Wal-Mart is by far the largest retailer in the United States. It consistently puts competitors out of business, and has sales larger than the Gross National Product of most countries. However, on average, it pays its employees lower wages than most retailers and uses contractors who use sweatshop labor overseas to produce goods that have been labeled “Made in America.” Wal-Mart is accused of increasing the need for social services in areas where its stores are leading employers, as many employees qualify for public assistance. Wal-Mart is also in the business of making moral decisions for its customers such as refusing to carry Previn, a “morning-after” pill, and censoring music and videos. This teaching case study aims to draw out discussion about these issues in undergraduate ethics and political economy classes.
In particular, some questions we hope arise from this study include: What are the responsibilities of a corporation, especially one as large as Wal-Mart? Should a corporation be concerned with the effects it has on a society, ecosystem, or community? What are the rights of communities when it comes to allowing or not allowing businesses into their area? What are the policy implications? This case study aims to raise more questions than answers in these areas, in the hope that classes can use the study as a guide for lively discussion about the marketplace, social welfare, cultural homogenization, labor and other issues in the context of expanding global corporate influence in society.
Wal-Mart or World-Mart?
Wal-Mart is a company that most Americans are familiar with, a company with stores that offer everything a person could need at low prices. What began as a company based in a small Arkansas town has grown to be the largest employer in the United States. By 1998, Wal-Mart had the fourth highest annual sales revenue of any American company and had stores throughout four continents. It is estimated that within a few years, twenty cents of every retail dollar spent in the U.S. will be spent at this store. Yet, most people are probably not familiar with how big Wal-Mart truly is, how it became so big, nor how powerful it is.
In order to minimize operating costs and maintain low prices, Wal-Mart pays relatively low wages and provides minimal benefits to its employees. Yet, Wal-Mart has taken some fairly drastic measures to ensure that their workforce is not able to form unions. Wal-Mart purchases many of its items, particularly clothing, from developing countries, including the U.S. Commonwealth of Saipan. This case study will consider the implications this policy has on laborers and development in those countries, as well as production and employment in the U.S.
Despite the positive public image it portrays, Wal-Mart’s size and growth have also allowed it to force other stores out of business, often causing a disintegration of communities and ultimately reducing consumer choices. One question this case study considers is whether Wal-Mart has lived up to its image as an American success story.
Although focused on Wal-Mart, this case study is more than a study of one particular large U.S. corporation, because it analyzes the effects corporate growth and size have on social, political and economic systems on the local, national and international levels. Numerous multinational corporations (MNCs), including Wal-Mart, have annual sales greater than the gross domestic product of the majority of countries in the world. This implies that MNCs are potentially becoming more powerful than national and local governments. This shift in power, in many instances, allows corporations to have an increasingly stronger influence on social, political, and economic aspects of people’s lives.
Studying the role of the multinational corporation is crucial to understanding the future of societies throughout the world. Over the past 30 years, sales of the world’s 500 largest MNCs have increased by sevenfold; yet, worldwide employment during this period has remained virtually unchanged. Since labor is relatively immobile, while capital (money, machines and technology) is extremely mobile, power to determine where and how business is carried out clearly lies with corporations. This dichotomy has a dramatic impact on social, political, and economic systems: for example, cities, states, and countries are offering extremely favorable terms in order to attract corporations, which in nearly every case are not concerned with the long-term, and possibly not even the short-term, interests of the area into which they locate.
We trust this case study will increase your understanding of the role of MNCs in contemporary societies. Behind the slick advertising and low prices of increasingly large corporations lies an encroachment on every aspect of life. However, the growth of large corporations throughout the world is not an inevitable process. It is our hope that this case study will provide you with a better understanding of MNCs and the effects that the process of their increasing size and power has on social, political, and economic aspects of life in all societies.
World-Mart: Big and Getting Bigger
Wal-Mart has grown from a single store opened by the late Sam Walton in 1962 to a global corporation. In the face of corporate competition – before Walton had opened 20 stores, there were 250 Kmart stores. The dramatic growth of Wal-Mart Corporation has reflected the dynamism with which Sam Walton operated the organization, maintaining the marketing principles of low prices and customer satisfaction that he practiced and preached while becoming the single largest retailer in the world.
