[Marxism] Walmart capitalism

Louis Proyect lnp3 at panix.com
Thu Dec 2 08:10:06 MST 2004


NY Review of Books
Volume 51, Number 20 · December 16, 2004

Inside the Leviathan
By Simon Head

BOOKS AND DOCUMENTS MENTIONED IN THIS ARTICLE
Wal-Mart: Template for 21st Century Capitalism?
edited by Nelson Lichtenstein

Papers presented at a conference on Wal-Mart held at the University of 
California, Santa Barbara, April 12, 2004.
New Press, forthcoming in 2005
US Productivity Growth, 1995–2000, Section VI: Retail Trade
a report by the McKinsey Global Institute

October 2001, at www.mckinsey.com/knowledge/mgi/productivity
Selling Women Short: The Landmark Battle for Workers' Rights at Wal-Mart
by Liza Featherstone

Basic Books, 282 pp., $25.00
Nickel and Dimed: On (Not) Getting By in America
by Barbara Ehrenreich

Owl, 221 pp., $13.00 (paper)
Betty Dukes, Patricia Surgeson, Cleo Page et al., Plaintiff, vs. 
Wal-Mart Stores Inc., Defendant: Declarations in Support of Plaintiffs

United States District Court, Northern District of California, at 
www.walmartclass.com
Everyday Low Wages: The Hidden Price We All Pay for Wal-Mart
a report by the Democratic Staff of the House Committee on Education and 
the Workforce

February 16, 2004, at edworkforce.house.gov/democrats/walmartreport.pdf

1.

Throughout the recent history of American capitalism there has always 
been one giant corporation whose size dwarfs that of all others, and 
whose power conveys to the world the strength and confidence of American 
capitalism itself. At mid-century General Motors was the undisputed 
occupant of this corporate throne. But from the late 1970s onward GM 
shrank in the face of superior Japanese competition and from having 
outsourced the manufacture of many car components to independent 
suppliers. By the millennium GM was struggling to maintain its lead over 
Ford, its longstanding rival.

With the technology boom of the 1990s, the business press began writing 
about Microsoft as if it were GM's rightful heir as the dominant 
American corporation. But despite its worldwide monopoly as the provider 
of software for personal computers, Microsoft has lacked the essential 
qualification of size. In Fortune's 2004 listings of the largest US 
corporations, Microsoft ranks a mere forty-sixth, behind such falling 
stars as AT&T and J.C. Penney. However, Fortune's 2004 rankings also 
reveal the clear successor to GM, Wal-Mart. In 2003 Wal-Mart was also 
Fortune's "most admired company."[1]

Wal-Mart is an improbable candidate for corporate gorilla because it 
belongs to a sector, retail, that has never before produced America's 
most powerful companies. But Wal-Mart has grown into a business whose 
dominance of the corporate world rivals GM's in its heyday. With 1.4 
million employees worldwide, Wal-Mart's workforce is now larger than 
that of GM, Ford, GE, and IBM combined. At $258 billion in 2003, 
Wal-Mart's annual revenues are 2 percent of US GDP, and eight times the 
size of Microsoft's. In fact, when ranked by its revenues, Wal-Mart is 
the world's largest corporation.

One sign of its rising status is an academic conference devoted entirely 
to the subject of Wal-Mart that was held last April at the University of 
California, Santa Barbara. The range of subjects covered in the 
conference papers to be published early next year testifies to 
Wal-Mart's impact both on the transfer of goods from third-world 
sweatshops to suburban shopping malls in the US and on local communities 
where its stores are located. At the conference the many class-action 
lawsuits against Wal-Mart's employment practices were discussed, 
particularly its unfair treatment of women, whether by paying them 
extremely low wages or denying them promotions. The conference 
organizer, the labor historian Nelson Lichtenstein, asked Wal-Mart to 
send a representative, but Wal-Mart declined.

Within the corporate world Wal-Mart's preeminence is not simply a matter 
of size. In its analysis of the growth of US productivity, or output per 
worker, between 1995 and 2000— the years of the "new economy" and the 
high-tech bubble on Wall Street—the McKinsey Global Institute has found 
that just over half that growth took place in two sectors, retail and 
wholesale, where, directly or indirectly, Wal-Mart "caused the bulk of 
the productivity acceleration through ongoing managerial innovation that 
increased competition intensity and drove the diffusion of best 
practice." This is management-speak for Wal-Mart's aggressive use of 
information technology and its skill in meeting the needs of its customers.

