Competition is good. Walmart Is Not.

Competition is good. It always leads to improvement all around. But is has to be a fair one. Unfair competition leads to destruction of the norm. Examples are all around us. However, the world is not a fair place. That and human nature together has led to protectionism. Even the most prosperous countries and largest economies indulge in just that. The US is known to give their farmers massive subsidies. The Chinese manipulate their currency to gain the upper hand. We would expect our government to do the same to protect our traditional ways of doing business instead of creating unfair competition. What Prof. Vaidyanathan said last year (we wrote a blog on this topic last year) was that the GoI needs to protect our dhoti-clad entrepreneur instead of subjecting them to a competition, which they are not equipped to deal with. The local shopkeeper can compete with the others in the market but is not equipped to deal with some outfit like the Walmart. That is what the point of discussion is.

If leeches were to evolve into sophisticated predators, that being would aptly describe the Walmart. What I have read is that it began as a store, which only sold stuff, made in America as a response to the Japanese domination of the production sector. But then they evolved into a company which did what the Japanese were doing except they raised that practice to an art. Today everything sold in Walmart is made in China. The Walmart executives use their financial muscles to bully all involved to keep the prices ridiculously low. By this they have driven everyone around out of business. The Corporation, the buyers and the Chinese owners are the winners. However, the American manufacturers and American small business owners have been destroyed. The Americans have managed to survive by other means being a powerful and (still) an upwardly mobile economy. Innovation supported by (still the best) an infrastructure. India and Indians do not have the same advantages.

If we bring in Walmart, we will be flooded with Chinese made stuff at prices which would destroy our small businessmen and manufacturers. As Prof. Vaidyanathan says:

More than 125 lakh kirana stores provide a source of livelihood to 16 crore people. Retail trade has grown faster than the economy: it registered a compounded annual growth rate (CAGR) of 9.4% between 2004-05 and 2008-09 when the Indian economy grew at 8.66%. The retail trade comprises all kinds of people and formats — from street vendors to departmental stores of various types, shapes and characteristics.

This segement of our economy deserves all the protection we can get. They keep jobs and money in India. Walmart will send the jobs to China and money to America. Manmohan and Montek Singh need to pull their heads out of American made sand and smell the “chai”.
Our blog and Prof. Vaidya's article can be read here.