Wal-Mart is presently the largest private employer, hiring directly for its own needs, in the United States. As of early 2000, there were an estimated 885,000 Wal-Mart employees in the United States, with another 255,000 employees internationally.
Number of Employees 1997 1998 1999
Wal-Mart 675,000 728,000 825,000
Kmart 307,000 265,000 261,000
Sears 335,000 296,000 324,000
JC Penney 252,000 260,000 260,000
Dayton Hudson 218,000 230,000 244,000
As shown in the table above, Wal-Mart’s American labor force at year-end 1999 was nearly as large as those of its three largest competitors in the general merchandise retail trade; Kmart, Sears, and JC Penney. In fact, at year-end 1999, Wal-Mart had nearly as many employees in the United States as General Motors (608,000 employees in 1999) and Ford (371,800 employees) combined.
Exhibiting tremendous growth in sales revenue, particularly in the 1990s, Wal-Mart’s annual sales revenue has continues to rise – 1999 sales revenue exceeded $164 billion. While its competitors have shown marginally increasing sales, or even fluctuating levels, Wal-Mart’s sales have consistently increased by 15-30 percent from one year to the next. Imagine your personal income increasing by these percentages from one year to the next, for seven consecutive years!
Sales Revenue ($000,000)
1991 1995 1996 1997
Wal-Mart 32,602 82,494 93,627 104,859
Kmart 29,563 31,713 31,437
Sears 32,250 34,995 38,236 41,296
JC Penney 16,648 21,419 23,649 30,546
Dayton Hudson 16,115 23,516 25,371 27,757
In 1991, Wal-Mart’s annual sales revenue of $32.6 billion was only slightly higher than that of Sears ($32.25 billion). By 1997, Wal-Mart’s revenue from sales was higher than Sears, JC Penney, and Kmart combined.
In 1998, Wal-Mart ranked as the fourth largest U.S. corporation in terms of sales revenue, behind only General Motors, Ford, and Exxon. Its 1998 sales revenue exceeded such industry giants as Toyota, General Electric, IBM, Daimler-Benz Group, Phillip Morris, AT&T, Sony, Nissan, Nestle, Boeing, Mobil, and Texaco. In fact, only 30 countries had levels of gross domestic product – simply defined as the value of total goods and services produced in a country – higher than Wal-Mart’s sales revenue in 1998. It is incredible to think that Wal-Mart’s sales revenue in 1998 was more than the entire official economic production of such countries as Greece, Finland, Portugal, Ireland, New Zealand, Israel, and Philippines.
This section of the case study outlines the more vital issues facing United States Wal-Mart employees. The focus will be primarily on what Wal-Mart terms as “associates”: the people stocking shelves, working the registers, handling retail sales, and greeting customers at the door. This emphasis underlies the fact that associates number nearly 800,000 and constitute, by a large margin, the majority of Wal-Mart’s workforce.
Always striving to cut inventory and operating overhead while cultivating employee moral, loyalty, and enthusiasm were posited as two of Wal-Mart’s guiding principles by Sam Walton when he was first starting the company. How can Wal-Mart cut operation costs and simultaneously create an environment which motivates employees and promotes their loyalty? The aim of this section is to provide information necessary for readers to answer this question.
The basic theoretical approach to management at Wal-Mart is to treat associates as equals, to keep them fully informed of company developments, to invite them to share their own suggestions regarding company policy and practice, and to make them feel that their contributions are important and that they are listened to. It seems probable that employees would be happy to be working for such a company, one listed in the top one hundred companies to work for by Fortune, Hispanic Magazine, and Latina Magazine.
While most estimates place national annual median income between $25,000-$30,000, the average full-time Wal-Mart employee is paid around $12,000 annually including bonuses provided through the company’s profit sharing. The low income of full-time Wal-Mart associates may be in part a reflection of their work week. Wal-Mart classifies as “full-time” any employee who works a minimum of twenty-eight hours per week. Moreover, Wal-Mart makes no commitment to provide associates with a guaranteed minimum hourly work week. If a store’s profits decline, management may simply cut associates’ hours resulting in the loss of benefits held by “full-time” employees. A shorter work week may partially explain why half of Wal-Mart associates, including some full-time, qualify for food stamps and even cash assistance in the more welfare- oriented states.
