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Monday, July 20, 2009

WAL-MART: A TEMPLATE FOR 21ST CENTURY CAPITALISM OR ITS DESTRUCTION?



WAL-MART: A TEMPLATE FOR 21ST CENTURY CAPITALISM?

by Nelson Lichtenstein

Wal-Mart, the largest corporation in the world, provides the template for a global economic order that mirrors the right-wing politics and imperial ambitions of those who now command so many strategic posts in American government and society. 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.

Founded less than 50 years ago by Sam Walton and his brother Bud, this Bentonville, Arkansas, company is today the largest profit-making enterprise in the world. With sales approaching $300 billion a year, Wal-Mart has revenues larger than those of Switzerland. It operates more than 5,000 huge stores world wide, 80 percent in the United States. In selling general merchandise, Wal-Mart has no true rival, and in 2003 Fortune Magazine ranked Wal-Mart as the nation’s most admired company. It does more business than Target, Home Depot, Sears, Kmart, Safeway, and Kroger combined. It employs more than 1.5 million workers around the globe, making Wal-Mart the largest private employer in Mexico, Canada, and the United States. It imports more goods from China than either the United Kingdom or Russia. Its sales will probably top a trillion dollars per year within the decade. Sam Walton was crowned the richest man in America in 1985: today his heirs, who own 39 percent of the company, are twice as wealthy as the family of Bill Gates.

The competitive success and political influence of this giant corporation enable Wal-Mart to rezone our cities, determine the real minimum wage, break trade unions, set the boundaries for popular culture, channel capital throughout the world, and conduct a kind of international diplomacy with a dozen nations. In an era of waning governmental regulation, Wal-Mart management may well have more power than any other entity to “legislate” key components of American social and industrial policy. The Arkansas-based giant is well- aware of this leverage, which is why it is spending millions of dollars on TV advertisements that tout, not its “everyday low prices,” but the community revitalization, happy workers, and philanthropic good works it says come when it opens a store.

Wal-Mart is the “template” business setting the standards for a new stage in the history of world capitalism. In each epoch a huge, successful, rapidly emulated enterprise embodies a new and innovative set of technological advances, organizational structures, and social relationships.

Wal-Mart is now the template business for world capitalism because it takes the most potent technological and logistic innovations of the 21st century and puts them at the service of an organization whose competitive success depends upon the destruction of all that remains of New Deal style social regulation and replaces it with a global system that relentlessly squeezes labor costs from South Carolina to South China, from Indianapolis to Indonesia. For the first time in the history of modern capitalism the Wal-Mart template has made the retailer king and the manufacturer his vassal. So the company has transformed thousands of its supplier firms into quaking supplicants who scramble to cut their costs and squeeze the last drop of sweated productivity from millions of workers and thousands of subcontractors.

Wal-Mart’s Asian Empire asia_map

One of the most important innovations enhancing Wal- Mart’s span of control has been a worldwide “logistics revolution.” The retailer tracks consumer behavior with meticulous care and then transmits consumer preferences down the supply chain. To make it all work, the supply firms and the discount retailers have to be functionally linked, even if they retain a separate legal and administrative existence. Wal-Mart is a huge retailer and a manufacturing giant in all but name.

Wal-Mart has installed its Asian proconsul in Shenzhen, the epicenter of Chinese export manufacturing. There a staff of 400 coordinates the purchase of some $20 billion worth of South Asian products. Because the company itself has an intimate understanding of the manufacturing process and because its purchasing power is so immense, Wal-Mart has transformed its 3,000 Chinese suppliers into powerless price-takers, rather than partners, deal-makers, or oligopolistic price administrators. While many of these suppliers are small and undercapitalized, a growing number of East Asian contractors manage factories that are of stupendous size. For example, Tue Yen Industrial, a Hong-Kong-listed shoe manufacturer, employs more than 150,000 workers worldwide, most in low- cost factories throughout southern China. A factory complex in Dongguan employs more than 40,000 workers, and its Huyen Binh Chanh mega factory in Vietnam will soon be the largest footwear factory on the planet, employing 65,000. To remember the last time so many workers were assembled in a similarly gigantic manufacturing complex you have to reach back to the armament factories of World War II—to the River Rouge, Willow Run, Boeing-Seattle, and Douglas-El Segundo in the United States, to Gorki and Magnitogorsk in the Soviet Union, and to Dagenham outside London.