In its own category of "general merchandise," Wal-Mart has taken a huge 
lead in productivity over its competitors, a lead of 44 percent in 1987, 
48 percent in 1995, and still 41 percent in 1999, even as competitors 
began to copy Wal-Mart's strategy. Thanks to the company's superior 
productivity, Wal-Mart's share of total sales among all the sellers of 
"general merchandise" rose from 9 percent in 1987 to 27 percent in 1995, 
and 30 percent in 1999, an astonishing rate of growth which recalls the 
rise of the Ford Motor Company nearly a century ago. McKinsey lists some 
of the leading causes of Wal-Mart's success. For example, its huge, ugly 
box-shaped buildings enable Wal-Mart "to carry a wider range of goods 
than competitors" and to "enjoy labor economies of scale."

McKinsey mentions Wal-Mart's "efficiency in logistics," which make it 
possible for the company to buy in bulk directly from producers of 
everything from toilet paper to refrigerators, allowing it to dispense 
with wholesalers. McKinsey also makes much of the company's innovative 
use of information technology, for example its early use of computers 
and scanners to track inventory, and its use of satellite communications 
to link corporate headquarters in Arkansas with the nationwide network 
of Wal-Mart stores. Setting up and fine-tuning these tracking and 
distribution systems has been the special achievement of founder Sam 
Walton's (the "Wal" of Wal-Mart) two successors as CEO, David Glass and 
the incumbent Lee Scott.

Throughout its forty-year existence Wal-Mart has also shown considerable 
skill in defining its core customers and catering to their needs. One of 
Sam Walton's wisest decisions was to locate many of his earliest stores 
in towns with populations of fewer than five thousand people, 
communities largely ignored by his competitors. This strategy gave 
Wal-Mart a near monopoly in its local markets and enabled the company to 
ride out the recessions of the 1970s and 1980s more successfully than 
its then larger competitors such as K-Mart and Sears.[2] Wal-Mart has 
also been skillful in providing products that appeal to women with low 
incomes.

Although her book Selling Women Short is a powerful indictment of how 
Wal-Mart has treated its female employees, Liza Featherstone nonetheless 
acknowledges the lure of the Wal-Mart store for female shoppers, who 
delight "in spending as little as possible, all in one place." At a 
Wal-Mart "supercenter"

     you can change a tire, buy groceries for dinner, and get a new pair 
of shoes and some yard furniture—a set of errands that once would have 
required a long afternoon of visits to far-flung merchants.

All these innovations contribute to Wal-Mart's remarkable productivity 
record, and this in turn has opened up another major source of 
competitive advantage for the company, its policy of "Every Day Low 
Prices" ("EDLP"), which makes it possible for it to undersell its 
competitors by an average of as much as 14 percent.[3] Here the picture 
darkens because Wal-Mart's ability to keep prices low depends not just 
on its productivity but also on its ability to contain, or even reduce, 
costs, above all labor costs. As Sam Walton wrote in his memoirs:

     "You see: no matter how you slice it in the retail business, 
payroll is one of the most important parts of overhead, and overhead is 
one of the most crucial things you have to fight to maintain your profit 
margin."

One of the ways to win this particular fight is to make sure that the 
growth of labor's productivity well exceeds the growth of its wages and 
benefits, which has in fact been the dominant pattern for US 
corporations during the past decade.

 From a corporate perspective, this is a rosy outcome. When the 
productivity of labor rises and its compensation stagnates, then, other 
things being equal, the cost of labor per unit of output will fall and 
profit margins will rise. Wal-Mart has carried this strategy to 
extremes. While its workforce has one of the best productivity records 
of any US corporation, it has kept the compensation of its rank-and-file 
workers at or barely above the poverty line. As of last spring, the 
average pay of a sales clerk at Wal-Mart was $8.50 an hour, or about 
$14,000 a year, $1,000 below the government's definition of the poverty 
level for a family of three.[4] Despite the implied claims of Wal-Mart's 
current TV advertising campaign, fewer than half— between 41 and 46 
percent—of Wal-Mart employees can afford even the least-expensive health 
care benefits offered by the company. To keep the growth of productivity 
and real wages far apart, Wal-Mart has reached back beyond the New Deal 
to the harsh, abrasive capitalism of the 1920s.

full: http://www.nybooks.com/articles/17647

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