Walmart is the nation’s biggest employer. As such, its impact on the economy is tremendous. To understand just how big this business is, it’s worth noting that their profit margin yearly is bigger than the GPD of Sweden. (BusinessInsider.com). Walmart’s actions shape our work, income distribution, consumption patterns, transports, politics, and the organization of industries from retail to manufacturing, from the United States to China. Our free market system has grown a monster that can’t be controlled by the Washington elites or Wall Street bankers. A few store closures could drastically change an entire city. A change to any part of its business model could potentially send the Dow Jones on a downward spiral. So the question becomes, how big is too big? Is Walmart in the same category as the too big to fail banks? The answer is simple. Walmart has the power to cripple this nation and no regulators will go against them and risk financial fail to our economy.
There are currently 1.4 million associates on their payroll, of which 60% are struggling financially and still relying on government assistance for food stamps and medical coverage. As we seen in the movie, The High Price of low cost, (2005), the retail giant would give info sessions to its employees on how to apply for government assistance. They exploit all the loopholes by first paying its employees minimum wage, a family of 3 would fall below the poverty level thus qualifying them for food stamps, then getting tax breaks that help them avoid paying taxes that fund food stamps. Another report by Americans for Tax Fairness and the Institute for Policy Studies claims the company exploits a little-known loophole to avoid an estimated $104 million in U.S. taxes by granting extravagant “performance pay” bonuses to top executives. The Waltons, the nation’s wealthiest family and owners of Walmart, contribute almost none of their personal wealth to the charitable foundation that bears their name and instead uses the charity’s tax structure to avoid an estimated $3 billion per year in estate taxes. By minimizing its tax liability, Walmart has once again dodged its responsibility in addressing its employees’ basic needs and is instead letting the rest of us foot the bill. (Jwj.org 01/29/2016). Lastly the company made sure it tapped in the food market by opening up supercenters and neighborhood markets which it turns brings the revenue from food stamps right back into the store. An employee receiving food stamps will more than likely shop at the store they are working at and receive the deep discounts than go to another retailer to spend. In 2014 Walmart collected 14.5 billion in food stamp revenue. (Forbes.com). They bring in the most food stamp revenue while at the same time having the most employees dependent upon food stamps.
When Walmart sees any changes in its revenue, they know they must restructure their business plan. Last month they closed 154 stores in the United States. The closures were mainly smaller neighborhood stores with a few supercenters. The closures turned some communities into a food desert. Once Walmart starts building the local impact is felt immediately. Smaller chain grocery stop can’t compete with Walmart’s low prices, forcing them to continuously cut prices until there is no longer a profit margin and thereby forcing them to close down. Once a Walmart closes in a community, and they have forced the closure of smaller chains stores, it takes a toll in the economy of the neighborhood. People are forced to travel further to shop for daily necessities, people are now out work and taxes for that community goes down. The effect is not just with groceries store either. In a small town in Alabama, the building of a new Walmart closed the neighborhood currency exchange, optical center, tire shop, mobile store. Most of these businesses had been in service for years and all had to close due to Walmart. With revenue slowly declining at this location, Walmart decided to close their doors, leaving behind a small town with no grocery store, no pharmacy and no currency exchange. The people in town had to drive almost 15 miles to the next town just to get the services they needed.
Walmart is also killing job growth in the USA. Almost 95% of their products and goods are made overseas in China and Bangladesh. When America’ s biggest company gets all of its good from overseas, it essentially drowns out the manufacturing sector here in the states. Because we are a free enterprise country nothing can be done to stop them from manufacturing in China. They pay the workers in China a few dollars a day for work that would cost almost a $100 here to do. With Walmart its all about profit and by having workers overseas they ensure they are able to see a good profit every year. According to Salon.com, Walmart could afford to pay each of its worker $14.58 an hours by simply not buying its own stock. The money they use to enrich the Walton’s could be used to give to their US workers a $5 raise, and they would still see a great profit.
After analysis all these details set forth in this paper, you can see they type of business Walmart is running. The question still is, Is Walmart too big to fail. My answer is yes. The US would bail them out of any situation that would hurt the US economy just as they did the banks and the auto industry. Walmart runs the US. Our economy is dependent upon their success.