies, are an important price a city pays to have the store within its borders. As mentioned earlier, because Wal-Mart attracts more criminals and ardently prosecutes every offense the police become burdened with responding to these calls. As a result, it becomes necessary to hire more police or allocate additional amounts of an officer’s time to Wal-Mart. This issue is especially pertinent to Staten Island where the public is understandably clamoring for a 4th police precinct to help protect a burgeoning population. Does it make sense to support a project – and to subsequently demand that the taxpayer foot the bill – that will strain services that are already drastically below where they need to be?

The box store also puts a tremendous strain on public roadways and streets that are often not equipped for the tremendous rise in traffic. It then becomes the city’s responsibility to pay for improvements necessitated by the activity of one store. Also, as we have pointed out, this traffic congestion increases the time it takes to get to work, the number of asthma cases, the amount of pollution and leads to a variety of other consequences all of which end up costing the tax payer.


Often, when small businesses and community groups voice their opposition to Wal-Mart critics respond that they are anti-competition and going against the very nature of the free enterprise system. The Alliance and other Neighborhood Conservatives argue exactly the opposite: it is Wal-Mart that is the real threat to the healthy competition necessary for vibrant neighborhood economies. Right off the bat, the large and varied subsidies that the chain receives puts it at an automatic competitive advantage vis-à-vis small business. We are baffled when people who purport to be fiscal conservatives fail to object to this financial largesse and, compounding the error, also fail to realize how the resultant skewed playing field has made real competition illusory.

More generally, Wal-Mart’s guiding philosophy as well as the public's finanical support for its developments should vex true champions of healthy competition. As more and more small businesses, supermarkets and other retailers are put out of business, competition inevitably declines as the chain becomes the only game in town. Exacerbating closures is Wal-Mart’s saturation policy of flooding new markets with numerous stores even if these stores end up cannibalizing each other. This desire to beat one’s competition is understandable, but when the results are monopolistic in nature two dangers manifest: Wal-Mart can now set its prices higher, and towns become increasingly reliant on a sole establishment for their sales tax revenues. If that same only game in town Wal-Mart decides to leave, as in the case of McGehee, Arkansas, the municipality often finds itself barren and destitute.

Concern about the concentration of power should not be restricted to the conservative fear of big government. Concentrated private power should also be a worry and the impulse to curb monopolistic behavior in this country has a noble conservative pedigree. Certainly, the Robinson-Patman Act, designed to protect local grocers from the rapidly expanding A&P, emerges from a Neighborhood Conservative world view.

The impetus behind that act was the ample evidence of predatory pricing. The pricing of goods below wholesale cost may be an initial boon for consumers but the long term affects of having businesses wiped out by temporarily fixed low prices is only going to be deleterious and-anti-competitive. From Oklahoma, to Wisconsin to Arkansas, to Germany, Wal-Mart has shown the will to destroy its competitors by lowering its prices to uncompetitive levels and, as Ulf Boge, director of Germany’s cartel office, remarked, “The benefit to consumers is marginal and temporary, while the damage to competition through illegal obstruction of small and medium-sized companies islasting and significant.”

Unfortunately, the type of anti-trust law necessary to protect consumers from these practices have been watered down or completely removed over the last couple of decades but the Neighborhood Conservative should nonetheless remain vigilant in protecting true competition, not the self-serving Wal-Mart variety.

Don’t people leave the city to shop at Wal-Mart already?

One of the stronger points raised by pro-Wal-Mart forces is that New Yorkers are already leaving the city to shop at Wal-Marts so why not build them here to capture those retail dollars. It must be noted that there's no evidence showing that new retail developments increase the overall dollars being spent in a city; they instead redistribute money already being spent at other establishments. Or, as author Al Norman likes to say, building more supermarkets does not make people hungrier. Therefore, the “Wal-Mart as an economic boon argument” is only somewhat valid if it can be shown that building the store will stop shoppers from leaving New York City, stemming the so-called leakage of dollars that would otherwise be spent within our borders.

Wal-Mart’s cheerleaders do a good job at pointing out that people leave the city to shop but fail to establish a causal link between this exodus and the need for box stores. It may seem self evident that if people shop at a Wal-Mart in New Jersey they would inevitably shop at a closer Wal-Mart in the five boroughs. But no supporting evidence, other than anecdotal, has been offered. In other words, no thorough, independent study has been conducted to demonstrate exactly why people leave to shop in Jersey, Long Island or the northern suburbs. In our opinion, though the issue of leakage seems simple on the surface it is, in fact, much more complex and begs to be more professionally examined.

Until this type of analysis is conducted, we’d like to offer some educated guesses that show that this phenomenon may not be stopped by building Wal-Mart stores in New York City. We have talked to a large number of people who shop in New Jersey and their common rationale is always the tax differentials.

As we’ve pointed out in a previous post, Staten Islanders and other New Yorkers can not only save on the sales tax, but can buy cheaper gas, don’t have to pay a deposit on their bottles and can steer clear of Mayor Bloomberg’s unprecedented cigarette tax increase. In fact, Mayor Giuliani was fond of pointing out that we were losing $700 million in revenues every year to New Jersey because of the drastic in sales tax disparity.

