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#14791951
My friend and I debated last night on the topic of big corporation driving out small businesses. I am in favor of free competition and he is in favor of protecting small businesses. He gave an example that was difficult for me to give a solution to what a free market should do. He said:

1. Big corporation like Walmart enters a developing country such as Bangladesh if the Bangladeshi government allow free market competition.
2. Because Walmart has huge amount of resources, they can operate at a loss by offering lower prices for the same quality of products offered by local small businesses.
3. Once all the local small businesses starved out, Walmart slowly raises its price higher than what the local businesses has offered in the past.
4. Since there are no more small businesses, Walmart is the only player in the market and they can charge whatever price they want.
5. In the end, Walmart drives out competition thus leaving it as the sole producer in the market.
6. This is bad, therefore, government should adopt a protectionism policy to help small local businesses.

How would a capitalist or a free enterprise advocate response to such rationale?
#14792037
All new stores have to operate at losses at first, but Walmart doesn't operate at an initial loss because it's selling for less than it's costs. It simply costs them less per item than a small business because of their economies of scale.

Basically Walmart has very slim profit margins but just makes it's money by selling huge volumes.

Whether or not it's good in the short run and/or long run that it drives out smaller less competitive local businesses is more debatable. It certainly has problematic employment practices which, in the US, is subsidized by welfare (companies like Walmart and mcdonalds helps employees apply for welfare programs). So the people losing their jobs in small businesses aren't seeing better employment at Walmart. On the flip side people are also paying less so on net their is more money for them to spend on other goods and services which should in principle grow other parts of the local economy. Another angle is that small businesses spend their profits in the local economy but Walmart profits tend not to be depending on where you are talking about which takes money out of the local economy.

It's hard to say if Walmart is a net good or bad in the long run ultimately.
#14792061
Get rid of all regulations, which form barriers to entry and promote economies of scale by saddling businesses with fixed costs. Enjoy life in a libertarian wonderland where strange anonymous out of towners can sell half rotten fish out of the trunk of their cars with no oversight or accountability.
#14792093
sadowclone wrote:My friend and I debated last night on the topic of big corporation driving out small businesses. I am in favor of free competition and he is in favor of protecting small businesses. He gave an example that was difficult for me to give a solution to what a free market should do. He said:

1. Big corporation like Walmart enters a developing country such as Bangladesh if the Bangladeshi government allow free market competition.
2. Because Walmart has huge amount of resources, they can operate at a loss by offering lower prices for the same quality of products offered by local small businesses.
3. Once all the local small businesses starved out, Walmart slowly raises its price higher than what the local businesses has offered in the past.
4. Since there are no more small businesses, Walmart is the only player in the market and they can charge whatever price they want.
5. In the end, Walmart drives out competition thus leaving it as the sole producer in the market.
6. This is bad, therefore, government should adopt a protectionism policy to help small local businesses.

How would a capitalist or a free enterprise advocate response to such rationale?


He would finally realize how utterly retarded he was being.
#14792139
sadowclone wrote:2. Because Walmart has huge amount of resources, they can operate at a loss by offering lower prices for the same quality of products offered by local small businesses.

This notion that big firms are willing to operate at a loss to drive out local competition is a canard. They have no interest in operating at a loss, and if they can't become profitable fairly quickly, they will leave. WalMart has often closed stores that couldn't be made profitable.
3. Once all the local small businesses starved out, Walmart slowly raises its price higher than what the local businesses has offered in the past.

Again, this just doesn't happen. A store like WalMart is able to offer lower prices because it is more efficient, not because it is operating at a loss, and it simply is not the case that it raises prices once the local competition has been driven out.
4. Since there are no more small businesses, Walmart is the only player in the market and they can charge whatever price they want.

Wrong. Anyone can enter the market, including big companies that have operations elsewhere, like Target, Costco, etc.
5. In the end, Walmart drives out competition thus leaving it as the sole producer in the market.

If they are the most efficient operator and continue offering better value than other firms can.
6. This is bad, therefore, government should adopt a protectionism policy to help small local businesses.

Historically, protectionism has been quite successful when applied judiciously. The problem is, it can get to be a habit; and when it is used to protect a local monopolist against outside competition, it just subsidizes inefficiency and rentier parasitism.
How would a capitalist or a free enterprise advocate response to such rationale?

I am an anti-capitalist free enterprise -- free market -- advocate, but see above.
#14792210
Truth To Power wrote:This notion that big firms are willing to operate at a loss to drive out local competition is a canard. They have no interest in operating at a loss, and if they can't become profitable fairly quickly, they will leave. WalMart has often closed stores that couldn't be made profitable.


Walmart occasionally closes a store mostly due to excessive theft.
Truth To Power wrote: Again, this just doesn't happen. A store like WalMart is able to offer lower prices because it is more efficient, not because it is operating at a loss, and it simply is not the case that it raises prices once the local competition has been driven out.


Partially true, when Walmart goes in there prices are usually much lower at first to get established.
Truth To Power wrote:Wrong. Anyone can enter the market, including big companies that have operations elsewhere, like Target, Costco, etc.

True, anyone with ten or twenty million bucks.

Truth To Power wrote:Historically, protectionism has been quite successful when applied judiciously. The problem is, it can get to be a habit; and when it is used to protect a local monopolist against outside competition, it just subsidizes inefficiency and rentier parasitism.
Yep, protectionism can work, just ask Japan.
#14792260
Suntzu wrote:Walmart occasionally closes a store mostly due to excessive theft.

Or union organizing, etc.
Partially true, when Walmart goes in there prices are usually much lower at first to get established.

That's simply untrue. WalMart's prices are just permanently lower. I haven't seen a credible report that they raised prices significantly after the competition left.
True, anyone with ten or twenty million bucks.

