Magazine article Foreign Policy

Give Sam Walton the Nobel Prize

Magazine article Foreign Policy

Give Sam Walton the Nobel Prize

Article excerpt

THERE IS MUCH to dislike about Walmart: the union-busting employee rules, putting mom-and-pop grocery stores out of business, all that plastic garbage it sells us, the shady business scandals. It's the mortal enemy of locavores, the big bad box store that environmentalists and community organizers demonize. But for all its manifold offenses, Walmart may have done more for poor consumers in the United States, and around the world, than any other business in American history.

The world's largest retailer, Walmart shrugs off the controversy for a simple reason; The stuff it sells is cheap. Beyond its immense buying power (which sucks profit margins from suppliers), its incredibly efficient logistics systems and sourcing from low-wage foreign labor allow Walmart to drive down the cost of making and shipping many of its products. And Walmart is only the most visible example of a far bigger phenomenon; Globally, even in places thousands of miles from the nearest blue-shirted greeter, more efficient production and transportation are reducing the prices of many of the basic goods purchased by the world's poorest people. If that's rapacious, Walmart-style capitalism, let's have more!

More than 1 billion people still live in the borderlands of absolute deprivation, scraping by on less than $1.25 a day. Nevertheless, many have more access to goods and services than they did only a few years ago (even if they're not yet buying their cassava at the Ouagadougou Walmart). That's in part because companies around the world have figured out how to make and ship the stuff that poor people want at lower cost, which makes lives better. Call it the global Walmart effect.

There are two ways to help poor people buy more of what they need. One is to help them make more money. The other is to make the money they have go further. And Walmart has proved incredibly adept at that second approach. Take food, for instance. Walmart is the world's biggest food retailer, and it offers foods at prices considerably lower than those at traditional supermarkets--as much as 25 percent lower, according to economists Jerry Hausman and Ephraim Leibtag. Factor in all the other stuff it sells, and Walmart's overall impact on its shoppers' spending power is even greater.

Walmart's low prices come in part from relying on efficient production in developing countries. Of course it isn't just Walmart's procurement agents who are buying cheap stuff from Asia; pretty much the whole world is, including retailers from Bangalore to Bangui. That's because manufacturers in China, India, and elsewhere have become particularly adept at producing low-cost versions of goods demanded by "bottom of the pyramid" consumers--otherwise known as the world's poorest people.

Think of the mobile phone. There are about 6 billion subscribers worldwide--86 out of every 100 people on the planet. And many of them are texting and calling on Chinese-made devices. China produced more than 1 billion mobile phones in 2012 alone. But it's not just telephones. China manufactures as many as four out of five of the world's bicycles, and it's the leading maker of penicillin, producing more than 50 percent of the global supply. A whole range of goods purchased by some of the planet's poorest people are now made at low cost in the Middle Kingdom.

What about India? A study found that generic companies based in India supplied 53 percent of the antiretroviral drugs to treat HIV in sub-Saharan Africa from 2004 to 2006. …

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