The Walmart Effect and a Decent Society - Who Knew Shopping Was So Important? (Article Analysis)

American capitalism is a symbol of economic strength and power, of unprecedented wealth and productivity, the strength which has built a nation that is today the envy of the world. However, according to Milton Friedman, the term ‘capitalism’ has a drastically varying and highly relative meaning - To some it is a term of opprobrium, signifying the oppression of small modest entities by ruthless gargantuan monopolies; to others it is a term of hope, signifying the freedom of men to shape their own economic destinies, the unleashing of human ingenuity and energy to raise the standard of living of the masses. ‘The Walmart Effect and a Decent Society’ very elaborately describes the actions of mega-corporations and brings to light the positive and negative impacts of their actions on stakeholders. Citing Walmart as the epitome of American capitalism, it utilizes specific examples coupled with astounding data and facts to fuel an intriguing yet tantalizing question – “How do we assure that American capitalism creates a decent society for all of us in the era ahead?”

               It is critical to first establish what H. Lee Scott eludes to, when he uses the term ‘decent society’. A rather reputable school of thought would define it as a civilization characterized by a high quality of life with superior purchasing power and ideal economic conditions, initiated by successful sustainable corporations which display great ethical standards and constantly transcend the limits of corporate social responsibility to benefit their local communities. Such a society would simultaneously be competitive, productive, progressive, balanced and free of social evils. The stalwarts of such a society, whilst pushing for constant development and growth, will also strongly advocate community welfare. Such an advanced society will, for instance, consistently strive to create employment and banish inferior products as well as those manufactured in an illegal manner. Business entities operating in such a society will be subject to rigorous measures of corporate governance. The efficiency of government policies pertaining to anti-trust laws ensure that monopolies never develop or exist.

If the above is truly an example of an ideal society, it is pertinent to measure where modern day U.S. society stands in comparison. The results are alarming – The U.S. is dominated by large corporations like Walmart, which have the power to influence an entire nation’s consumption patterns, decisions and thereby its economy and very culture. While these giant organizations bring many benefits to modern society in doing so, quite often, the decisions they make have detrimental effects as well. What is even more baffling is that in a capitalistic economy, the decisions are made by the people who own or manage the basic productive resources, and that is in contrast with decisions which are conformed to in a larger plan made by the state under non-capitalist forms of enterprise. People, as consumers, also make choices that inevitably favor such corporations, effectively making them almost monopolistic in nature as witnessed in the case of Walmart. While an actual monopoly can never really exist in a competitive capitalistic landscape, since it is largely governed by the laws of supply and demand, it is nonetheless possible that corporations can grow to gigantic scales and thereby exert relentless pressure on other institutions with devastating consequences. For instance, this can drive them to establish whatever conditions they so please on suppliers, be it maintenance of confidentiality terms or exertion of imbalanced bargaining power. These actions contradict the very laws of American capitalism.

How might this issue be resolved to ensure that capitalism creates benefits for society while keeping its negative effects in check? In effect, the American legal system failed to recognize that corporations would grow large enough to dominate the economy itself. The U.S. government is currently vying to attain 2% inflation in order to boost the nation’s GDP by maintaining consistent demand in the economy, but mega-corporations like Walmart have policies that advocate lower prices, thereby hindering this progress. Reforms in government regulation is therefore, one of the means through which such concerns can be addressed and artificially low prices can be extinguished. In an effort to protect investor and stakeholder interests, corporate governance reforms need to be periodically reviewed to also account for issues like child labor, low wages, employment of illegal immigrants, and the use of questionable raw materials.¹

Another more subtle means of ensuring that capitalistic mega-corporations conform to ethical standards put forth by government, is by building on the premise that ethics is a critical concern in all societies and that large corporations have a responsibility to maintain high standards of ethics in their business operations. This ideology essentially builds expectations among stakeholders for businesses in an ethical society and even advocates that abiding by these practices enhances a firm’s profitability. This acceptance of capitalism as the best economic system and the incentive of greater profitability can compel mega-corporations to comply.²  

    

An organization’s approach towards its stakeholders is also a significant aspect in this struggle. In the past, the mind-set required to rise to the top of a large corporation has run counter to adopting a stakeholder perspective in the process of value creation. Capturing sustainable value requires the large corporations of today to see stakeholder value as essential to the growth of their companies. Stakeholder power is now a reality in the new global business environment. Business leaders who fail to adopt a new mind-set risk putting their companies and careers at risk. It is thus pivotal that the leaders of today’s mega-corporations understand the distinction between the old and new mind-set of stakeholder value, and its repercussions on their businesses to initiate a requisite course of action.³ 

In conclusion, it is vital to note that this is, for the most part, a public policy issue that will need some form of government intervention. Partly, the tightening up of anti-trust laws is imminent but in addition, the lack of information made available to the public by today’s large capitalistic mega-corporations is also a significant issue that must be addressed with immediate effect. The implementation of these measures today will be the nascent steps towards assuring that American capitalism creates a decent society for all of us in the era ahead.

Citations & References

1.      ‘Corporate Governance’ by Steger, Ulrich.,Amann and Wolfgang (Digital Version) – ‘Beyond the Scandals and Buzzwords: Diffusion of corporate governance regulation’ (Page 6-7)

2.      ‘Why ethics and profits can and must work together in business’ by Donald P. Robin (WISE Reading)

3.      ‘Sustainable Value: How the World’s Leading Companies Are Doing Well by Doing Good’ by Chris Laszlo – ‘The old mind-set about stakeholder value versus the new mind-set about stakeholder value’ (Page 132-133)