Posted on 05/17/2006 10:55:50 AM PDT by A. Pole
Sam Walton had a dream: find out what people want and sell it to them for less. His dream was a variant of Adam Smith’s assertion in The Wealth of Nations: “The sole purpose of all production is to provide the best possible goods to the consumer at the lowest possible price.” The variation stems from the qualifier “best possible”: Walton’s obsessive quest never extended to quality. And in the 230 years since Smith penned those famous words, society has learned to question his narrow vision of “the sole purpose of all production.”
As books like this demonstrate, Wal-Mart is the elephant in the room that no one is ignoring. Like the blind men who tried to assay the elephant in the fable, many have touched on different aspects of the mega-retailer. Business journalist Charles Fishman’s purpose is to synthesize all the critiques into one overarching analysis of “the Wal-Mart effect,” that is, how the company “gets those low prices, and what impact the low prices have far beyond Wal-Mart’s shelves and beyond our own wallets: the cost of low prices to the companies that supply Wal-Mart, and to the people who work for those companies.”
The author frontloads his account with positives about this largest corporation in the history of the world, although here and there he drops the odd discordant note, each of which gets a full hearing beginning with Chapter Four, “The Squeeze.” The biggest positives are the two for which Wal-Mart is beloved of blinkered free traders: its deflationary effect upon prices and its relentless promotion of efficiency up and down the chain of production, distribution, and sale.
Wal-Mart’s impact on the economy is difficult to assess since it is a notoriously close-mouthed entity, but Fishman has done a fine job of mining what data have been amassed. Fishman uses the insights they afford to move his case studies above and beyond “anecdata” to the level of important conceptualizations of the globalizing economy. The child crusaders protesting at New World Order summits ought to read this book if they want finally to be able to articulate what’s wrong with globalization.
Wal-Mart began in Bentonville, Arkansas in 1962 as a single store and has grown to be the world’s largest corporation and employer. Target and Kmart opened their first stores the same year; the difference between them and Wal-Mart was, and is, the latter’s single-minded focus on offering the lowest possible prices all the time, not just during sales, no matter what it takes. Sam Walton banked on the addictive power of “too good to be true” bargain pricing to grow his business by cannibalizing existing retailers. It has worked—and in the process helped transform America from the workshop of the world into a nation not even of shopkeepers but of shop assistants (“sales associates”).
“In 2003,” notes Fishman, “for the first time in modern U.S. history, the number of Americans working in retail (14.9 million) was greater than the number ... working in factories (14.5 million).” These are the jobs that Wal-Mart has created; at the same time, “10 percent of everything imported to the United States from China” is sold at Wal-Mart. The company should have a seat at the United Nations. At the very least it should register as an NGO.
A nation’s businesses used to favor and protect the home market at the expense of “the colonials.” This book demonstrates that the Wal-Mart effect is the most powerful market force expelling jobs and technology from our own country. Not only does Wal-Mart create low-wage jobs that lure further illegal immigrants here to do jobs that Americans could not afford to do even if they wanted to, but it provides a place those illegals can afford to shop. At the same time, it forces American taxpayers to subsidize its low wages by transferring the cost of health insurance to government programs.
Fishman excels at combining statistics with first-person narratives and tales of the rise and fall of companies. His book does justice to the fascinating material drama of the business world and to the substantiality and likeability of its inventors, engineers, managers, salesmen, and employees. Fishman has a warm feel for ordinary Americans—guys named Jim, Bill, and Larry who know their work inside out, talk a colorful lingo (to “have a big pencil,” to “go vertical”), and still care, often passionately, about craftsmanship, a word absent from Wal-Mart’s vocabulary.
Snobs sneer at the slobs who roam Wal-Mart’s aisles (as gleefully and lovingly portrayed on the TV comedy “My Name Is Earl”), who guzzle Wal-Mart wines like “NASCARbernet” and “World Championship Riesling,” whose pastors moonlight as Elvis impersonators and whose Ph.D.’s stand for “post-hole diggers.” For that matter, the critique of mega-retailers goes back at least to the 1920s, when the petite bourgeoisie found itself hard pressed by the success of department stores. But the real problem with Wal-Mart is that it knows the price of everything and the value of nothing.
One of Fishman’s ordinary guys, president Steve Dobbins of Carolina Mills, makes the book’s most eloquent critique:
People say, how can it be bad for things to come into the United States cheaply? How can it be bad to have a bargain at Wal-Mart? Sure, it’s held inflation down . ... But you can’t buy anything if you’re not employed. We are shopping ourselves out of jobs.
We want clean air, clean water, good living conditions, the best health care in the world. Yet we aren’t willing to pay for anything manufactured under those restrictions.
