BUS_DQ_"One Nation Under Walmart"

144 pa rt t wo AmERiCAN BUSiNESS ANd iTS BASiS

as preventions or cures for the H1N1 (swine flu) virus.82 Or the quack remedies and treatments peddled to AIDS patients here and abroad. Bottles of processed pond scum and concoctions of herbs, injections of hydrogen peroxide or of cells from the glands of unborn calves, the eating of bee pollen and garlic, $800 pills containing substances from mice inoculated with the AIDS virus, and even whacking the thymus gland of patients to stimulate the body’s immune system—all these are among the treatments that have been offered to desperate people by the unscrupulous and eccentric. Deregulation of the medical field seems most unlikely to diminish such exploitation.

disCUssiOn QUestiOns

1. What explains the fact that licenses are required for so many occupations? What do you see as the pros and cons of occupational licensure in general? Does it have benefits that Friedman overlooked?

2. Do you believe that licensure in medicine or any other field is desirable? If so, in which fields and under what circumstances? What guidelines would you use to deter- mine where licensure is needed?

3. Is occupational licensure consistent with the basic principles and values of capitalism? Is it a violation of the free-market ideal? How would you respond to the argument that licensure illegitimately restricts individual freedom to pursue a career or a trade?

4. Does licensure make the market work more or less effectively? Would you agree that as long as consum- ers are provided with accurate information, they should be permitted to make their own choices with regard to the services and products they purchase—even when it comes to medical care? Or is licensing necessary to protect them from making incorrect choices?

5. Friedman and others view the AMA as a trade union, and they believe that the high incomes of doctors are due more to artificial restrictions on the free market than to the inherent value of their services. Is this an accurate or fair picture of the medical profession?

6. Is licensing an all-or-nothing issue? Or is it possible that although only licensed professionals should be permit- ted to perform certain services, paraprofessionals and laypersons could perform less expensively but equally competently other services now monopolized by licensed professionals?

the hUge COrpOr atiOns that prOdUCe OUr

cars, appliances, computers, and other products—many of them household names like Nike, Coca-Cola, and Johnson & Johnson—are a familiar feature of contemporary capitalism.

But Walmart represents something new on the economic landscape. Now the world’s largest company, Walmart has

achieved its corporate preeminence not in production but in retail. No other retailer, at any time or in any place, has ever come close to being as large and influential as Walmart has become. After years of nonstop growth, there are now more than 8,400 Walmart stores worldwide, and 140 million shop- pers visit its U.S. stores each week. And the company is

C a se 4 . 3

One nation under walmart

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opening more stores all the time as it moves beyond its stronghold in the rural South and Midwest and into urban America. In fact, 82 percent of American households pur- chase at least one item from Walmart every year. As a result, the company’s marketplace clout is enormous: It controls about 30 percent of the market in household staples; it sells 15 percent of all magazines and 15–20 percent of all CDs, videos, and DVDs; and it is expected to control soon over 35 percent of U.S. food sales. For most companies selling con- sumer products, sales from Walmart represent a big chunk of their total business: 28 percent for Dial, 24 percent for Del Monte, and 23 percent for Revlon. Walmart is also responsi- ble for 10 percent of all goods imported to the United States from China.83

The good news for consumers is that Walmart has risen to retail supremacy through the bargain prices it offers them. The retail giant can afford its low prices because of the cost efficiencies it has achieved and the pressure it puts on suppli- ers to lower their prices. And the larger the store gets, the more market clout it has and the further it can push down prices for its customers.

Everyone, of course, loves low prices, but not everyone, it seems, loves Walmart. Why not? Here are some of the charges that critics level against the retail behemoth:

• Walmart’s buying power and cost-saving efficiencies force local rivals out of business, thus costing jobs, disrupting local communities, and injuring established business districts. Typically, for example, within five years after a Walmart super- center opens, two other supermarkets close. Further, Walmart often insists on tax breaks when it moves into a community, so its presence does little or nothing to increase local tax revenues.

