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 th growth of US productivity, or output per worker, between 1995 and 2000- the years of the "new economy" an the high-tech bubble on Wall Street-the McKinsey Global Institute has found that just over half that growth too place in two sectors, retail and wholesale, where, directly or indirectly, Wal-Mart "caused the bulk of th productivity acceleration through ongoing managerial innovation that increased competition intensity and drove th 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.
[...]
Sex discrimination at Wal-Mart has a long history. Bethany Moreton, a doctoral candidate in history at Yale, has stressed the importance of Wal-Mart's origins in the rural, small-town culture of the Ozarks, where Wal-Mart's corporate headquarters at Bentonville, Arkansas, is still located.[7] In the early years many of the women who worked at Wal-Mart were the wives of local Ozark farmers, and the women's earnings were a meager supplement to their husbands'. The women in the Dukes case say that some of their store managers still often think of them as resembling those farmers' wives. Ramona Scott, a Dukes case petitioner who worked for Wal-Mart in the 1990s, was told by her store manager that "men are here to make a career and women aren't. Retail is for housewives who just need to earn extra money."
In her book on the Dukes case, Selling Women Short, Liza Featherstone describes the women who have testified against Wal-Mart and shows why they have been willing to take on the corporation, often at the cost of their jobs. What the Dukes case women share in common is competence (as revealed in their work records), an ambition to move on to more responsible and better-paying jobs, and a sense of indignation when they discover that their male counterparts are paid significantly more than they are and are promoted ahead of them. The group includes college graduates who have worked at Wal-Mart's Bentonville headquarters, as well as high school graduates and dropouts assigned to Wal-Mart's checkout counters. For example, Stephanie Odle, an assistant store manager at a Riverside, California, Wal-Mart, decided that she would testify in the Dukes case when she found that a male assistant manager was earning $10,000 a year more than she was.
[...]
In the introduction to her book Liza Featherstone argues convincingly that Wal-Mart is a "scandal, not a praiseworthy business model." Yet Wal-Mart is Fortune's most admired corporation, the star of McKinsey's productivity study, and the subject, as recently as last April, of a hagiographic cover story in The Economist, "Wal-Mart: Learning to Love It."[10]
[...]