Let's talk about Wal-Mart instead of retailers in general. What is Wal-Mart telling Rubbermaid about what kind of plastics goods it wants, whether you're talking about office in-box trays or garbage cans for family homes? What is Wal-Mart doing that gives it some leverage over Rubbermaid?
Well, it tells them what is selling and what they want to be able to sell. And they engage in more control over the product, so that they want to make sure that the product is stuff that their micromarkets are interested in. So they often form partnerships, or they try. The ideal is to form partnerships with your vendors or your suppliers, and to give them information at the time of sale of what is selling so that you can have replenishments ordered. ...
... When you look at a company like Wal-Mart, what are the secrets of Wal-Mart's success?
Well, there are many secrets, but let me just focus on one issue; that is, their control of logistics. So their leadership, particularly their post-[Sam] Walton leadership ... had the wisdom to hire logistics people who are very, very competent. And basically, they gained control over the supply chain. That was their goal, and they put in information technology that enabled them to collect it and disperse this information. They have the largest commercial satellite system in the world. They have satellites that are collecting information and beaming it down to their vendors. ...
So the idea is to master the process of production, movement of the goods, warehousing of the goods, making sure that it arrives at the right place at the right time. That's what Wal-Mart is so good at. And they're very good at squeezing the price out of that. So they insist that it be done cheaply, it be done accurately, it be done quickly.
And they determine what it is they want and when they want it?
Yes, I believe they do. ...
What is it that enables Wal-Mart to know what it wants, when it wants [it] and where it wants it?
The bar-coding revolution -- which actually did not begin in discount retailing; it began in the food sector, in the supermarkets that started to use bar codes -- they were the first to use [bar codes]. [A] bar code includes information about the precise product. These are called stockkeeping units, or SKUs. That little bar code that you see [has] everything [on it]: which company it is and exactly what product [it] is; a shirt of a certain size, a certain color, short sleeves, with pockets, every little detail -- a precise description of the product.
When they scan that in when you buy it, that information is immediately collected. So they know where you bought it; they know the brand name and so forth. All of that is put into the information system. And then, if you have a good partnership with your vendor, that [information] is beamed down to them, and they know [what] has sold. They know, "We need to reproduce this."
If something's moving fast -- let's say toys - [and] a particular toy becomes incredibly popular, the replenishment problem is huge. So they try to speed up that information [so] that you'll know what it is that's going to [need to be] reordered as quickly as you possibly can. …
Why does it give Wal-Mart power, if it's dealing with the shirt makers, or with Procter & Gamble making hairspray or soap or whatever? You talk about a revolution and changing relationships. …
Part of Wal-Mart's power lies in its sheer size. There's a kind of building effect that occurs. ... They form a monopsony: in other words, a single buyer for a number of major products. So they are the major buyers. They don't control 100 percent of the market, but they may control 38 percent of the market for [several] goods. They are the largest toy seller. They are the largest grocer. So there are large products that they control. And then the manufacturers are basically stuck having to sell to them. If they don't sell to [Wal-Mart], then they're in deep trouble. So there's a big volume effect. ...
Wal-Mart's big, but is that really the only source of its power? I mean, what gives Wal-Mart the incredible leverage it has in the marketplace?
Wal-Mart's leverage lies in the fact that they are at the end of the supply chain: in other words, that they front with the consumer, and the transaction of selling the goods is under their control. Therefore, they know what is being sold, and they're able to use that information to tell the producers what needs to be made, when, where. They also know what prices are popular, so they are able to say: "We want to sell this at a certain price. You make it at a certain price, or we're not going to work with you."
So the manufacturers are dependent on Wal-Mart for knowledge of the market?
That's right. And the manufacturers are dependent on Wal-Mart for being able to sell their goods at all.
... [So Wal-Mart] has the shelf space, and it's got the know-how.
Right. And the shelf space is absolutely critical to their power. In other words, there are some industries that don't depend on large retailers, like the automobile industry, which still controls its dealers. The dealers are small and don't have power, and it's General Motors and Ford that control them.
