Sam Walton, the founder of Wal-Mart, based the cornerstone of his marketing campaign in the mid-80s on “Made in America”, offering to pay 5% more for goods manufactured in the United States — a practice and ethic long gone at the world’s largest retail store.
Today, consulting firm Retail Forward estimates that 50% to 60% of the merchandise in the company’s U.S. stores is imported. Labor activists estimated in the mid-1990s that as many as 50,000 Bangladeshi children were sewing apparel for Wal-Mart.
With Wal-Mart’s incessant push to reduce its prices, it is the workers, both domestic and foreign, who suffer when suppliers have to survive by cutting corners. Khadija Akhter can attest to that. The 22-year-old factory worker in Dhaka earned $21 a month, a wage three times higher than a maid or cook, often working 10- to 15-day stretches from 8 a.m. to 3 a.m. to fill big orders for Wal-Mart. Exhausted, she quit after a year and took a lower-paying but less grueling job.
Where are your values? Jeffrey Seglin, business ethics columnist for the New York Times: “Deciding whether or not to shop at Wal-Mart [is] based on the question of what are my values. If my values are such that I don’t care about whether the company has a progressive policy in terms of health care benefits for their employees, then it is perfectly fine to buy the product in question. If my values are such that it is the only product I can afford to buy due [to] the economical class I happen to be in, then, that is [also] a choice I’ve made based on my values.”
Wal-Mart disregards and disrespects local culture. Letta Taylor, Sun-Sentinel: “Wal-Mart, Mexico’s largest retailer and private employer, opened a discount superstore on the outskirts of the Teotihuacán ruins [, the ancient Aztec pyramids]. The National Institute of Anthropology and History claims [that] valuable artifacts have been destroyed beneath the cornfields that bulldozers razed to make way for the structure… Residents found several relics in a dumping area for construction debris once workers began clearing the ground for the store. Archaeologists removed 17 tiny clay pots and five graves containing skeletons from the site, and preserved the base of an earthen altar that was found beneath the superstore parking lot.”
Shopping at Wal-Mart is unethical in a global economy. Bob Brownstein, policy director of Working Partnerships USA: “Wal-Mart pays low wages and appears to aggressively [work] to keep wages down. On average, Wal-Mart workers earn an estimated $8.00/hour with a 32-hour work week. This equals $256 a week or $13,312 a year. The Federal poverty level for a family of three is $14,630… Charges have been made that older workers are laid off to bring in younger and cheaper employees. Some 40 lawsuits accuse Wal-Mart of a failure to pay overtime. Accusations have also been made of widespread sex discrimination to keep a class of employees — women — at lower wages. Wal-Mart is not just a threat to the standard of living of its own employees. It damages the standard of living of numerous others in the economy. To begin with, it pulls wages and benefits down in other grocery stores. It lowers area standards. In some cases, it forces the closure of better paying firms. Business Week estimates for every Wal-Mart supercenter that opens, two other supermarkets will close. It pressures suppliers to make products more cheaply, putting pressure on wages, causing jobs to be moved overseas… Two-thirds of Wal-Mart workers can’t afford to participate in the company health insurance plan, which costs about 20% of a worker’s paycheck. Since 1993, Wal-Mart has increased the premium cost for its workers by 200%, well above the rise in cost of health insurance. Wal-Mart is both a cultural symbol and is an economic force that destroys other institutions based on relationships of human connection and solidarity — be they neighborhood businesses or unions. Wal-Mart helps transform people into anomic creatures whose lives are dominated by the search for bargains — at whatever social cost. The recent case in which a crowd of WM shoppers trampled a woman in their desire to purchase a $29.00 DVD illustrates the Wal-Mart impact on values. It is unethical to shop at Wal-Mart.”
Everyday low prices do not mean a positive domestic economy. PBS Frontline interview with Alan Tonelson, United States Business and Industry Council:
Q. Are we seeing a huge production shift from America to China?
A. In recent years, a large percentage, and a rapidly growing percentage of the U.S. manufacturing base, has gone to China. Big retailers always want to get the lowest possible price for the products that they offer to us. Wal-Mart is always going for the lowest price from any company that supplies it with any goods. Wal-Mart can then sell this product for as high a price as it can get on the free market. It’s a great way to widen profit margins. So, Wal-Mart is so big that it’s able to tell the companies that sell products to it: “We want to pay X dollars for this product and not a penny more. It’s up to you to supply us with that product at that price. If you can’t do it, we’ll go to somebody else.” And the companies that do business with Wal-Mart don’t have much of an option to sell to someone else because there aren’t that many big retailers left… U.S. trade with China is basically stripping the United States of its ability to earn its way in the world, to finance its consumption by producing goods or by producing services, and the only option that we’ll have left once we’ve lost production capacity to China is somehow borrowing the money we need to consume at the levels that we’ve grown used to… A completely misleading impression of the China market was created by supporters of current trade policies, both in the U.S. government and in private business, especially among the ranks of multinational companies. picture painted for the American voter was that China was a big emerging market for U.S. exports and that U.S. workers and also U.S. companies — companies that made their products here — could profit tremendously from the opening of trade flows with such an enormous country like China. After all, it had 1.2 billion people. What they never told us was that the vast majority of the 1.2 billion people earned virtually nothing and therefore have no ability to consume [American products].
Q. What’s wrong with this? What’s wrong with Wal-Mart going over and getting the lowest prices for the American consumer?
A. There is nothing wrong with any individual company going anywhere in the world, including China, to get the lowest possible prices for U.S. consumers. The problem comes in when most, if not all, U.S. companies are going all around the world in search of the lowest possible prices for U.S. consumers, because when they go all over the world and leave the U.S., they wind up firing U.S. workers. If Americans can’t earn enough income to buy these products, the business model breaks down… [When] the whole economy is based on this kind of outsourcing, the whole economy breaks down.
