The Expansion of Wal-Mart - Essay Example

EVALUATING THE CASE Case Summary The concerned case focuses on the fact that the expansion of Wal-mart has benefited the country’s economy in two broad ways. First, the expansion of Wal-Mart in the rural areas of the country has helped to capture the mass of the consumers. It helps in reducing the imbalances between the rural consumers and the urban consumers and increasing the opportunities of the rural mass. Wal-Mart can offer products at a very low price. Larger the Scale of Production the larger is the cost advantages enjoyed by the producers. Wal-Mart could offer a lower price because of this cost advantage it enjoys and also by forcing the suppliers to lower the supply price and thus reducing the sell price of the products. Thus the consumers enjoy products at the minimum price, which is often called the Bargain price. Wal-Mart has come up as a blessing for the consumers but not for the entire society. No other retailers can sell products at such a lower price because they do not enjoy similar cost advantages, and if they intend to do so their revenue will be less than their cost of production and thus they will be forced to quit the market because of the loss. Wal-Mart is anti-union organization, which means that it does not entertain trade union. Thus the labors are forced to work under low wage rates and also it does not provide health insurance to the workers. Study reveals that the wage cost of Wal-Mart is 20% lower than any unionized institutions. Many supermarkets have been forced to close down with the expansion of Wal-Mart. Thus the workers employed in those were unemployed. Wal-Mart insists on tax reduction while expansion thus it contributes a little or nothing to the total tax revenue of the govt. Since the expansion of Wal-Mart is the reason behind the shut down of many of its competitors, it leaves the consumers with no choice but to depend only on the commodities provided by Wal-Mart. Because of the above reasons the expansion of Wal-mart is facing a lot of resistance from the local residents, as they want to secure their local markets and also on the ground of Moral issues. The expansion of Wal-mart is desired from the point of view of the consumers and shareholders of Wal-Mart but not from the workers and the producers’ point of view. The expansion of Wal-Mart involves strong moral issues. The moral issue concerned with Wal-Mart is that its expansion is harming the interest of the masses. Despite providing the consumers with low price products it is reducing employment opportunities and also reducing the income level of the wage earners. Thus it is adding to low standard of living of the masses. Moreover by enjoying tax concessions it is also reducing the revenue of the govt which if earned could have been further used for providing education to the local residents, providing better medical facilities and other necessary amenities. The case of Wal-Mart might be evaluated under the following moral theories: Libertarianism, Utilitarianism (Mill and Bentham), and Theory of Justice (Difference Principle). Libertarianism According to the Libertarianism principle every individual possesses a right to optimum “equal empirical negative liberty” where negative liberty refers to the “absence of forcible interference from other agents when one attempts to do things” (Vallentyne, 2010). In the context of Wal-Mart, this principle does not hold because the workers are not working by free choice. They are compelled to work at low wage and for longer hours. Unions are not encouraged amongst the workers and hence freedom is restricted, though the employer enjoys non-interference from the workers (due to absence of unionism). Libertarianism principle works in favor of the capitalist but not the laborers. Utilitarianism (Mill and Bentham) Utilitarianism is a concept in which the happiness of the greatest number of the people is considered as good. John Stuart Mill developed this concept in his book ‘Utilitarianism’ in 1863. According to this theory action is said to be right if it is able to give as much or more happiness to all those are affected than if the action is not done. Society consists of different economic individuals, consumers, producers, laborers etc. Those who are producers and workers they also fall in the group of consumers. So if we consider the consumers to be the largest economic group then any action that increase the welfare of them can be said to follow utilitarianism. Thus providing consumers with low priced commodities by Wal-mart may to an extent be considered to follow utilitarianism. But for that we need to assume that the producers and the workers are also the consumers of Wal-mart, which may be unrealistic. Thus the welfare of the greatest number of people may not always lead to the welfare of the society as in the case of Wal-Mart. (Mill, 1883) According to Bentham’s Principle of Utility, “act so as to produce the greatest good for the greatest number”. The idea working in the background is that happiness is ensured by pleasure and therefore it is good which makes a person happy or gives him pleasure. When this is achieved for the larger number of people utility is attained. In this context Wal-Mart has provided to be effective as it produces goods at a cheaper rate for the consumers and this automatically expands its coverage making. (Ross, 2005) Theory of Justice (Difference Principle) Theory of Justice is the theory provided by John Rawls (1999). This theory can be said to be an extension of utilitarianism. This theory emphasizes that any act will be social if it guarantees a just society without sacrificing the happiness of any individual. According to the theory inequality in the society can be tolerable only if it is for the advantage of the worse off people i.e. if the inequality makes that person well off in terms of freedom, opportunities and income. This is in line with the Difference Principle of Rawls, which states “social and economic inequalities” should be “to the greatest benefit of the least advantaged” and “attached to offices and positions open to all under conditions of fair equality of opportunity” (Rawls, 2005, p. 83). Evaluating the effect of the expansion of Wal-Mart it can be said that is continuously increasing the inequality in the society .The only positive achievement that could be noted is its expansion in the rural areas, which may result in reduction of regional inequality. Wal-Mart’s expansion is proving to be disadvantageous to the economically weaker sections as it leads to several of its competitors closing down and making many workers lose their job. They would be forced to work a low wage for Wal-Mart. The poorer sections are getting affected, as they have no health insurance facilities provided by their giant employer and have to work for long hours at lower wage. Therefore the company’s operations do not satisfy the theory of justice by Rawls. Concluding remarks In today’s world most of the suppliers of the consumer products and other daily household commodities are perfect example of Capitalism. Capitalism came into discussion in the Western economy after the end of the era of Mercantilism and became dominant in the context of Adam Smith’s Wealth of the Nations and ‘theory of Invisible hand’, which assumes a free, flow of the market forces. But the world’s largest retail company, Wal-Mart has set an example of a somewhat different economic scenario. Wal-Mart is still expanding and is set to cover the rural areas of south and mid west America and also the urban America. References 1. Mill, J.S. (1883), Utilitarianism, Parker, Son and Bourn. 2. Rawls, J. (2005) .A Theory of Justice, Oxford: Oxford University press 3. Ross, K.L. (2005) “The Mummy’s Curse: Jeremy Bentham (1748-1832)”, retrieved on November 20, 2010 from: http://www.friesian.com/bentham.htm 4. Vallentyne, P. (2010), Libertarianism, Stanford Encyclopedia of Philosophy, retrieved on November 20, 2010 from: http://plato.stanford.edu/entries/libertarianism/ Read More