The Wal-Mart supply chain is just as tightly monitored within the United States as without. Here those manufacturers that manage to survive do so only by bending the knee to their retail overlord. “If you want to service Wal-Mart you have got to be more efficient,” asserted the retail consultant Howard Davidowitz, “The power will stay with Wal-Mart.”

Wal-Mart vs New Deal America

Wal-Mart’s mastery of information technology and the logistics revolution explain but a slice of the company’s success. Equally important, Wal-Mart has been the beneficiary and a driving force behind the transformation in the politics and culture of a business system that has arisen in a Southernized, deunionized, post-New Deal America. Thus, the controversy sparked by Wal-Mart’s entry into metropolitan markets—Chicago, Los Angeles, the Bay Area—embodies the larger conflict between what remains of New Deal America and the aggressive, successful effort waged by Sunbelt politicians and entrepreneurs to eviscerate it.

Discount retailing depends on continuous, near-obsessive attention to wages and labor costs. Discounters must have two or three times the turnover of traditional department stores, like Sears and Macys, in order to make the same profit. Stock movement of this velocity depends on a low markup, which in turn demands that labor costs remain below 15 percent of total sales, about half that of traditional department stores. And Wal-Mart is clearly at the head of this discount class, with selling and general administration costs—wages mainly —coming in at about 25 percent less than K-Mart, Target, Home Depot and other contemporary big box retailers. In 1958 when manufacturing jobs outnumbered those in retail by three to one, the impact of this downward wage pressure might have been limited. Today, when non-supervisory retail workers compose a larger proportion of the work force than those in the production of durable goods, we get a downward ratcheting of the pay scale for tens of millions.

Of course, Wal-Mart’s success in establishing a pervasive low-wage standard in big box retailing is not just a product of retail economics, Sam Walton’s thrifty ways, or technologically advanced control mechanisms. The company had its origins and began its stupendous growth at a particularly fortuitous place and time. Neither the New Deal nor the civil rights revolution had really come to northwest Arkansas when Walton began to assemble his small town retailing empire. But the agricultural revolution of the early postwar era was in full swing, depopulating Arkansas farms and putting tens of thousands of white women and men in search of their first real paycheck. In the 1950s and 1960s a road-building frenzy in the rural South doomed thousands of hamlet stores sited at the confluence of a couple of dirt tracks. But the new highways and interstates brought a far larger group of potential consumers within reach of the small, but growing, commercial centers, towns like Rogers, Harrison, Springdale, and Fayetteville. And these same interstates enabled non-metropolitan retailers to build and service the large, efficient warehouses necessary for discount operations.

Walton took full advantage of these circumstances. His folksy paternalism was not a new management style, but he carried it off with brio. Meanwhile, like so many Southern employers, Walton frequently played fast and loose with minimum wage laws and overtime standards. And Walton was an early client of the anti-union law firms that were beginning to flourish in the border South. Wal-Mart staunched Teamster and Retail Clerk organizing drives in the early 1970s by securing the services of one John E. Tate, an Omaha lawyer whose militant anti-unionism had its origins in the racially charged warfare that convulsed the North Carolina tobacco industry in the late Depression era. It was Tate who convinced Walton that a profit-sharing scheme for hourly employees would help the company generate good PR and avoid new union threats, while keeping wage pressures at a minimum. Indeed, profit sharing and low wages are Siamese twins. Low pay generated high turnover and high turnover insured that few employees could take advantage of the profit sharing plan, which required two years to qualify.

Wal-Mart growth after the mid 1970s, when the chain had about 100 stores, was nurtured by the Reaganite transformation of the business environment that relieved labor-intensive employers of hundreds of billions of dollars in annual labor costs. In the immediate post World War II era, when Sears and Montgomery Ward had expanded into the suburbs and exurbs, the threat of unionism forced these companies to pay relatively high wages, especially to the male salesmen who sold the big-ticket stoves and refrigerators. But the failure of labor law reform in 1978, followed by the PATCO debacle in 1981, meant that unionism would not be much of a threat in discount retailing. Real wages at Wal-Mart actually declined in the years after 1970, tracking the 35% decline in the real value of the minimum wage during the next three decades. The failure of the Clinton health insurance scheme in 1994 made it possible for Wal-Mart to continue to externalize these labor costs, giving the company a $2,000 per employee cost advantage in the grocery sector that Wal-Mart was just then entering. Free trade legislation, including China’s entry into the World Trade Organization, allowed Wal-Mart to easily exploit the global market in sweatshop labor.

