The Wal-Mart Experience That Has Captured Us All.

7 11 2010

“Wal-Mart is a retail planet with a gravitational pull so strong it shapes our economic universe in ways we can barely comprehend.” – Bob Thompson, The Washington Post

The above quote sums up Wal-Mart pretty well.

From a consumer point of view, it certainly seems like a planet. If you need something, Wal-Mart has it. There’s no trouble getting there, since they’re everywhere. And once you get there, there is no problem parking in an endless supply of pavement and white lines. Inside, there is an endless supply of whatever it is you came for – and whatever it is you didn’t come for, but… its so cheap, why the heck not?

“Push” is a strategy in marketing whereby a company  “pushes” the product in customer’s faces, hoping they will buy it. These companies try to attract returning customers to build brand loyalty. Of course, there has to be an incentive for customers to come back – Wal-Mart’s incentive is economic. Wal-Mart is synonymous with the words “rollback” and “low prices”. Its cheap prices combined with our society’s love for material goods keeps customers coming back, under the guise of saving money.

When compared to other retailers, you are technically saving money. Instead of spending $10 on a shovel, you spend $4. How Wal-Mart gets you is when you don’t need a shovel. Economic theory assumes that we are all rational. In reality, that’s not true. Your eye catches the happy face with bright letters that exclaim “ROLLBACK!”, and the bold numbers that seem to yell the price at you. Immediately, you start to rationalize: “well, it’s going to be winter and I’m going to need to shovel. The one I have in the garage is starting to look old. What if I want to buy it later? I might as well buy it now and save myself another trip.” And the same thing happens with ten other items and you walk out of Wal-Mart with ten things you don’t need, and you have no idea what just happened. Read the rest of this entry »





Free To Lose – The Power of (Dr. Friedman’s version) of the Market

7 11 2010

Journal Entry Two (On Prompt Three)

The Friedman Free Market

Dr. Friedman seems to have some clear ideas of how an ideal market should operate. His ideas are so clear and one sided that some might find them irrational. He believes in a free market economy, a pure free market economy. I personally believe too much of one thing is not good. Therefore, I support a free market with certain mixed market components, not the extreme version cooked up by Dr. Friedman. I have no problem with many of the things that Dr. Friedman says but some of it is a bit too irrational and illogical. Moreover, a pure free market economy has never existed and never will as the 16th president of the United States Jean Kirkpatrick said, “There is no pure free-market economy.” Therefore, the primary purpose of this entry is not to prove that a free market will not work, as it does to a certain degree of effectiveness, but rather to prove the flaws in a pure free market as Dr. Friedman proposes.

Law And Order

The purpose of the government is to serve the people’s needs. How can the government serve the people’s need if it is not allowed to have a hand in people’s monetary matters? In a democracy the fate of the people and the government is connected, the two bodies are interdependent. In all free markets there is a certain degree of government intervention no matter what, there is no pure free market. But we have to decide on where the government can interfere and where it cannot. However, it is necessary that the government regulates and implements laws in order to prevent business fraud. Competition does not always necessitate that the best quality products will enter the market, but rather the most profitable products will. It is up to the government to ensure that product quality and business integrity is maintained. There must be a neutral body between the businesses and the consumers that prevents unethical business activities such as monopoly, price fixing and price gouging. An economic system without any degree of regulation would cause a lawless market, unless you trust firms to look out for consumer interests.

A different corporation

Moreover, as Canadians we would probably have nightmares if  something like our health care was privatized to ensure a pure free market. There will always be claims that it can be done cheaper, better and more efficiently if these sectors were privatized. However, crown corporations, government controlled corporations, have served us well. Few notable crown corporations are the Canadian Broadcasting Corporation (CBC), Via Rail and Canada Post. Don’t get me wrong, Canada ranks 7th in the global economic freedom index, one above the United States. But we still have a progressive tax system, tariffs on trade and numerous public services. As a daily commuter I can tell you that the TTC is not perfect, but it gets me where I need to. There have been global attempts to privatize public transit but all of them have failed miserably, Vancouver and London U.K are two examples. It goes to show some markets are best left public. Furthermore, the profits from crown corporations come back to benefit the public and help provide further governmental services. Moreover, there has to be a controlling body which regulates services that we cannot afford to privatize, for example the army, fire service and police. We call this controlling body the government. Unless, Mr. Friedman can enlighten us on how we can turn fire service, law enforcement and the army into private services I think we need the government.

 

You may have seen one of these notorious red boxes in your neighbourhood. Canada Post is a crown corporation.

 

Human decisions, inhumane market

In a free market economy the private entrepreneur is not out there to look out for the interest of the public, this is why we need the government. A tragic flaw of the free market is it makes few better off and leaves the rest where they are (or worse). Creating a giant gap between the rich and poor. Whereas, the mandate of the government is to ensure the improvement of the economic situation of those left behind. A free market is a market controlled by human actions, but human actions can be irrational. Money will always get in the way of ethics, morality and humanity in a free market. Even though, the market is determined by human actions, the market by no means is humane. It is up to the government to look out for the people, this is something the firms will not do. I would like to end this entry with a quote from the former head of U.N, Kofi Annan, who said “We have to choose between a global market driven by calculations of short-term profit, and one which has a human face.”

Canada ranked 7th overall in the global economic freedom index of 2010.