The Wal-Mart Bargain

John Lanchester, "The Price of Pickles", London Review of Books, vol. 28, No. 1, 22 June 2006. — Link.

Robert Reich, "Don’t Blame Wal-Mart", New York Times, February 28, 2005. — Link.

The good thing about Wal-Mart stores is well-known, simple, and can be stated in three of the company’s own words: Always Low Prices. The bad things about Wal-Mart are what it does to get those prices low. These are now also well known: cut costs remorselessly and exploit the benefits of scale.

Few would argue with the claim that a low price is, by itself, a good thing. The trouble is that there is no such thing as "low price, by itself". Wal-Mart’s low prices are unavoidably one side of a two-sided coin. Wal-Mart knows how to push its costs onto others so that the prices on their shelves stay low: how to buy land cheap and still get subsidies from cities, how to pay so little that employees in many US states rely on government programs for health care and food stamps, how to squeeze suppliers so that they have to export jobs, and so on. Wal-Mart offers us a bargain, and as with any bargain we have to ask ourselves "is it worth it?"

The fact that over 100 million North Americans each week shop at Wal-Mart suggests that we like the one side of the coin. But this huge number does not mean that we have decided in some cumulative sense that the bargain is worth it: we have not voted in favour of low costs even at the cost to the health of other parts of our cities, and at the cost of abused workers both in poor nations and in North America. The free market is often portrayed as a continual exercise in democracy, with our purchases as votes, but that’s not how it works.

The reason is that most of us have only one direct relationship to Wal-Mart, and that is as consumers. As a result, Wal-Mart only responds to our consumption wishes. But as Robert Reich wrote a year ago during a debate over Wal-Mart coming to New York, we are not just consumers but are also workers and citizens. "New Yorkers, like most other Americans, want the great deals that canbe had in a rapidly globalizing high-tech economy. Yet the prices onsales tags don’t reflect the full prices we have to pay as workers andcitizens."

Our consumer choices are determined by those sales tags. But whether we like it or not, our consumer choices end up affecting other things too, in a minuscule way. They affect the shape of our cities, the wages that those who provide the goods pay their employees, and so on. Our own individual contribution makes almost no difference to any of these things, which is why we tend to ignore them when we make our decisions of what to buy and where to buy it. There is nothing that we can do as individual consumers to make a difference to any of these things. But multiply by 100 million and those little contributions add up. All those ignored side-effects become a big factor in our lives, and their costs can overwhelm any benefit we get from our consumption. If we trust our consumer decisions to shape our world, we inevitably end up with a world that undervalues those other parts of our lives. The private benefits of consumption drive out the shared benefits of other parts of our lives.

This is one reason why John Lanchester writes in the London Review of Books (August 7, 2006) that "Ethical consumption may indeed be the best we can do, and it gives theethical consumer a nice warm glow, but it is also another form ofself-expression through consumption, and it is consumption, at root,which is the problem." Not that we need to stop consuming, but that our consumer decisions should not shape our whole world. Lanchester goes on to argue that "The case of Wal-Mart makes us realise just how badly we lack a way oftalking about the public good that is not framed purely in terms of economics. The huge fortunes made at the end of the 19th and start ofthe 20th centuries were broken up by anti-monopoly and anti-cartel legislation, because they had been accumulated at the expense of the public good. That is a useful idea, and one that needs to be revivedand used as a yardstick. In its absence, the only ways of talking about Wal-Mart we have are through economics, which offers clear figures (sometimes) whose meanings are murky; or through local protests and objections; or through considering our own ethics as consumers. That, Iwould say, is not enough."

Lanchester and Reich both highlight the fact that free market economies won’t deliver those things that we can’t choose in a consumer kind of way. "The welfare state, free universal healthcare, paid holidays, workers’ benefits of all kinds" – those things did not come about by making wise consumer choices. The same goes for healthy cities, a clean environment, and a fair distribution of income. And all those things will go by the way if we trust consumption decisions to direct our society. The way Reich says it is "The only way for the workers or citizens in us to trump the consumersin us is through laws and regulations that make our purchases a social choice as well as a personal one. A requirement that companies withmore than 50 employees offer their workers affordable health insurance, for example, might increase slightly the price of their goods and services. My inner consumer won’t like that very much, but the worker in me thinks it a fair price to pay. Same with an increase in the minimum wage or a change in labor laws making it easier for employees to organize and negotiate better terms."