According to Walton himself, wages at Wal-Mart have always been “as little as we could get by with at the time.” The average Wal-Mart associate make $7.50 an hour, the national average for most general merchandise workers is $8.71. An associate at the Flagstaff, Arizona, Wal-Mart claimed that in her department, eight of the ten employees hold a second job, and a few were forced to hold three jobs just to make ends meet.
An article in Wall Street Journal noted, “Perhaps more than any other U.S. Company, Wal-Mart has relied on stock incentives to motivate otherwise low paid employees, giving them a feeling of ownership and hope for wealth.” Between 1981 and 1991 the profit sharing bonus paid out to employees averaged six percent of their wages. Introduced in 1971, the profit sharing and stock ownership plans provide an incentive for employees to work hard as they have shared interest in the overall well being of the company. Theoretically, their own incomes become linked to their productivity. From the perspective of the company, these plans have several benefits: a) Wal-Mart does not need to pay high labor costs when the company is not experiencing profit growth; b) associates are motivated to work hard; and c) stock benefits can be used to redirect complaints about poor pay.
The program is structured using a formula based on profit growth. Employees are awarded a contribution to their profit sharing plan according to their wages, which employees can keep or cash out when they leave the company. In addition to stock gained through the profit sharing program, employees can have a percentage taken from their paycheck to purchase Wal-Mart stock from which Wal-Mart matches fifteen percent up to $1,800 annually.
All full-time associates are eligible for participation in Wal-Mart’s medical plan once they have completed their ninety day probation period. However, less than forty percent of Wal-Mart’s eligible employees participate in the plan: “[Wal-Mart employees] who choose not to participate [in Wal-Mart’s health care plan] usually get their health care benefits from a spouse or the state or federal government.”
Wal-Mart’s recent acquisition of Canada’s Woolco can provide some insight into Wal-Mart’s attitude towards their obligation to their employees as well as how they treat employees compared to other companies. Holding true to their anti-union stance Wal-Mart simply refused to buy the seven Woolco stores that had unionized, leaving 1,000 Canadians jobless.
For many of the remaining employees, the buy-out meant lower wages; for example, former auto mechanics suffered a halving of their wages when Woolco’s auto repair shops were converted to Wal-Mart lube shops; five hundred fairly paid Woolco warehouse workers were fired and rehired as Wal-Mart associates for near minimum wage irrespective of their experience, and 750 former Woolco supervisors were informed that if they wished to keep their $28,000 annual salary they would have to increase their work week from forty to fifty-two hours. In the province of Quebec, French is the official language and, for some, the only language they speak. Yet, when Wal-Mart took control of the Woolcos located in Quebec they required employees to sign contracts that were only made available in English.
Does Wal-Mart provide its associates with a fair wage? What would you consider a “fair wage?” Should corporations provide fair or living wages to employees?
Is profit sharing and stock ownership an adequate substitute for wages?
What would be the impacts of below subsistence wages on a local community? On local government revenue? On family life?
“Right to Work:” Wal-Mart Wins Again
“Wal-Mart Wins Again.” Wal-Mart won a court ruling against the United Food and Commercial Workers (UFCW) in October of 1999. The right of a union to organize workers at the location of labor [see sidebar] was temporarily restrained and the union was banned from Wal-Mart property. Wal-Mart, the leading direct private employer in the United States, had once-again avoided the union. Wal-Mart won another battle with the unions in court, even though the judge was found to own more than $500,000 of Wal-Mart stock. However, the judge was later forced to step down from the case due to his conflict of interest with Wal-Mart.
WHAT ARE WORKERS RIGHTS TO ORGANIZE?
