WAL-MART, the world?s largest company, recorded sales of $375 billion last year from its international chain of large-format retail stores. There are just 21 countries in the world with a gross domestic product (GDP) larger than that, with Indonesia just making the grade, and Denmark and Saudi Arabia failing to even get within striking distance. Wal-Mart?s expansion has, no doubt, been aided by globalisation, or at least the Davos version of it. It is a successful business model that has more or less seen all its competitors off, and it is being multiplied in market after market at a pace that physical possibility and public policy?more than capital and labour, certainly, which are not constraining factors?will permit. Equally noteworthy is the fact that this megacorp?s profits grew faster last year than its turnover, which basically represents the sum total of all the stuff sold through thousands of outlets. This is at least partly a direct result of the manner in which globalisation has let transborder supply chains respond effectively, at very low cost, to consumer demand addressed by the company. In fact, the story of how Wal-Mart has crushed costs and strengthened margins runs parallel with that of inflationary impulses being contained by a combination of information efficiency and production outsourcing to low-cost zones. Labour-surplus countries have attracted huge amounts of FDI for such purposes, boosting their own economies. In this sense, the Bentonville-based retailer deserves praise. Clearly, it is part of the wealth generation processes that the whole world needs.
Yet, there is no denying that Wal-Mart?s very size worries some observers immensely. Is this a rational anxiety? Should financial clout in itself be something for sovereign countries to watch out for? Are national policies at risk of being trampled under a business machine that can sign cheques larger than the size of so many economies in the world? Can the company?s shareholders regulate its behaviour? In India, many of these questions are coloured by stark inter-generational memories of the East India Company, the shameful behaviour of which is what gave rise to modern-age principles of corporate governance as we know them. But Wal-Mart?s sense of accountability is sharp, as its conversion to the green cause (and CFLs) last year showed. Moreover, in India, it will face domestic competition that will, hopefully, refuse to be overwhelmed by it. India should reject Wal-Mart-phobia.