Outten & Golden: Empowering Employees in the Workplace

Wal-Mart: Worldwide Humanitarian?

October 18th, 2006 | Paula Brantner

Just when you think you’ve seen it all, then you see something that still has the capacity to make your blood boil. For me, this week, it was the following statement, found on the editorial page of the New York Times: “Has any organization in the world lifted more people out of poverty than Wal-Mart?” No matter how many times I blinked, the statement didn’t go away, so I had to figure out what it was really about. Unsurprisingly, it was based on so many fallacies that I almost felt sorry for those who actually believe this stuff — except of course, there’s far too many people who will get sucked in.

The discussion in Shopping for a Nobel (requires Times Select membership) started innocently enough, with an acknowledgement of the work that newly anointed Nobel Peace Prize winner Muhammad Yunus has done to lift the world’s citizens out of poverty, by offering what is known as microcredit, small loans of usually less than $200 to individuals, usually women, in order to establish or expand a small, self-sustaining business. The organization founded by Yunus, Grameen Bank, began in 1976 in Bangladesh, and since that time, has expanded to 2,226 branches at work in 71,371 villages around the world. So far so good, right? Obviously Yunus’ work has empowered individuals around the world to escape poverty through working and building businesses that serve as a valuable source of sustenance.

But Times columnist John Tierney thinks those selecting the prize could do even better by acknowledging the role that Wal-Mart plays in lifting people out of poverty worldwide. What? (or as those who use cyberspeak might say — not to be too indelicate — WTF?) Here’s the argument: There’s a natural limit to what villagers can make selling their goods to one another, when entire villages are steeped in poverty — the “thatched ceiling.” Thus, the best way out of poverty for these villagers is to work at creating manufactured goods that can be sold to Wal-Mart. Even the lowest-paying sweatshop wages are enough to lift individuals out of poverty. Coupled with the low prices that Wal-Mart offers in this country to American workers, shopping at Wal-Mart does more to help people around the world escape poverty than any other practice.

To be fair to Tierney, much of his column spouts the views of one Michael Strong, but there’s enough love being spread around that we can assume Tierney agrees with the basic concept. Strong uses as his case study China, citing statistics that between 1990 and 2002 more than 174 million people escaped poverty in China, about 1.2 million per month. With an estimated $23 billion in Chinese exports in 2005 (out of a total of $713 billion in manufacturing exports), Strong argues that Wal-Mart might be single-handedly responsible for bringing about 38,000 people out of poverty in China each month, about 460,000 per year. (See TCSDaily article.)

If the Chinese consider Wal-Mart the nation’s economic savior, then can someone tell me why the Chinese are poised to pass a new law which seeks to crack down on sweatshops and protect workers’ rights by giving labor unions real power for the first time since the 1980’s? (See New York Times article.) And is it a coincidence that the law’s emphasis is on foreign-owned companies and the suppliers to those companies? Doubtful, when Wal-Mart is the single largest foreign-owned company doing business there, and approximately 70% of Wal-Mart’s goods are made in China. (See China Daily article.) In fact, the law’s provisions are strong enough that some companies have hinted that they will do less business in China, and are heavily lobbying to stop the reforms. Sound familiar? (Those in Chicago can probably tell us what’s going on.)

It’s easy to blithely spout the argument that even those workers in America that Wal-Mart exploits the most are much better off than they would be if they were poor in some of the other countries where Wal-Mart does manufacturing business. Even if that were true, are we prepared to forfeit any aspirations whatsoever of being world leaders when it comes to how we treat our workers? (Some might argue that we’ve already done so. See Binghamton Press & Sun Bulletin article.) Should we just reconcile ourselves to sinking to the lowest common denominator. It’s really akin to children who argue they should be allowed to do whatever they want just because their friends are doing it, and the proper parental response, “If your friends were jumping off a cliff, would you want to do that too?”

Another argument that Tierney and others use is that Wal-Mart saves American consumers so much that it effectively assaults poverty here in the United States. Tierney tells us, “The best evidence is that, while Wal-Mart’s competition might (or might not) depress the wages of some workers, on balance Americans come out well ahead because they save so much money by shopping there.” (See Shopping for a Nobel.)

Even if that were true, the maxim “the customer is always right” doesn’t extend so far as to allow employers to violate the law in order to keep the customers happy. And there’s considerable evidence that Wal-Mart’s “always low prices” are made possible — at least in part — by Wal-Mart’s illegally low wages. I don’t know if economists would call this past week’s $77 million and counting verdict against Wal-Mart an anti-poverty tool, but those workers who weren’t paid for the hours they worked and were locked in the stores while working off the clock will definitely be better off, at least if they are ultimately able to collect any of that money. And as a recent article in The Nation notes,

Slavery kept cotton prices low in the United States for centuries and saved consumers countless dollars. But it was wrong. Likewise, Wal-Mart’s strategy of keeping costs down by exploiting sweatshop suppliers abroad while undermining unions and paying less than living wages in this country should be deemed unacceptable in the twenty-first century.

(See The Nation article.)

But it’s not even true. As The Nation also points out:

The Economic Policy Institute has ripped apart the methodology Wal-Mart’s consultants used to come up with this most popular claim of the Wal-Mart pundits [that Wal-Mart saves American consumers $263 billion a year]. The consultants based their finding on an analysis of the effect of Wal-Mart expansion in a locality on overall consumer prices in that area. The problem, as EPI points out, is that 60 percent of the consumer price index is made up of services like transportation and housing that Wal-Mart doesn’t provide. Therefore, the $263 billion figure is wildly exaggerated.

(See The Nation article.)

Instead, Wal-Mart’s profits are subsidized by the American taxpayer. As one study in California noted, “Employment policies at Wal-Mart, the nation’s largest employer, cost California taxpayers approximately $86 million a year in public assistance to company workers…The study indicates that Wal-Mart workers in California rely on the state for about $32 million annually in health-related services, and $54 million a year in other assistance such as subsidized school lunches, food stamps and subsidized housing.” (See UC Berkeley press release.)

So don’t think you’re doing the world any favors by marching down to the local Wal-Mart. You’re not even doing yourself a favor — and don’t let anyone who writes for the New York Times (or any other paper, for that matter) convince you otherwise.

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