Wal-Mart On Profits And Capital Accumulation

This question is based on the movie “Is Wal-Mart good for America? ” a. Using the determinants of profit discussed in Bowles et al, Chapter 10, and applying the theory to the case of Wal-Mart, explain Wal-Mart’s strategies used to increase profit. (3 points)

Determinants of profit, discussed in Bowles et al, Chapter 10, include ideas to predict how high the profit rate will be include profit per unit of output, intermediate inputs per unit of output, and unit labor costs (Bowles, 2018, p. 226). Wal-Mart’s strategies used to increase profit have a lot to do with Wal-Mart’s monopolistic powers. Their market power enables them to bully suppliers and squeeze out as low as prices as possible to retain profit margins. Chinese factories are able to provide very low costs for mass produced products. With the Chinese factories come very low cost of labor for the factory workers. The workers make as little as one cent an hour. Wal-Mart can encourage suppliers to move production overseas, which means lower wages- a determinant of profit- potentially leading to higher profit. Wal-Mart also buys products produced overseas, as they are cheaper and enable higher markup for retail prices that can lead to high profit rate. Overseas, the margin on merchandise ranged from 60%-80%.

Whereas merchandise made in American had margins from about 18%-22% (Young, 2004). Another Wal-Mart tactic to increase profit is an intermediate input involving technology. Wal-Mart has a barcode system in which each item is stickered and can be scanned, enabling employees to track sales. The barcodes help to facilitate what should be sold and how much of it. With the ability to restock quickly and have rapid response to high demand product, Wal-Mart lowered the cost of intermediate inputs, which in turn means a positive determinant of profit. b. According to the political economy approach, the process of making a profit (or capital accumulation) cause changes over a period of time, explain some of the major changes in the US economy caused by the profit-making activities of Wal-Mart. (2 points)

There are major changes in the US economy caused by the profit-making activities of Wal-Mart. Outsourcing abroad, like to China, creates a huge loss of job opportunities for low wage workers in the US and therefore unemployment rates rise. Suppliers, like Rubbermaid lost control of their company as it was dominated by Wal-Mart. In Wooster, Ohio lived the Rubbermaid manufacturer. Wal-Mart once saved Rubbermaid by being a huge client/buyer and marketing the product. Rubbermaid pushed back when Wal-Mart asked for lower prices, so Wal-Mart lost some volume of product and Rubbermaid lost some business, which became a major impact to the start of Rubbermaid’s decline. Rubbermaid eventually went out of business and auctioned off their remaining product, and even machinery. Wooster lost a major landmark and about 1,000 jobs with the closing of the factory (Young, 2004). The barcode technology that Wal-Mart utilizes can also bring major change to the US economy. If other companies adopt this method then all retailers will have a much more precise understanding of their customer and how they shop! c. Propose one policy solution to the social and economic imbalances caused by the rise of globalization and Wal-Mart. Explain carefully how your policy solution would work in practice. Note: Feel free to refer to any of the handouts given in class or conduct your own research to answer this question. (1 points)

A policy solution to alleviate some social and economic imbalances caused by the rise of globalization and Wal-Mart can be implementing a public program to train people in coding. Offering coding classes is a step towards a more tech-savvy nation. Wal-Mart’s barcode technology is a phenomenon, and if more people were educated about the technology behind the operation than more businesses could execute it. The efficient system creates opportunity for companies and firms to expand. Such expansion can lead to employing contractors, constructors, and builders, as well as employees for the expanding companies. People can enhance their professional capacities by enrolling in free public courses in the complex subject of coding, like Matthew Watson in Arlie Hochschild The Coders of Kentucky article (Hochschild, 2018). America can be exposed to new and higher paying jobs, directly related to the growth and expansion of innovating companies as well as indirectly with regards to infrastructure.