One way to recognize the reactionary particularities of the Wal-Mart business model is to briefly contrast it with that of COSTCO, a Seattle-headquartered warehouse/retailer whose Fed-Mart and Price Club predecessors Walton frequently acknowledged as the model that he incorporated into his own retail operations. But there was one big exception: Wal-Mart would have no truck with the Fed-Mart-Price Club- COSTCO personnel program! COSTCO owes its character to Sol Price, the Jewish New Deal Democrat whose social and cultural values were those of Depression-era New York. Price became a multimillionaire, but even in the era of Ronald Reagan, he favored increased taxes on high incomes, enhanced social welfare spending, and a confiscatory tax on wealth.

Price instituted a high-wage, high-benefit personnel policy that kept COSTCO turnover at less than a third that of Wal-Mart. And he visualized his shoppers in a very different fashion from those of Wal-Mart. They were neither rural ex- farmers nor up-scale suburbanites, but derived their identity and income from that thick middle strata who had been organized and enriched by the institutions of the New Deal and the warfare/welfare state that followed. In his early years Price sold only to those with steady jobs and good credit: aside from licensed businessmen, he sold club “memberships” exclusively to unionists, federal employees, school teachers, hospital and utility workers, and people who had joined credit unions. The company soon generated a bi-coastal reputation for low-cost, high-volume quality, so customers spent about 50 percent more on each shopping visit than the clientele of other big-box retailers. With few stores in the Midwest and none in the deep South, COSTCO is definitely a blue-state phenomenon; executives donate to Democrats and take a hands-off attitude toward Teamster efforts to organize.


Ideology and Culture

Wal-Mart, of course, is red state to the core. It is a Republican firm, certainly among the top managerial ranks, whose political contributions in 2000 and 2004 flowed almost exclusively to George Bush and his party. But the red state character of Wal-Mart is about a lot more than electoral politics, just as modern conservatism represents far more than allegiance to any single political party. Wal-Mart has proven remarkably successful in propagating a distinctive brand of Christian entrepreneurialism and faux egalitarianism well beyond its southern roots. The company prides itself on its corporate culture, but the resonance of that ideology arises not from its uniqueness, but from the way that Wal-Mart executives have played a systematic role in translating a Reagan- era conservative populism into a set of ideological props that legitimize Wal-Mart’s hierarchical structure and insulate most employees from other calls upon their loyalty.

The ideological culture projected by Wal-Mart has several interwoven components, some not all that different from the welfare capitalism pioneered by paternalistic firms, including Pullman, Heinz, and National Cash Register, in the years before World War I. The first theme is that of family, community, and a corporate egalitarianism that unites $9 an hour sales clerks with the millionaires who work out of the Bentonville corporate headquarters. Wal-Mart’s small-town communitarianism is usually identified with the persona of Sam Walton, famous for his Ozark twang, shirtsleeve dress, and the aging pick-up trucks he drove around Bentonville. Walton strove mightily, and often successfully, to project Wal- Mart as the embodiment of a more virtuous and earthy enterprise. Despite the technological sophistication of the Wal-Mart infrastructure, Walton derided computer-age expertise and instead celebrated hard work, steadfast loyalty and the mythos of small-town America as the key that has unlocked success for the corporation and the individuals who labor within it.

Walton and other executives institutionalized this imaginary social construction with an adroit linguistic shift. They labeled all employees “associates,” routinely used first names in conversation and on badges, and renamed the personnel department the Wal-Mart “people division.” Associates who perform below par are not disciplined, but rather “coached.”

Even more important than this faux classlessness is the Wal-Mart culture of country, faith, and entrepreneurial achievement. Large U.S. firms have always linked themselves to a patriotic impulse and not only in times of war or crisis. In the 1950s General Motors sought to sell its lowest priced car with a jingle that told working-class consumers to “See the USA, in your Chevrolet. America’s the greatest land of all!” Wal-Mart has been even more intent on such a linkage, beginning with its abortive “Made in the USA” advertising and purchasing campaign of the late 1980s to its contemporary efforts celebrating the guardsmen and troops—many former Wal-Mart employees—who are serving in the Middle East. But overt U.S. nationalism has its limits in a firm dedicated to international expansion. As Don Soderquist, Wal-Mart’s chief operating officer during most of the 1990s, told associates, “We have pride in our country, and they have the same pride in theirs. What’s transferable is the culture of Wal-Mart, making people feel good, treating them right.”

