Wal-Mart: The Face of Twenty-First Century Capitalism

Nelson Lichetenstein, Ed.

(New Press)

The Wal-Mart Effect: How the World’s Most Powerful Company Really Works–and How It’s Transforming the American Economy

Charles Fishman


What is it that pisses people off so much about Wal-Mart? Just mention the discount behemoth and the response is curled lips and a look of contemptuous disgust–this from people who wouldn’t think twice about shopping at Target. Is it just another skirmish in the culture wars, with Democratic urbanites shopping at their Isaac Mizrahi-endorsed big box stores and rural Republicans loading up on NASCAR gear at theirs? It’s easy to look to Wal-Mart’s roots in bloodred Arkansas and Target’s origins in cool blue Minnesota for answers. The reality, though, is more complicated than cultural snobbery or ideology will allow.

One of the many emotional moments in Robert Greenwald’s 2005 film Wal-Mart: The High Cost of Low Price comes when a man named Red Esry describes how his painstakingly built family-run grocery chain in a small Missouri town was wiped out in just a couple years after Wal-Mart came to town. The kicker? He wasn’t done in by free-market capitalism, but by local government, which gave millions in subsidies to Wal-Mart while refusing assistance to local merchants.

Although it’s got all the hallmarks of agitprop–tabloid urgency, arguments that don’t always hold up under scrutiny–The High Cost of Low Price effectively uses the stories of people like Esry to make its point: Wal-Mart is bad for the country in ways that can’t simply be explained away by free-market economics. The movie appeals to the emotions to grow resentment against Wal-Mart for its treatment of an underpaid and overtaxed workforce and for the devastating effect a new store, stuffed to the ceiling with vast mountains of goods at “everyday low prices,” has on the economic fabric of the surrounding community. But while Greenwald’s polemics aren’t without foundation–on January 12 alone a Pennsylvania judge ruled that workers could move ahead with a class-action suit alleging they were pressured to work off the clock and the Maryland legislature in effect voted to force Wal-Mart to spend at least 8 percent of its payroll on employee health benefits–you have to turn to the bumper crop of new books on the company for context. It’s one thing to hear in the film about a corporate jet full of union busters that zooms in from headquarters to quash the faintest whisper of labor organizing and quite another to read the detailed schematic of Wal-Mart’s aggressively anti-union culture as laid out by Nelson Lichtenstein in his essay in Wal-Mart: The Face of Twenty-First Century Capitalism, an authoritative anthology he edited that came out last month from the New Press.

Without resorting to red-state-baiting, Lichtenstein makes a good case for linking the company and the current administration: “Like the conservatism at the heart of the Reagan-Bush ascendancy, Wal-Mart emerged out of a rural South that barely tolerated New Deal social regulation, the civil rights revolution, or the feminist impulse. In their place, the corporation has projected an ideology of family, faith, and small-town sentimentality that coexists in strange harmony with a world of transnational commerce, stagnant living standards, and a stressful work life.”

Lichtenstein shows how a company that’s the largest private employer in Mexico, Canada, and the United States and has $300 billion in annual sales developed a corporate lingo that tries to obscure minuscule pay and negligible benefits in a faux-populist fog. While unions have been working hard to crack the Wal-Mart nut–the best anti-Wal-Mart news site, Wal-Mart Watch, was started by the president of the Service Employees International Union–they’ve had little success thus far.

One of the many uncomfortable realities raised by Charles Fishman’s smart, lively, and coolly rational new book, The Wal-Mart Effect: How the World’s Most Powerful Company Really Works–and How It’s Transforming the American Economy, is the fact that Wal-Mart may simply not be able to pay much more than it does. The company’s profits ($10.3 billion in 2004) don’t look so big when spread across 1.6 million workers earning an average of $8 to $9 an hour. Even if Wal-Mart devoted all annual profits to raising wages, they couldn’t even get them above $12: “There isn’t enough money,” says Fishman, a senior writer at Fast Company. “Not without raising prices.”

Wal-Mart’s neutron-bomb effect on small towns is harder to unpack. Greenwald’s film isn’t just full of stories of small businesses shutting down. It also presents damning testimony from former employees who explain how they helped annihilate the homegrown businesses of one community after another. One blithely recalls how the Wal-Mart advance team would drive down a town’s main street and guess how long the mom-and-pop stores would stay in business. Six months? Eight? The most dramatic example of this appears in David Karjanen’s essay in the Lichtenstein anthology, which tells the chilling tale of Nowata, Oklahoma. After a Wal-Mart opened near Nowata in 1982, all the local businesses eventually closed. Twelve years later corporate HQ shut down the Nowata store and opened another 20 miles away, “leaving something close to a ghost town in its wake.”

But this is just capitalism, right? Wal-Mart’s not forcing anybody to shop there. Not exactly. You may prefer shopping at the local grocery, but if you’re poor and unemployed–and Lichtenstein’s book quotes a study showing that Wal-Mart has caused a loss of one and a half jobs for every one it creates–and can save $100 or more a month by going to Wal-Mart, the choice has been made for you.

Ultimately the Wal-Mart difference is simple: size. “Wal-Mart is increasingly beyond the control of the market forces that capitalism relies on to enforce fair play,” says Fishman. “Wal-Mart isn’t subject to the market forces because it is creating them.” Take the all-too-typical example of the Peoria-based L.R. Nelson sprinkler company: Nelson had been manufacturing high-quality lawn sprinklers since 1911 and sold many of them at Wal-Mart. But the retailer regularly demands that suppliers cut prices year after year–and often tells them just how to do it. Last year Nelson laid off almost all of its Peoria factory workers because Wal-Mart said unless they cut costs by moving manufacturing to China, the company could no longer do business with them.

After running through the litany of companies bruised, battered, and sometimes bankrupted by doing business with Wal-Mart (Levi Strauss, Vlasic, Welch’s), Fishman brings up the rare example of Snapper, which decided not to play the game. Snapper pulled its high-end lawn mowers from Wal-Mart in 2002, instantly losing 20 percent of its business. Today Snapper mowers continue to be made at the company’s bustling factory in McDonough, Georgia, which is about to add a second assembly line.

Meanwhile, in Peoria, former Nelson employees look for jobs–and try to avoid giving Wal-Mart their money. But it’s hard. The ironic consequences of unchecked capitalism are highlighted in one laid-off worker’s comment to Fishman: “You feel like you are living in [a] communist society. Pretty soon there will be nowhere to shop but Wal-Mart.”