But in these mass consumer-merchandise [industries], the retailers are the ones that have grown in power and have become enormous and incredibly wealthy. And you can see that shift in the way that the Fortune 500 has changed. In other words, it used to be General Motors and Exxon that dominated the Fortune 500 for years. Now Wal-Mart is number one. It shifted in 2002, I believe, and they now are the largest corporation in terms of sales in the world, let alone in the United States, and they're growing at something like a 15 percent clip. So there's no hope of anybody catching them up, unless they have a large consolidation of some kind.
... [When was] this information revolution, this logistics revolution that you're talking about? ... There's a quantum jump that takes place. When does that take place?
Wal-Mart emerged as a major power in the 1980s. That was when it started to really develop its control over information technology. I believe they bought their satellites in 1983. They started to put a lot of money into technology, and it was a bet. I think that Walton himself had serious questions about it.
David Glass is the CEO who succeeded Walton, [in 1992], the guy who's credited by a lot of people as being the technology guru, the technology pusher. [Is that right?]
I believe it really takes off in the 1990s. And of course one needs to realize that the company is continually growing. So its power is being amassed. David Glass was a logistics expert who pushed for this technology, and now the current CEO, Lee Scott, rose through the ranks of logistics. He was actually a trucking expert, and he now is the head of the company. And so the top four [executives], I believe, are all logistics experts.
Where does Wal-Mart's supply chain begin and end? Where does it extend to? Are we talking about a global supply chain now? ...
The logistics supply chain has definitely become global, and, in fact, you might even say that's equated to what "globalization" really means. Or it's certainly a very important aspect of globalization.
So what these companies do is typically either they work through manufacturers, who then arrange for their production abroad--
You're talking Wal-Mart now?
No, I'm talking about Wal-Mart using a supplier who then produces abroad. Take, for example, Mattel Toys, which is also located in Los Angeles. Mattel produces in China. All the toy companies do. …
What's interesting is [that] all of this is done through networks; it's not done through ownership. So, for example, Mattel will work through contractors and subcontractors throughout Asia around the world. Various companies will do their production. But Wal-Mart itself also produces a certain amount of private-label [goods] -- that means store-label [goods] -- and they arrange for the production, too. They don't own anything in Asia, to my knowledge. It's all done through arm's-length transactions, where they arrange for the production.
To what degree is Wal-Mart pushing American suppliers to move their production to China and places like China in order to reduce costs? ...
The big-box producers, of which Wal-Mart is the leader, are all engaged in the game of pushing production offshore -- not necessarily that they're saying that's the ideal model, but basically, they go to their suppliers, and they tell them: "We want you to cut your cost by 10 percent. We want you to cut the price by 10 percent."
So the producer will try to cut it, and eventually, they'll come to the point where "We can't make it legally in the United States for that price." And then Wal-Mart shrugs its shoulders and says, "Well, if you have to move offshore, that's what you've got to do." I doubt that they say "Move offshore" directly. They just set the conditions making it impossible to meet their price demands unless they move offshore. ...
We're seeing several revolutions going on here at once, right? … If you had to put broad brushstrokes on the big changes we're looking at here, what are the big changes?
The big changes involve a shift in power from manufacturers to retailers. There's been a major shift in the way production is organized. There's been a major shift in the way logistics is organized, and there has been a big shift in the power of labor -- and particularly organized labor. There's been a decline in the power of workers. American workers have lost power and lost control and lost jobs. So each of these things shows a big shift. …
There's been a shift in the locus of production. Manufacturers and retailers are seeking out the lowest-cost labor in the world, and they have gone to areas and regions of the world where peasant farmers are being disposed of their land and pushed into the labor market and are forced to take jobs of desperation. China represents the heartland of this, where millions of peasants are being pushed off the land. So it's going to take a long time before China reaches the point of industrial development where there won't be this replenishment workforce of people who are desperate for survival.
