Friday, December 17, 2004

The Wal-mart Problem

As someone with too much time on my hands, or more specifically, my mind, I tend to toss around issues over and over til they make sense. I have been a pure capitalist. Yet over the last few years my position has changed and I would like to express why.

Assume for a second that Wal-mart, our nation's biggest retailer, had the ability to get every product sold from China. Short term profits rise. Customers continue to see prices fall. China's working class gets a chance to rise from the level of peasant farming.

But what happens over the longer run? What happens as more and more Wal-mart customers have lost their jobs in the United States. They will buy less. Much less. Sure, Wal-mart would likely get more of their business. But is more, say 90% of less better for Wal-mart than 50% of more? I think not.

What if Wal-mart 's inventory were produced in one state only? What if it all came from, for arguements's sake, South Carolina? The standard of living in South Carolina would rise. Businesses would grow that support all of the manufacturer's that are making things. Restaurants, housing. medical services, and so on would all grow. The effect of a customer spending $1 on an item from Wal-mart made in the US would actually be more like a dollar spent 6 or 7 or 8 times. The results would be enormous. So, a million dollars in sales might actually be creating an 8 million dollar economy in SC.

And an bigger producing economy would certainly lead to more being spent at Wal-mart there. Even if they had a lower percentage of sales. In the long run, Wal-mart would certainly make many more dollars.


At 2:14 PM , Blogger frogtox said...

You been talking to my dad??


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