[9 December 2005]
The Wal-Mart model works.
—Lee Scott, President and CEO, Wal-Mart Stores, Inc.
Wal-Mart: The High Cost of Low Price opens with the din of applause, panning over a sea of smiling faces. It’s a Wal-Mart Stores, Inc., shareholder meeting, and the swell of adulation is for one man: Lee Scott, President and CEO.
He takes the stage and, after faux-sheepishly quieting the audience, begins to list the retail giant’s latest accomplishments: “It’d be a pleasure for anybody to be the CEO of this company, because you know, it doesn’t matter if you’re Sam Walton or you’re David Glass or Lee Scott, you get to say, ‘We had record sales. We had record earnings. We had record re-investment back into our company.’” As the applause again rises, punctuated by whoops and hollers, Scott looks out at all those bright eyes. The euphoria is palpable.
But all is not rosy in the People’s Republic of Low Prices. Scott quiets the audience again. He takes on solemn look, exhorting his flock, “You’d better be ready to be better. Because today, for whatever reason, Wal-Mart Stores, Incorporated, has generated fear if not envy in some circles.” He explains Wal-Mart’s plan to combat such envy as two-fold: a marketing blitz (“Tell the Wal-Mart story”) while continuing to act as they always have (“Stay the course”).
This scene succinctly captures Wal-Mart’s problematic position within the global economy. The world’s largest private employer, its business plan, reduced to its essence, is “Sell cheaper, sell more.” Wal-Mart is the first company to exceed a quarter of a trillion dollars in global sales. It’s no surprise that the merest shrug of this economic King Kong provokes fear and envy in those most affected by its actions.
For instance, H&H Hardware. In 1962, Don Hunter and his family started the store in a one-room basement in Middlefield, Ohio. Three generations of Hunters built the business into a community staple. When, 43 years after the opening of H&H Hardware, Wal-Mart came to town, the larger company was bolstered by local government subsidies not offered to the Hunters, a cheap workforce, and a ruthlessly efficient global supply chain. H&H closed, illustrated in the film by a montage of Middlefield’s downtown, all shuttered stores and empty sidewalks.
It’s a familiar story. Most economists agree that Wal-Mart has shifted the balance of power from suppliers to retailers, mostly through importing cheaply-produced Chinese products and selling them to Americans at a substantial markup. The company’s defenders portray it as the apotheosis of free-market capitalism, claiming that Wal-Mart redistributes jobs but does not destroy them. Any company with its clout, they claim, would do exactly the same.
Yet director Robert Greenwald, with the A/V-club production values of his previous documentaries (Outfoxed, Unconstitutional) argues that Wal-Mart is more than a gargantuan economic engine. Through news reports and interviews with Wal-Mart workers, he assembles an impressive litany of sins: the company abuses government safety nets to cut health-benefit costs, going so far as to encourage workers to apply for welfare (“In Florida, Wal-Mart has more employees and family members eligible for Medicaid than any other employer,” a news anchor reads); it takes advantage of small-town development subsidies to build new stores, then closes them before paying tax on the properties; it is unapologetically anti-union, with a quick-response and corporate jet ready to battle any worker-organization attempts; and it’s biased against promoting women and minorities.
The list continues: Wal-Mart views environmental laws with indifference, with a 2005 $1.15 million fine for clean water violations in 22 states having done little to change the company’s ways. Its vast parking lots are largely unguarded; while Wal-Mart hires dozens of in-store security professionals, the asphalt oceans outside its doors have become havens for criminals who prey on customers. Meanwhile, the Waltons, heirs to the Wal-Mart fortune (each family member’s share is valued at a little over $18 billion), have built a post-9/11 underground bunker in case of an apocalyptic attack. It would be tough to find a more apt metaphor for the company’s business philosophy.
As polemic, The High Cost of Low Price succeeds in personalizing the effects of a system that allows—some would say encourages—the ruthlessness of Wal-Mart. The company’s seeming amorality sends ripples through the economy, affecting everyone from competing retail chains such as K-Mart and Target, to manufacturers who, in order to meet Wal-Mart price points, send their business to China, to, finally, consumers, whose taxes wind up subsidizing Wal-Mart’s growth.
It shows us the American Wal-Mart associate who has to choose between feeding her family and taking her sick child to the doctor, and it shows us the Chinese factory worker who earns 50 cents an hour assembling the goods that fill Wal-Mart shelves. It shows us the manufacturing jobs lost in America, and those workers forced to shop at the only store they can afford to, Wal-Mart.
If there’s a major flaw in this documentary, it’s in a lack of context. The High Cost of Low Price doesn’t focus on the underlying forces that make it possible for Wal-Mart to exist: the opening of Chinese trade, the rise of information technology that enables large retailers to track and review customer data, and the decline of union bargaining power. (For an analysis of these issues, see Frontline‘s “Is Wal-Mart Good for America?”.)
The film shows us the symptoms of a dramatic shift in American economy, but does little to explain the cause: a shift in business philosophy away from companies that innovate and create, to those that cater solely to consumers, selling goods cheaply and with high volume. When Wal-Mart CFO Tom Schoewe crows that his company’s sales are equal to “one IBM, one Hewlett Packard, one Dell Computer, one Microsoft and one Cisco System—and oh, by the way, after that we got $2 billion left over,” he reveals sheer size as the company’s highest value.
Yet the companies he cavalierly dismisses did more than push product. IBM was the first global information technology company, with a history stretching back to 1888; in 2004, Big Blue registered over 3000 patents. Hewlett Packard created the first personal computer, and Dell brought it to the masses. Microsoft’s Windows software jump-started the personal computer era. Cisco Systems’s routing technology made the Internet possible. These corporations made immeasurable contributions to the techno-social environment of today—ironically, it’s the fruit of their technical innovations that enables Wal-Mart’s logistical efficiency. The Wal-Mart Revolution, on the other hand, offers no new ideas, but simply re-asserts an old one: profit as the final and only end, justifying any means.
Wal-Mart CEO Lee Scott says, “Wal-Mart Stores has a responsibility to society to make sure that what we do fits in and represents what it is that society expects from a big company,” and we should take him at his word. There’s no doubt that the Wal-Mart model works. The question is, for whom?
Published at: http://www.popmatters.com/pm/review/walmart-high-cost/