Do Wal-Mart backers really think that building one of their stores here will reverse the trend? According to the Staten Islanders we’ve spoken to, they will continue to cross the bridges, especially now that a Supercenter was approved in Edison, NJ, 3 miles away. The prices will still be lower and the convenience factor of a NY store will be drastically diminished by the fact that, due to traffic congestion, it will probably be faster to get to Jersey than navigate the local roads.

Therefore, we question how many New Jersey-bound shoppers will actually be captured at a New York Wal-Mart. Instead, we believe that a great influx of shoppers at a Staten Island Wal-Mart will be people from Brooklyn. In that scenario, shopper dollars would not be kept in the city but simply redistributed. Clearly, absent rigorous empirical analysis, the pro-development argument remains unproven and precariously self-serving.

In the case of Westchester and Long Island the tax issue is definitely not as relevant but there are solid reasons to wonder if box stores will stanch the economic bleeding. The irony may be that New Yorkers want to preserve their communities and neighborhoods with their unique blend of smaller, walk-to-shop retail and quiet residential living, while at the same time wanting the benefits that suburban malls afford. They may be quite content to allow the suburban sprawl to remain accessible but not overly close by and threatening. Or in the words of Zarega’s legendary Artie Felice: “If you want a bargain, get in your car and drive to the bargain. Never put the bargain in your neighborhood.”

It is also very possible that Queens residents enjoy leaving the city on weekends to do some shopping and catch a movie at one of the large malls in Nassau county. Would this trend be reversed if a Wal-Mart was built in the city? Once again, this is a hypothesis in need of testing. In essence, we are saying that when price discrepancies are less of an issue there still are factors that affect people’s choices and point to how a NYC-based box store may do little to stop the efflux after all.

Improving the Business Environment

The question of box stores and the loss of retail dollars can’t be fully addressed, particularly from a conservative perspective, without also analyzing New York City’s business climate. We at the Alliance believe that it is inherently unfair to promote local box store building without first addressing this city’s severe anti-business climate.

Put simply, New York’s tax and regulatory burden makes all local stores less competitive. Improving the overall business climate, then, should precede the promotion of box stores because, as we have argued elsewhere, the enhancement of locally-based retail has intrinsically greater value than any proliferation of box stores and mall could possibly have. To base the argument for building a Wal-Mart on the inadequacies of local stores becomes one of the more vivid examples of blaming the victim.

Localization of Power: Real Community and Neighborhood Input

A final point is that Neighborhood Conservatives, like conservatives nationwide, generally espouse a theory of limited government where decisions are often best made by local representative bodies. However, in New York City the land use process consists of an inadequate, truncated form of public input and is more likely to be the imposed scheme of a developer or economic development official than representative of true community desires. In addition, local community boards are too often packed with politically connected cronies and do not adequately represent true neighborhood sentiment.

It is also true that the community is not given the resources to adequately analyze the real impacts of a project. All the data is generated by consultants, hired by a developer, who cavalierly underestimate traffic and economic impacts. The mandated land use review clock creates an artificial hyper-atmosphere that is not conducive to rational evaluation.

Even this innocuous kind of oversight, however, was deemed too onerous by the developers and their big government acolytes who wanted to remove any local input in order to insure that all land use decisions be made at City Hall. What could be less conservative than the policy, advanced by former Mayors Dinkins and Giuliani, of removing from review scores of megastores that would have impinged on almost every neighborhood in the city? This is precisely why the policy was resoundingly defeated by a small business/civic group coalition in 1996. As the Times and Newsday reported the plan was “Defeated in the Nabes.”

Yet, as conservatives and liberals alike have pointed out, neighborhoods are viewed by economic and social planners as fossil relics, outdated in a world where concepts like a global village and international community have gotten great cache. According to Morris and Hess, authors of Neighborhood Power: The New Localism, “The Neighborhood, if not simply scoffed at in this new globalism, is actually reviled and rejected” (3).

However, it is precisely in this global age of great technocratic government and mega, multi-national corporations, that neighborhoods make the most sense. They do so because they have the capacity to embody real human interaction. Morris and Hess continue, “Most persist, and all could be revived, for the simply practical reasons of making life livable and resolving problems which have remained untouched by the movement toward huge, dehumanized scale in social organization, economic organization and in the organization of resources and technology” (5).

Neighborhoods create a social space that has the capacity to overcome isolation and alienation and create a real sense of community. Within its borders people are not viewed (as in everyday low prices) through the exclusive lens of the cash nexus. It is precisely the array of neighborhoods that makes New York City the unique place that it is. The proliferation of box stores is a direct threat to this communal context.


The concept of the Neighborhood Conservative is crucial to understanding the opposition of many New Yorkers to the construction of Wal-Mart and other big box stores. It is important to note that this conservative case against Wal-Mart may not apply (at least in totality) to every single proposed site in New York but is an essential argument nonetheless. It is a line of reasoning that complements other, more “liberal” Wal-Mart critiques regarding wages, worker treatment and discrimination but also stands alone as a powerful defense of the important relationship between local business and New York City’s many vibrant, unique neighborhoods.