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Business and Society Review 120:3 385–408
The Real Walmart

JUAN MORILLO, CALLIE MCNALLY, AND WALTER E. BLOCK
ABSTRACT
The Walmart Company is one of the favorite punching

bags of market critics. They accuse this firm of under-
paying employees, dealing unfairly with customers,
exploiting suppliers, and bankrupting small competi-
tors. Various political jurisdictions have banned this
firm from their environs, either implicitly or explicitly.
The present article offers a more nuanced position on
the behemoth from Arkansas. Although it has some
flaws, there is an overwhelming case to be made in its
behalf as an employer, competitor, purchaser, benefac-
tor of customers.
INTRODUCTION
W
almart is a prime example of what the market system is
capable of accomplishing. It is a huge store packed with
quality products at cutting-edge low prices that is
extending its services throughout our entire nation, and indeed,
throughout the world. Walmart efficiently operates as they utilize
Juan Morillo is Professor of Economics and Business, Universidad Internacional de la Rioja

(UNIR), Madrid, Spain. E-mail: juan.morillo@unir.net. Callie McNally is Independent scholar at
Joseph A. Butt, S.J. College of Business, Loyola University New Orleans, New Orleans, LA.
E-mail: ccmcnall@loyno.edu. Walter E. Block is a Harold E. Wirth Eminent Scholar Endowed
Chair and Professor of Economics at Joseph A. Butt, S.J. College of Business, Loyola
University New Orleans, New Orleans, LA. E-mail: wblock@loyno.edu.
© 2015 Center for Business Ethics at Bentley University. Published by Wiley Periodicals, Inc.,
350 Main Street, Malden, MA 02148, USA, and 9600 Garsington Road, Oxford OX4 2DQ, UK.
386 BUSINESS AND SOCIETY REVIEW
their limited time, talent, and resources to make strides in new

technologies and efficient procedural techniques. It also manages
to maintain a reputation of integrity in business circles. Walmart
should be nothing but praised by society as they continually
create wealth and consequently raise our standard of living.
However, critics have grabbed hold of the media and defamed
Walmart’s good name. These negative comments are derived from
misconceptions about economic policies that allow antimarket
ideologues to indulge their personal biases and foist an irrational
dislike of an innovative company on an unsuspecting public.
Critics rail against Walmart claiming that they cause unemploy-
ment, lower wages, and of greedy consumerism. Their cries have
been heard as 56% of citizens polled by Zogby now believe that
“Walmart is bad for America.” But this company is not at all the
great evil the media portrays them to be (Kirklin 2006, p. 2).
Looking through the lenses of economic growth and progress,
Walmart can be seen for the contributions it has made to society
as it makes strides at improving our standard of living. It does so
by making wealth more accessible to the poorest people in our
nation, taking advantage of the global trade market, and improv-
ing the efficiency of its trade partners.1
In our analysis, we must keep in mind the casual antecedents
of prosperity and economic growth. As a whole, the science of
economics is poorly grasped by our population, and without basic
knowledge of this science, the citizens are left susceptible to their
personal biases. This ignorance also renders the populace sus-
ceptible to the manipulation of those with the large microphone.
This article is an attempt to logically approach Walmart’s contri-
butions to our nation from an economic standpoint. To under-
stand these contributions to economic progress, we must first
gain an understanding of what economic progress requires. It is
defined as an increase in the level of wealth for both the indi-
vidual, and the nation as a whole.
Walmart is a producer of wealth.2 This company not only
creates wealth, but also does so in the most efficient and cost-
effective way in order to keep prices low. When companies
succeed in this regard, this is not an act of exploitation; it is the
very opposite. Lowering the price of a product is a direct means of
increasing a population’s standard of living, because people are
able to obtain more of that product, at lower prices. This is what
MORILLO, MCNALLY, AND BLOCK 387
prosperity is all about. The poor benefit the most from actions
taken to cut cost and boost production.
States von Mises (1958/1979) in this regard:
Descriptive terms which people use are often quite mislead-

ing. In talking about modern captains of industry and
leaders of big business, for instance, they call a man a
“chocolate king” or a “cotton king” or an “automobile king.”
Their use of such terminology implies that they see practi-
cally no difference between the modern heads of industry
and those feudal kings, dukes or lords of earlier days. But
the difference is in fact very great, for a chocolate king does
not rule at all; he serves. He does not reign over conquered
territory, independent of the market, independent of his cus-
tomers. The chocolate king—or the steel king or the automo-
bile king or any other king of modern industry—depends on
the industry he operates and on the customers he serves.
This “king” must stay in the good graces of his subjects, the
consumers; he loses his “kingdom” as soon as he is no longer
in a position to give his customers better service and provide
it at lower cost than others with whom he must compete.3
Walmart4 is a company that prides itself on constantly offering the

