The Walton kids are ABSURDLY wealthy – and you're benefitting

That's the Waltons of Walmart, not John-Boy and family

Household spending

At which point we can add a few numbers. That $260bn odd is actually about the same as Walmart's total sales. True, different years, but close enough the way that we're using numbers here. And the other number we want is Walmart's net profit margin: a shade over 3 per cent at present.

We can therefore construct the following. Before the existence of Walmart then the American household's vital consumption of Chinese tchotchkes would have cost all households, in aggregate, $520bn. Because of Walmart's existence, it actually costs those households $260bn. That's an increase, per annum, of $260bn in the general standard of living of American households.

Walmart: Stuffing the pockets of US families, allegedly

Not that it doesn't actually matter whether households now buy the same amount of Chinese tchochkes at half the price or buy the same amount and spend the half the cash they've saved elsewhere. It's still an increase in the consumption, and thus the living standards, of those households by that amount.

We should also note that this isn't a calculation of the benefit that they get from shopping at Walmart: this is the benefit they get from the existence of it. That is, we're including the effects on the lower profit margins that everyone else has to accept given that Walmart is offering those low prices.

Another way to put this is that consumers benefit by 50 cents from every dollar they spend at Walmart. Without Walmart, prices would be twice what they are. And what's the benefit that the Walton family get from this? Well, on a 3 per cent profit margin and they own 50 per cent of the company then it looks to me like they get 1.5 cents out of every dollar. And consumers getting 50 cents on the dollar, the entrepreneurs getting 1.5 cents looks pretty close to our Schumpeterian result of the entrepreneurs getting 3 per cent or less of the total value created.

We could, of course, say that these are simply the inheritors to the entrepreneur, Sam himself. And that would be true. And we could go on to say that inheritors simply shouldn't be allowed to have that much. And we might even be right at that. But it's obviously true that being able to hand on wealth to children is one of those things that does motivate entrepreneurs.

Just look at the desperation with which they use schemes to be able to do so rather than having to hand it over to the taxman on their death. If being able to leave your children stinking rich wasn't one of the reasons people did the entrepreneuring then we wouldn't have those tax shelters, trusts and dodges, would we? We should therefore, to some extent, look at the children being an extension of the entrepreneur: we're pretty sure that it was part of his incentives at least.