In the world of Adam Smith, specialization of labor and free exchange of goods and services lead to lower prices and a higher standard of living for all. In modern democracies like the United States business is dominated by corporations and improvements in communication and transportation have extended markets worldwide. Is the world of Adam Smith really comparable to modern society?
The goal of corporations is to provide goods and services at the lowest possible cost to compete in the free market, while maximizing profits to their shareholders. Large corporations like Wal-Mart have done this very successfully and their growth has been phenomenal.
In small town America, residents get the advantage of low prices, and at least comparable wages and benefits so this seems a good proposition for shrinking small towns. In larger cities, residents making even higher wages in other jobs reap the benefits of the low Wal-mart prices, so it’s even a better win-win situation. Or is it?
There are still benefits from the economies of scale and the free exchange of goods and services. And, the laws of supply and demand haven’t been repealed. But in modern society, no one is allowed to starve or die from lack of shelter or medical services. If wages are low and benefits like health care are eliminated many in the work force cannot afford to pay for the services they need, and the burden falls on government to make up the difference. So in effect, large businesses who offer only low-paying jobs which do not support their employees are increasing the size of government to make up the difference.
Yet, supporters of free markets and big business place the blame for the growth of government on “tax and spend” “socialists”. If we truly want to limit the growth of government it appears the only way to reconcile this dilemma is to let people in these low-paying jobs go without health care or adequate food and shelter, or increase their wages to the level required to pay for their needs. It would seem the latter alternative is better than the former.
In California, there is now a movement to prevent Wal-Mart from moving into neighborhoods. This may be short sighted. It seems a better solution would be to take advantage of the economies of scale that Wal-mart offers and simplify increase the minimum wage to a reasonable level. This would be accompanied by howls from the usual suspects about throwing people out of work. But, this is just another red herring offered by the same people who blame big government on tax and spend liberals. People have to live and there is a cost to that. You can pay them a living wage or you can subsidize their pay with government services. It is likely that everyone will be happier and more productive if they have a job that pays their way.