public high-quality goods at low prices. This has in the past and
continues to increase the American standard of living across the
board. Walmart’s attempt to keep prices low is the very reason
that the media and misled individuals claim it has had a negative
impact on our country. Some claim that Walmart is destructive.
These criticisms are problematic and derived from resentment of
a success not achieved (Schoeck 1966). According to Fishman
(2003, p. 5): “Walmart wields its power for just one purpose: to
bring the lowest possible price to the customer.” We are those
customers, and those low prices are precisely what allow us to get
more for our dollar. Walmart does not say this is their mission,
and they should not have to do so. The founder of Walmart, Sam
Walton states:
. . .We’ll lower the cost of living for everyone, not just in

America, but we’ll give the world an opportunity to see what
it’s like to save and have a better lifestyle, a better life for all.
We’re proud of what we’ve accomplished; we’ve just begun.5
Walmart’s purpose is clear and is reflected in their consistently

low price. They continue with their efforts to cut cost while
improving efficiency.
Walmart continues to be the largest retailer in the world with
reported revenues of approximately $469 billion for fiscal year
ending January 2013. It has over 10,000 stores worldwide and
sells goods across almost all merchandise categories including
groceries, electronics, appliances, apparel, sporting goods, home
furnishing products, and drugs.
Walmart has been making more and more revenue each year:
annual revenue growth rate is 5% and gross profit margins have
remained relatively stable during the last years at around 26.5%.
In this sense, we can see that Walmart is clearly building wealth
for society, because it fulfils human desires. Walmart is creating
both consumer and entrepreneur wealth (http://stock.walmart
.com/annual-reports).
WEALTH, CAPITAL GOODS, AND WAGES
Critics (Basker 2007; Freeman 2006; Jia 2008) urge the belief
that Walmart’s large profits are gathered selfishly at our expense,
and we should all get a piece of the billion dollar pie that Walmart
has accumulated. They also paint the picture that company chief
executive officers and higher-ups earn excessive profits, and ruin
neighborhoods and small businesses. This is not the case.
In a market based on the institution of private property, profits
occur when a company (or an entrepreneur) takes scarce
resources of a certain market value and transforms them into
finished goods (or services) of a higher market value. This is the
important sense in which profitable companies are providing a
definite service to others in the economy. If a company is hem-
orrhaging money, it is a signal that consumers would prefer that
resources stop flowing into the losing operation, and go elsewhere
so as to create more valuable goods and services.
As Hazlitt (1979, pp. 161–2) states:
In a free economy, in which wages, costs, and prices are left
to the free play of the competitive market, the prospect of
profits decides what articles will be made, and in what
quantities—and what articles will not be made at all. If there
is no profit in making an article, it is a sign that the labor

and capital devoted to its production are misdirected: the
value of the resources that must be used up in making the
article is greater than the value of the article itself.
One function of profits, in brief, is to guide and channel the
factors of production so as to apportion the relative output of
thousands of different commodities in accordance with
demand. No bureaucrat, no matter how brilliant, can solve
this problem arbitrarily.
The ultimate source of profits is always the foresight of future

conditions. Those who succeed better than others in anticipating
future events and in adjusting their activities to the future state
of the market reap profits because they are in a position to satisfy
the most urgent needs of the public (von Mises 1949/1998, part
4, chapter XXIV).
The majority of Walmart’s wealth is held in capital (Kirklin
2006, p. 9).
We call capital goods those goods the value of which comes
from their aid in producing goods of the first order (goods that
directly relieve some dissatisfaction, such as food). These goods
were also called goods of a higher order by Menger (1871/1976,
chapter 2). Note that this distinction does not exist in the goods
themselves, but rather in human thought and planning. Every
capital good is produced from the combination of natural
resources and labor. Most capital goods are also produced with
the help of other (preexisting) capital goods.
This material wealth is then used in the production of more
wealth. Capital is vital to the production of more wealth because
without it we are reduced to what we are able to produce with our
bare hands (McLean and Applegate 2010, p. 13).
As we increase capital, our levels of productivity and our stan-
dards of living subsequently rise. von Mises ([1949] 1998, chapter
XV) stated, “. . . saving and the resulting accumulation of capital
goods are at the beginning of every attempt to improve the mate-
rial conditions of man; they are the foundation of human civili-
zation. Without saving and capital accumulation there could not
be any striving toward non-material ends.”
Clearly, the prime objective of making an investment in a
business is to obtain a satisfactory return on capital invested.
One of the best metrics for assessing the success of a business in
realizing this objective is return on capital employed (ROCE).6 It

