The Invisible Hand of Wal-Mart

In the NY Times last fall, columnist John Tierney wrote that "Wal-Mart has been one of the most successful antipoverty programs in America," and posed the question, "Has any organization in the world lifted more people out of poverty than Wal-Mart?" So far, nobody has provided any convincing alternative to Wal-Mart as the #1 global organization for bringing people out of poverty. You could argue that Wal-Mart has done more for world poverty than the World Bank, the IMF, the United Nations, United Way and Red Cross combined.

From the WSJ yesterday, an article about Wal-Mart's huge success in countries like Mexico:

"Like Wal-Mart fans in less affluent parts of America, most shoppers in developing countries are much more concerned about the cost of medicine and microwaves than the cultural incursions of a multinational corporation. That fact is making Wal-Mart a dominant force in Latin America."
Translation: Low prices at Wal-Mart make consumers in Mexico and Latin America better off and significantly raise their standard of living.

"Wal-Mart de México SAB, a publicly traded subsidiary, is the biggest private employer in Mexico. Wal-Mart's jobs pay well by Mexican standards and serve as a gateway to the state health and pension systems. Full-time jobs with regular salaries are scarce."
Translation: Wal-Mart provides thousands and thousands of jobs to help bring people out of poverty in Mexico and Latin America.

"In Mexico, Wal-Mart has been a counterweight to the powers that control commerce. One of the most closed economies in the world until the late 1980s, Mexico was dominated for decades by a handful of big grocers and retailers. All were members of a national retailing association called ANTAD, and cutthroat competition was taboo."
Translation: Wal-Mart broke Mexico's former grocery and retail cartels, and replaced high prices, limited selection and restricted competition with competitive low prices and lots of choice.

"In recent months, as rising prices for U.S. corn pushed up the price of Mexico's corn tortilla, a staple for millions of poor, Wal-Mart could keep tortilla prices largely steady because of its long-term contracts with corn-flour suppliers. The crisis turned into free advertising for Wal-Mart, as new shoppers lined up for the cheaper tortillas."
Translation: Wal-Mart's size helps to stabilize prices for staples, much more so than small retailers can. Also, Wal-Mart's distribution system and computerized logistics allows it to sell products like microwaves for the same price around Mexico, and smaller, more remote towns no longer pay premiums.

From Adam Smith, paraphrased: "By pursuing profits, Wal-Mart intends only its own gain, and yet it is led by an invisible hand to bring people out of poverty, which is not even part of its self-interested intention. But by pursuing its own self-interest, Wal-Mart as an organization promotes the general interests of society, does more to help lift people out of poverty, and does this more effectually than if it were to intentionally try to promote the public interest and address world poverty through an organization like the United Way, United Nations, World Bank or IMF."