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Special report on 'Is Wal-Mart Good for America?' on PBS Frontline, Nov. 16, 2004

(For a summary and access to a paid transcript of MSNBC's Nov. 10, 2004 , Wal-Mart documentary that won a George Foster Peabody Award, click here.)

By Alan Lowhorn, fall 2004 graduate assistant, Institute for Rural Journalism and Community Issues

The story behind Wal-Mart’s unprecedented growth and power is no mere tale of numbers, but the numbers begin to tell the tale:

—More than 5,000 stores worldwide

—100 million shoppers per week in the U.S. alone

—$256 billion in sales in 2003

These numbers portray a wildly successful company that has grown from humble roots as a single store in Bentonville, Ark., to become the most powerful retailer in the global economy.

In fact, as Nelson Lichtenstein from the University of California Santa Barbara argues in a recent episode of the PBS series "Frontline," Wal-Mart has set a standard for business in the twenty-first century, in much the same way that U.S. Steel and General Motors epitomized the twentieth-century corporation. The Frontline episode examines the origins of Wal-Mart and its worldwide influence while investigating its title question: “Is Wal-Mart Good for America?”

According to traditional retail distribution models, manufacturers set the terms of sale for their products — prices, schedules, quantities, and displays — while retailers accepted these dictates and managed their inventories as best as possible. Wal-Mart alone changed this dynamic away from the old “push” system and toward a “pull” system in which the retailer tells the manufacturer what to produce and how much.

The “pull” has even lured major multinational manufacturers, such as Hoover, Kodak, Timex and Kraft, to set up offices in Bentonville, near the international headquarters of Wal-Mart. As portrayed on Frontline, Wal-Mart buyers, armed with an overwhelming array of inventory histories and sales tracking data, tell the representatives of these and other corporations how many watches or boxes of macaroni they will buy. The ambassadors from “Vendorville,” as the rows of corporate offices next to Wal-Mart headquarters have come to be known, have little room to negotiate. Because of its inventory system’s unmatched efficiency and accuracy, Wal-Mart knows exactly what to buy and exactly how much to pay for it.

Wal-Mart’s vice president for government relations, Bob McAdam, deems this way of doing business his company’s “motivation” and its “challenge” to maintain costs “as low as possible, so that we can provide the customer a value and still make a reasonable profit for our company.” Shoppers interviewed during the Frontline special agree with McAdam’s assessment, offering such praise as “I know I don’t have to look and see where I can save the most money,” and “Good prices, good quality of stuff.”

Others are quick to disagree. Alan Tonelson from the U.S. Business & Industry Council argues, “The lowest prices have to lead to the lowest wages and to job loss and to lower living standards.”

The residents of tiny Wooster, Ohio, also felt negative, if indirect, effects of Wal-Mart’s global reach. Wooster was for decades the home of Rubbermaid, a household name in storage and trash containers. In the early 1990s, Rubbermaid changed its business strategy to reflect the shifting nature of retail sales. It began selling two thirds of its volume to a half-dozen of America’s leading giant retailers. When an increase in its raw material costs forced Rubbermaid to implement a universal retail price hike, Wal-Mart refused the change and dropped most of its Rubbermaid orders. Rubbermaid, never to regain its former strength, sold out to a competitor and closed its Wooster factory once and for all in 2002, eliminating 1,000 jobs from the rural Ohio town.

“Is Wal-Mart Good for America?” also focuses on the nation that, though replacing towns like Wooster as the favored supplier of manufactured goods for multinational retail giants, has expanded at a rate that parallels Wal-Mart’s astronomical growth. In China, the city of Shinzen has grown from a state of non-existence to a population of seven million since the 1980s. The city’s port has become the world’s fourth largest since it was constructed a decade ago. Fully 80 percent of Wal-Mart’s 6,000 global suppliers are based in China. Again, the numbers fail to relate the full story, but they begin to tell the tale.

Duke University’s Gary Gereffi characterizes the relationship between the nation-state of China and the Wal-Mart corporation as a “joint venture.” Each partner in this venture seeks to claim as large a segment of the U.S. economy as possible, with Wal-Mart on the retail side and China on the manufacturing side. Although portrayed as the key to opening up Chinese markets for goods manufactured in America, the move by Congress and the Clinton administration to normalize trade relations with China has actually accomplished the opposite, to the tune of a $124 billion trade deficit in 2003.

Frontline puts the spotlight on another Ohio town, Circleville, to discuss the further effects of these shifting economic tides. Circleville, like Wooster, also lost over 1,000 jobs when a long-time corporate resident closed its doors. Thomson Electronics’ plant supplied televisions to brand-name companies such as Sanyo to be sold in retail outlets worldwide. Ron Wunsch, former mayor of Circleville, depicts this golden age for his town as an era of “good jobs, good living standards, and good people in the community.”

The good times would not last. According to Randy Strutz, former manager of the factory, when Wal-Mart cancelled Sanyo orders because of lower-priced options available from China, Sanyo cancelled its orders from the Circleville plant in turn. The hit proved too much for Thomson to absorb, and the company closed its Circleville location in 2002. In an act of final bitter irony, Wal-Mart recently announced plans to open a SuperCenter in Circleville within sight distance of the abandoned shell of the old Thomson plant.

UCSB’s Nelson Lichtenstein borrows a term from Austrian economist Joseph Schumpeter in describing this effect: “creative destruction.” Wal-Mart’s newest outlet will create jobs for Circleville residents, including former Thomson factory employees who may now find work in the new superstore on the outskirts of town, ironically next to the shuttered plant. However, according to several analysts interviewed on Frontline, these new opportunities will not live up to the old manufacturing jobs in terms of wages or benefits. As Lichtenstein puts it, “Wal-Mart has…discovered, with this low-wage model…a sort of new model of world capitalism, really, beginning in America and the rest of the world. And it is destroying, creatively, but nevertheless destroying competitors and, really, other ways of thinking about the way the world works.”

Bob McAdam, the Wal-Mart vice president, says his company is good for America: “We are raising the standard of living through lowering the cost of goods for people.”

Larry Mishel of the liberal Economic Policy Institute disagrees: “Well, if people were only consumers buying things, lower prices would be just good. But people also are workers who need to earn a decent standard of living. And the dynamics that create lower prices at Wal-Mart and other places are also undercutting the ability of many, many workers to earn decent wages and benefits and have a stable life.”


 

Institute for Rural Journalism & Community Issues

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Al Cross, director , al.cross@uky.edu