indicates how well the management has used the investment
made by owners and creditors into the business. In other words,
return on capital measures how much profit a company earns
on every dollar invested in inventory and property, plant, and
equipment.
The higher the ROCE, the more efficient the firm is in using its
funds. Walmart has an average ROCE of 22%.7 It is a strong
indicator of a competitive advantage. This high ROCE indicates
that Walmart can reinvest a greater portion of its profits back into
its operations (payout is about 37.4%8) and those profits will be
employed at a higher rate of return, generating higher earnings
growth. This is what makes a company create value and wealth
for its shareholders, customers, and the whole society.
This is important when we look at the alternative, capital
consumption, which leaves the society less wealthy. When we
deprive companies of a portion of their earning in order to create
artificially higher wages,9 we are depriving them of fund they can
invest in capital to increase the future production of wealth.
Anyone truly concerned with the welfare of workers should first
analyze the source of wages. They are determined by worker
productivity. As capital goods enable workers to be more produc-
tive, the accumulation of capital goods directly raises workers’
incomes through higher wages because each hour of work (with
the better tools) now produces more output.
Indeed, Walmart would like to keep its costs low by “trying” to
pay low salaries. But in a pure market economy, competition
protects workers from arbitrarily low wages. Certainly, any
employer cannot prevent a competitor from coming along and
offering a higher wage to his own underpaid employees. This will
tend to occur every time the employer is paying less than the
marginal productivity of the worker.10 So in the long run, compe-
tition ensures that employers do not “underpay” for labor
services—or any other resources—that they must hire or pur-
chase in their operations. Only government intervention can make
wages lower than they would be in a free-market society. The
existence of regulations, fees, and licensure requirements elimi-
nates lucrative alternatives for employees.11
The capital taken away from large companies in the form of
taxes is given to employees, not as a result of their productivity
and value, but as a forced “donation.” Wage earners consume the

vast majority of their income. This implies a reduction in the
capital investment that will perpetuate future economic growth.
This biases the economy in the direction of instant gratification
versus future growth. The balance between consumption versus
growth is best achieved naturally through the market as marginal
cost and benefits reach equilibrium (McLean and Applegate 2010,
p. 13). Allowing companies to retain the amount of money that
would accrue to them under free enterprise enables them to
reinvest their earning and increase capital and wealth for every-
one. When Walmart is unduly penalized, the prospects for the
accumulation of wealth are reduced, compared to the situation
that otherwise would have ensued were this not the case
(Hulsmann 2003).12
Some critics of Walmart argue that the creation of wealth is
futile if people do not have money with which to purchase the
products available. They warn that while everyone loves low
prices, they come at a much higher cost than we realize. The
detractors claim they have our interests in mind as they warn us
of Walmart’s evil and destructive nature. They base these argu-
ments on the fact that many suppliers of Walmart have been
forced to lay off employees, or move overseas in order to operate
under Walmart’s strict demands (Fishman 2003, p. 6). These
arguments have no economic bases or merit. These false claims
are derived from three personal biases that include: antimarket
bias, make-work bias and antiforeign bias (Caplan 2007; Stossel
2007, p. 1).
First, consider antimarket bias. People suffering from this
malady fail to understand that the free-exchange is a win–win
situation. In a free-market exchange, a voluntary agreement is
formed by two parties who decide to trade goods, services, and
cash, or some combination of these assets. Both people benefit
from this voluntary transaction at least in the ex ante sense;
otherwise, it would not have been undertaken. Those who have an
antimarket bias are those who believe that trade and profit are
zero-sum games, where one person’s gain comes at the expense of
someone else. This is completely off base. Walmart negotiates with
many different companies, both here and abroad, and every one of
them does so of their own free will, in the hopes of turning a
profit. Companies trade with Walmart because of what Walmart
offers them in return. This is the beauty of a noncoercive free-