One representative story might be called the Great Pickle Caper. Vlasic Corporation found itself bound to supply huge gallon jars of pickles to Wal-Mart for $2.97, a price at which it made maybe a penny a jar. An “abundance of abundance,” the jars’ sales went through the roof and became a “devastating success” for Vlasic. A former Vlasic executive comments that consumers would “eat a quarter of a jar and throw the thing away when they got moldy. A family can’t eat them fast enough.” Forced to continue offering the deal or lose its entire Wal-Mart account, the company saw its profits squeezed for two and a half years before Wal-Mart finally let it “up for air.”
In January 2001, after Wal-Mart was done making its “statement,” Vlasic filed for bankruptcy. Fishman discerns the same “devastating success” among other suppliers, from Huffy bikes to Lovable lingerie: bankruptcy and closed factories here, a diaspora of jobs and entire industries to the Third World. “For the wages of a single U.S. factory worker, competitors could hire seventy people in Indonesia,” one former manufacturer tells Fishman. Not only wages are forced downward: pensions, union representation, job security, overtime, health benefits, the very concept of a “career” are all flattened by the cost-cutting juggernaut.
Chapter Seven, “Salmon, Shirts, and the Meaning of Low Prices,” uses the explosive growth of the farmed salmon industry as a case study. Wal-Mart sells more salmon than anyone, at $4.84 per pound. That is “a price so low, it doesn’t seem to make sense if you think about it for even a moment.” And indeed, the unpaid costs include miles of seabed buried in a “toxic sludge” of fish excreta, feed, and untreated entrails on the environmental side; and long hours at low pay with few benefits on the labor side. The eerily low price, in other words, masks the high cost of what the price does not “internalize”—humane, sustainable conditions for both salmon and humans.
No factor of production is more cannibalized than that of labor, because it is human labor more than any other factor that creates value. From the Wal-Mart manager who works a 60-hour week starting at 6:00 in the morning to the teenage girl in Bangladesh who, according to an international lawsuit filed in September 2005, was forced to sew pocket flaps onto 120 pairs of pants per hour for 13 cents per hour (“If you made any mistakes or fell behind on your goal ... they slapped you and lashed you hard on the face with the pants. ... I clean my teeth with my finger, using ash. I can’t afford a toothbrush or toothpaste”), the primary material out of which costs are squeezed is human. It is important to note, by the way, that even Bangladeshi labor law forbids the sort of workplaces patronized by Wal-Mart’s buyers.
Fishman at this point asks, “Do Americans need clothing to be so inexpensive that the people making it cannot afford a toothbrush?” The answer is no, of course we don’t, but Wal-Mart’s cost-cutting dynamic not only demands it but forces all who resist it out of business. The ultimate goal is not really “low prices for the consumer” but the obliteration of all competitors. Once this goal has been achieved through reverse predatory pricing (AKA dumping), once Wal-Mart has become one-stop shopping for every product and every service in every land, the pressure to keep prices low will abate, to say the least.
Wal-Mart’s pricing monomania has rooted out wasteful practices like the packaging of bottles, jars, and canisters of product in cardboard boxes but has itself created another gigantic category of waste: the bargain TV or DVD player or lawn mower that, purchased without the benefit of a knowledgeable service person and manufactured with cheaper and cheaper materials, soon breaks down, is not worth repairing, and winds up dumped in the trash—the Pickle Caper writ large. Fishman notes, “In the Wal-Mart economy, we as consumers often buy too much just because it’s cheap.”
Quality vs. quantity has never been counterposed more urgently. Price deflation is here accomplished by wage reduction—a process directly counter to the American Dream, which sings the ever rising standard of living, the mutability of classes, the betterment of successive generations. Rarely has capitalism been rendered more “visible” than in Sam Walton’s “always low prices,” an Absolute Idea thinking itself over and over in idiot repetition.
W.B. Yeats wrote in “Easter 1916” that “Hearts with one purpose alone/ Through summer and winter seem/ Enchanted to a stone/To trouble the living stream.” Sam Walton wanted to make the whole world Waltonville, just as Mr. Potter in “It’s A Wonderful Life” wished to make it Potterville. Their dream is the stuff of nightmares for George Bailey and the rest of us. Even if you include “best possible goods” in your vision along with “lowest possible price,” you have still not defined “the sole purpose of all production.” Production is human self-creation, self-invention, self-discovery, service—humbling, ennobling, restorative—sacred toil.
According to Jeff Foxworthy, you might be a redneck if you’ve ever been promoted to dishwasher, or if the last physical you had was on board a UFO. In the Wal-Mart economy, you might not be a redneck yet, but you could be soon. If taxes are the price we have to pay for civilization, higher prices may be the price we have to pay for a First World society.
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Marian Kester Coombs writes from Crofton, Md.
None of the free traders I know do that. I think borders are great. I also love walls and border guards. I think we need more of both. And I think illegals are illegals. And should be sent back. Glad I could clear up your obvious confusion.
