Wal-Mart is the leading retail chain across the United States of America. Wal-Mart’s rapid expansion between 2001 and 2008 in America has been felt in both positive and negative ways. Despite the numerous positive contributions that Wal-Mart has made, it has also had negative impacts to the economy of America. Being a dominant corporation, Wal-Mart has used its financial muscle to stifle competition in the retail industry. Some of its growth policies such as selling cheap imports and paying low wages have had negative effects on economic growth and development. This paper seeks to examine the demerits of Wal-Mart in the economy of America and how such demerits can be controlled.
TRADE BALANCE OF AMERICA
One of Wal-Mart’s growth policies is to offer products to customers at the lowest prices possible. The company finds it cheaper to import and sale Chinese products as compared to the products made in America. Chinese products tend to be cheaper than American products due to the low cost of labor in China. However, selling more of Chinese products has resulted into more importation of goods from China than what America exports to China. Consequently, Wal-Mart has contributed to the huge trade deficit between America and China. America has had to export its raw materials to the less developed countries while importing finished products from countries like China. This is against the economic development policies of America.
Wal-Mart has a high bargaining power since it is the largest retailer of most products in America. Thus, it dictates the quantity and quality of products to be manufactured. This has led to the exploitation of customers since some of their needs are not taken into account in the production process. The suppliers on the other hand, have lost their right to decide what to produce and how much to produce. Thus, Wal-Mart’s suppliers find it difficult to fully control their growth plans.
Wal-Mart’s increased importation from China has forced several American companies to reduce their productivity due to a lack of a market for their products. In some cases, companies that are not able to compete with their Chinese counterparts have had to close down. The overall effect has been a loss of jobs in America. It has also reduced the growth rate of America’s GDP, and lowered the quality of life. Wal-Mart has also developed human resource policies that are detrimental to its employees. For example, its employees have had to go to work while sick since their sick leaves are not paid by the company. This implies that Wal-Mart is reducing costs at the expense of the employees’ welfare.
ENVIRONMENT AND THE COMMUNITY
The retail activities of Wal-Mart are supported by manufacturing activities of its suppliers. The manufacturing activities directly lead to pollution of the environment. However, Wal-Mart has not been successful in ensuring that its suppliers adhere to the environmental regulations in order to reduce pollution.
The negative effects of Wal-Mart’s expansion are a clear indication that extreme capitalism is not good for the economy. While a free market economy encourages growth, government involvement through regulation is necessary to ensure sustainable growth. Consequently, I believe that the government should restrict imports in order to avoid loss of jobs in America. The government should also ensure that multinational corporations uphold ethics and adopt acceptable corporate governance principles. This will help in preventing exploitative practices such as paying low wages and pollution of the environment.
Wal-Mart remains the most successful firm in America’s retail industry. However, its rapid growth has had serious setbacks on the economy of America. The growth strategies adopted by Wal-Mart have led to loss of jobs, and the worsening of America’s trade deficit with China. Besides, it has failed to ensure that its suppliers adhere to environmental regulations in order to avoid pollution. The negative impacts of Wal-Mart’s operation in America can be reduced through industry regulation by the government.