market system.
Walmart is now the largest retailer in the world.13 People
patronize this colossus because, as a retailer, it offers honesty,
cleanliness, swift efficient service, and low, low prices.14 Does
Walmart have the power to write its own ticket as some claim?
No (Fishman 2003, p. 3). If this were true, Walmart would not be
worth doing business with. People enter into contracts with
Walmart in order to make a profit, whether by selling to it or
purchasing from it. If this were not the case, people would refuse
to deal with it.
Walmart’s toughness is beneficial to all of its business partners.
Companies want to work with Walmart because they are honest
and efficient. Their business is tough and constantly demanding
more from the supplier and themselves. Walmart’s business part-
ners honor Walmart with the rave review that they consider
Walmart to be a company with honesty and integrity.
A common objection that arises when speaking about the uti-
lization of low wage foreign labor is that companies who employ
this type of labor are exploiting workers in the third world. When
companies create jobs overseas, they are offering employees a
wage. If that wage is lower than what already exists, no one will
enter into the contract because it has negative consequences.
Therefore, these companies must offer an option better than the
one already provided so as to obtain employees. In this exchange,
both the foreign worker and the company benefit. And so do
Walmart customers in the United States.15
Another objection to foreign trade, Walmart style, was made as
follows: “We want clean air, clean water, good living conditions,
the best health care in the world—yet we aren’t willing to pay for
anything manufactured under those restrictions.”16 The president
of Carolina Mills, Steve Dobbins, who made this bold statement
failed to understand that the jobs created overseas are a prime
example of a free-market exchange.17 These jobs have the poten-
tial to promote growth, which we know, leads to a higher standard
of living. Evidence of this cycle can be seen in our own history of
economic progress in America, as we have witnessed the direct
correlation between economic growth rates and the rise in our
standard of living, even for the poorest of Americans (McLean and
Applegate 2010, p. 2). Economic growth has both the power and
potential to reduce world poverty. When companies with wealth-

creating abilities, similar to and including Walmart, expand into
counties with the lowest standards of living, they change people’s
lives—for the better.
Then, there are the negative consequences imposed by the
critics’ solutions. They advocate government intervention. But this
will serve to lessen the capital companies have to create more
wealth. Second, they urge minimum wage salaries. These wages
are not representative of productivity levels, but are an artificial
wage manufactured by the government and will cause unemploy-
ment.18 Another serious consequence of this intervention would
be to stunt the economic progress in foreign countries, and this
provides the potential for their increased standard of living. Thus
the very thing critics think they are protecting us from, exploita-
tion of the poor in the third world, will result if their proposals are
carried out.
Sending business overseas can benefit both producers and
consumer by keeping prices low, and raising the ability of com-
panies to create more wealth for a larger number of people.
Still, critics of Walmart refuse to understand this and object that
these low prices destroy American jobs. This objection is founded
on our third and final bias, the make-work bias. This bias is
established on the assumption that jobs make us wealthy (Caplan
2007; Stossel 2007, p. 1). Therefore, anything that destroys
jobs is considered a hindrance to progress. But if this preposter-
ous idea were true, we should outlaw all inventions. Imagine the
number of jobs we could create if we stripped technological
advances from our lives. We would undoubtedly increase the
number of jobs available, but wealth would be dismal in compari-
son. If all the farm technology, such as tractors and automated
sprinkler systems were done away with, we would require a very
large portion of the population to move into the agriculture busi-
ness. There would be an overabundance of these jobs available. In
like manner, Hazlitt (1979) talked of eliminating railroads, and
substituting for them men carrying 50 pounds sacks on their
backs. This would “create jobs” to a gargantuan degree, but we
would all starve. This is why their argument is utterly absurd.
What really occurs when we lose jobs to improvements in tech-
nology, procedural efficiency, or trade with other nations is our
current resources, such as land, labor, capital, are freed from
their previous (now less efficient) employment. This freedom is an

