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.
Why're yessir, of cause...a bunch of them thar Wally Arkinsaw hellbillys russled up execs, forc'd 'em to drink moonshine, and sign on dat there dotted line to do bidness with good-old Sam.
An "infeasible" technology producing that much oil?
What is your definition of "infeasible?"
I didn't say union anywhere in my post.
So, what is the function of a citizen? Not citizen of the world as the "free traders" like to think of themselves, but a citizen of a sovereign nation. What is their function? What is their duty?
Energy is needed to process 2 tons of sand for each barrel of oil (from your article). Then $25 or more just to process the heavy oil into lighter oils and they don't give a figure for cost of energy with that. Energy is required to maintain the equipment, heat and feed the workers, etc. All that energy starts at $70 / barrel, then add refining and shipping. I would think the only thing that keeps this maintainable is that they use local natural gas for a lot of the energy inputs. In effect, they are trading the exportable natural gas for more valuable exportable gasoline. So the price of natural gas here goes up even more.
Again, at what energy price? Clearly the authors of this article are clueless.
So you're saying they shouldn't do it because it costs them more to do it this way?
In the economics I learned, if revenues exceed expenses you are making a profit and should stay in business.
What brand of alternate-reality economics do you subscribe to?
Instead of being offered a $50 toaster that lasts a lifetime, made by skilled workers, we get one for $12.99 that lasts 3 years. People think they are "saving" but after the 4th toaster, they are behind and they bought foreign crap instead of domestic.
That is what Wal-Mart means to me. America in the 50's and 60's made high quality, "pricy" things. But they really weren't so pricy. First came the Japanese, then other countries importing CRAP for low prices, and we changed our model. But they actually made crap better than we did, so we lost both ways. Japan turned away from crap into high end electronics. We lagged. They turned into affordable, high quality fuel efficient cars, and we created the Pinto.
Wal-Mart didn't start the trend, they just nationalized it, and sped up the process. Wal-Mart is good in the short run, but not the long run. Yes, we can fill up our landfills with all the crap from Wal-Mart, rinse and repeat, or we can manufacture goods that the growing middle and upper classes throughout the world want to have creating wealth and jobs here that are not greeter or checker or stocker. The choice is ours.
Yes, I want to know it too!
Oh wait, it's not conservative, it's from Patsy Buchanan's site!
Again, at what energy price? Clearly the authors of this article are clueless.
$60,000 of absolute costs.
The basic law of accounting is: Revenues minus Expenses equals Net Income.
If they are in the black, they are in the black. Asking "At what energy price?" is like asking "Why is the sky blue?
Energy is a cost of production, even when you are producing energy.
Making a fetish of "energy cost" sounds like something an Apparatchik would worry about.
They can do whatever they want except pretend that their oil costs $70/barrel. Undoubtedly they are getting lots of free natural gas other free stuff that Canadian taxpayers pay for. Their other inputs require energy to maintain and replace like the truck tires. We're not talking about a nuclear power plant where you could put a wall around it and send relatively small amounts of energy through the wall to run it. Their energy requirements are huge and only possible with government-created economic distortions.
Good article, Gabz!
I was in Wal-Mart today, too. I spent $19.35 and purchased:
Laundry Soap (Formulated in USA)
Birthday Card (Printed in USA; Paper from Wisconsin)
Plastic Tote Box w/cover (Extruded in USA)
Dog Treats (Baked in USA)
Old Roy Canned Dog Food (Cows Killed and Cooked in USA)
Two Bags of Potting Soil (Dug from Earth in the USA)
Works for me. :)
Let me help.
A citizen has no duty to pay more for anything to keep another citizen in a job.
Sort of like the Holy Grail of "alternative enerby sources" you love so much: ethanol?
Very much like corn-based ethanol which I hate. My older engine has had very poor performance since they started mixing that crap in with the gas. The same analysis applies: a heavily subsidized farmer with energy intensive farming methods creates a low energy product which is fermented and added to the fuel. Takes energy every step of the way including transporting that crap from the midwest.
(Denny Crane: "Every one should carry a gun strapped to their waist. We need more - not less guns.")
Wal-Mart does offer cheap toasters.
Just last month, I bought a two-slice chrome toaster made by Cuisinart from Kohl's, on sale, for $42.00.
I saw the identical toaster at Wal-Mart for $45.00. So, it is simply false that Wal-Mart doesn't offer quality products.
Should a college student who wants to buy a toaster not have the option to buy a $15.00 version versus having to shell out $45.00 for a top-of-the-line model?
The notion, which some goobers here continue to push, that Wal-Mart sells nothing but junk is just incorrect. Maybe you haven't been in a Wal-Mart lately, or maybe you're just being disingenuous.
Whatever the case, you are venturing into busybody territory by telling the rest of us what preferences we ought to have in products or in jobs.
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