But this is a global phenomenon. It's going on in Mexico. It's going on throughout Latin America. It's going on through Africa and through many countries in Asia.
And when you study the logistics ... does China play a big role when you're watching the logistics of Wal-Mart?
Absolutely. China is a major source of production. There are people who say that all of manufacturing may end up in China, and it's moving there rapidly. I believe the figure is now 60 percent of the goods that are brought in from Asia are now coming in from China.
And I'd like to point out that one of the major revolutions is going on at the ports. The ports of Los Angeles and Long Beach represent the gateway to Asian production, and they're growing at a tremendous speed. Something like 10 percent a year of goods that [come into the U.S.] are coming in these massive container ships ... bringing these manufactured goods from Asia by the ton load. And they're piled up to the gills, and they're loaded with goods that are going to be sold to the U.S. market by U.S. retailers.
And who are the big importers from China? Who are the big American importers?
The largest importers are retailers. So Wal-Mart is the number one retailer, outstripping anybody else by far -- huge numbers of containers. ... Number two is Home Depot, another big-box retailer. Number three is Target, another big-box retailer.
Those are the three biggest American importers?
Those are the biggest three.
So what you're saying is Wal-Mart's imports from China are massive.
For example, Wal-Mart sometimes [fills] a whole ship, a whole container vessel. Each of these containers contains, like, 30 tons of material. And there will be 3,000 or 4,000 containers on the ship that [are] all pure Wal-Mart.
A hundred thousand, 150,000 tons of goods coming into just Wal-Mart on one ship?
Yes. And then these ships, multiple ships, are coming in every day to the ports of Long Beach and Los Angeles. ... Together, they're the third largest container port in the world behind Hong King and Singapore. So they're this major gateway.
At a variety of ports, Wal-Mart has distribution centers where the goods go, but Los Angeles has this major distribution center for Wal-Mart, an import distribution center that has 2.7 million square feet in distribution-center space. …
… What does that supply line look like?
When the containers are unloaded from the ships, some of them are immediately placed on trains, double-stacked on trains and then shipped to the rest of the United States. And that process is called intermodal transportation. Some of it is done on-dock, some of it is trucked to railheads, and out it goes.
Some of the goods remain in the West, some of them in the Southern California basin, and some of them are shipped to Texas, to Northern California, to the rest of the West. ... And the idea is to make that move as efficient as possible.
... So what are the implications for American labor and the workforce of this enormous influx of Asian product[s], primarily from China and some other places?
What is going on is that manufacturing is leaving the United States [and] all the developed world and moving to poorer and poorer countries. And some people describe this as a "race to the bottom," because the various developing countries are vying for the work and are vying by undercutting each other: by denying worker rights; by offering to provide a docile workforce, a controlled workforce who will produce the goods for 50 cents a day -- something like that.
So on the one hand, the production is cheapened, which, of course, allows Americans to buy goods more cheaply. On the other hand, U.S. production also is cheapened. What happens, for example, in the apparel industry is that you get the growth of domestic sweatshops. ... So wages are declining, health benefits are declining, and labor standards are declining. And this is true not only in manufacturing industries, but also in the service providers. So, for example, port truckers have seen a decline in their standards -- huge. They used to be unionized, and they're no longer unionized. They now use an [immigrant], racialized workforce -- people who face all kinds of political disadvantages -- and that's going on worldwide.
Wal-Mart makes the argument that it is really reducing the cost of living for American consumers. But I hear you saying Wal-Mart and its competitors are also reducing the standard of living. Is that right?
That's right. So on the one hand, you can say that poor people need cheaper goods, and this is a tremendous service for the United States. But on the other hand, that is ignoring that people are not just consumers, but they also are workers, and they are citizens, and they have other interests besides being a consumer. But the United States can focus entirely on the consumer role and ignore, to a large extent, the worker role. And Wal-Mart, in its promise to lower consumer costs, is ignoring the fact that at the same time it's participating in the lowering of worker standards; that the very people who buy their goods are, in fact, being pushed into a lower earnings [category].