opportunity for us to invest these resources into other outlets and
keep increasing the production of overall wealth in order to make
wealth more assessable to a larger group of people. Jobs do not
create wealth. The companies that create jobs create wealth. What
we want is what jobs bring us, namely products, goods, and
services, not the jobs themselves. If we could eliminate the job
slots and keep the result of them, we would be very happy. As one
of our incisive referees reminds us, “the free market is a system
that depends on the willing participation and cooperation of
people who invest as well as those who buy. The mistake of those
who focus exclusively on job creation is that they forget or disre-
gard this systemic fact. But it is equally a mistake to focus only
on investment. What creates wealth is the properly functioning
interaction of all components of the market system.” Hear, hear!
There is one last issue to discuss. Walmart is not only accused
of, but actually does bankrupt small business, mom and pop
shops, etc. Should this be held against the giant retailer, or in
favor of it? The latter, clearly. For, did not the light bulb bankrupt
the candle makers, the automobile manufacturers do the same to
the horse and buggy industry? And are we not all thankful that
this was the case? Of course. The ethic of the market place is that
those who serve the consumer well remain in business, and those
who do not must seek other employment, hopefully that which
will satisfy customers. Walmart can better serve the populace
than the horse and buggy retailers who came before it; that is
what economic progress is all about.
However, disagreement with this contention of ours is offered
by some scholars (Bonanno and Goetz 2013; Lichtenstein 2006).
According to the former: “. . . articles focusing on a broad spec-
trum of local conditions that could be affected by the company,
including poverty rates, social capital, food insecurity, policy
effectiveness, and obesity are reviewed. For each dimension, evi-
dence is found of both positive and negative effects, suggesting
that we are still far from truly understanding the net effect of
Walmart on local economies, let alone the overall consequences in
the long run.”
The present authors take this amiss. For example, consider
obesity. Let us stipulate, arguendo, that Walmart is guilty as
charged in this regard. Should this really count on the debit side
of the account? Hardly. For is it not the fault of this grocer that
people indulge in unhealthy eating as it is easier for them to do
so, at the lower prices brought forth by the company. Let us posit,
too, that the rise of Walmart has been accompanied by an
increase in poverty. We maintain, and necessarily so, that this is
in spite of the increased market share of the giant from Arkansas,
not because of it. That is, had Walmart not come on the scene, the
poverty rate would have been worse. Why do we go so far
out on the limb to make this claim? This is because every time
someone buys groceries in this emporium, they necessarily gain
in economic welfare, at least in the ex ante sense. Authors such
as these fail to appreciate that Walmart has passed a market test
(Hazlitt 2008/1946) with flying colors, which indicates that at
least in the subjective evaluations of its customers, suppliers,
employees, it has been a rip-roaring success. They also fail to
incorporate into their analysis Schumpeter’s (1942) concept of
“creative destruction.” Every new successful product, distribution
system, innovation in retailing, wholesaling, without exception,
destroys old ways of doing things. But how else can progress
possibly take place?
These arguments over whether or not Walmart is positive or
negative for America is of little importance to the typical citizen.
Every day we move from task to task very consumed by everyday
life. While the ordinary people may be unaware of their power,
they are the ones who decide whether or not Walmart will con-
tinue to be successful. If customers no longer patronized Walmart,
they would go out of business forthwith. We all vote with our
dollars on such matters. The choices are available. We are able to
choose to spend our money at a mom and pop stores that charges
more for most items, but right now, the majority of people choose
Walmart.
Nevertheless these critics and the media19 encourage the gov-
ernment to stop the spread of Walmart. This reduces competition
in the marketplace, and thus consumer choice. If people do not
support what Walmart stands for they are free to shop elsewhere;
that is an instance of what freedom is all about. Hopefully, the
electorate will not allow government to limit freedoms in the name
of unsound arguments intended to manipulate the unwary. If the
naysayers do not like what Walmart stands for, their choice will be
respected. They will not be forced to shop there. Unfortunately,
they will not grant others the same in return: they demand laws
that will bankrupt this company, and/or forbid it to conduct
business.20
Walmart is an efficiently run, honest business. They are a
mass producer of wealth and a current power in the market-
place. Walmart takes advantage of our global market, and is a
driving force behind economic growth. They will maintain their
powerful position as long as American shoppers choose their
services over other retailers. The choice should be theirs, and no
one else’s.
Let us consider one last argument, put to us by a referee of this
journal. He writes:
When I was an adolescent in a small town in Maine there

was a thriving main street. Then Walmart moved in and Main
Street collapsed. It could not compete with Walmart’s huge
variety of inexpensive goods. People benefitted from this. The
few dollars they had bought more. But there was also a cost,
not only to store owners, but to the community, which basi-
cally dried up and blew away. It has never recovered. Are the
people there better off because they can buy things more
cheaply? Yes. Are they worse off because what was once a
community is now not much more than a bunch of shop-
pers? Also yes. They gained in one area of their lives, and lost
in another. This is not Walmart’s fault; it was an unintended
consequence. Moreover, it is unlikely that Walmart is the sole
cause. It is more likely a contributing factor, possibly the
proverbial straw that broke the camel’s back. But it was a
consequence nevertheless. Were we to do a cost/benefit
analysis, would the economic benefits outweigh the commu-
nity costs? In my judgment the author is much too quick to
dismiss Bonanno and Goetz and others who have attempted
this sort of work. The author writes “how else can progress
take place?,” where “progress” is intended as “an increase in
economic well-being.” This kind of progress is indeed of great
value, and capitalism has contributed mightily to its achieve-
ment. But it is not the only thing of value we possess. In my
view, many critics of Walmart are as concerned about the
loss of these other things, and about Walmart’s alleged role
in these losses, as they are about low wages and all the rest.
I believe their concerns should be taken seriously.
We the present authors respectfully disagree. We do not think

