Our Take: Responding to Reich on Wal-Mart

Date: 8 Mar 2005 | posted in: Retail | 0 Facebooktwitterredditmail

Our response to the destructive force of mega-corporations like Wal-Mart ought to involve much more than adopting regulations that “soften the blows” and “slow the pace of change,” as Robert Reich, former Secretary of Labor under Clinton, argued in a recent New York Times op-ed entitled ” Don’t Blame Wal-Mart.”

Yes, we most certainly should raise the minimum wage and require companies to offer employees affordable health insurance, as Reich suggests.

But the problem with Wal-Mart is far more fundamental. We have an economic system—supported by public policy—that fosters concentrated power. It separates those who make the decisions from those that feel the impacts and it rewards shareholders when companies exploit workers, destroy the environment, and undermine communities.

Reich ignores the fact that Wal-Mart is as much a product of public policy as it is of consumer choice. Local and state governments have provided billions of dollars in tax breaks and subsidies to fund big-box development. Tax policies in many states allow national retailers to escape paying much of their income tax, while local businesses must shoulder their full-share. Wal-Mart and other chains have also benefited enormously, though more indirectly, from a host of policies that subsidize sprawl at the expense of older business districts and of the small businesses that inhabit them.

Every time Reich chose Amazon.com over his ill-fated Cambridge bookstore, the government rewarded him with a five percent discount (because federal policy exempts online retailers from collecting state sales tax).

By rendering government policy invisible, Reich treats the rise of Wal-Mart as a natural phenomenon, which, like the weather, is both inevitable and blameless.

Reich endorses the basic framework that Wal-Mart uses to neutralize criticism. When confronted with its exploitive labor practices here and abroad, Wal-Mart invariably counters that it’s only looking to save consumers money.

It’s an effective divide-and-conquer strategy, pitting all of us as consumers against workers and small business owners and everyone else harmed by Wal-Mart. Once we are within this us-and-them framework, Wal-Mart is cleverly absent as causal actor. Never mind that the company generated an astounding $19 billion in surplus last year ($9 billion in profit and $10 billion used to build new stores).

How much does Wal-Mart really care about consumers? A shopper in Nebraska recently sent me two receipts for an identical cartload of groceries purchased on the same day at supercenters in two separate communities. One shopping trip cost 17 percent more than the other. It’s hard to come up with a reasonable explanation for this?other than the fact that the more expensive supercenter is located in a town where virtually all of the competition has closed.

Cities are more dynamic and less easily monopolized to be sure, but when Wal-Mart says New York is its next “frontier,” it’s not talking about erecting one or two big flagship stores like Macy’s. It undoubtedly intends to employ the same lethal combination of carpet-bombing saturation and predatory pricing that has proved so effective elsewhere.

(In 2003, Wal-Mart crippled and nearly annihilated Toys R Us by treating its entire toy department as a loss leader. It’s a tactic small business owners contend the company has employed in a more localized fashion across the country.)

Left unchecked, New Yorkers might well be left with a choice of Wal-Mart, Target, or Costco for many basic needs. We’ve experienced industry sectors dominated by a “big three” before (television networks, carmakers) and few would say that consumers fared well.

Rather than letting mega-retailers have their way while trying to “soften the blows,” we need to make fundamental changes to the rules that govern our economy. We need to democratize economic power, so that those who make the decisions are also those who feel the impacts.

This means vesting real decision-making authority with workers and shifting more of our economic activity back to locally owned businesses.

To understand why this is crucial, consider that companies are far less likely to make decisions that harm communities?by, for example, polluting a local water source or impoverishing the workforce or gutting the town center?if those who call the shots actually have to live with the consequences.

The New Rules Project has put forth a number of policy ideas to move us in this direction, including reviving antitrust enforcement, making our tax system fair to small businesses, increasing citizen authority over corporations, and overhauling local land use and economic development policies to foster locally owned, living wage businesses.

This does not mean sacrificing the efficiencies of modern retailing. Many small businesses have gained the benefits of scale by working together and taking advantage of new technologies. Most independent pharmacies, for example, now buy in bulk through regional cooperatives, and surveys have found that they actually beat national chains, including Wal-Mart, on price. Independent bookstores have jointly developed an e-commerce site, Booksense.com, that allows customers to shop online at their nearest local bookstore.

Reich may dismiss New York’s anti-Wal-Mart coalition as “paternalistic,” but—in keeping with his conviction that we are not just consumers but workers and citizens—we have every right to defend our communities in a collective fashion and to set standards that account for all those costs that never show up on Wal-Mart’s price tags.

One would think that a liberal would be excited about a coalition of small business owners and workers. But the disconnect seems to be that Reich has already ceded a great deal of ground to the corporate model, and this is a coalition that may well contain the seeds of a much more fundamental and effective response to the problem of Wal-Mart and the ravages of our race-to-the-bottom economy.

Stacy Mitchell is a senior researcher with the New Rules Project of the Institute for Local Self-Reliance.

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Stacy Mitchell

Stacy Mitchell is co-director of the Institute for Local Self-Reliance and directs its Independent Business Initiative, which produces research and designs policy to counter concentrated corporate power and strengthen local economies.