Paul Krugman teaches teaches economics at Princeton, and has done the same at MIT. Enron evidently thought enough of his understanding of the dismal science to hire him as a consultant - though Krugman has at times been reluctant to disclose that fact. But judging by his latest anti-Wal-Mart jeremiad [subscription required] in this morning's New York Times, you really have to wonder how much the good professor of economics . . . understands about capitalism.
Krugman's portrait of Wal-Mart is a caricature of greedy management conducting what he calls a "war on wages." Krugman has apparently gotten hold of a couple leaked internal Wal-Mart memos that discuss ideas for keeping labor costs under control. Among the ideas: increasing the percentage of part-time workers, since they qualify for fewer benefits, and limiting raises for long-term employees.
Krugman suggests that the only thing that permits Wal-Mart to "impose" its "brutal strategy" is a legal climate, created by Republicans who "come down on the side of the wage-cutter," that makes unionization of Wal-Mart workers more difficult.
Can Krugman really believe this? You sense he is stuck in some kind of fantasy time-warp in which Wal-Mart managers are Monopoly-millionaires in silk top hats, cackling as they run their fingers through piles of gold pieces and dream up new wage-cutting schemes that they will "impose" on workers.
Has the Times columnist ever heard of something called . . . the free market? Wal-Mart can no more "impose" wages on workers than it can impose high prices on customers. All Wal-Mart can do is offer wages. If workers find the offer attractive, they will accept it, taking new jobs at Wal-Mart or remaining in the Wal-Mart jobs they already have. If other employers offer more attractive employment terms, workers will reject Wal-Mart's offer. Wal-Mart would then have to improve its offer until it is able to attract the number and quality of workers it seeks.
There is no such thing as a free lunch in the free market. If in the short run unions "succeed" in imposing higher-than-market wages, they ultimately threaten the competitiveness and even the survival of employers and the jobs they provide. See the plight of US automakers for a good example.
Wal-Mart is the nation's largest employer. When new Wal-Marts open, job-seekers tend to turn up in droves. Those facts are the best proof that - far from "imposing" below-market wages - Wal-Mart is offering opportunities better than what more than a million Americans have concluded they can find elsewhere.
It could be time for Prof. Krugman to give up teaching and take a crash course in Market Economics 101. Who knows? Perhaps Milton Friedman might even be willing to sit down with him for a while.