Wal Mart Through the Eyes of Adam Smith and Karl Marx

Wal-Mart’s exponential buying power is forcing smaller, local rivals out of business and is driving factories out of America. This results in job loss and the destruction of established business communities stunting the economic development of the retail sector. According to Smith’s “Inquiry into the Nature and Causes of the Wealth of the Nations” (1776), free competition is the only regulator that allows the individual’s pursuit of self interest to be directed towards the total benefit of society (Invisible Hand Concept) and rules out vicious profiteers. To accomplish this Smith believed in a free market system, a Laissez-Faire governmental leadership style and the removal of traditional restraints on the sale of goods and wages to allow everyone equal access to resources and to pursue self-interest.

Smith’s theory contrasted against the current influential position of Wal-Mart emphasises how free competition in the markets is eliminated as Wal-Mart’s control over the markets grows. Wal-Mart’s cost efficiencies allow them to put downward pressure on both prices of goods on the market and prices offered by sellers. This contradicts Smith’s theory that the only regulator of market prices should be the self correcting forces of supply and demand. Small scale retailers cannot cope on the massive cost efficient level of the bulk buyers Wal-Mart and no longer have free access to equal resources due to Wal-Mart’s influence on supplier prices. Small and medium retailers are vital to economic development as they promote entrepreneurship, innovation and investment in American markets, provide employment (especially youth employment) and lead to the development of bigger companies and industries.

The growth of the nation is stunted by Wal-Mart’s squandering of its competitors and by driving of factories out of America, which can lead to the destabilising of the economy, a reduction in money generated in the country and even to the collapse of various sectors. Wal-Mart’s market power has allowed them to dictate the range of products it supplies, restricting consumer choices and allows Wal-Mart a hand in the formation of the culture of the community, for example, Wal-Mart stocks inexpensive firearms but refuses to stock Preven, a common morning after pill. Smith’s theory criticises this as it eliminates the element of a free market system and increases Wal-Mart’s power over price regulation restricting economic development due to the lack of competition. Smith would criticise the fact that the American government is not leading in a Laissez-Faire manner by providing subsidy welfare programs to Wal-Mart employees, because this disrupts the free market system by aiding Wal-Mart’s ability to keep wages down. Wal-Mart holds a large concentration of the market’s resources placing immense economic power in its hands.

This capitalistic power has lead to Wal-Mart’s development into an oligopoly which would be heavily criticised by Marx. Marx believed that this influential power would result in a tip in the balance of power between the capitalists/bourgeoisie (Wal-Mart) and the labourers/proletariat (Wal-Mart employees). Marx emphasised that this shift of power leads to an exploitation of workers. Wal-Mart exploits employees through low wages, disallowing unions and by not providing insurance or medical aid to its employees enabling the entity itself to generate larger profits and increase its capital. The development of labour in large economic sectors impacts greatly on poverty and the economy, especially if it provides for the general well-being of workers. With the amount of power Wal-Mart yields it is able to provide employment to many, yet, despite this, the employment it provides does not wholly benefit the lives of its employees.

The economic development is restricted in terms of uses of the country’s finances as the government has to compensate for Wal-Mart’s lack of basic care for its employees through welfare subsidy programs. The lack of employee protection may lead to a revolt (Predicted by Marx) through which employees could refuse to work for Wal-Mart. The loss of employment numbers will not only result in additional expenses for the government but too will negatively impact economic development through the decline in Wal-Mart’s financial performance.

According to Marx’s “Economic and Philosophic Manuscripts” (1844) capitalism results in the alienation of individuals from the objects they create. Marx would criticise Wal-Mart’s use of anti-unionisation policies reducing employees to mere parts to a system with no intrinsic value. The employees of Wal-Mart are not truly free as they are not free from being economically exploited and alienation. This negatively impacts economic development because the alienation of workers leads to no drive or desire to perform their jobs which lowers and restricts the standard and quality of performance offered by an entity such as Wal-Mart. Reduced performance reduces profits which results in a slow in the inflow of money into the economy from the retailing giant.