Soderquist, the foremost articulator of the Wal-Mart culture, wrote in his 2005 memoir, The Wal-Mart Way, “I’m not saying that Wal-Mart is a Christian company, but I can unequivocally say that Sam founded the company on the Judeo- Christian principles found in the Bible.” Actually, Walton took his Presbyterian identity rather lightly, and unlike Soderquist, who has contributed heavily to Arkansas evangelical churches, the company founder thought profit sharing schemes and Ozark high jinks more central to the Wal-Mart ethos than do contemporary executives. But Soderquist is right in emphasizing the extent to which Wal-Mart exists within a cultural universe that is Protestant (Christian in contemporary parlance) even if corporate officers never declare this evangelical sensibility to be a component of the Wal-Mart culture.

But it is there. Like the mega-churches, the TV evangelists, and the Zig Ziglar motivational seminars, Wal-Mart is immersed in a Christian ethos that links personal salvation to entrepreneurial success and social service to free enterprise. Wal-Mart publications are full of stories of hard pressed associates who find redemption, economic and spiritual, through dedication to the company. Selfless service, to the customer, the community and to Wal-Mart, will soon reap its own reward. The telephone company, the old AT&T, also once declared itself devoted to “universal service,” to projecting the “voice with a smile,” but Wal-Mart’s invocation of this imperative has a decidedly less secular flavor. The 1991 Sam’s Associate Handbook declared that Wal-Mart “believes management’s responsibly is to provide leadership that serves the associate. Managers must support, encourage and provide opportunities for associates to be successful. Mr. Sam calls this ‘Servant Leadership.’” That phrase, with its subtle Christian connotation, has increasingly appeared in Wal-Mart publications and spread to a growing number of company vendors. When H. Lee Scott was being groomed to take over the company, Joe Hardin, a former Sam’s Club executive, then CEO of Kinko’s, praised Scott, “Lee is a great Wal-Mart person. He is someone who has grown up in the culture, and he openly communicates and listens to other people’s ideas. He is a true servant leader who knows how to build a team....”

It is one thing to formulate a distinctive corporate culture, but it is quite another to preserve and reproduce that set of ideological and organizational structures when Wal-Mart built stores and distribution centers outside its home territory. But Wal-Mart has succeeded. In the 1970s and 1980s the com pany did not leapfrog into the rich but culturally alien suburban markets, but expanded like molasses, spreading through tier after tier of rural and exurban counties. Although Wal- Mart was opening or acquiring hundreds of stores, the average distance of a new store from Bentonville was but 273 miles in the late 1970s. Moreover, Wal-Mart recruited executive talent almost exclusively from the South Central states— the Company’s two most recent CEO’s are graduates of Southwest Missouri State University and Pittsburg State University in Kansas—and when Wal-Mart did put its stores beyond a hard drive from Northwest Arkansas, its high degree of centralization insured that the Bentonville ethos would not be diluted. Wal-Mart’s fleet of corporate jets enables many regional managers to live in Bentonville, even as they administer a far-flung retail territory. Like the yearly extravaganza in Fayetteville, the weekly Saturday morning show and tell puts the top brass, scores of middle managers, and a selected group of lesser folk together in a ritualized setting that may be “quaint and hokey” but which a visiting Fortune reporter avers “makes the world’s largest enterprise continue to feel as small and folksy as Bentonville. And what ever makes Wal-Mart feel smaller and folksier only makes it stronger. Or scarier.”

Wal-Mart’s real business takes place not in Bentonville, but in thousands of discount stores and supercenters. Here the essential corporate cadres are the managers and assistant managers. They are responsible for meeting the sales targets and expense ratios that Bentonville’s computers relentlessly put before them each week. The Wal-Mart corporate culture may smooth their way, but the job of the manager, sometimes the only salaried employee in the store, and his assistants, is essentially labor management, conducted with more sticks than carrots, more actual sweat than inspirational speeches. It is difficult, with long hours, and uncertain career prospects.