Q. Wal-Mart says it’s lowering the cost of living by delivering everyday low prices. What’s wrong with that idea?
A. Wal-Mart certainly does lower the cost of living for American consumers by offering low prices, but it also lowers the standard of living, because as jobs leave the U.S., the country’s wage level gets lowered, too. It’s a lose-lose [situation], and it’s a race to the bottom in terms of living standards. The lowest costs have to lead to the lowest wages and to job loss and to lower living standards… Wal-Mart [is not] good for the American economy because even though it’s offering more and more people lower and lower prices, by encouraging job flight, it’s helping to drive down the wage level of the entire American workforce. And as the wage level falls, Americans become less and less able to pay for products, however low the prices are, in a responsible way. Their only choice is to go deeper and deeper into debt. The country goes deeper and deeper into debt as well, and the country is encouraged to import from countries like China much more than it can possibly export. Wal-Mart alone imported an estimated $15 billion worth of goods from China in the year 2003… In fact, Wal-Mart imported almost as much from China as the entire American economy exported to China in the year 2003.
Sarah Schafer, Newsweek International: “Wal-Mart buys so many Chinese-made products that if it were a country, it would be China’s sixth largest export market (after Germany) and its eighth largest trade partner. In the case of [Wal-Mart’s goal to open 1,000 retail stores in China], it’s not clear whether Beijing fully realizes what it’s in for. The transfer of Wal-Mart technology could prove hugely disruptive in a market that is far larger and far less stable than the United States.”
Lower prices equals lower salaries. BusinessWeek Online: “With $245 billion in revenues in 2002, Wal-Mart is the world’s largest company. It is three times the size of the No. 2 retailer, France’s Carrefour… Last year, 82% of American households made at least one purchase at Wal-Mart… Over the years, Wal-Mart has relentlessly wrung tens of billions of dollars in cost efficiencies out of the retail supply chain, passing the larger part of the savings along to shoppers as bargain prices… However, Wal-Mart’s seemingly simple and virtuous business model is fraught with complications and perverse consequences. America’s largest private employer is widely blamed for the sorry state of retail wages in America. [Wal-Mart cites] an employee turnover rate that has fallen below 45% from 70% in 1999. [This is proof] of a lack of employment alternatives in a slow-growth economy. A series of academic studies have debunked the notion that a new big-box store boosts employment and sales and property-tax receipts… ‘Everyday low prices’ come at a cost. As the number of supermarkets shrinks, more shoppers will have to travel farther from home and will find their buying increasingly restricted to merchandise that Wal-Mart chooses to sell — a growing percentage of which may be the retailer’s private-label goods, which now account for nearly 20% of sales. Meanwhile, the failure of hundreds of stores will cost their owners dearly and put thousands out of work, only some of whom will find jobs at Wal-Mart, most likely at lower pay.”
Lower prices equals lower quality. James A. Wier, CEO of Simplicity Manufacturing: “Wal-Mart really is about driving the cost of a product down,” says James, a lawn-mower maker that decided to stop selling to Wal-Mart last fall. “When you drive the cost of a product down, you really can’t deliver the high-quality product like we have.”
When manufacturing shifts out of countries, the standard of living is reduced, and most countries are desperate to retain these jobs. Nancy Cleeland, Los Angeles Times: “When WalMart Stores Inc. demands a lower price for the shirts and shorts it sells by the millions, the consequences are felt in a remote Chinese industrial town… Isabel Reyes, who has worked at the plant for 11 years, pushes fabric through her sewing machine 10 hours a day, struggling to meet the latest quota scrawled on a blackboard. She now sews sleeves onto shirts at the rate of 1,200 garments a day. That’s two shirts a minute, one sleeve every 15 seconds. ‘There is always an acceleration,’ said Reyes, 37, who can’t lift a cooking pot or hold her infant daughter without the anti-inflammatory pills she gulps down every few hours. ‘The goals are always increasing, but the pay stays the same.’ Reyes, who earns the equivalent of $35 a week, says her bosses blame the long hours and low wages on big U.S. companies and their demands for ever-cheaper merchandise. WalMart, the biggest company of them all, is the Cosmos factory’s main customer. Reyes is skeptical. Why, she asked, would a company in the richest country in the world care about a few pennies on a pair of shorts? The answer: WalMart built its empire on bargains… The company has established a network of 10,000 suppliers and constantly pressures them to lower their prices. At the same time, WalMart buyers continually search the globe for still-cheaper sources of supply. The competition pits vendor against vendor, country against country. [For example,] to cut costs, Honduran factories have reduced payrolls and become more efficient. The clothing industry is one of the few sources of decent jobs for unskilled workers in [Honduras]. Many of those jobs depend on WalMart. WalMart is so important to the stability of Honduras that leaders [attempt to] cultivate stronger ties with the company, almost as they would a foreign country, [and have] lobbied the government to send high-level envoys to WalMart’s Arkansas headquarters, something Bangladesh and other countries already do.”
Jerry Useem, Fortune magazine: “[Wal-Mart] will do just about anything to get bigger. You’ve seen the headlines. Illegal immigrants mopping its floors. Workers locked inside overnight. A big gender discrimination suit. Wages low enough to make other companies’ workers go on strike. And we know what it does to weaker suppliers and competitors. Crushing the dream of the independent proprietor — an ideal as American as Thomas Jefferson — it is the enemy of all that’s good and right in our nation.”
You have the responsibility to invest in the future of your children and grandchildren by boycotting shopping at Wal-Mart and (just as importantly) dumping mutual funds in your portfolio that invest in Wal-Mart.
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