• Walmart is staunchly anti-union and pays low wages. Its labor costs are 20 percent lower than those of unionized supermarkets; its average sales clerk earns only $8.23 an hour, and most of its 1.4 million employees must survive with- out company health insurance. Small wonder that employee turnover is 44 percent per year. Moreover, because of its size, Walmart exerts a downward pressure on retail wages and benefits throughout the country. Critics also charge that Walmart’s hard line on costs has forced many factories to

move overseas, which sacrifices American jobs and holds wages down.

• Government welfare programs subsidize Walmart’s poverty- level wages. According to one congressional report, a two- hundred-employee store costs the government $42,000 a year in housing assistance, $108,000 in children’s health care, and $125,000 in tax credits and deductions for low- income families. And internal Walmart documents, leaked to the press, confirm that 46 percent of the children of Walmart’s 1.33 million workers are uninsured or on Medicaid. The docu- ment also discusses strategies for holding down spending on health care and other benefits—for example, by hiring more part-time workers and discouraging unhealthy people from working at the store by requiring all jobs to include some physical labor.

• As Walmart grows and grows, and as its competitors fall by the wayside, consumer choices narrow, and the retail giant exerts ever greater power as a cultural censor. Walmart, for example, won’t carry music or computer games with mature ratings. As a result, the big music companies now supply the chain with sanitized versions of the explicit CDs that they provide to radio stations and that are sold elsewhere. The retailer has removed racy magazines such as Maxim and FHM from its racks, and it obscures the covers of Glamour, Redbook, and Cosmopolitan with binders. Although many locations offer inexpensive fire- arms, Walmart won’t sell Preven, a morning-after pill—the only one of the top ten drug chains to decline to do so.

For these reasons, Walmart’s expansion is frequently meeting determined local resistance, as concerned residents try to preserve their communities and their local stores and downtown shopping areas from disruption by Walmart through petitions, political pressure, and zoning restrictions. As one economist remarks, for Walmart “the biggest barrier to growth” is not competition from rivals like Target or Winn- Dixie stores but “opposition at the local level.” As a result, Walmart has begun responding to the criticism that it is a poor corporate citizen and miserly employer by improving employee health insurance coverage and adopting greener business practices. And even its usual critics applauded when the company responded rapidly to Hurricane Katrina, sending truckloads of water and food, much of it reaching residents before federal supplies did.

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First Lady michelle Obama teamed up with Walmart on an initiative that will  result  in  the  company  offering  a  larger  selection  of  healthy  foods  at  more  affordable prices. What does such an alliance suggest about the relationship  between business and society and between business and politics?

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When it comes to Walmart, Professor John E. Hoopes

of Babson College encourages people to take a long-term

view: “The history of the last 150 years in retailing would

say that if you don’t like Walmart , be patient. There will be

new models eventually that will do Walmart in, and

Walmart won’t see it coming.” And, indeed, in recent

years the company’s sales growth has slipped as the

Internet has changed people’s shopping habits and as

other discounters have done a better job of attracting

affluent consumers and providing higher quality and bet-

ter service.

In the meantime, where you stand on Walmart probably

depends on where you sit, as Jeffrey Useem writes in Fortune magazine: “If you’re a consumer, Walmart is good for you. If

you’re a wage-earner, there’s a good chance it’s bad for you.

If you’re a Walmart shareholder, you want the company to

grow. If you’re a citizen, you probably don’t want it growing in

your backyard. So, which one are you?”

Discussion Questions

1. Do you like Walmart? Do you shop there? If so, how frequently? If not, why not?

2. Is there a Walmart store in your area? If so, has it had any impact on your community or on the behavior of local consumers? If there’s no store in your area, would you be in favor of Walmart opening one? Explain why or why not.

3. Is Walmart’s rapid rise to retail dominance a positive or a negative development for our society? What does it tell us about capitalism, globalization, and the plight of workers?

4. Can a retailer ever become too large and too powerful?

5. Is opposition to Walmart’s expansion a legitimate part of the political process or is it unfair interference with our market system and a violation of the company’s rights? Do opponents of Walmart have any valid concerns?

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