In the early 1980s Wal-Mart faced a recruitment crisis. With more than a hundred new stores opening each year, Wal- Mart had to hire or promote upwards of a thousand managers or management trainees during the same time frame. The company faltered. Recruitment from within meant the promotion of a lot of women, and that ran headlong into those Wal-Mart family values that tilted toward small town patriarchy. Of course, the company’s sexism had its own logic. The feminist revolution had barely reached middle America, which meant that the kind of women who worked for Wal-Mart were still largely responsible for rearing the children, putting dinner on the table, and taking care of grandma. Most were not about to pick up stakes and move to a distant town in order to move up Wal-Mart’s short and unpredictable managerial ladder. But if Wal-Mart promoted them into management in their hometown store, then they were likely to be poor disciplinarians.

How were they to “coach” old friends and relatives who had once shared gossip in the break room?

So Wal-Mart looked to the universities to recruit a new generation of managers. But here they faced another problem. Few freshly minted MBAs were going take an arduous $25,000 per year assistant manager job, and even the undergraduate business majors at the big schools became frustrated when they found that Wal-Mart had little use for their accounting and marketing skills. The solution was to search for a fresh cohort of management trainees in the denominational colleges and the branch campuses of the state universities, where diligence, Christian culture, and modest career expectations were already the norm. Wal-Mart wanted the B and C students, the organization men, the undergraduates who were the first in their family to take college courses. They wanted young men, and a few women, who could fully commit to the Wal-Mart ethos and the corporate culture.

Wal-Mart sent recruiters to small middle South colleges, worked with established organizations like the Distributive Education Clubs of America, and advertised on cable, at local military bases, and in area churches. However, Wal-Mart would soon recruit as many as a third of its management trainees from the ranks of a dynamic new group, Students in Free Enterprise (SIFE), which claimed a presence on more than 700 U.S. campuses by the end of the century.

SIFE was and remains an ideological formation that propagandizes on behalf of free market capitalism within the conservative Christian world nurtured at places like College of the Ozarks; John Brown University in Siloam Spring, Arkansas; Southwest Baptist University in Bolivar, Missouri; Drury University in nearby Springfield; and La Sierra University in Riverside, California. Like Wal-Mart, which put several of its top executives on the SIFE board and funded hundreds of faculty as Sam Walton Free Enterprise Fellows, SIFE has not celebrated a neo-liberal world of naked self-interest and Darwinian struggle. Unlike Wall Street’s Gordon Gekko, SIFE does not preach that greed is good. Instead the organization, which was revitalized by Wal-Mart in the early 1980s, has prepared students for entry-level management posts by linking the collegiate quest for self-esteem and humanitarian good works to an ideology of market capitalism and career advancement. Thus the SIFE statement of principles declares: “We believe that the best way to improve the lives of others is through Free Enterprise practiced morally.” Propagated successfully, this was just the kind of philosophy needed to generate the devoted, youthful cadre Wal-Mart wanted to staff its ever-expanding retail empire. And it was enough to earn this “student” group a place on the official Wal-Mart web site.

SIFE is highly centralized and hugely ambitious. It is a “missionary organization,” observed one Sam Walton Fellow, whose annual convention taps into some of the same enthusiasms that energize the larger Wal-Mart conclaves. The SIFE board largely replicates the set of firms with the largest stake in the Wal-Mart supply network, plus a few specialty retailers, like Walgreens and Radio Shack, that do not compete directly with the Bentonville monarch. As Wal-Mart expands abroad, so too does SIFE, which now claims campus “teams” at more than 600 foreign schools. Sam Walton Fellows are now mentoring young people in free enterprise education in the republics of the former Soviet Union, in South Africa, throughout Britain and Western Europe - where Wal-Mart is trying to establish a bigger footprint - and above all in East Asia, which is truly capitalism’s most dynamic frontier.

Working at Wal-Mart

Wal-Mart defends its low wage/low benefit personnel policy by arguing that it employs workers who are marginal to the income stream required by most American families. Only seven percent of the company’s hourly “associates” try to support a family with children on a single Wal-Mart income. The company therefore seeks out school-age youth, retirees, people with two jobs, and those willing or forced to work part-time. The managerial culture at Wal-Mart, if not the formal company personnel policy, justifies its discrimination against women workers, which now compose two-thirds of the workforce, on the grounds that they are not the main family breadwinner. Not since the rise of the textile industry early in the 19th century, when women and children composed a majority of the labor force, has the leadership of an industry central to American economic development sought a workforce that it defined as marginal to the family economy.