The National Labor Relations Act (NLRA) of 1935 protects the right to organize into labor unions. This law created the National Labor Relations Board to mediate the tensions between workers and employers and ensure the free flow of commerce. Under this act, workers have several important rights:
1. Right to self organization
2. Right to “form, join, or assist labor organizations”
3. Right to bargain collectively through representatives of the workers’ own choosing
4. Right to concerted activities which are for the purposes of collective bargaining
5. Right not to join a union
Also, the NLRA prohibits “unfair labor practices.” Unfair labor practices includes the following:
1. Dominating or interfering with the formation of a union.
2. Discrimination in hiring or promoting any person due to their union affiliation or non affiliation. As well as firing an employee because they have filed a complaint or given testimony about a violation of worker rights or unfair labor practices.
3. Refusing to bargain with a union; conversely it is illegal for a union to coerce employees into bargaining or not bargaining.
An Arizona representative of the UFCW argues that the giant retail firm has illegally tampered with the workers’ right to organize, which is established through the National Labor Relations Act of 1935. The union has brought charges against Wal-Mart that the corporation has destabilized the bargaining process by not conducting labor relations in good faith and it has obstructed organizing activities that are legally protected to provide “workers’ rights.” The National Labor Relations Board (NLRB) agreed with these charges in three specific cases.
In decisions dated April 9th, 1999 (in the initial NLRB ruling), August 27th, 1996, and September 30th, 1993, Wal-Mart was found to have threatened associates affiliated with protected organizing activities. In Ontario, Canada, even though the union was voted down by employees by a margin of more than 3 to 1, the province of Ontario certified the United Steelworkers Union to represent the workers in that store because the province found the firm interfered with the organizing process.
Robin Zaas, an associate, won a suit against Sam’s Club for being threatened due to protected organizing activities. The NLRB found that the management in her branch of Sam’s Club threatened promotions and raises because she was trying to start a union at her work place. The UFCW claims that Wal-Mart was tampering with the union process in several ways, including “stacking” voting departments with anti-union workers.
According to Jim Mclaughlin, a representative of the Arizona UFCW, if workers were to unionize, they would make an average of $5.00 an hour in wages and benefits above what they make now. Income from “full-time” Wal-Mart wages are low enough that about half of all Wal-Mart employees are estimated to be eligible for food stamps. Mclaughlin argues, “There is no justice in their workplace right now.”
Also, considering that one study estimates that for every person Wal-Mart employs, they displace 1.5 full-time workers somewhere else in that geographic job market, low wage Wal-Mart jobs are taking over higher-paying retail and grocery jobs. This is why some studies say social service needs, such as food stamps, healthcare, etc, go up in an area where Wal-Mart is a major employer.
Given that there are over 800,000 Wal-Mart employees in the United States, such a wage increase would substantially increase Wal-Mart’s operating costs. In order to offset this increase in costs, Wal-Mart would likely argue that it would need to increase prices or lay-off large numbers of workers if workers unionized. (Or could they simply lower salaries of the executives or overall profit margins?)
To say that Wal-Mart is not unionized is not entirely correct. One meat department in one store in Texas voted to unionize. After this vote, Wal-Mart implemented a policy to begin using pre-packaged meat in order to close the butcheries in their stores, but has denied the closures are related to the union and have anything to do with bargaining in good faith, an aspect of the Labor Act. Wal-Mart has been found to have violated this law in 1999, when the NLRB found that Sam’s Club had threatened to close a store in Landover Crossing, Maryland if the store unionized .
How is it that such a large employer, who pays low wages, offers limited health benefits, and inconsistent working hours been able to create a “union-free zone”?
If there are difficulties in the Wal-Mart workplace for Wal-Mart workers, are low prices worth these difficulties? For whom?
Are low prices/ low wages versus higher prices/higher wages the only real choices? What are other scenarios?
What is the effect on the community when many community jobs are low wage jobs?
As you refer to the NLRA sidebar on workers rights, can you suggest any other rights you think workers should have?
Cheaper Clothes: At What Price?
Wal-Mart’s venders pay the following wages to their workers in Third World factories:
Nicaragua – 15 cents / hour Guatemala – 65 cents / hour
Bangladesh – 20 cents / hour Haiti – 67 cents / hour
El Salvador – 61 cents / hour Mexico – 61 cents / hour
With such low wages for those who make the clothing, Wal-Mart can profit greatly while still providing low prices to its customers. In a global labor market, it is the companies who can find the cheapest, most exploitable conditions, with little worker protection or regulations who will profit the greatest.
