Market economic theory holds that free competition will benefit people as it allows consumers to buy cheaper goods and services, and allows income to be generated through investment.

Mainstream economic theory cannot, however, answer the big problems that the retail sector is facing because of the lack of a level playing field, much like organising a boxing match between fighters from different weight divisions.

Mom-and-pop shops are mostly family-run businesses, founded on family savings, borrowings or inheritances, while giant retailers invest with a huge amount of capital on hand and are in a much stronger position to bargain.

Moreover, mom-and-pop stores have long been a traditional part of the community. The entry of foreign-owned hypermarkets may provide consumers with the cheaper products and greater competition outlined in economic textbooks, and consumers may enjoy strolling through spacious aisles looking at the variety of goods they offer. On the flip side, however, customers of multinational retailers have lost touch with the traditional way of life. While employees of superstores may greet clients with robotic manners, customers of superstores have lost the opportunity to build lifelong relations with shop-owners in the way that their parents did.

The grandparents of this generation might be able to explain what it was like in the era before cashiers greeted customers with a robotic line of welcome without even bothering to glance up at them. Economic theory does not take into account the social implications of the free market system, in which small entrepreneurs find it difficult to build up their businesses amid competition from giant retailers.

Mainstream economists also realise that giant retailers have changed the Thai people's way of life by creating a continuous demand for new goods, such as refrigerators or microwaves. This has led to a strong trend of consumerism in the Kingdom.

Moreover, political economists believe the overall impact on society should be taken into account, instead of focusing solely on the customers of superstores, who are now able to buy cheaper goods.

Conflicts related to this issue have been around for a long time, putting pressure on many countries including the United Kingdom, France, Germany and the United States. In response, these countries have introduced measures to protect local retailers. Wal-Mart branches in the US were forced to locate in remote areas and the Israeli government does not allow foreigners to operate large retail outlets, with the exception of 7-Eleven. Large superstores must be organised as foundations in that country.

In Thailand, the Retail Business Act was drafted in 2002 but never implemented because of a lack of firm support from the government and related parties. It was reported that a small yet influential business group has obtained huge benefits from this source of foreign investment.

The market economy has also proven to be a failure in the world of everyday business because foreign superstores with high bargaining power have forced local suppliers to cut their prices. As a result, suppliers have inevitably been forced to sell their products at lower prices than before using long-term credit.

Superstores create investment and employment in areas where they are located, but such investment does not create competition in the market. As a result, large superstores can dominate the retail sector - another indicator of the failure of the market economy.

Although foreign retailers may create jobs, they cause more people to lose their businesses because of their inability to compete directly with foreign companies that have larger budgets to conduct marketing campaigns to lure customers.

As globalisation is inevitable, the government may have to introduce measures to protect local retailers, such as location restrictions and limited opening hours. The government could limit the minimum distance between superstores, as Germany has done with its 25-kilometre limit. In Australia, foreign retailers are prohibited from opening at certain times. Price controls to ensure that superstores are prevented from selling products at lower-than-average market prices should also be introduced here.

According to mainstream economic theory, the national government of a country that has agreed to trade liberalisation must not intervene in the market. However, local government agencies may have to intervene to protect their constituents in the same way as other countries have done, such as the US, where the government plays a role in protecting the people.

Local retailers may take the opportunity ahead of the general election to pressure the government into launching measures to protect them.

They have a substantial chance of receiving assistance, according to the school of thought which stresses the connection between political and economic policies.

Anoma Srisukkasem

The Nation