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Amber Sampson, Retriever Weekly Editorial Staff, published May 5, 2004
If there’s one thing we Americans treasure, it’s low prices. Somewhere along the line, we were convinced that low prices are nothing less than a Constitutional right—a worthy goal to be sought after with vigor.
And no one gives you low prices like Wal-Mart. No one.
Wal-Mart has done a remarkable job of painting itself as the defender of the common consumer, offering a low-prices-driven marketing strategy that has made it the largest and richest corporation in history—and gained for five Waltons a net worth more than double that of Bill Gates.
However, beneath the yellow happy faces and commercials with smiling elderly employees, everyone can find a common enemy in Wal-Mart—whether you’re a market-loving conservative or a regulation-happy liberal. It is a direct threat to the health and well-being of the market economy and to each and every worker in its path. In the end, its low prices come at a cost that’s too high for us to bear.
First, Wal-Mart’s effect on the market.
The problem with Wal-Mart is that of monopoly: it’s just too big to be confined to the rules of the market system. According to Business Week, by 2002, Wal-Mart held 30 percent of the U.S. market share in household products (such as shampoo and toothpaste), 19 percent in groceries, 16 percent in pharmaceuticals, 15-20 percent of CDs, DVDs, and videos, and 15 percent of single-copy magazine sales. Numbers like that are unprecedented, and dangerous (apart from the fact that the fate of the entire American economy, and therefore the world’s economy, hinges on one corporation).
In a competitive market, decisions made by individual firms are supposed to have little or no effect on the cost of inputs (supplies and wages) or the sale prices of goods. These costs and prices are supposed to be derived from the collective decisions of consumers and producers.
Contrast this with Wal-Mart’s effect on market prices. Groceries sell for 14 percent less where Wal-Mart competes. Suppliers who sign contracts with Wal-Mart (a necessary evil when one retailer controls 30 percent of your market) are forced to lower input costs. Wal-Mart crushes competition by using its size as leverage in negotiations. It can get the cheapest wholesale deals, pass those prices onto its customers, and make up for it in the sheer volume of sales. Other businesses are forced to slash also, causing a general deflation in prices known as the "Wal-Mart effect."
The "Beast of Bentonville" is also a threat to the entrepreneurial spirit of the American economy. No industry is safe. The supercenter—which has finished off small specialty shops of all kinds, eradicated discount department stores, and fatally wounded large grocers—is only the beginning. According to Ira Kalish, chief economist for Retail Forward, other industries that were already in Wal-Mart’s sights by 2002 include retail gasoline, used car dealership, financial services, food service, home improvement, and dollar-discount retailing. With its enormous economic clout and capital stock, it’s sure to dominate every category it enters. And after the large chains go under, there’s no hope left for those "small businesses" which politicians tout as the heart of Americana.
Wal-Mart is giving no signal of slowing down its expansion. And Business Week reports that for every Wal-Mart that opens in the next few years, two grocery stores will close down. This of course will put people out of work, who will most likely shift over to Wal-Mart.
Now, if you have any concern for the livelihood of working people, this is very bad news.
Wal-Mart, which is fiercely anti-union, pays on average 30 percent less than unionized grocery stores. According to one of many lawsuits filed against the company, in 2001, the average Wal-Mart sales clerk made $8.23 an hour, or $13,861 a year (significantly below $14,603, which was the federal poverty line for a family of three for that year). Again, because of its size, it is blamed for the general deflation of retail wages nationwide.
Wal-Mart is also being held responsible for the pressure on employers to depress or eliminate health benefits. At the last annual meeting of the American Public Health Association, Wal-Mart was singled out as the leader in the move away from employer-provided health insurance. Health advocates and representatives from the United Food and Commercial Workers International Union lambasted Wal-Mart for failing to provide health insurance to 60 percent of its employees, neglecting basic provisions in its care plans (such as immunizations), making the acquisition of benefits difficult for already underpaid employees, and putting pressure on unionized grocery chains who have to compete with a non-unionized company providing lower wages and benefits.
Ellen Rosen, a resident scholar at the Women’s Studies Research Center at Brandeis University in Boston, who is currently writing a book about Wal-Mart, said that the only solutions to the health care crisis are the unionization of Wal-Mart, or national health insurance—a testament to the company’s reign on the fate of all American workers. Another speaker noted that care for many of Wal-Mart’s impoverished employees shifts to tax-funded public health programs. Rosen responded by stating, "We are all subsidizing Wal-Mart."
