Wednesday, November 27, 2013

Second-guessing Walmart executives

“Here's How Walmart Could Pay Workers a Decent Wage Without Raising Prices”

Now this had to be a good one, right?

Turns out the suggestion, carried on Mother Jones, was simple: Instead of buying back some of their stock as planned, Walmart executives instead ought to invest the money in raising employees’ wages.

Gee, why didn’t they think of that?

Now, there can be many reasons why Walmart is buying back its own stock. Perhaps they feel they are the target of an unfriendly acquisition attempt and want to drive up the price of the stock to prevent it.

Now consider the alternative. Walmart executives decline to buy back their own stock, thereby allowing the price of the stock to fall. A prospective new owner swoops in, buyds or merges with Walmart, and increases prices on merchandise.

Or perhaps the new stockholders demand that executives seek savings by laying off employees. Then the employees not only don;t have higher wages, they don;t have jobs either.

There could be myriad reasons Walmart executives  are buying back their own stock. The point is, we simply don’t know.

Unless you are in their shoes you simply don;t know what Walmart executives are thinking.

Those who think they do are parading their economic illiteracy.

It would be better for all of  us if they would find a copy of Thomas Sowell’s “Basic Economics” and read it.

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