Fiscal Policies
Fiscal policies can be viewed as rules or decisions that governments or other form of leadership use to address the macroeconomic affairs of a region or country. These polices have been formulated with an effort of developing a conducive environment that affects the country as a whole in terms of production, interest rate, level of national production and international trade. Fiscal policies also define the manner in which a country or a regional economic block trades with each other. This polices have far reaching implications in terms job creation, economic growth of a country and the living standards of the population. In appreciating the enormity of the concept of fiscal policies, most countries and regional blocks have relied on economists and other experts to provide guidance on how to formulate such policies. This paper evaluates the effects of different fiscal policies on operation of Wal-Mart.
Tax cuts for 95% of all households
Wal-Mart is a famous department store company in the United States and is said to be largest retail business in the world. The Company is concerned with selling household goods ranging from electronics, households utilities to groceries and hardware tools. In general therefore, the company’s main line of businesses is retailing household goods.
In such a business, selling most of the products at the cheapest possible prices is the best possible situation for doing business. In this sense, revenue is an integral part for the performance of the business. Thus should the government decide to implements a policy that cuts about 95% of all taxes, WalMart will greatly benefit from this policy.
The basic reason behind such benefits can be explained simply by understanding consumer behavior. Consumer behavior refers to any character adopted by consumers with regard to selection, purchasing and consumption of goods and products . In general, it is agreed that humans are rational beings and will always prefers a cheaper option. Cutting about 95% of taxes implies that these household goods will much cheaper as compared to earlier prices. Therefore consumers will be able to purchase more goods thus increasing the revenue of the company. Increased revenue often leads to increased profitability.
Trade Policy
Trade policies are regulations that help governments regulate trade between different nations. These policies have been evolving along with other aspects of the world such industrialization, evolution in technology and globalization . However, as to whether there are benefits that Wal-Mart would gain from international trade, this is not debatable. International trade has and will continue to provide Wal-Mart will several benefits as is discussed next.
First, trade is a means by which products produced from different locations of the world are moved from one location to another. Kliesen, (2007) argues that this movement of goods of services to be sold in different location greatly increases the variety of products available to the consumer. This is illustrated that fact that the average variety of products available to the consumer has increased four folds over the last thirty years . This increase in variety implies that Wal-Mart would ensure that consumers are assured of the product they seek in the store. Hence, Wal-Mart, through in international trade is able to attract clients from different backgrounds to the store, increasing sales and profits.
International trade also allows countries and regions to produce products that they are very good at. This concept of specialization was first proposed by the famous economist, Adam Smith, who proposed the specialization concept in his publication, ‘The Wealth of Nations’ . Here, Smith argues that international trade will allow countries to specialize their production depending on the availability of raw materials and the level of expertise available to them. The result is extremely quality products that meet the needs of the consumers. International trade would allow such goods to be shipped to any consumer in the world.
Trade Tariffs
A trade tariff is said to be a form of restriction on sale of external goods in the domestic market. The general method that has been used in imposing is either by high taxes on external goods or placing a ceiling on the amount of commodities that can be imported. The most common reason for tariffs the fallacious argument that cheap goods from external markets outsell goods from domestic producers thus pushing domestic industries out of business. The rise of China and other emerging economies especially in Asia has rejuvenated the tariffs debate.
However, Kliesen, (2007) argues that imposing trade tariffs is all but a contractionary fiscal policy. One of the fallacious arguments that have emerged from tariffs is the protectionism theories. Here, argument point to the idea that imposing tariffs ensures that jobs and industries within the local market is maintained. On the contrary, Kliesen, (2007) asserts that the cost of saving the said jobs is simply enormous. Consumers end up purchasing products at high prices that they would otherwise purchase much cheaply if there were no tariffs. Thus economy suffers slow business and this has a moribund effect on growth.
References
Blinder, A. (2010). Free Trade. Retrieved May 18, 2012, from Library of Economics and Liberty: http://www.econlib.org/library/Enc/FreeTrade.html
Friedman, M. (1997). The Case for Free Trade. Retrieved May 18, 2012, from http://www.hoover.org: http://www.hoover.org/publications/hoover-digest/article/7125
Kliesen, K. L. (2007, October ). Trading Barbs: A Primer on the Globalization Debate. Retrieved May 18, 2012, from http://www.stlouisfed.org: http://www.stlouisfed.org/publications/re/articles/?id=19
Peter, J. P., & Olson, J. C. (2007). Consumer behavior and marketing strategy. McGraw-Hill/Irwin,: New York.