Her comment leads back to my original proposition: the cost of low prices is too high for society to pay. Despite what they would like us to believe, we don’t need Wal-Mart; we were getting along just fine before we had one on every corner. Everyone likes low prices; but is the monopolization of the American economy, the depression of wages, the depletion of health coverage, and the surrender to the will of one corporation worth saving 14 percent on toothpaste? I think not.
Carl Steidtmann, Deloitte Research’s retail economist, is quoted in Business Week as stating that the biggest barrier to Wal-Mart’s expansion is "opposition at the local level." Some bold communities have declared their independence from Wal-Mart by refusing entry into their territory. The menace will only cease or reform if current and potential customers show the Waltons who’s boss
Christopher Paul, published May 4, 2004
In Rebuttal to Sampson's article "Always low, always Wal-Mart," she is quite right about Wal-Mart offering low prices at a cost. What the left hand giveth, the right had taketh away. Wal-Mart is not the only retailer to eliminate employee health benefits. In order to compete with Wal-Mart the trend has been for retailers to reduce operational costs by eliminating employee health benefits. Also on target is due to low wages and a lack of benefits, the burden is passed to the consumer in the form of more people applying for public assistance programs for health services, housing, food stamps, etc.
Some time ago, Wal-Mart was brought up on charges for not providing employees with lunch hours and Wal-Mart's defense was the employees were not punching out properly. Here's the employees side; these employers pay so little in wages that employees in order to gain an extra 1/2 hour's day pay decide not to take lunches and work straight through, either eating on the floor, on their fifteen minute breaks, or while on bathroom breaks. The employee's thinking is that every minute counts at the end of the week. If one is making say $8 per hour, 21/2 more hours per week results in $20 extra in their paycheck. It may not sound like a lot but as with students, when you're living on the edge, $20 can make or break you. Hence, we're back to the sweat shop mentality.
One other point Sampson failed to mention is the known fact that wherever Wal-Mart sets up shop, due to it's low prices, it puts the local mom/pop main street shops right out of business. Two examples are Lancaster, PA and Clinton, IL. Despite strong opposition by the townspeople, Wal-Mart set up six stores in Lancaster County. Within three years, the main street stores began to fold one by one.
How did Wal-Mart overcome the opposition? For every regulation the town set up to make it tough for Wal-Mart, Wal-Mart said, "We'll take care of it," such as problems of traffic congestion, zoning, and environmental concerns. Wal-Mart's solution was to throw money at it. Or in other words, "Wal-Mart will provide," and provide they did! Not only because they have the money to take care of it all but they also know within five years they will recoup their losses and begin to gain in clear profit.
The most sinister group of points that have been missed are the future implications of Wal-Mart, better known as "China-Mart." When one examines most of the products for purchase in Wal-Mart, one will find most are made in China. What few people are aware of is we are in the process of repeating history. China is the number one buyer of our scrap steel, as was Japan in the 1930's. China takes the scrap steel and turns it into consumer products and the American consumer who desires cheaper, better, faster products buys these products from China, thereby; one we fuel China's need for more scrap steel, two we end up sending our hard earned dollars to China, thereby fueling their economy, and four because of this insatiable hunger for ever cheaper consumer products, Americans make it that much harder for manufacturing to compete, causing more plants to close in the US.
Now this in itself may seem sinister in itself, but remember I said we are repeating history. In the 1930's, Japan was our largest buyer of our scrap steel. On that day which will live in infamy, Japan thanked us by returning all that scrap steel back to us in the form of ships, planes, bombs, and bullets. Now if China will do the same thing remains to be seen, but the possibility does exist. Plus, if it were a conventional war, China has a good chance of winning. China has a population of three billion plus people and from lessons learned in the Korean War, in a conventional war where the lines of battle are clearly drawn, the Chinese Army can easily win by "bleeding all over us." What this means is because of the sheer number of people in the Chinese Army as it moves forward, our soldiers would find themselves shooting them dead and after a while the dead bodies continue to build until our soldiers are just firing bullets into a wall of dead bodies, but the Chinese Army would still be coming. Remember I said that if it were a conventional war, but as discussed in my paper "Bizzirka" the lines of war are no longer clearly drawn lines in the sand because of advancements in modern warfare technology. But regardless, if it were conventional or unconventional warfare, the possibly still exists that the Chinese government could return all this scrap steel to us in the form of planes, rockets, bombs, and bullets.
The only solution is for the American consumer to be more savvy in their spending and be aware of these implications and choose to not purchase products in China based on lessons learned in the 1930's. The alternative as it has been said many times, "those who choose not to remember history are doomed to repeat it."
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