Kids need consequences to learn right from wrong, don't they?!

You tell me which child will be learning "right" from "wrong?"

Kid 1, a grade schooler, is in a store with mom. She sees something she wants and grabs it and keeps it in her pocket. When they get out to the car mom finds the item and asks, "Did you get this inside the store?"
"Yes."
"You know that's stealing, right?"
"Yes."
"Do you know that the person who owns that store is a dad and that he has a family and kids to buy food for, just like your dad and I do?"
"No, I didn't know that..."
"And, did you know that when you take something like that that he had to pay for it? And, that means you just took money from him and his whole family?"
"Noo..."
"And, he also uses the money he makes when he sells things to pay for his employees to have jobs so they can feed their families, and if everybody stole guess what would happsn?"
"He wouldn't have any money?"
"Right! He wouldn't have any money and he wouldn't have any money to have employees and then they wouldn't have any money, either."
"Wow."
"And, guess what else would happen if everybody stole?"
"Ummm..."
"The man who owns the store would have to make all of his prices very very expensive to make up for the money he lost. And, that means that your dad would have to work extra hard to make even more money for food because food would be so much more expensive!"
"I didn't know..."
"So, what do you think we should do with that?" (pointing to the stolen item.)
"I should take it back."
Mom goes back inside with her child to put the item back. Mom finds an employee on the way in and explains what happened and that they're returning the item to its proper place. Mom says to the employee, "We're bringing this back because we know that when people steal it hurts everybody who works at the store, isn't that right?" The employee follows the mom's lead, "Yes, it does."
They exit the store with mom talking with the child about how they feel about what's just happened. They talk about different situations where people have stolen on the news and in the Bible. They talk about when there ever might be a good reason to steal and what would be the best thing to do if someone ever broke into their house to steal something? Not too far down the road in the car the subject is on something else and no "spanking" or other punishments happen at home.


Kid 2, a grade schooler, is in a store with mom. She sees something she wants and grabs it and keeps it in her pocket. When they get out to the car mom finds the item and asks, "Did you get this inside the store?"
Child looks up at mom with deer-in-headlights look on face, "Yes."
"What!? I can't believe you STOLE that! What is the matter with you! You know better than that! You know stealing is bad!"
Mom grabs the kid by the arm and heads back into the store and stands her child in front of the first employee she finds and makes him hand the person the item and say sorry. She tells the employee she's sorry, too, and how embarrassed she is and assures the employee that the child will be punished. She then heads back out to her mini-van and, thinking better of it, decides not to get the wooden spoon out of the glove box just then but opts to wait till they get home to punish her kid.
The whole ride home mom is fuming and alternately telling the child how naughty they are or being silent. Once home she gets out the paddle and gives the kid a good spanking to teach the kid a lesson about spanking. (and/or makes the child stand out by the road with a sign that says, "I STOLE!")

You hear parents often talking about the need for "discipline" and "consequences" so that children learn right from wrong.

Which kid in this example do you feel was "disciplined" in the true meaning of that word which is "to be taught?"

Which kid kid in this example do you feel understands the true "consequences" of stealing? Both kids were faced with a parent telling them that stealing is bad...but which kid learned the actual consequences brought about in the world by stealing? 

Which child do you think felt shame, humiliation and separation from the parent? Which child do you think felt fear? Do you think any of those feelings help a person understand their actions?

Which kid do you think has a better understanding after this event of what's "right" and what's "wrong?" Learning a lesson that when a child does "x" that mom and dad get super mad and spank them only teaches them that when they do "x" mom and dad get mad and spank them. 

To learn "right" from "wrong" one must care about people first of all, and caring is empathy and it is taught by example. Secondly, one must understand the full consequences of their actions to know how those actions have affected people badly and the empathy inside them will convict them that doing "x" is "wrong" and the empathy in them will make them want to never do that again. 

Example 1 is how I would handle it, actually.
How would you?