these sorts of “social” concerns21 should be taken seriously. Why
not? For several reasons. For one thing, if they are “taken seri-
ously,” the implication would appear to be that the private prop-
erty rights of Walmart, should be violated. That is, this company
should not be allowed to destroy local communities. How could
this be accomplished? Presumably, by forbidding to this company
hitherto legal activities, such as purchasing en masse, lowering
prices, improving services, in a word, competing. This sort of
Luddite-ism would by no means be confined to gigantic retailers.
It would also apply to the light bulb manufacturers that destroyed
the communities of the candle makers, to the automobile manu-
facturers who did the same to communities created by the horse
and buggy industry, to Silicon Valley that ruined the neighbor-
hoods where typewriters were manufactured and Rochester New
York, home of Kodak. And even this is but the tip of the iceberg.
Every new innovation of whatever type would have to be looked at
askance, lest it destroy social relations.
Second, and far more important as a matter of technical eco-
nomics, there is no way to establish that any of these Godzillas
did anything of the sort of what they are accused of. There is in
the dismal science a concept called “demonstrated preference.”
According to Rothbard (1997/1956), this means “. . . that actual
choice reveals, or demonstrates, a man’s preferences; that is, that
his preferences are deducible from what he has chosen in action.
Thus, if a man chooses to spend an hour at a concert rather than
a movie, we deduce that the former was preferred, or ranked
higher on his value scale. Similarly, if a man spends five dollars
on a shirt, we deduce that he preferred purchasing the shirt to
any other uses he could have found for the money. This concept
of preference, rooted in real choices, forms the keystone of the
logical structure of economic analysis, and particularly of utility
and welfare analysis.”
It can be demonstrated that every step in the process of
“ruining neighborhoods,” of turning communities into a “bunch of
shoppers” is mutually beneficial. The free-market, of which this
process is but one instance, consists of nothing but the concat-
enation of all such voluntary arrangements. Each and every
one of them necessarily confers benefits on all parties to the
commercial interaction, at least in the ex ante sense. They are all
“capitalist acts between consenting adults” in the felicitous

phraseology of Nozick (1974, p. 163). Can the other side of this
debate mount any “costs” whatsoever that can also be demon-
strated? They cannot do any such thing. Let us suppose that
Mrs. Grundy, now, complains that what used to be a nice, cozy,
friendly, mutually supportive community, is now, thanks to Wal-
Mart and or its ilk, is just a “bunch of shoppers.” And that she
does not much like this at all. But, can she “demonstrate” this as
a matter of technical economics? No, she can do no such thing.
Why should we believe her. She might be lying.
We call once again on the elucidation of Rothbard (1997/1956)
who says of an analogous situation: “But what about . . . the
envious man who hates the benefits of others? To the extent that
he himself has participated in the market, to that extent he
reveals that he likes and benefits from the market. And we are not
interested in his opinions about the exchanges made by others,
since his preferences are not demonstrated through action and
are therefore irrelevant. How do we know that this hypothetical
envious one loses in utility because of the exchanges of others?
Consulting his verbal opinions does not suffice, for his proclaimed
envy might be a joke or a literary game or a deliberate lie.” To be
sure, Mrs. Grundy need not be “envious” about the trades of
others that have turned neighbors into mere “shoppers”,22 but she
is in the same position vis a vis them as is the envious man. She
cannot demonstrate that she loses out as a result of their action,
and neither can he.
NOTES
1. The authors are indebted to Jacob Robinson for comments on an

earlier version of this article. We are also grateful to two very incisive
referees of this journal; we do not thank them for each specific one of
their important suggestions, but this article is greatly improved because
of their care and effort. The usual caveats apply in this case, of course.
2. For a defense of their corporate structure, see Huebert and Block
(2008a, 2008b).
3. Capitalism is responsible for the creation of the automobile.
Who benefitted more from this invention: the nobleman who went
from a carriage and six horses to a Rolls Royce, or the poor man, who
substituted a low-priced car for walking on foot? The free enterprise

