- 31 Mar 2017 06:16
#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?
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?