The fact is that many of these wages do not match up to minimal living standards in these countries. According to the doctrine of the free traders, Third World countries have an economic advantage with their cheap labor. The question is not only whether the Third World will catch up, but also how far the American worker falls behind. The American worker is now in competition with children who will work 60 hours a week for pennies an hour. American workers will lose production jobs to these countries unless American workers are willing to match the labor deals in the Third World. The commitment to low prices seems to rely on the exploitation of Third World labor, and this factor should be taken into account when Wal-Mart makes claims about “always the lowest prices.”
The International Labor Organization (ILO)
The ILO is the labor rights organization at the UN that focuses on labor rights and treatment throughout the world. They are founded on the conviction that “social justice is essential to universal and lasting peace.” Unlike many mainstream economists who argue that economic growth leads to social justice, the ILO advocates that “economic growth is essential but not sufficient to ensure equality, social progress and the eradication of poverty.”. The ILO states that only strong social policies within just and democratic societies can alleviate the exploitation of labor worldwide.
The ILO produced its Declaration on Fundamental Principles and Rights at Work in 1998 at its 86th convention. All nations signing the agreement must adhere to the following fundamental rights:
1.) freedom of association and the effective recognition of the right to collective bargaining
2.) the elimination of all forms of forced and compulsory labor
3.) the effective abolition of child labor
4.) the elimination of discrimination in respect of employment and occupation
Wal-Mart itself promotes its “Vendor Standards” but they have yet to assimilate the principles of the ILO, with their intent to create a world based on social justice and equality.
Contrary to its Vendor Partner Standards, Wal-Mart’s labor practices represent below subsistence wages for the workers who are supposed to be protected through their implementation. For example, Mandarin International, a Taiwanese garment vendor for Wal-Mart, working with one of Wal-Mart’s “vendors of the year” for 1997, Fruit of the Loom, fired 186 workers in El Salvador for belonging to a union. Wal-Mart also routinely purchases merchandise from factories in Latin America where workers are forced to work overtime, verbally abused, not given clean drinking water, denied health care, and limited to bathroom breaks by armed guards.
H.H. Cutler sports apparel, owned by VF Corp, producer of Wrangler and Lee jeans, was reportedly sewing “Made in the USA” labels on garments produced in Haiti and sold at Wal-Mart. A 1992 NBC dateline exposé also found that garments sewn together by 12 year olds in Bangladesh had “Made in the USA” labels sewn into them and were sold at Wal-Mart under such pretense. In light of this, Wal-Mart’s claims of “Made in the USA” products are not as truthful as they would like us to believe.
How does the use of overseas labor affect your community?
What are the consequences of Wal-Mart’s low prices for laborers abroad?
“Made in the USA”
Saipan, the governmental seat of the Commonwealth of the Northern Mariana Islands (CNMI,) is important to our study of Wal-Mart because in 1986, it became a commonwealth of the United States. Therefore, textiles and other products manufactured on the island can technically wear the “Made in USA” label, which Wal-Mart proudly waves.
But in the island garment factories of Saipan, US labor standards have not been enforced. Because Saipan is exempted from the US Immigration and Nationality Act (INA,) foreign-owned companies are located in the CNMI and are allowed to recruit tens of thousands of foreign laborers each year.
Foreign laborers vastly outnumber the local, resident workers and have not been protected by labor laws. In the 1986 Covenant to Establish a Commonwealth of the Northern Mariana Islands (CNMI), the US government granted the concession that minimum wage laws need not be enforced. The average Saipan textile worker sewing US garments earns $3 an hour. These workers– mostly young women–could be fired and deported for a variety of reasons; if they refused to work overtime, including unpaid “volunteer hours;” participated in political or religious activities; asked for a higher wage; criticized labor conditions; did not have an abortion if they became pregnant; refused to lie to inspectors; or tried to organize a union.
Yet the 1986 Covenant states that the CNMI would need to comply with American law on fair labor standards (see Right to Work: Wal-Mart Wins Again). However, as we have seen in the previous section on international labor practices, sweatshop labor is rampant. In fact, the plight of these 14,000 overseas workers from China, Korea, the Philippines, Thailand, and Sri Lanka, along with 2,500 local and US workers (Chamorro & other Micronesians) have become the concern of various groups. Saipan has been the target of media attacks about its coercive labor practices.