Right: it takes capital to be that efficient. Similarly, you can't expect to compete against, say, a copper mining company without putting up many millions to get your mine started. That doesn't mean copper mining is a protected monopoly.
Yep, protectionism can work, just ask Japan.

The key is that Japanese companies have to compete against each other. They don't protect monopolies, just domestic production. For example, the price of rice in Japan is kept at about five times the world level; but there are many thousands of tiny rice farming operations scrambling to produce as much as they can at that price.
#14792269
[quote="Truth To Power"]Or union organizing, etc.

Not much union activity in Texas. I am aware of two stores closed, Raymondville and Robstown due to excessive theft.

That's simply untrue. WalMart's prices are just permanently lower. I haven't seen a credible report that they raised prices significantly after the competition left.

Bullshit. Prices aren't even the same in the local area. I compare prices in Harlingen and Kingsville about 100 miles apart all the time.

Right: it takes capital to be that efficient. Similarly, you can't expect to compete against, say, a copper mining company without putting up many millions to get your mine started. That doesn't mean copper mining is a protected monopoly.

Never said it was a protected monopoly.

The key is that Japanese companies have to compete against each other. They don't protect monopolies, just domestic production. For example, the price of rice in Japan is kept at about five times the world level; but there are many thousands of tiny rice farming operations scrambling to produce as much as they can at that price.

They do the same for cars and beef.
#14792278
Suntzu wrote:Bullshit. Prices aren't even the same in the local area. I compare prices in Harlingen and Kingsville about 100 miles apart all the time.

And...? Costs are different, markets are different, so why would prices be the same? I still haven't seen a credible report of WalMart raising prices after the competition left.
#14792563
The argument fails on two points.

shadowclone wrote:2. Because Walmart has huge amount of resources, they can operate at a loss by offering lower prices for the same quality of products offered by local small businesses.

It is simple for competitors to check if Walmart is engaging in predatory pricing by comparing the prices being offered in their local store versus those offered elsewhere. Since this is unsustainable, its competitors only need wait it out, if possible.

This practice can be made less expensive by buying up the under-priced goods and selling them on at a small profit - though this is more possible in other industries.

shadowclone wrote:3. Once all the local small businesses starved out, Walmart slowly raises its price higher than what the local businesses has offered in the past.

Since their are now profits to be earned, competitors enter the market.

Even if you don't think that the smaller businesses will re-enter, there is nothing stopping larger chains from setting up affiliates here.

shadowclone wrote:6. This is bad, therefore, government should adopt a protectionism policy to help small local businesses.

In most jurisdictions I can name, predatory pricing is illegal under competition law. There is no need to impose tariffs on foreign goods.

shadowclone wrote:How would a capitalist or a free enterprise advocate response to such rationale?

On another point, ask them to direct me to an empirical example where predatory pricing has been used to establish a monopoly.
#14792601
Walmart is not the best example for a natural monopoly.

Whatsapp is a great example. An absolutely trivial messaging app but sold to Facebook (itself a natural monopoly) for $19bn. What Facebook bought with this deal is market power, nothing else.
#14792603
Vlerchan wrote:The argument fails on two points.


It is simple for competitors to check if Walmart is engaging in predatory pricing by comparing the prices being offered in their local store versus those offered elsewhere. Since this is unsustainable, its competitors only need wait it out, if possible.

This practice can be made less expensive by buying up the under-priced goods and selling them on at a small profit - though this is more possible in other industries.


Wait it out how? Walmart may be operating at a loss, but the poor suckers waiting out for Walmart's demise would be operating on nearly zero sales.

This practice can be made less expensive by buying up the under-priced goods and selling them on at a small profit - though this is more possible in other industries.


Sell them to who? If selling overpriced goods was profitable, there never would have been a problem in the first place.

And there's no way that Walmart would sell its goods to its competitors if those same competitors could re-sell them at a higher price.
#14792607
sadowclone wrote:My friend and I debated last night on the topic of big corporation driving out small businesses. I am in favor of free competition and he is in favor of protecting small businesses. He gave an example that was difficult for me to give a solution to what a free market should do. He said:

1. Big corporation like Walmart enters a developing country such as Bangladesh if the Bangladeshi government allow free market competition.
2. Because Walmart has huge amount of resources, they can operate at a loss by offering lower prices for the same quality of products offered by local small businesses.
3. Once all the local small businesses starved out, Walmart slowly raises its price higher than what the local businesses has offered in the past.
4. Since there are no more small businesses, Walmart is the only player in the market and they can charge whatever price they want.
5. In the end, Walmart drives out competition thus leaving it as the sole producer in the market.
6. This is bad, therefore, government should adopt a protectionism policy to help small local businesses.

How would a capitalist or a free enterprise advocate response to such rationale?

Either order from Amazon.com, other websites, mail catalogs, or travel to/move where there is more competition.
Capitalism can't work with out competition. Anyone should know that. If you insist on shopping at Walmart, buy only sale priced items or search their internet site Walmart.com to see if you can get it at a cheaper price. They sometimes ship it free or you can pick the item up at your local Walmart at that internet price. You will just have to wait a day until they notify you that it is ready to be picked up.
.
Praise the Lord.
HalleluYah
#14792626
Vlerchan wrote:Since their are now profits to be earned, competitors enter the market.

Even if you don't think that the smaller businesses will re-enter, there is nothing stopping larger chains from setting up affiliates here.

So the best way to avoid large impersonal, lifeless out-of-town supermarkets from destroying small locally owned businesses is to replace the small businesses with large, impersonal, lifeless out-of-town supermarkets.

Isn't that the core complaint people make. That they prefer to have vibrant town centers full of shops staffed by people whose names and faces they recognise.

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