Prisoner's Dilemma

Richard Reich wants to go beyond the conventional rhetoric about Wal-Mart and look at the relationship between low prices and low wages in a new way:

The fact is, today's economy offers us a Faustian bargain: it can give consumers deals largely because it hammers workers and communities.

We can blame big corporations, but we're mostly making this bargain with ourselves. The easier it is for us to get great deals, the stronger the downward pressure on wages and benefits. Last year, the real wages of hourly workers, who make up about 80 percent of the work force, actually dropped for the first time in more than a decade; hourly workers' health and pension benefits are in free fall. The easier it is for us to find better professional services, the harder professionals have to hustle to attract and keep clients. The more efficiently we can summon products from anywhere on the globe, the more stress we put on our own communities.

But you and I aren't just consumers. We're also workers and citizens. How do we strike the right balance? To claim that people shouldn't have access to Wal-Mart or to cut-rate airfares or services from India or to Internet shopping, because these somehow reduce their quality of life, is paternalistic tripe. No one is a better judge of what people want than they themselves.

The answer, Reich argues, is increased regulation to protect our public selves, who presumably want good wages and vibrant communities for everyone, from our private selves, who just want the best possible price. In a sense, Reich is revisiting the problem of the prisoner's dilemma, and concludes that on their own, people cannot be counted on to cooperate. In an attempt to minimize their costs, individuals will routinely defect against the larger community.

It is indeed a waste of time, as Reich notes, to argue whether Wal-Mart in itself is good or bad. Rather, the argument we should be having is about the constraints that Wal-Mart and companies like it should be required to operate under. If the private sector is characterized by an endless race to the bottom, then the only way out of the resulting dilemma is to raise the bottom up to an acceptable level. Doing that isn't free, but neither is the alternative.