In fact, in January of 1999, an international labor union and three human rights organizations filed a class-action lawsuit in California against US corporations using sweatshops in Saipan. Among a group of top retailers, including Tommy Hilfiger USA, J. Crew, and the GAP, the lawsuit charges: Wal-Mart has shipped approximately 7.3 million pounds of garments (worth approximately $43.8 million) manufactured in sweatshops in the CNMI. This conduct violates state, federal, and international law.
The United Stated government has taken some steps to address these concerns. In October 1999, the US National Labor Relations Board (which oversees treatment of labor by American firms) entered into a Memorandum of Understanding with the Mariana Islands (CNMI). The memorandum appears to be a compromise between the sweatshop conditions and full implementation of the National Labor Relations Act (NLRA.) Specifically, the Memorandum refers to the “protection of non-resident workers” in the CNMI and recognizes that the CNMI retains authority over immigration and that a CNMI government official will act as a liaison to the NLRB. (One might ask how exactly a ‘non-resident worker’ is defined in the document and why it is necessary for a governmental official to act as a liaison.)
In return, the document requires the CNMI authorities to recognize their non-resident workers (which number over 14,000) as employees under the NLRA. The CNMI authorities are also expected to refrain from reviewing collective bargaining agreements. As well, they must comply as follows: grant protection against deportation of persons claiming labor discrimination which are in violation of the NLRA; issue necessary documentation to allow non-resident workers to stay in the CNMI while looking for alternative employment; and finally, ease the reinstatement of workers found to be unlawfully discharged.
Have things improved? After a 1998 Senate Hearing on the alleged labor abuses, Saipan clothiers agreed to allow monitors in their manufacturing sites. Yet there is a decreasing availability of ‘indigenous’ items in Saipan’s biggest retailing group. Carline B. Sablan stated that ‘local’ manufacturers only hold about five percent of the market, and most items are imported from the mainland. This is an interesting observation, considering that much of the manufacturing on Saipan is shipped to the US mainland. One gets the picture of the same item being produced in Saipan by someone being underpaid [$3 an hour], shipped to the US, and then shipped back to Saipan and shelved with a price that the person who actually sewed the garment could not afford to pay!
Saipan’s only institution of higher education received drastic cuts in funding: “Governor Pedro P. Tenorio has called on government offices to explore ways to trim down expenditures like reduction in overtime and work hours.” This includes drastic cuts to the Northern Marianas College, in order to “curb potential distraction in its delivery of education.” In 2000, “Average Weekly Help-Wanted Ads declined slightly more in the third quarter than in the second, which is indicative of lower demand for workers in a state of economic decline.” Apparently, the economic strength and stability in the Northern Mariana Islands is declining, even with the heavy contract load negotiated by industry giants like Wal-Mart.
What would happen if Wal-Mart changed their overseas labor practices and stopped using underpaid labor?
Why doesn’t the U.S. government step in and enforce U.S. labor laws as a condition of “Made in the USA” labels?
Claims vs. Reality: Is Wal-Mart a Good Neighbor?
Wal-Mart pursues a hometown identity for itself in every community it enters. It displays this identity through its “People Greeters,” those happy people welcoming you as you enter any Wal-Mart in the country. Wal-Mart claims to proudly display and frequently sell locally-made merchandise in the store. After much searching, it was determined that “locally-made” for Flagstaff, Arizona refers to a few decorative items at the register such as imitation Native American pots and wood-crafted coyotes with handkerchiefs around their necks.
Wal-Mart reaches out to the community in that it allows associates who grew up in the area to direct outreach programs as they are more likely to understand the needs of the community. Associates seem to be given a great deal of freedom in terms of community involvement, such as the charities to which funds are donated. Much of the funds, after all, come out of their pockets: the Wal-Mart Foundation matches up to $2000 for funds raised by associates and donated by customers. Wal-Mart announced it contributed $163 million in 1999 to charities nation-wide; what it does not announce is thatsum includes private contributions from associates and customers, not simply corporate monies.