I had purchased a small TV for my home office, seldom used it, but on occasions wanted to watch major stories as the occured during the day (yet keep working). I turned it on the other day, and poof, a little smoke then nothing.
I can not think of the last time a TV quit working on me. I have replaced them for other reasons, but not because they quit working. I was a little perplexed on what happen, but never gave a thought that we were accually going backward in technology, taking fairly simple and reliable technology, and building it so cheap it will not last a year.
This was some off brand since I (mistakenly believed) a TV is a TV. I guess I will need to be more careful when I make my next purchase of what I think is reliable electronic device.
" "the way for humane manufacturing and social relations" was rather proposed by the Church. The best formulation of it is available in the papal encyclicals like Rerum Novarum The Christian approach was rejected for Marxists who did not believe in social solidarity and in inherent value of private property. But Marxists liked Free market ideology as a useful tool for bringing socialist revolution closer."
Well said.
Dear Mr. Jeeves,
"Again, what kind of moron delegates decisions on product production to a retail outlet?"
"Morons" who want to sell to Wal-Mart.
If you decide to sell to Wal-Mart, you have to let them into your house, and you have to do things the Wal-Mart way. This is a double-edged sword. Wal-Mart introduces business processes and technologies to its vendors that enable its vendors to become more efficient and excellent competitors. But its vendors do contractually lose a certain amount of their autonomy to Wal-Mart.
If you want to sell your manufactured products through the largest retailer in the world, that's the deal you have to take. There are folks lining up to take the deal.
As for Vlasic, if I recall correctly, the company was in financial trouble BEFORE the Wal-Mart deal, and saw the Wal-Mart deal as a way back to solvency. Needless to say, it didn't work.
sitetest
Sorry. You are mistaken about EPI. Liberal, obviously, but marxist? Don't think so. But that's your bag.
The guy had the answer staring him right in the face, but he went on with his inane article anyway.
Nope, no Marxists there. And why would you post from a liberal source to FR?
If a large field of low-wage labor made a nation prosperous & powerful, Mexico would be an international powerhouse.
WalMart is like slavery?
Are you F-n retarded? Human bondage and the scourge that it was in the American South HAS NOTHING to do with WalMart.
You aren't forced to shop there, you aren't forced to work there.
Go back to DU.
Actually, it is -- sort of. Economic prosperity by definition doesn't necessarily mean that high-paying jobs are plentiful (since "high-paying job" is a very relative term), but that a society as a whole enjoys a high standard of living.
This is incorrect. Wal-Mart owes it success primarily to the fact that it was able to take advantage of several ongoing developments that heavily influenced the retail industry over the last 25 years:
1. They were first major retailer to take advantage of the most important advance in the freight shipping industry since World War II -- the advent of containerized shipping. This more than anything else is what made it extremely cost-effective to ship most finished products long distances around the globe.
2. Their most robust growth period coincided with an era when America was becoming increasingly suburbanized and when fuel had become very inexpensive (in relative terms). These two factors combined to make big-box retail centers the most cost-effective venue for the retail industry, replacing the regional shopping mall concept that had dominated the industry since the 1950s.
3. They've developed the most efficient methods of delivering products from their point of origin to their point of sale. Wal-Mart has built enormous (4+ million square feet) distribution centers in places where nothing existed before they arrived, which tells me that they've got a pretty unique approach to warehousing and distribution.
At some point in the not-too-distant future, coal will replace natural gas as the primary source of energy for these oil sands projects.
Actually, that's not the case at all. Governments are prohibited under NAFTA from providing energy subsidies for industrial customers. (This doesn't apply to residential users, which explains why my last combined gas/electric bill in Canada a couple of years ago was only $14.)
Many oil extraction projects are able to get natural gas relatively cheaply because natural gas is often found in abundance in the same places where oil is found.
Does he pay you to post his name over and over again? Just curious.
I am a little late to the article,but here it goes.
You are absolutely correct.Nobody held a gun to my head 7 years ago when I applied at WAL~MART and started working there.
I started work there because it is two blocks from my house and they could give me the hours I wanted at the time.
I am happy that WAL~MART gave me a chance and that I have the opportunity to move up within the Company.
That is why people apply there.
What the hell are you talking about.
I work at WAL~MART and I shop at other places as well,i.e. Fred Meyers,The Gab,Mervyns and so on and so forth. I buy my Groceries at Albertson's,Safeway and at the local Grocery store.
BTW,I have people working with me that worked for a Unionized retailer and they all say the are making the same amount of money as they did with the Union job and that they actually keep more of there money,because no DUES are taking out. You must be a Union lackey.
With thinking like that I guess you support raising the minimum wage to a "liveable wage".
Yep. Unliveable wages increase government taxes.
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