Walmart, China, Monopoly and the Nature of Man....Please Help

Economics Economics Questions
1

I have never posted before so my apologies if some of this has been answered in other places. I am never that good at forum searches.

I was discussing the ideas of a free, voluntary society without any forms of government with my friends and while they were receptive to it at first it didn’t take long for them to start throwing different questions my way and doubting the idea. I have generally been able to answer many tough questions though at times not as eloquently as I would like. Practice makes perfect so that is why I want to reach out to this community for some answers to certain questions. Sometimes I feel like I am all alone out here in !

Wal-Mart eventually came up and I did my best to answer the questions of monopoly. I feel as though I failed and was hoping that someone could either explain the answers to these questions/statements or provide me with some reading material or both!

  • Without government you have monopoly, like Wal-Mart (I tried to discuss eminent domain, how it is virtually impossible for monopolies to form absent government and competition but fell short of the mark)
  • Wal-Mart makes people in surrounding towns lose their jobs (I had nothing here)
  • Wal-Mart exploits labor in to get such low prices (Did not do so well explaining the rise of the standard of living in , but I don’t find that very compassionate)
  • Wal-Mart is too powerful because it can basically tell its suppliers what price they will sell their goods

Besides Wal-Mart they misinterpreted my stance as assuming all men/women are naturally good. While I know that is not the case, I was really unable to explain what sort of system of law would be set up in a society absent of government.

I explained that libertarianism has a strict code of law that respects property rights. Whenever someone violates another person’s property rights they should be punished accordingly. But I was unable to explain how they would be punished and what type of system there would be.

So if anyone could help me out here I would be very grateful. Correct anything I may have said poorly. I want to be able to fine tune my argument and spread the idea of liberty but it is awfully hard when everyone thinks that government is necessary for “society” to function.

Please post some good reading material if you have it. I appreciate your responses!

2

The problem outlined in each case is that people feel they will have less protection from aggressors, real or imagined, when they are free to choose to whom they appeal for protection. My advice is to stay on the offensive and ask them why they wouldn’t hire someone to protect them from Walmart.

3

Monopolies are, by definition, government granted privilege over a segment of the market. Large companies are not monopolies unless they use coercion to exclude others from the market. The only way for a monopoly to arise outside of government is for the monopolist himself to act as an initiator of violence, or as a government. Wal-Mart is a monopoly, not because of it’s size, but because it does indeed benefit from favorable tax and regulatory exemptions than the typical Mom and Pop store.

Is this supposed to be a bad thing? If Wal-Mart is able to provide goods at a lower cost in labor than other companies that are displaced, valuable labor is freed for more productive uses. Of course, it is an inconvenience for those displaced who will have to find new jobs. But even they will benefit from the lower prices that Wal-Mart can apparently provide.

There is always an infinite amount of work to be done to satisfy all human wants. The more work that can be done with the same effort, or likewise the less effort is expended to do the same work, the greater the prosperity enjoyed by all of society.

This illusion that work is somehow scarce is created by governments granting monopoly privileges to certain classes of workers over the labor market. Less fortunate, unskilled, non-unionized, workers are excluded by law from selling their labor and are forced into unemployment.

How is it possible for Wal-Mart to attract (and exploit) labor in China without offering higher wages, better working conditions, etc than would otherwise be available to them? By hiring the cheapest available labor, more workers can be hired and those who were worst-off are benefited the most.

There is a hint of truth in this objection, however, but only because the Chinese government is accomplice in subsidizing exporters like Wal-Mart at the expense of the Chinese people. This occurs because the Chinese government inflates it’s own currency to buy (ultimately worthless) US dollars from exporters. This gift to American consumers consists of wealth confiscated from the Chinese people by their government. In absence of government coercion, Wal-Mart could certainly not take advantage of this situation.

This doesn’t make any sense. Either Wal-Mart is bidding prices up and creating profit opportunities for suppliers or not. There are plenty of other opportunities for investment, and no supplier can be forced to sell at a loss. In any case, if suppliers are unable to provide goods at the market price despite Wal-Mart bidding up prices, then they are in the wrong business and should liquidate their capital and invest it with other more successful entrepreneurs.

It’s interesting how socialists blame us for being idealists with regard to human “goodness” when it is in fact their system or any system of government that must assume some supernatural goodness of politicians and bureaucrats. Libertarians know that most people seek personal satisfaction above the greater good of society and that is precisely what free markets take advantage of. There is no possibility of “corruption” under free markets simply because there are no false pretenses about motives in the first place.

It’s a bit hard to explain in a few sentences how a free-market system of customary law would really work, but I can recommend this book I just finished reading: http://store.mises.org/The-Enterprise-of-Law-Justice-without-the-State-P297C0.aspx

4

The Market For Liberty, For a New Liberty and Democracy - the God that Failed are all good places to find information, too.

5

Thank you all very much for the info. I will get to work taking it all in!

6

I find it interesting that you were using Wal-Mart as an example of a monopoly, particularly their practice of using foreign labor. They certainly aren’t the only retailer, the only department store, or even the only discount department store. They are just the dominant discount department store chain.

If you take a look at the stock chart for Wal-Mart, you’ll find that the stock took quite a dip last year. This was, in part, because they had to pay their foreign labor more dollars as the value of the U.S. dollar dropped in relation to foreign currencies. They are now aggressively opening stores in foreign countries and their stock has rebounded. My point is that private companies must constantly adapt to changing conditions if they want to remain dominant in their industries.

IBM once had a “monopoly” on the computer market, and then Dell came along. Standard Oil is now Mobil, which is a much smaller refiner than industry leader Exxon. And how about Bear-Stearns’ “monopoly” on the financial markets.

I wouldn’t necessarily try to explain how society would work without any form of government. I think that we first have to get to the point where the government is no more intrusive than it was in 1890. Then we can discuss whether it’s possible to do away with government altogether.

7

This is one of the favorite criticism of wallyworld…

I learned a bit about this at work when I was accidentally transfered to a call in progress. Walmart will go into a business and say ‘we will buy all your excess production at a discount’. The company has two choices, retain their current rate of production or run their factory 24-7-365 and whichever is the most profitable wins out.

So after the factory gears up for the increased production and sells it all to walmart for a while it becomes time to renegotiate the contract and here’s where the ‘too powerful’ comes from. They will ask for an even higher discount and now the factory has to calculate yet again if their former production schedule was more profitable than the currently proposed deal.

Of course it now gets difficult because everyone knows that once you are hired you are entitled to that job and if the company went back to the former production level it would mean cutting jobs. That option is off the table or at least the last resort.

Can’t cut workers pay either because of the entitlement issue so what is left is the owners accepting less of a profit than what they were making after the first malmart deal but more than (or equal to) when they had a limited production output.

Wal-Mart is labeled as evil because they actively try to get the lowest priced good on their shelves at the expense other companies bottom lines. It doesn’t matter to them what brand of mac-n-cheese is sitting on their shelves as long as it gets bought by the customers (and isn’t recalled) so they have immense power to get prices lowered because they can just go to another manufacturer and say ‘we will buy all your excess production at a discount’.