Dominic Lawson: Why we should give thanks for Wal-Mart

It does more to raise the living standards of poor Americans than any government agency
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The Independent Online

Giants have never had a good press. Their slayers, however, are celebrated - regardless of the origins of the dispute. So Goliath, Grendel and the giant at the top of Jack's beanstalk are all brutally dispatched to public acclaim. It's hardly surprising, therefore, that Robert Greenwald's film, Wal-Mart - the High Cost of Low Price, has just opened in this country to universally adulatory reviews. After all, Wal-mart is the world's biggest company - what more tempting target could a giant killer hope for?

I've yet to see Greenwald's latest offering, but I've watched the trailer on the film's own website. It tells the heart-rending story of H&H Hardware, which, we are told, closed down its store in Middlefield, Ohio, as a result of brutal cost-cutting Wal-Mart opening a branch in the same town.

Only it's not true. As Wal-Mart has subsequently pointed out, to Greenwald's discomfiture, H&H Hardware closed down months before Wal-Mart arrived in Middlefield. It sold its site to new owners, Middlefield Hardware, which has been doing very well - presumably thanks to its proximity to the shoppers' magnet that is Wal-Mart.

As Middlefield Hardware's owner explained: "New businesses are locating here all the time." When a documentary film's "killer fact" is shown so easily to be a fiction it makes me worry about the ethics of the director, rather than those of his target. Greenwald's general allegation is that Wal-Mart has been responsible for the mass closure of "mom and pop" grocery stores.

I'm sure that many grocery stores have indeed gone out of business as a result of Wal-Mart. But what is true of Middlefield is true of America; according to research conducted in 2002 by Ryerson University in the US the arrival of a new Wal-Mart in an urban area led to an average annual increase in local sales of $57m and the opening of 13 new stores.

Few urban centres in America need such renewal more than the former steelworking district of Cleveland. The Democratic mayor of Cleveland drew up a plan to revive the desolate area known as Steelyard Flats with a retail centre based around a new Wal-Mart. It attracted the furious opposition of the United Food and Commercial Workers' Union, whose local leader, Tom Robertson commented: "Wal-Mart just fuckin' destroy jobs, period, because they replace high-paying jobs with low-paying jobs." But as the mayor's chief of staff responded: "We know these are starter jobs, but this city has seen a collapse in its employment base, and a starter job is better than no job. We need jobs, period."

The issue of low pay, as you would expect, also plays its part in the trailer for Greenwald's film. A man with a placard chants: "No Wal-Mart in Chicago - they don't pay a living wage." The minimum wage in the state is $6.50 an hour. The average paid by Wal-Mart to its Chicago supermarket employees is $10.69 an hour. Across the nation Wal-Mart's wages are in line with the rest of the retail sector, but the career prospects offered by a company with such an extraordinary record of growth acts as a magnet: a new Wal-Mart store in Oakland received 11,000 applicants for 450 jobs.

Those applicants were clearly not deterred by another of Greenwald's "killer facts" - that only 48 per cent of Wal-Mart's employees buy into the company's healthcare plan (in fact the company has 18 separate healthcare plans, starting at $1.25 a day). Yet Wal-Mart's figure is well over the average for US retailers, only 36 per cent of whose employees are in company healthcare plans.

It is true that Wal-Mart makes very big profits, but that is not the same thing as excessive profits. Wal-Mart's profit margins are 3.5 per cent - a lower rate of return than many businesses which decide to close down. Wal-Mart's business model is ruthlessly simple: to buy in goods at the lowest possible price and then pass on as much of the benefits as possible to consumers. Its prices are about 20 per cent lower than its competitors', even though its very presence in the marketplace has the effect of driving down the prices charged by rivals. According to the market research company Global Insight the average American family saves over $2,300 a year because of the "Wal-Mart effect".

Obviously there is a much more significant saving for the low-income families who typically are the bulk of Wal-Mart's customer base. Given that wealth is just spending power by another name, it is clear - to me, at any rate - that Wal-Mart does more to raise the living standards of poor Americans than any government agency. As the Austrian economist Joseph Schumpeter observed: "The capitalist achievement does not consist in providing more silk stockings for Queens but in bringing them within the range of factory girls for decreasing amounts of effort."

In America itself there is unease at the way in which Wal-Mart uses imports from China and Africa to bring down its prices. I can understand why an American manufacturing trade union would find that objectionable. I'm not sure why a British viewer of Greenwald's film would feel that Chinese workers were less entitled to the work than their American counterparts. The US companies we should condemn are those who lobby Washington to increase tariff barriers against the Third World, not those such as Wal-Mart, who lobby for those barriers to be removed.

I have the impression that many of those who feel most hostile to Wal-Mart somehow believe that running a business of such immense size is easy. The truth is very different - companies rise and fall, and only the most brilliantly run stay at the top for long. In the 1930s a chain called The Great Atlantic & Pacific Tea Company was much more dominant in the US grocery business than Wal-Mart is today. It no longer exists.

If there is a secret to Wal-Mart's remarkable success it lies in information technology. Wal-Mart was the first to develop the wireless bar-code, and through that it became able to learn what was happening in every inch of every store in real time. The company now owns the world's largest privately owned satellite network. In a very rare interview -Wal-Mart does not like talking to the press - its IT chief claimed that the company was governed by "divine discontent". I suppose that was his way of saying that he was never satisfied.

Mr Greenwald is certainly good at expressing discontent, but it's hardly divine. You should, nevertheless, visit his film's website (walmartmovie.com). It has a store, advertising a DVD of the film for $12.95. Or "get a 5-pack for $50 of DVDs and we'll throw in free shipping". Better still: "You can also buy boxes of 30 Wal-Mart Movie DVDs for $240 each to re-sell at your own screening!" Mr Greenwald can teach us nothing about Wal-Mart, but Wal-Mart has certainly taught him.

d.lawson@independent.co.uk

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