There's a kind of cyclical process of poorer workers needing cheaper goods, needing poorer workers to produce those goods, in a kind of ratcheting down of standards. What happens is that inequality is increasing in the United States. The middle class is kind of being hollowed out, and there're more and more workers who find that it's hard to earn a living wage. They don't make enough in order to live. The distinction between the earnings of workers and the earnings of management, that division has grown huge. It used to be something like 60-1, [what] the highest executives made versus their workers. Now it's something like 600-1.
And you see Wal-Mart having a role in this?
The big-box retailers, of which Wal-Mart is the leader, clearly are playing a particular game, which is the game of cheapening products. Some people say that Wal-Mart alone has played a critical role in controlling inflation so that they're able to keep prices down. But at what expense? That's really the question.
And what is the expense, in your mind? ...
The workers in this country are suffering in various ways. One way is that there's been an attack on organized labor, an attack on unions. Unions in many industries are finding that they can't bargain the same kind of contracts that they could for their workers before. ... In many industries, it's been de-unionization.
This has implications not only for the workers themselves, but ... for democracy in America. In other words, in the United States we have a history of having various kinds of organizations -- a civil society, as some people call it -- where people are able to represent their interests by being organized and being able to speak for themselves. But if you have a mass consumer base without any organizations to represent their interests, then it hurts democracy.
And that's part of what's going on. The de-unionization that's going on hurts democracy, because unions played a critical role in giving voice to workers.
Let's just look right here in Southern California. Just recently [California] had a supermarket strike by workers ... Do you connect the coming of Wal-Mart and the way Wal-Mart practices business -- adding groceries to merchandise, coming in with Supercenters, coming in at low-wage scales, having limited benefits and so forth -- do you see Wal-Mart as having an impact right here in Southern California on wage levels?
The supermarket strike that occurred just recently was based on the fact that the supermarkets themselves were terrified that they would be undercut -- severely undercut -- by Wal-Mart, and that it would drive them out of business. This, in turn, led them to bargain much more fiercely with their unions. And basically, the strike, I think, was a disaster for the supermarket workers, who were forced to make serious concessions, one of which was that [they] are now on a two-tier system, where the new workers coming in don't have the same benefits as the older workers. And then, secondly, they lost health-care benefits.
So Wal-Mart does play a role, Wal-Mart and the other big-box retailers, the big discounters, who are all influenced by each other. Each major discounter has to meet their competition.
... What's the importance of the confrontation that's taking place over Wal-Mart's Supercenter in Inglewood, in Los Angeles? What's that all about? ...
The clash over whether the Supercenter should be allowed into Los Angeles is over fundamental values. Should consumerism -- should the right to buy goods cheaply -- be the overwhelming and predominant value that our society represents? Or should government play a role in looking for a balanced society that looks after multiple interests, that looks after protecting the well-being of workers, that looks after democratic participation in the workplace and in the community?
Wal-Mart, when they tried to win a referendum in Inglewood, was incredibly arrogant in terms of saying that they wanted all regulation by the city to be bypassed in their case. And I think that's one of the reasons why they lost with such a hefty vote, was the idea that they believed that the only thing that matters is cheap prices, that everybody would be willing to sell their souls for cheap prices. And that's not all that matters.
In the end, is Wal-Mart good for America?
I think, in the end, Wal-Mart and big-box retailers are driving a system that causes people to lose jobs, that causes a global system where cheapness is the only value that matters. And so all other human values are put in second, third, fourth, fifth place. And there are just so many other things that a society has to be about. It's not just about having a lot of stuff. It's not just about getting it very cheaply.
I mean, that very quality, the focus on consumerism is, in some sense, incredibly destructive. I can see it in my classroom, where kids feel that there is an incredible pressure on them just to make money in order to buy stuff. But they recognize that it's not the key to a full life; that a full life involves many other things. ...