Ending poverty...through supermarkets?

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Walmart has attracted its fair share of attention in debates about globalization and poverty. A new paper from the University of Chicago business school suggests that stores like Walmart have helped dampen the growth of inequality in the U.S. by reducing the prices faced by the poor. Christian Broda, one of the authors, sums it up over at Vox:

The expansion of superstores – like Wal-Mart and Target – has also played an important role in accounting for the inflation differentials between rich and poor. Superstores sell the same products as traditional shops at much lower prices. Today the poor do roughly twice as much of their buying of non-durable goods in these stores than the rich. So poor consumers have been the biggest beneficiaries of Wal-Mart coming to town.

Of course, I doubt this will end the debate about Walmart. (Look at this paper for a rather less sanguine take on Walmart that focuses on its effects on employment and income.) Yet, the U.S. is not the only place providing evidence that chains benefit the poor. A recent briefing from the International Food Policy Research Institute suggests that the spread of supermarkets in developing countries has been beneficial for poor consumers.   

In The Supermarket Revolution in Developing Countries, Thomas Reardon and Ashok Gulati come to the following conclusion about the impact of supermarkets:

Supermarkets tend to charge consumers lower prices and offer more diverse products and higher quality than traditional retailers - these competitive advantages allow them to spread quickly...The food price savings accrue first to the middle class, but as supermarkets spread into the food markets of the urban poor and into rural towns, they have positive food security impacts on poor consumers.

However, it is interesting to see that the discourse on supermarkets follows the same contours as the debate around Walmart. Reardon and Gulati spend much of the paper discussing the potential negative impacts that the spread of supermarkets could have on traditional retailers, which dovetails with the 'less sanguine' take about Walmart that I pointed to earlier in this post. Reardon and Gulati settle on a formula of promoting "competitiveness with inclusiveness." In practice, this means upgrading the skills of traditional retailers and farmers to help them contribute to this new supply chain. And after the spread of supermarkets, what's next? Walmart?


Ryan Hahn

Operations Officer

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