144 part two American Business and Its Basis
as preventions or cures for the H1N1 (swine flu) virus.82 Or the
quack remedies and treatments peddled to AIDS patients here
and abroad. Bottles of processed pond scum and concoctions of
herbs, injections of hydrogen peroxide or of cells from the glands
of unborn calves, the eating of bee pollen and garlic, $800 pills
containing substances from mice inoculated with the AIDS virus,
and even whacking the thymus gland of patients to stimulate the
body’s immune system—all these are among the treatments that
have been offered to desperate people by the unscrupulous and
eccentric. Deregulation of the medical field seems most unlikely
to diminish such exploitation.
Discussion Questions
1. What explains the fact that licenses are required for so
many occupations? What do you see as the pros and
cons of occupational licensure in general? Does it have
benefits that Friedman overlooked?
2. Do you believe that licensure in medicine or any other
field is desirable? If so, in which fields and under what
circumstances? What guidelines would you use to determine where licensure is needed?
3. Is occupational licensure consistent with the basic
principles and values of capitalism? Is it a violation of
the free-market ideal? How would you respond to the
argument that licensure illegitimately restricts individual
freedom to pursue a career or a trade?
4. Does licensure make the market work more or less
effectively? Would you agree that as long as consumers are provided with accurate information, they should
be permitted to make their own choices with regard to
the services and products they purchase—even when
it comes to medical care? Or is licensing necessary to
protect them from making incorrect choices?
5. Friedman and others view the AMA as a trade union, and
they believe that the high incomes of doctors are due
more to artificial restrictions on the free market than to
the inherent value of their services. Is this an accurate or
fair picture of the medical profession?
6. Is licensing an all-or-nothing issue? Or is it possible that
although only licensed professionals should be permitted to perform certain services, paraprofessionals and
laypersons could perform less expensively but equally
competently other services now monopolized by licensed
professionals?
C a se 4.3
One Nation under Walmart
The huge corporations that produce our
cars, appliances, computers, and other products—many of
them household names like Nike, Coca-Cola, and Johnson &
Johnson—are a familiar feature of contemporary capitalism.
But Walmart represents something new on the economic
landscape. Now the world’s largest company, Walmart has
achieved its corporate preeminence not in production but in
retail. No other retailer, at any time or in any place, has ever
come close to being as large and influential as Walmart has
become. After years of nonstop growth, there are now more
than 8,400 Walmart stores worldwide, and 140 million shoppers visit its U.S. stores each week. And the company is
chapter four The Nature of Capitalism 145
o pening more stores all the time as it moves beyond its
stronghold in the rural South and Midwest and into urban
America. In fact, 82 percent of American households purchase at least one item from Walmart every year. As a result,
the company’s marketplace clout is enormous: It controls
about 30 percent of the market in household staples; it sells
15 percent of all magazines and 15–20 percent of all CDs,
videos, and DVDs; and it is expected to control soon over 35
percent of U.S. food sales. For most companies selling consumer products, sales from Walmart represent a big chunk of
their total business: 28 percent for Dial, 24 percent for Del
Monte, and 23 percent for Revlon. Walmart is also responsible for 10 percent of all goods imported to the United States
from China.83
The good news for consumers is that Walmart has risen to
retail supremacy through the bargain prices it offers them.
The retail giant can afford its low prices because of the cost
efficiencies it has achieved and the pressure it puts on suppliers to lower their prices. And the larger the store gets, the
more market clout it has and the further it can push down
prices for its customers.
Everyone, of course, loves low prices, but not everyone, it
seems, loves Walmart. Why not? Here are some of the
charges that critics level against the retail behemoth:
•
•
Walmart’s buying power and cost-saving efficiencies force
local rivals out of business, thus costing jobs, disrupting local
communities, and injuring established business districts.
Typically, for example, within five years after a Walmart supercenter opens, two other supermarkets close. Further, Walmart
often insists on tax breaks when it moves into a community,
so its presence does little or nothing to increase local tax
revenues.