Wal-Mart promotes educational values by offering college scholarships to graduating seniors as well as money ($500) for classroom supplies given to the teacher of the year. In Flagstaff, for example, students apply for Wal-Mart scholarships every year. The “Competitive Edge” scholarship, based on ACT/SAT scores and interest in certain fields and in certain universities, is an award of $20,000 to a teen who is chosen. In addition, “Community Leadership” awards of $1000 are given to seniors who apply.
Wal-Mart also educates the public about recycling and other environmental topics with the help of the “Green Coordinator,” a specially trained associate who coordinates efforts to make the store environmentally responsible. Although Wal-Mart claims to have given more than $1 million in Wal-Mart Environmental grants to community recycling and environmental education programs in 1999, in Flagstaff the Green Coordinator could not be located.
IT’S OUR NEIGHBORHOOD TOO
The urban bike trail and large, deep wash (gully) along the expansive parking lot of Wal-Mart in Flagstaff, AZ was declared by the city as the very worst place of trash litter – including large pieces of metal and plastic. For years, Wal-Mart overlooked the fact that the business their store attracted was the source of the litter. The local cycling club, weary of endless hours of trash clean-up, started a campaign with the manager. Each day a different member requested to speak to the manager and mentioned the heavy trash problem, defining it as a Wal-Mart responsibility.
Two months later another local club chose the trail as a ‘Forest Week’ project, bringing out 40 people from the community to clean a one mile stretch, the most debris-strewn portion of which was along the parking lot. When they arrived to begin, the shopping carts had been removed from the deep gully wash; no Wal-Mart plastic bags were to be seen. Along a log-rail fence, Wal-Mart had put up a mesh fence, to catch debris blowing from the parking lot onto the trail. Further, about 10 ‘associates’ of Wal-Mart came to assist the clean-up, but all as volunteers on their own time. The store provided cold drinks and hot dogs for all and did pay the vendor her wages for the time.
In responding to appreciation for the Wal-Mart effort, the manager replied, “It’s our neighborhood too.” Such an attitude change resulted from adverse publicity and direct customer pressure.
It remains to be seen if Wal-Mart accepts full responsibility for keeping the trail clean —
Contributions to the local community: Is there a trade-off for cheaper goods?
“Sam Walton believed that each Wal-Mart store should reflect the values of its customers and support the vision they hold for their community.” According to the Economic Impact Information FYE 1/31/99, Wal-Mart’s community involvement in Arizona was $1.5 million. On a national level, Wal-Mart gave $61 million in contributions of community grants; $27 million for Children’s Miracle Network; $14.5 million to United Way chapters; $8 million in scholarships; nearly $3 million in Economic Development Grants; $1.5 million in environmental grants; and nearly $3.4 million for all other types of donations.
But what about the products sold in Wal-Mart stores and the money driving the success of Wal-Mart across the country? Wal-Mart’s total sales for fiscal year ending 1/31/00 was $165 billion. When considering contributions, it is interesting to note that the total amount contributed by associates and customers, and matched to a degree by Wal-Mart itself, is less than 10% of the total sales of one year for Wal-Mart.
Wal-Mart claims that suburban shopping centers were draining the urban centers of a much needed tax base. Wal-Marts, on the other hand, move into the city limits or county limits and encourage residents to buy what Wal-Mart considers to be local goods at a cheaper price. This provides the local government additional tax revenue. It is important to consider where Wal-Mart is now opening its superstores. Located off exit ramps on the outskirts of cities or in counties, these stores pull the local dollars out of the core of the city, and the vitality of the core with it. The result is many downtown areas are reduced to ghost towns, unable to compete with Wal-Mart’s cheap goods in bulk.
Another view of Wal-Mart comes from Fortune Magazine, which ranked Wal-Mart number seven of the most admired corporations, out of 333 global companies across 24 industries (1999). According to the rating data, Wal-Mart performed well in overall management quality, product or service quality, innovativeness, value as a long-term investment, financial strength, commitment to community and to the environment, use of corporate assets, and global business acumen.
How much responsibility should Wal-Mart have in the community in which it is located?
What effects might a store offering cheaper goods in bulk under one roof have on various community groups (the customers, local store owners, the local government)?
