Wal-Mart's "everyday low prices" benefit millions of American consumers, and it is Fortune magazine's number-one most admired company in the United States. But others argue that Wal-Mart is a bad bargain for American workers. Here, Gary Gereffi, professor of sociology at Duke University; Brink Lindsey, vice president for research at the Cato Institute; Jon Lehman, a former Wal-Mart store manager; and Ray Bracy, Wal-Mart's vice president for federal and international corporate affairs, address the question: Is Wal-Mart good for America?
Professor of Sociology, Duke University
The Wal-Mart model is a double-edged sword. On the one hand, Wal-Mart is probably the most efficient company in the history of American business. It's pushed a low-cost, global-sourcing model to the nth degree. It's created suppliers that produce goods cheaper than they ever could before.
The flip side of that model is that this has come at the cost of U.S. jobs that are actually moving offshore, and even Wal-Mart's own suppliers are concerned that by pushing costs down so low, companies can no longer be profitable. So in a sense, it's like we have two models in the world economy. We have the efficiency model, which is based on low cost and global sourcing, and Wal-Mart is the best company of its kind in promoting efficiency, low-cost sourcing. But we also have an innovation model based on higher wages, new products, good benefits for U.S. workers.
And those two models are in conflict to some degree. I think Wal-Mart has actually been producing global efficiency, but it's as though the efficiency model doesn't have a floor.
[Is it] a race to the bottom?
Wal-Mart is one of the major companies that's been promoting a global race to the bottom. It's like we're on a bus with an accelerator pedal with no brakes. …
Vice president for research, Cato Institute
I think Wal-Mart is good for America. Wal-Mart is doing what America is all about, the American market economy is all about, which is producing things consumers want to buy. And Wal-Mart is offering consumers a wide range of goods at rock-bottom prices, and therefore, it is meeting the market test.
It is not good for its competitors. They have a tough time keeping up. As far as its workers are concerned, everybody that's working at Wal-Mart, none of them were drafted. All of them chose to work at Wal-Mart, presumably because the opportunity they had at Wal-Mart was better than any other opportunity they had. If Wal-Mart vanished off the face of the earth tomorrow, that means those people would have to go to the next best option, and they would be worse off relative to where they are today. So as far as consumers are concerned and workers are concerned, Wal-Mart's a big plus for America. …
Professor of Sociology, University of California, Riverside
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.
Former Wal-Mart store manager
... I don't think Wal-Mart is good for America because what's happening is, yeah, you can get maybe a bag of groceries more, or you might spend $50 at Wal-Mart and spend $50 at Target or Kmart and you might get a few more items at Wal-Mart because of the prices.
But there's a cost to low prices. … Many people don't look behind that big, yellow smiley face that they show on TV and see the reality of what's happening to our economy here, what's happening to good, American jobs in the United States here. ... Workers are being worked off the clock many times. There's lawsuits, class-action lawsuits, in over 30 states right now of workers saying: "Enough is enough. I'm being worked off the clock, not paid for my overtime." ...
And look behind that yellow smiley face and see what's really happening to workers. Good American jobs like at Thomson Electronics in Circleville, Ohio -- that poor guy making $15, $16 an hour, now he's [going to be] making a fraction of that, $7, $8 an hour, working 32 hours a week; a meager health care plan that he's got to pay for now, token health care plan; no pension; no future. There's a revolving door at Wal-Mart -- workers coming in, seeing the reality of it. They've been duped by the yellow smiley face many times. Then they go right back out the same door they came in a week later, a month later, a year later, whatever, however long they choose to stay. That's what's happening behind closed doors. That's what's happening [behind] that big, yellow smiley face. ...
Wal-Mart Vice President for Federal and International Corporate Affairs
If you think of us being one of the largest food retailers in the United States -- most of the food that we have in our stores, over 90 percent I am told, is made or grown in the United States. It's about $40 billion. If you think about the fact that we're building 50 million square feet of stores just in Supercenters -- it doesn't include distribution centers; it doesn't include the variety of neighborhood markets that we have and just what we call Division One stores, the stores that don't have food -- it's over 50 million square feet a year [total]. The jobs that are created just in construction alone are 40,000, 45,000 jobs a year, and about $5.5 billion of product bought that goes into [those] stores, whether it's carpet on the floor or ceiling tiles or lights or toilets in the bathroom or plumbing fixtures -- that is significant. We likewise estimate that in information technology, we support roughly 20,000 jobs in America. We do no outsourcing of our information technology at Wal-Mart. And the list goes on.
If there are products that you buy in our store -- if you just go through the category of health and beauty aids, for example, or tire and lube or CDs or DVDs, all the cleaning products that are in our stores, that stuff is by and large made in America.
What I can't tell you is that I created X numbers of jobs that way or what the dollar amount is. We understand the importance of being able to convey that. We're trying to get a handle on it. But I can tell you the numbers are significant, and all you have to do is walk in a Wal-Mart store and see all of that is sold. We are the biggest purveyor of pet food and the biggest purveyor of shampoos, and that stuff is made in America.
We are creating a lot of American jobs, and that is on top of the fact that we have 1.2 million workers of our own. So this is an economic engine that's all about creating jobs in America. It's not just about buying things [from] China.
I understand and I hear what you're saying, and I value what you're saying. I also need your response to the people that were saying that suppliers, longtime American suppliers ... a lot of their jobs are getting driven overseas. Either they are moving their facility overseas, or they can't compete. They're shutting down, and they do, in fact, point to you. I mean, they point to Target; they point to Costco; they point to you as a group, and they point to Wal-Mart as the leader of the group. What do you say to them?
Well, again, I'd go back to the fact that we think we have an obligation to provide the lowest price of goods. We also think we have an obligation to be fair to our suppliers and tell them what we need of them, what the customers that we are in touch with [need].
One of your beginning questions [was] what they require of them in terms of an opening price point. We'll share that with them in a fair way, and if they can continue to build those products or provide those products in America, that's fine. And if not, then I think that's an issue that is far greater than Wal-Mart. It's about our economy. It's about the kind of jobs that we create. It's about the kind of costs that are inherent in our system, that are in the overhead of our manufacturing and businesses alike, that are creating us to be noncompetitive. It's unfair to pin that on any one company, not just Wal-Mart or Target, Costco. It's also unfair to pin it just on government, but it's a complicated set of issues that play into this that makes it difficult for a manufacturer to compete here. It's not a Wal-Mart phenomenon. ...
Somebody said we're on a bus that's going in a direction we like going, but it's got no brakes. And in effect, the question is, [is] the single-minded pursuit of lower cost and lower prices bringing with it costs that in the end will be greater, and that Wal-Mart is not alone in this, certainly, but is a part of this?
I would argue that the answer to that question in my mind is no. This question almost belongs [to] a Nobel Prize-winning laureate in economics rather than an executive from Wal-Mart. But I have to tell you that I can't think of a real reason, as a businessperson, why a company that in 1970 had 30-some stores in three states and in 2004 has over 3,500 stores in 50 states and 1,500 in 10 countries, has gone from less than $1 billion a year to $250 billion a year in that same time period, how that's a bad thing to the world's economies. …