Walmart is staunchly anti-union and pays low wages. Its
labor costs are 20 percent lower than those of unionized
supermarkets; its average sales clerk earns only $8.23 an
hour, and most of its 1.4 million employees must survive without company health insurance. Small wonder that employee
turnover is 44 percent per year. Moreover, because of its
size, Walmart exerts a downward pressure on retail wages
and benefits throughout the country. Critics also charge that
Walmart’s hard line on costs has forced many factories to
move overseas, which sacrifices American jobs and holds
wages down.
•
Government welfare programs subsidize Walmart’s povertylevel wages. According to one congressional report, a twohundred-employee store costs the government $42,000 a
year in housing assistance, $108,000 in children’s health
care, and $125,000 in tax credits and deductions for lowincome families. And internal Walmart documents, leaked to
the press, confirm that 46 percent of the children of Walmart’s
1.33 million workers are uninsured or on Medicaid. The document also discusses strategies for holding down spending on
health care and other benefits—for example, by hiring more
part-time workers and discouraging unhealthy people from
working at the store by requiring all jobs to include some
physical labor.
•
As Walmart grows and grows, and as its competitors fall by the
wayside, consumer choices narrow, and the retail giant exerts
ever greater power as a cultural censor. Walmart, for example,
won’t carry music or computer games with mature ratings. As
a result, the big music companies now supply the chain with
sanitized versions of the explicit CDs that they provide to radio
stations and that are sold elsewhere. The retailer has removed
racy magazines such as Maxim and FHM from its racks, and it
obscures the covers of Glamour, Redbook, and Cosmopolitan
with binders. Although many locations offer inexpensive firearms, Walmart won’t sell Preven, a morning-after pill—the only
one of the top ten drug chains to decline to do so.
For these reasons, Walmart’s expansion is frequently
meeting determined local resistance, as concerned residents
try to preserve their communities and their local stores and
downtown shopping areas from disruption by Walmart
through petitions, political pressure, and zoning restrictions.
As one economist remarks, for Walmart “the biggest barrier
to growth” is not competition from rivals like Target or WinnDixie stores but “opposition at the local level.” As a result,
Walmart has begun responding to the criticism that it is a
poor corporate citizen and miserly employer by improving
employee health insurance coverage and adopting greener
business practices. And even its usual critics applauded
when the company responded rapidly to Hurricane Katrina,
sending truckloads of water and food, much of it reaching
residents before federal supplies did.
Mark Wilson/Getty Images News/Getty Images
146 part two American Business and Its Basis
First Lady Michelle Obama teamed up with Walmart on an initiative that will
result in the company offering a larger selection of healthy foods at more
affordable prices. What does such an alliance suggest about the relationship
between business and society and between business and politics?
When it comes to Walmart, Professor John E. Hoopes
of Babson College encourages people to take a long-term
view: “The history of the last 150 years in retailing would
say that if you don’t like Walmart , be patient. There will be
new models eventually that will do Walmart in, and
Walmart won’t see it coming.” And, indeed, in recent
years the company’s sales growth has slipped as the
Internet has changed people’s shopping habits and as
other discounters have done a better job of attracting
affluent consumers and providing higher quality and better service.
In the meantime, where you stand on Walmart probably
depends on where you sit, as Jeffrey Useem writes in Fortune
magazine: “If you’re a consumer, Walmart is good for you. If
you’re a wage-earner, there’s a good chance it’s bad for you.
If you’re a Walmart shareholder, you want the company to
grow. If you’re a citizen, you probably don’t want it growing in
your backyard. So, which one are you?”
Discussion Questions
1. Do you like Walmart? Do you shop there? If so, how
frequently? If not, why not?
2. Is there a Walmart store in your area? If so, has it had
any impact on your community or on the behavior of
local consumers? If there’s no store in your area, would
you be in favor of Walmart opening one? Explain why or
why not.
3. Is Walmart’s rapid rise to retail dominance a positive or
a negative development for our society? What does it
tell us about capitalism, globalization, and the plight of
workers?
4. Can a retailer ever become too large and too
powerful?
5. Is opposition to Walmart’s expansion a legitimate part of
the political process or is it unfair interference with our
market system and a violation of the company’s rights?
Do opponents of Walmart have any valid concerns?
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