The impact that Wal-Mart has on the American economy is not as simple as looking at facts and figures, however, as the other social effects need to be considered. Therefore, in determining whether or not Wal-Mart is good for America, the basic economic principles of any market must be analyzed. Every market is governed by two basic forces, supply and demand. Wal-Mart is able to control both these forces because of the immense size that it has (Hicks 27). It controls supply by deciding what items it chooses to retail. It also decides the demand for the item by pricing competitively (Hicks 27).
In its early years, Wal-Mart provided jobs for most Americans because a majority of the goods supplied were produced in the United States (Nene 34). With globalization and the theory of a flat world, other countries have become more competitive industrially and have now taken those production jobs that were previously held by Americans. The outsourcing of consumer goods industries to other countries can be theorized to have been created by the Wal-Mart demand for cheaper products from their suppliers (Nene 34). The problem with this scenario is that it creates unemployment for Americans who are the main buyers from Wal-Mart.
In order to counteract this scenario, Wal-Mart must then reduce prices lower to meet the increasing lower income bracket of unemployed Americans who have lost their jobs because of the global production tilt to other countries (Nene 34). As this trend continues, it may be theorized that Wal-Mart will eventually strangle itself by driving the prices of goods down too much without protecting its major market which is the United States.
Basker, E. (2007). Job Creation or Destruction? Labor-Market Effects of Wal-Mart Expansion. The Review of Economics and Statistics, 87, 174-183 Global Insight. (2007).
The Economic Impact of Wal-Mart. Business Planning Solutions Global Insight Advisory Services Division Hausman, J. & Leibtag, E. (2008). Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effect of Wal-Mart. Economic Research Service, U. S. Department of Agriculture. Hicks,M. (2007) “The Impact of Wal-Mart on Local Fiscal Health: Evidence from a Panel of Ohio Counties. ” Econ WPA Economics Working Papers. (Urban/Regional Archive No. 0511016) Nene, G. (2008). The Effect of Wal-Mart on the Economic Growth of Nebraska Counties. Master of Sciences Thesis, Agricultural Economics: University of Nebraska-Lincoln.