Sunday, March 27, 2005 - The California Fifth District Court of Appeals recently faulted the city of Bakersfield for failing to address economic consequences in its approval of two Wal-Mart Supercenters slated for that community. Expanding the interpretation of the state's 1970 Environmental Quality Act, the court ruled that Bakersfield should have included physical decay -- abandoned buildings and the resulting loss of economic activity -- as part of an assessment of the environmental impact of new development projects.

But in truth, the court's ruling had little to do with environmental issues, and everything to do with opposition to Wal-Mart by existing supermarkets and unions.

Unions never tried to invoke the Environmental Quality Act in this way back when the large supermarket chains were massively expanding. In every city, large supermarkets took market share from smaller regional or local establishments, but not one word was heard from the union leadership. The reason for this hypocrisy is clear -- the supermarkets are unionized.

It was the growth of supermarkets that facilitated unionization in the industry. It would have been nearly impossible to unionize the fragmented, often individually owned establishments that characterized the grocery industry prior to the advent of supermarkets.

The California Environmental Quality Act should not be used to protect union jobs and competitors' market shares. The legislation was designed to stop development when there are legitimate environmental concerns associated with a particular project. It could be the case that a particular superstore might have serious environmental impacts, but the chances that all have serious environmental impacts is nil. No one brought up this issue when Wal-Mart was putting nonunion department stores out of business.

If this standard had been applied to development 50 years ago, there would be no malls, few supermarkets, no entertainment centers (no sports arenas or movie theaters). Instead we would be stuck in a 1940s world of mom-and-pop stores and local businesses. In their place, modern establishments have found ways to bring us products and entertainment relatively cheaply by taking advantage of economies of scale in shipping, sales and service.

In any case, physical decay in inner-city neighborhoods is not the result of competition from Wal-Mart and other new entrants. It is the result of strict zoning and other laws that limit redevelopment in old neighborhoods. Often, the lack of public services, such as crime prevention and street maintenance, lead to urban decay. Whether Wal-Mart opens or not, these areas are bound to decay without changes in public policies.

It is understandable that unionized grocery workers would oppose the expansion of nonunion Wal-Mart Superstores, but many of these changes are inevitable. The history of growth shows us that every major step forward toward convenience, lower prices and better service has caused disruption.

We don't underestimate the potential personal hardship that individuals face with changes in how an industry is organized to deliver services. However, the reason we have a high standard of living in the United States is that we work through these disruptions and view them as an inevitable part of progress toward greater prosperity.

The politics of the situation favor those who oppose entry, at least in the near term. Opponents of development are very organized and stand to gain substantially from stopping entry to the grocery industry. In contrast, those who stand to gain from the entry of Wal-Mart and other big-box retailers are dispersed across the entire consumer population.

In the longer term, the effort to limit entry to the grocery market in California may prove to be exceptionally shortsighted. As California limits development, consumers will increasingly shift their consumption of nonperishable groceries to the Internet. Already, ordering in bulk off the Internet is often as cheap as shopping locally. With large orders, shipping is often free and there is the added convenience of having the products delivered to your doorstep.

We shouldn't overlook the fact that, as Wal-Mart brings low prices and convenience to millions of shoppers, other industries will prosper. Lower grocery costs mean that consumers will spend more on other nongrocery items. As consumers increase their spending on services such as hair salons and health clubs, these services will expand and create jobs.

At this point, given the relatively high cost of doing business in California, the state can ill afford to pile additional constraints on business growth and development. The application of environmental laws in this manner is anti-competitive and has little to do with environmental quality.

Consumers benefit from competition among firms. Wal-Mart's competitors should not get favorable treatment under the guise of environmental protection.

Robert Krol and Shirley Svorny are professors of economics at California State University, Northridge.