We're not sure why, but the media expressed shock last week after Andrew Young told a reporter that Jewish, Korean and Arab inner-city shopkeepers are guilty of "overcharging" minorities for inferior goods. The subsequent criticism of Mr. Young is certainly warranted, but his remarks shouldn't have surprised anyone.
The notion that racial animus rather than marketplace realities are responsible for high prices in urban ghettos is unfortunately far too common. And that's in part because black civil rights leaders such as Mr. Young and Al Sharpton and Jesse Jackson have long ignored economic factors and blamed supposedly exploitative immigrant middlemen. The right Reverend Al has referred to them as "interlopers."
....To his credit, Mr. Young has distinguished himself from much of the black left by not siding with Big Labor, environmentalists and other liberals who would happily deny minorities the jobs and low-price goods that big-box stores have to offer. Which makes it all the more unfortunate that Mr. Young's economic analysis is so off-base.
Businesses charge more in low-income, high-crime areas in part because it costs more to deliver goods and services in those areas. Inner-city grocery stores have higher operating costs and tend to be smaller than their big-box suburban counterparts. Taking advantage of economies of scale, the latter are able to offer more brands and sizes at lower prices. Urban supermarkets also typically have less competition, which allows them to charge more than they otherwise could. Wal-Mart's ability to offer more selection and lower prices is due to scale and efficiency, not virtue.
Rather than scapegoat immigrant entrepreneurs, Mr. Young and other civil rights leaders would do better to address the cultural and economic barriers that make it difficult for more black Americans to start businesses in the same neighborhoods.
Tuesday, August 22, 2006
The Wall Street Journal explains to Andrew Young, racism aside, what was wrong with his analysis of why mom and pop stores charge more in urban areas.
Posted by Betsy Newmark at 7:40 AM