system created the light bulb. Who benefitted more from this invention:
the nobleman who went from all the candles he wanted to a magnificent
chandelier, or the poor man, who used to live in darkness after sunset
and now has a cheap bulb in his ceiling? To ask these questions is to
answer them.
4. For example, the grocery “king.”
5. Quoted in Bergdahl (2004, p. 5).
6. The mail elements of ROCE are operating profit and capital
employed. ROCE compares earnings with the capital employed in the
company. There are a number of ways that we can reach the earnings (or
operating profit) ratio, but a common approach is to use as the denomi-
nator earnings before interest and tax, while capital employed is the
capital investment necessary for the company to function and grow.
7. For ROCE calculation, see the Walmart annual reports: http://
stock.walmart.com/annual-reports.
8. See Walmart 2013 annual report: http://az204679.vo.msecnd.net/
media/documents/2013-annual-report-for-walmart-stores-inc_13022102
4708579502.pdf. The Board of Directors approved an increase in the
annual dividend for fiscal 2014 to $1.88 per share, an increase of
approximately 18% over the $1.59 per share dividend paid in fiscal 2013
(p. 26, 2013 annual report). Earnings per share increased 10.6 percent to
$5.02 (p. 1, 2013 annual report).
9. In this article, we have been praising Walmart to the skies (for
further support of this firm see Anderson 2004; Cantor 2006; Carden
2006; DeCoster and Edmonds 2003; DiLorenzo 2006; Huebert and Block
2008b; Kirklin 2006; Vance 2006). For a magnificent fictional defense of
Walmart, see Cantor (2006) and also South Park’s Walmart episode.
However, we must acknowledge this company also has clay feet. It
supported a raise in the minimum wage law (Rockwell 2005), which is a
serious contravention of economic freedom.
10. More technically, it is the discounted marginal value product
(DMVP) that determines wages (Block 1990). There are those who reject
DMVP as the source of wages (Greenhouse 2013; Saez 2013). They
maintain that economic data from the last number of years show pro-
ductivity rising while wages remain flat or in some cases even decline.
There are several explanations for this disparity. One, the economic data
are fallacious. Two this only applies under full free enterprise, and three,
in equilibrium. However, we do not now have pure laissez faire capital-
ism, and we never reach complete equilibrium, although we are always
tending in that direction. Fourth, DRVP applies only to the private sector;
economists have no theory as to wage determination in the public sector
of the economy. To be clear, the present authors vociferously deny that
there is any “gap” between wages and productivity. We go so far as to
claim that wages are a proxy variable (given complications mentioned
earlier in this footnote) for productivity, the best approximation possible.
Given that wages are not rising, we infer, then, that neither is produc-
tivity. Mishel (2012) opines that a “wedge” has developed between pro-
ductivity and wage increases since the early 1970s, with the former
outstripping the latter. Sherk (2013) maintains the very opposite: that the
two have been increasing in tandem. From the perspective of the present
authors, it is barely possible that both could be correct, depending upon
the evidence surveyed. However, it is a basic premise of economics that
in equilibrium there cannot be the slightest divergence between the two
(for if there is, the market forces of profit seeking will tend to eliminate
any such phenomenon). It does not violate economic principle to say that
productivity and remuneration have been treading increasingly separate
paths for almost a half century, but this would imply an almost complete
absence of profit-seeking behavior. As we consider this unlikely in the
extreme at least for the United States, which still boasts at least a
modicum of competitive behavior, we strongly side with Sherk (2013) on
this matter.
11. When government places onerous restrictions on companies with
50 or more employees, firms tend to reduce the size of their payroll to 49.
When government places onerous restrictions on companies who employ
workers full-time, they tend in the direction of hiring part-time only.
12. Might it be said, contrary to the text, that Walmart has thrived,
and continues to thrive, in a way that makes it appear unlikely that its
capacity to produce wealth has been substantially reduced by tax
burdens? No. Had its wealth not been substantially reduced by tax
burdens, it would have done even better, ceteris paribus.
13. See http://www.stores.org/2011/Top-250-List or http://www
.retail-digital.com/top_ten/top-10-business/top-ten-largest-retailers-in
-the-world
14. But what of the Walmart bribery scandal in Mexico (Barstow
2012)? Should this not count as a negative, to offset the positives
mentioned in the text? No. The fault was that of the Mexican govern-
ment’s zoning laws, which violated the private property rights of the field
owner who wished to sell land to Walmart. On the illicitness and ineffi-
ciency of central planning type zoning laws, see Block (1980) and Siegan
(1970, 1972); for the justification of defensive bribery against improper