Wal-Mart argues that the company’s downward squeeze on prices raises the standard of living of the entire U.S. population, saving consumers upwards of $100 billion each year, perhaps as much as $600 a year at the checkout counter for the average family. A McKinsey Global Institute study concluded that retail-productivity growth, as measured by real value added per hour, tripled in the dozen years after 1987, in part due to Wal-Mart’s competitive leadership of that huge economic sector. “These savings are a lifeline for millions of middle- and lower-income families who live from payday to payday,” argues Wal-Mart CEO H. Lee Scott, “In effect, it gives them a raise every time they shop with us.”

But why this specific, management imposed trade off between productivity, wages, and prices? Henry Ford used the enormous efficiencies generated by the deployment of the first automotive assembly line to double wages, slash turnover, and sell his Model T at prices affordable even to a tenant farmer. As historian Meg Jacobs makes clear in Pocketbook Politics: Economic Citizenship in Twentieth-Century America, the quest for both high wages as well as low prices have been at the heart of America’s domestic politics throughout much of the 20th century. And when social policy tilts toward the left, as in the Progressive era, the New Deal, and on the World War II home front, workers and consumers find their interests closely aligned. They see the relationship between wages and prices as a fundamentally public, political issue and not merely a dictate of corporate management or the interplay of market forces. Thus, as late as 1960 retail wages stood at more than half those paid to autoworkers, in large part because the new unions and the New Dealers had sought to equalize wages within and across firms and industries. But by 1983, after a decade of inflationary pressures had eroded so many working class paychecks, retail wages had plunged to but one third of that earned by union workers in manufacturing, and to about 60 percent of the income enjoyed by grocery clerks in the North and West. And this is just about where retail wages remain today, despite the considerable rise in overall productivity in the discount sector.

Indeed, if one compares the internal job structure at Wal- Mart with that which union and management put in place at GM during its mid-twentieth century heyday, one finds a radical transformation of rewards, incentives and values. GM workers were often lifetime employees so factory turnover was exceedingly low: these were the best jobs around, and they were jobs that rewarded longevity. Auto industry turnover is less than eight percent a year, largely a result of normal retirements. At Wal-Mart, in contrast, employee turnover approaches 50 percent a year, which means it must be even higher for those hired at an entry-level wage. Turnover at K- Mart is somewhat lower and Costco, which provides even higher wages and benefits, reports a rate of only 24 percent.

The hours of labor, the very definition of a full workday, constitutes the other great contrast dividing America’s old industrial economy from that of its retail future. Since the passage of the Fair Labor Standards Act in 1938, most Americans have considered an eight-hour workday and a 40-hour week the nominal standard. Employers are required to pay time and a half to most non-supervisory workers when their hours exceed 40 per week. But the reality of our work lives has not always conformed to this standard. Industrial managers at General Motors and other high benefit firms have frequently insisted upon a longer workweek, perhaps 48 or 56 hours, in order to meet production goals. Most workers disliked such mandatory overtime, but neither the unions nor the government could do much about it because, from the employer’s perspective, the total cost of each additional hour of work has been relatively low. General Motors and other unionized firms have never been required to pay overtime on that large slice of their labor cost that consists of health and pension “fringe benefits.” But at Wal-Mart and other low- benefit firms it is a near capital offense for store managers to allow workers to earn overtime pay. Indeed, at Wal-Mart a 32-hour workweek is considered “full time” employment. This gives managers great flexibility and power, enabling them to parcel out the extra hours to fill in the schedule, reward favored employees, and gear up for the holiday rush. But the social consequences of this policy are profound: Unlike General Motors, Wal-Mart is not afraid to hire thousands of new workers each year, but employee attachment to their new job is low, and millions of Americans find it necessary, and possible, to “moonlight” with two part time jobs.

GM and Wal-Mart have also generated extraordinarily divergent pay hierarchies. During its heyday, factory supervisors at GM—hard driving men in charge of 2,000 to 3,000 workers—took home about five times as much as an ordinary production employee. At Wal-Mart, district store managers—in charge of about the same number of workers — earn more than ten times that of the average full time hourly employee. And when one calculates the ratio of CEO compensation to that of the sales floor employees, the disparity in pay becomes even greater. In 1950 GM President Charles E. Wilson,one of the most well paid executives of his era, earned about 140 times more than an assembly line worker; while H. Lee Scott, the Wal-Mart CEO in 2003, took home at least 1,500 times that of one of his full time hourly employees.

