Why Is Wal-Mart Being Regarded as Despicable?

by Leon Hadar
by Leon Hadar

Forget about Osama bin Laden and his associates hiding somewhere. Pay very little attention to the growing nuclear threats from North Korea and Iran. And you should place concerns over the rise of China as a "peer competitor" on the bottom of US policy agenda.

The Clear and Present Danger that is facing the American people has nothing to do with international terrorism, rogue regimes, weapons of mass destruction (WMD), or even the "outsourcing" of American jobs to India.

It's Wal-Mart!

Are we talking about the world's largest retailer, with US$285.2 billion in sales in last year's fiscal year that employs 1.6 million associates worldwide through more than 3,800 facilities in the United States and more than 2,400 units in other countries? Is that the company that was founded by the legendary Sam Walton and which promises "Every Day Low Prices?"

You may be one of the 138 million customers who shops at Wal-Mart in one of its worldwide stores every week, but you probably don't know what's good for you or for that matter, for the "public." So pick up the local daily newspaper in Small-Town America and you'll discover that Wal-Mart is the fifth Horseman of the Apocalypse. Indeed, it's riding into your neighborhood and threatening to destroy jobs and prosperity and the American Way of Life. Be afraid – very afraid.

Just to make sure that this dire message gets across to the American people, there are quite a few consumer groups, lobbying organizations, websites and blogs that are leading a brutal campaign against Wal-Mart. Google "Wal-Mart" and you'll discover Wakeup Wal-Mart.com ("We are the ones who shop at Wal-Mart . . . Together, we have the power to change Wal-Mart. Together, we can hold Wal-Mart accountable and improve our America."); Walmart.Watch.com (which "invites your ideas, participation, and commitment to establishing higher standards for the world's largest company"); and Wal-Mart.blows.com ("The premise is simple; I hate Walmart! Walmart Sucks! Wal-Mart can kiss the fattest part of my xxx . . . This site will bring you the latest Wal-Mart news, allow you to post your rant in the public forum, and give you a warm fuzzy feeling inside. This website is dedicated to giving a voice to Wal-Mart associates. You deserve to be heard.").

And, hey, there is even a movie: Wal-Mart: The High Cost of Low Price. A feature-length documentary, produced by Robert Greenwald and which "uncovers a retail giant's assault on families and American values" has been screened in movie theaters across the country to rave reviews. Ebert and Roeper gave it "two thumbs up" and the New York Times called it "breathtaking!" What's next? A television sitcom or reality show? A computer game? A hip-hop hit?

Just recently, the legislative assembly of the state of Maryland, in which I reside, became the first state in the nation to approve legislation forcing Wal-Mart to pay more for its employee health care, potentially paving the way for other states to follow suit.

The bill, which passed despite a veto by Republican Governor Robert Ehrlich, requires employers with more than 10,000 workers to spend at least 8 per cent of their payroll on employee health care or else pay into a fund for the uninsured. Only Wal-Mart is affected by the legislation. ("Guys, what about fixing those potholes on our roads?").

Critics of Wal-Mart allege that much of the company's financial success is due to business practices harmful to employees, the community, the American and global economy, and the environment. More specifically, American bashers of the retail giant have argued that Wal-Mart is responsible for the job losses in the US, an issue that was the subject of a recent Frontline documentary, Is Wal-Mart Good for America?, on US public television.

"Wal-Mart's power and influence are awesome," said Hedrick Smith, a former New York Times correspondent who produced the program. "By figuring out how to exploit two powerful forces that converged in the 1990s – the rise of IT and the explosion of the global economy – Wal-Mart has dramatically changed the balance in the world of business. Retailers are now more powerful than manufacturers, and they are forcing the decision to move production offshore."

Most of the experts that Smith interviewed agreed that Wal-Mart changed, if not revolutionized, the way business is done.

"Wal-Mart has reversed a hundred-year history that had the retailer dependent on the manufacturer," explained Nelson Lichtenstein, a professor at the University of California, Santa Barbara. "Now the retailer is the center, the power, and the manufacturer becomes the serf, the vassal, the underling who has to do the bidding of the retailer. That's a new thing."

To understand the secret of Wal-Mart's success, Smith traveled from the company's headquarters in Bentonville, Arkansas, to their global procurement center in Shenzhen, China, where several hundred employees work to keep the company's import pipeline running smoothly. Of Wal-Mart's 6,000 global suppliers, experts estimate that as many as 80 per cent are based in China.

"Wal-Mart has a very close relationship with China," said Duke University professor Gary Gereffi. "China is the largest exporter to the US economy in virtually all consumer goods categories. Wal-Mart is the leading retailer in the US economy in virtually all consumer goods categories. Wal-Mart and China are a joint venture."

Indeed, Wal-Mart estimates it imports US$15 billion of Chinese goods every year and concedes that the figure could be higher – some estimates range as high as US$20 billion or even US$30 billion. "We do depend on products from around the globe to draw our consumers into the stores," said Ray Bracy, Wal-Mart's vice-president for federal and international public affairs. "We feel they need to have the best product, the best value, at the best price we can achieve."

Which means that Wal-Mart has been doing exactly what American and global capitalism expects successful companies to do – that is, offer consumers a wide range of products at low prices.

There is no doubt that a dynamic free-market economy also produces some losers in the form of declining industries and unemployed workers, but the overall progress that results from Wal-Mart's operations in the US and around the world, including China, benefits a huge number of Americans and Chinese.

Moreover, as Thomas DiLorenzo – an economist with the Mises Institute and author of How Capitalism Saved America: The Untold Story of Our Country's History, from the Pilgrims to the Present (Crown Forum/Random House, August 2004) – notes, the campaign against Wal-Mart is "primarily a labor union-inspired campaign against Wal-Mart employees," as well as the company in general.

Hence the main lobbyists in favor of the legislation passed in the Maryland assembly – which would force Wal-Mart to provide its workers with expensive, government-prescribed health insurance – have been the labor unions which provide financial backing to politicians in the state.

"The ultimate goal is to get the company to sign a union contract without ever involving the employees themselves," according to DiLorenzo, who argues that the whole idea of a corporate campaign is based on a Big Lie: that the union is somehow concerned about the well-being of non-union employees at places like Wal-Mart.

"In reality, the objective of the union is to force every one of those employees to either join its union (and pay its expensive dues) or become unemployed," he argues.

January 28, 2006

Leon Hadar [send him mail] is Washington correspondent for the Business Times of Singapore and the author of Sandstorm: Policy Failure in the Middle East (Palgrave Macmillan). Visit his blog.

Copyright © 2006 Singapore Press Holdings Ltd. All rights reserved. Reprinted with permission of the author.

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