laws see Kinsella (2011), Lemieux (2005), Rockwell (1997), Rothbard
(2007), and Skaskiw (2010). What of the fact that the American Customer
Satisfaction Index consistently ranks Walmart dead last as both a retailer
and a grocer (Moran 2014)? Should this not count in the debit side of the
ledger? It is hard to see how this can be taken seriously. What of the
charge that Walmart is both a monopolist and a monopsonist? This
charge, too, may be readily dismissed. There are hundreds of thousands
of grocery stores, and dozens of large-scale chain competitors. So, even
on the basis of neoclassical economics, which endorses such concepts,
this indictment is erroneous. For a more radical critique of the very
idea of market monopoly see Anderson et al. (2001), Armentano (1999),
Barnett et al. (2005, 2007), Block (1994), Boudreaux and DiLorenzo
(1992), Costea (2003), DiLorenzo (1996), DiLorenzo and High (1988), High
(1984–1985), McChesney (1991), Rothbard (2004/1962), Shugart (1987),
Smith (1983), and Tucker (1998a, 1998b). Regarding market monopsony,
see Block and Barnett (2009).
15. For a defense of so-called “sweatshops” see Block (2000a, 2008,
2011), Greene, Henry, Nathanson and Block (2007), Krugman (1997,
2001), Myerson (1997) Powell (2006, 2008), Powell and Skarbek (2006),
Powell and Zwolinski (2012), Williams (2004), and Zwolinski (2007). Note
that Krugman, one of the most bitter critics of the free enterprise system
on the entire planet, is a supporter of “sweatshops.”
16. Cited in Coombs (2006).
17. To obtain a better understanding of Mr. Dobbins and his experi-
ence with Walmart, see Fishman (2003).
18. For a critique of this law on the ground that it prices unskilled
labor out of the market and into unemployment, see Becker (1995), Block
(2000b, 2001), Block and Barnett (2002), Burkhauser, Couch,
Wittenburg (1996), Cappelli and Block (2012), Deere, Murphy and Welch
(1995), Landsburg (2004), McCormick and Block (2000), Neumark and
Wascher (1992, 1995), Rothbard (1988), Salihu (2013), Sohr and Block
(1997), Sowell (1995), Vuk (2006), Wenzel (2013), and Williams (2013).
19. Along with clergy, academia and other molders of public opinion.
20. For example, there are no branches of this store in New York City
(Greenhouse and Clifford 2013). Washington D.C. almost experienced
this pattern (Novack 2013).
21. For want of a better phrase.
22. Do not people who shop together become friends, upon occasion?
And, while we are entering the perilous waters of sociology and psychology,
can we not make the case, not as a matter of technical economics of

course, that Walmart brings people together? Before the advent of this
“monster” people, both shoppers and workers, were separated into dozens
of little shops. Now, thanks to this large firm, they are all brought together
onto its premises. Therefore Walmart promotes community, does not sever
the ties that connect people with one another.
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Business and Society Review 120:3 385–408

The Real Walmart

The Walmart Company is one of the favorite punching

Juan Morillo is Professor of Economics and Business, Universidad Internacional de la Rioja

their limited time, talent, and resources to make strides in new

Descriptive terms which people use are often quite mislead-

Walmart4 is a company that prides itself on constantly offering the

. . .We’ll lower the cost of living for everyone, not just in

Walmart’s purpose is clear and is reflected in their consistently

WEALTH, CAPITAL GOODS, AND WAGES

is no profit in making an article, it is a sign that the labor

The ultimate source of profits is always the foresight of future

realizing this objective is return on capital employed (ROCE).6 It

and value, but as a forced “donation.” Wage earners consume the

offers them in return. This is the beauty of a noncoercive free-

potential to reduce world poverty. When companies with wealth-

their previous (now less efficient) employment. This freedom is an

When I was an adolescent in a small town in Maine there

We the present authors respectfully disagree. We do not think

“capitalist acts between consenting adults” in the felicitous

1. The authors are indebted to Jacob Robinson for comments on an

substituted a low-priced car for walking on foot? The free enterprise

(1970, 1972); for the justification of defensive bribery against improper

can we not make the case, not as a matter of technical economics of

Block, W. E. 1990. “The discounted marginal value product—Marginal

DeCoster, K., and Edmonds, B. 2003. “The case for Walmart,”

Jia, P. 2008. “What happens when Walmart comes to town: An empirical

Novack, J. 2013. “Walmart wins again as Washington D.C. mayor vetoes

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