Reforming Wal-Mart

The fight to change the Wal-Mart business model, and in particular its labor policies, is part of a larger struggle to democratize our economic life. In China and elsewhere this requires a political transformation of the first order. When authoritarian governments preside over an era of massive, sustained proletarianization, an eruption of considerable magnitude cannot be far down the agenda. China’s transformation into the workshop of the world is therefore generating the flammable social tinder that might well explode, along lines first glimpsed at Peterloo in 1819, Lowell in 1912, even Shanghai itself in 1927. When this eruption takes place, the shock waves will force companies like Wal-Mart to rethink their wager on trans-Pacific supply-chains and global sweatshops.

At home our ambitions involve the effort to revive a social democratic ethos within American politics, policy, and work life. The fight is not against Wal-Mart per se, on aesthetic or consumerist grounds, but against the reactionary squeeze the corporation has been able to mount against the wages and income of all who labor within, compete with, or depend upon the new retail-centered political economy. This road leads to politics, especially in those bi-coastal states where Wal-Mart now seeks a large retail footprint. The roar that greeted GM President Wilson’s claim that what was good for GM was good for the country generated a set of real constraints upon America’s most profitable and efficient auto corporation. GM could have put Chrysler into bankruptcy and pushed Ford to the wall had it chosen to expand its market share beyond the 45 percent it enjoyed after World War II. Correctly fearing federal anti-trust action had it chosen to pursue such an aggressive pricing strategy GM instead maintained a price umbrella under which smaller competitors might shelter and autoworkers win higher take home pay.

Wal-Mart’s competitive strategy has been just the opposite, which has generated a howl of outrage from the unions, from small business, and from those communities that see the company’s “everyday low prices” as a threat to main street vibrancy. Site-fights in California and elsewhere in the coastal

U.S. may well signal the start of an era in which Wal-Mart is subject to much greater political challenge and constraint. Wal- Mart’s major worries derive not from the competition mounted by Target or Home Depot, but from angry voters, hostile government officials, and skillful class-action lawyers. This is not unique in American business history: powerful firms have often been forced to alter their business model and their labor policies, even without the passage of new legislation or the unionization of their employees. Muckraking journalists put John D. Rockefeller’s Standard Oil on notice that it would have to curb its predatory pricing strategy. Reformers forced U.S. Steel to abandon the punishing 12-hour day in 1924. IBM put its blue collar workers on salary in 1959 to avoid unionization. And in China, Central America, and elsewhere Non-Governmental Organizations, often backed by students and unionists in the U.S., have exposed the sweatshop labor employed by contractors who supply the apparel and toy departments of many American stores.

Today, Wal-Mart faces legal challenges on a variety of fronts, from the exploitation of illegal immigrants and the violation of child labor laws to discrimination against its female employees. If successful, these suits will have a material impact on Wal-Mart labor costs, bringing them somewhat closer to those of its competitors. Perhaps even more important, Wal- Mart’s labor policies are coming under attack from a wide variety of elected officials, as well as unionists and academics, who argue that the company’s ability to pay such low wages is possible only because state and federal tax, welfare, and health-care programs subsidize the living standards of Wal-Mart employees to an extent far greater than those of other U.S. workers. In California researchers at UC Berkeley found that Wal-Mart wages - about 31 percent below those paid in large retail establishments as a whole - made it necessary for tens of thousands of company employees to rely on public “safety net” programs, such as food stamps, Medicare, and subsidized housing, to make ends meet. The Berkeley study estimated that reliance by Wal-Mart workers on public assistance programs in California cost state taxpayers about $86 million annually, in part because the families of Wal-Mart employees utilized an estimated 40 percent more in taxpayer- funded health care than the average for families of all large retail employees. In Connecticut and Alabama the findings were similar if not so dramatic. In Georgia, offspring of Wal- Mart employees were by far the largest participants in “Peach- Care,” the state’s medical insurance plan for poor children.

The challenge, therefore, is to channel this critical wave into a broad coalition that can begin to transform the nature of work at Wal-Mart and the whole business model under which the big box retailers are now restructuring so much of the economic world. If Wal-Mart’s ambitious expansion plans are thwarted, then Wal-Mart management might begin to realize that a higher-wage, higher-benefit employment model may well be only way that they can escape from these populist constraints. And when workers at Wal-Mart see that they may have a lifetime career, then they will be much more likely to look to the trade union idea to give to their work life the democratic dignity and sustaining income it deserves.

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