It is for these reasons that citizens who take a stand against Wal-Mart coming to town have my support. It’s time to reclaim some space for the non-consumer parts of ourselves.

Wal-Mart Uses Bloggers in PR Campaign

Link: Economist’s View: Wal-Mart Uses Bloggers in PR Campaign.

A couple of months ago Mark Thoma posted a piece on Wal-Mart’s attempt to enter the world of banking, which took a fairly even look at both sides of the issue.

The next day he got an e-mail from one Marshall Manson who "does public affairs for Wal-Mart" and today he does us all a service by posting it on his weblog. Here are some of the best bits, but it is worth reading the whole thing.


I hope you’re well. I just wanted to drop you a line and introduce myself… for my day job – I do online public
affairs for Wal-Mart, working with Mike Krempasky who runs…

It’s always a challenge when opponents organize to attack corporations. The
companies always seems to have one arm tied behind their backs when they try to
respond, so it’s nice to see folks like you defending them when it’s the right
thing to do [aside: Thoma’s piece was not defending them].

If you’re interested, I’d like to drop you the occasional update with some
newsworthy info about the company. Let me know.

And in the meantime, I thought you might be interested in another story that
we’re working on today:

Ever notice the difference between what union leaders do and what union
members want? It’s a story almost as old as labor unions themselves — and
nowhere is it more evident than the union leadership’s campaign against

Today, Working Families for Wal-Mart released a poll that shows that even as
union leaders continue their anti-Wal-Mart campaign, 96% of union households
shop at Wal-Mart and 63 percent of union households think Wal-Mart is good for

We don’t expect to change the minds of the union leadership — but we’d like
your help. Do you have any other examples of union activities that run directly
counter to their members’ wishes or interests?…

All the best,



No comment needed really.

Wal-Mart Extending Dominance of the Grocery Business – New York Times

It is  easy to forget just how big and powerful Wal-Mart is, but you just need to look at its relationship with its suppliers to be reminded.

I thought Coca Cola (number 91 on the 2003 Fortune 500 with a revenue of $21 billion) and Pepsi Cola (numer 62, revenue of $26 billion) were pretty big companies  who controlled their own futures, but according to the New York Times today Wal-Mart has just finished telling Coca Cola not to introduce a diet soda they were going to introduce, and then went on to tell them what drink Coca Cola should make instead, and then it told Coke to change how it distributes Powerade, its sport drink.

Apparently they did the same thing to Pepsi: "Wal-Mart executives asked Pepsi sales representatives in Bentonville to
come up with a new diet soda in flavors not widely available" and Pepsi agreed. Apparently Wal-Mart likes drinks that use Splenda as a sweetener, and what Wal-Mart likes, it gets.

Of course, the official word around all this is that it is a partnership, that Wal-Mart makes suggestions, and that "it’s a collaborative process" but it is clear who is calling the shots. Charles Fishman’s excellent book The Wal-Mart Effect documents many such cases of Wal-Mart reaching inside its suppliers and telling them what to produce and how much they (Wal-Mart) will pay for it. The suppliers are left with a Hobson’s Choice, especially in cases like Coke and Pepsi where there are two or more players in competition with each other. As the NYT article says:

"Wal-Mart wants competition," Mr. Greenberg said. "They love that Coke
and Pepsi kill each other in colas to service them. They love
everything where you have close market shares because without that you
don’t have high relative profits in the category."

For Coke and Pepsi, there is only one thing worse than doing business with Wal-Mart and that’s not doing business with Wal-Mart.

Here is my favourite quotation from the article:

"a bottling executive, who requested anonymity for fear of
alienating Wal-Mart, said the retailer thought it could do a better job
stocking and promoting Powerade in its stores than the bottlers could.

It is worth reading what the bottling executive says. It is not even critical of Wal-Mart, but he or she still want anonymity. This appears typical behaviour among those who do business with Wal-Mart or who may do so in the future: they won’t speak out of line publicly for fear of upsetting Wal-Mart, even when they don’t have anything bad to say.

Link: Wal-Mart Extending Dominance of the Grocery Business.