Do benefits to one group cause difficulties for another?
How would you measure the “local impacts” of a Wal-Mart superstore in your town? Environmental issues
Cultural homogenization can be understood as the domination of one worldview over another, as the monopolization of a certain product or company over its competition, or as the lack of opportunity within a certain region for individuals to explore moral, social, or cultural alternatives. Marlboro billboards, Levi’s jeans, and Michael Jackson CDs have re-packaged American culture for global consumption in many newly democratic post-communist countries, as well as in Third World nations, slick advertising and all.
“[Wal-Mart] ignores a town’s capacity to absorb another retailer and instead aims to steal customers away from shops they frequent. Typically, Wal-Mart locates on the outskirts of town and sets prices below cost to draw customers away from the commercial center…. From automotive supplies to clothing to pharmaceuticals to kitchenware, Wal-Mart moves sector by sector to undercut its competitors.”
This stage of development is not usually a profitable one for Wal-Mart. Due to its size, the Wal-Mart corporation can afford to lose money for long periods of time at any given location. By selling an assortment of products near or below cost, Wal-Mart successfully draws business away from any local business epicenter. After smaller businesses go under, small to medium size communities become dependent on the product offerings at Wal-Mart for their consumer needs. Studies have shown that within a five year period after Wal-Mart sets up shop, “stores within a 20-mile radius suffer an average 19 percent loss in retail sales.” This is more than enough to put most mom and pop stores out of business.
Within a few years, studies estimate that at least twenty cents of every retail dollar spent in the United States will be spent at Wal-Mart. If we take into account the fact that Wal-Mart has become the sole retailer in many communities nationwide via its business tactics, Wal-Mart’s decisions to stock or not stock certain products limit the variety of goods available to consumers. Freedom of choice in selecting a laundry soap has environmental consequences. For example, environmentally conscientious shoppers routinely buy “low-suds” detergents with low pollutant levels; if these consumers only have access to Wal-Mart brand products, they cannot make environmentally friendly purchases.
This “monoculture” also has the capacity to impose a single morality upon its consumers. Wal-Mart has undertaken a moral crusade to eliminate “unsuitable” products from its shelves. Along with decisions not to sell hand guns, adult magazines, and Sheryl Crow CDs, Wal-Mart has banned Preven, the so-called “morning after” contraceptive, from every one of its 2,428 pharmacies. While our position here is not to judge the morality or immorality of any of these products, we must ask is it Wal-Mart’s right to act as the moral policeman for hundreds of communities? Put another way, if Wal-Mart moves into a community and drives out pharmacies, grocery stores, and department stores, then Wal-Mart has instituted itself as the sole merchant in that community. What it then sells or does not sell directly affects customers’ right to discriminate for themselves.
The effects of Wal-Mart’s homogenizing practices have very negative impacts upon the free market. The only stores, it seems, that can complete with the retail giant are streamlined discount stores. Stores like Save-A-Lot, Aldi Stores and Dollar General are the only true competition that Wal-Mart faces. But in order to keep their prices at a standard 20-40% below Wal-Mart’s, these stores must take measures which severely impact local communities. For example, they offer a product line of between 600 and 1200 items, most of which are private-label products and are offered in a one-size, one-brand context. These stores often buy cheap property near a Wal-Mart, detouring bargain-hunters. Aldi Stores are each run by a staff of three employees, and no store phone numbers are listed to discourage any on-the-job disruptions.
Thus Wal-Mart’s competitors may have to employ Wal-Mart-like business tactics to succeed. Wal-Mart’s competition builds nearby, thus further contributing to the disintegration of community business districts. These stores offer less of a selection than even Wal-Mart, further collapsing any local variety of product. By employing a limited number of people, these stores contribute almost nothing to the local economy. The outcome entails economically disadvantaged people being faced with an almost complete uniformity of product. Wal-Mart publicly proclaims its allegiance to the free market and free consumer choice; are their practices in contradiction with such beliefs?
What are some examples of cultural homogenization that you have observed in your community?
How does cultural homogenization affect your free choice?
Is cultural homogenization inevitable in today’s global economy?
Courtney from Study Moose
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