One would generally expect that if output markets are competitive and if input markets (including labour) are competitive, then innovation will make some people worse off, others better off, but the net effects will be positive. That is exactly the outcome of recent research.
From a New York Times Op-Ed piece[registration required]:
... to chalk up Wal-Mart's success simply to the exploitation of its work force, as many of the company's most ferocious critics do, is simply wrong, for two reasons.First, Wal-Mart hasn't just sliced up the economic pie in a way that favors one group over another. Rather, it has made the total pie bigger.
... Second, most of the value created by the company is actually pocketed by its customers in the form of lower prices. According to one recent academic study, when Wal-Mart enters a market, prices decrease by 8 percent in rural areas and 5 percent in urban areas. With two-thirds of Wal-Mart stores in rural areas, this means that Wal-Mart saves its consumers something like $16 billion a year. And because Wal-Mart's presence forces the store's competitors to charge lower prices as well, this $16 billion figure understates the company's real impact by at least half....debate around Wal-Mart isn't really about a Marxist conflict between capital and labor. Instead, it is a conflict pitting consumers and efficiency-oriented intermediaries like Wal-Mart against a combination of labor unions, traditional retailers and community groups. Particularly in retailing, American policies favor consumers and offer fewer protections to other interests than is typical elsewhere in the world. Is such pro-consumerism a good thing?
The answer depends on who these consumers are, and Wal-Mart's customers tend to be the Americans who need the most help.
Posted by TheEclecticEconoclast on August, 3 2005 at 05:00 AM
