Who Hates Wal-Mart and Why?
Competitors Turn to Politicians to Hamstring Wal-Mart
America remains a country where you can get fabulously rich rolling the dice on a business venture or lose all your money. We have the greatest venture-capital market in the world. Our culture honors success almost unashamedly, from athletes to entertainers to entrepreneurs.
At the same time, there is a tendency to tear down the most successful, suggesting an ambivalence about wealth and success. Class warfare doesn’t sell like hotcakes, but it does sell.
Our two most successful companies of the last 20 years, Wal-Mart and Microsoft, are often under cultural and legislative attack. Microsoft, like IBM before it, has been under legal attack for years. Now Wal-Mart is increasingly dealing with legal restraints on its ability to compete.
The Maryland legislature has just passed legislation requiring companies with more than 10,000 employees to pay at least 8 percent of their payroll costs for health care or be forced to pay the difference to the state. This affects only one company in the state—Wal-Mart. The Maryland governor vetoed the bill. But cities and counties around the country have passed various forms of legislation to make it harder for Wal-Mart to enter their areas. Some areas have banned Wal-Mart.
On the surface this looks similar to the challenge facing Microsoft, the inevitable disdain and dislike for the super-successful and the inevitable and frightening use of the governmental process to drag down those who rise to the top.
Both companies face public-relations challenges stemming from their success. Bill Gates is one of the wealthiest men in the world. Fairly or not, his company is perceived as having a dominance in the marketplace that Wal-Mart can only aspire to. Because of Microsoft’s market share, any product failure or imperfection is perceived as a disdain for the customer and the result of corporate arrogance.
Bill Gates’s foundation softens his image somewhat. But until Microsoft’s market share slips due to a rise in the effectiveness of its competition, the resentment is likely to stick around. But Wal-Mart’s public-relations challenges and the consequent legal challenges it faces are very different. They are due to a different nexus of political and economic forces hidden by the way the media and the public perceive economic events.
When Sam Walton, the founder of Wal-Mart, was alive, his wealth made him a target for criticism, but his charm often disarmed the critics. Now, without an individual that the public associates with the company, Wal-Mart’s enemies have only the company to vilify. The dislike for Wal-Mart would then seem a bit mysterious. Yes, it’s a successful company. Yes, it’s very large. But what is the source of the public’s suspicion of a company that brings low prices and quality products to its customers?
Unlike Microsoft, which has to defend its software’s unwieldiness and its vulnerability to spam and viruses, few complain about Wal-Mart’s quality or prices. So what’s the problem? What’s the source for the public support of the political and legal attacks on Wal-Mart? The allegations against Wal-Mart are cultural. It allegedly destroys small towns by wreaking havoc with small, independent mom-and-pop retailers on Main Street. It’s allegedly a lousy employer that abuses its workers by paying too little and burdening communities with higher health-care costs.
It is these charges of social neglect and decay that Wal-Mart must answer. But who really feels strongly about these issues? As the millions of customers storm through the front doors in search of the cornucopia that it provides, how many of them feel guilt or shame for shopping there?
Very few, as far as I can tell. The happy customers do hear a steady drumbeat in the media about the cultural issues mentioned above. A TV reporter once told me that Wal-Mart’s employees are like slaves. Yes, I agreed; it’s a wonder they manage to walk to their cars at the end of the day carrying the ball and chain the company forces them to wear. But most of the complaints against Wal-Mart come from those who choose not to shop there, the intellectuals who romanticize small-town life while choosing to live in cities.
Even with all that negative coverage, I suspect the average American and certainly the average Wal-Mart customer feel pretty good about Wal-Mart. So what’s the source of the political hostility and legislative agenda it faces?
Most of it comes from the competition. In Maryland, the recent health-care legislation was spearheaded by Giant Foods and various retail-employee unions, whose sphere shrinks steadily under Wal-Mart’s expansion.
If you’re Giant Foods or another retailer up against Wal-Mart, you have two ways to compete with its grocery business. One is to try harder. Improve your products. Lower your prices. Get better employees. Remodel your stores. Or you can turn to politicians to hamstring Wal-Mart.
The political solution is always appealing. Using the political process avoids a lot of messiness. After all, when you’re trying to succeed in the marketplace, it’s not enough to try harder. You might make the wrong choices. But going to the legislature is pretty foolproof. If you’re Giant Foods, you can’t go wrong getting the legislature to tax Wal-Mart.
Hamstrung by Union Contract
But there’s another reason the political solution appeals to Giants Foods versus trying harder. Giant Foods’ ability to try harder is handicapped by earlier attempts at trying harder. Recent stories on the Maryland health-care shakedown revealed that Giant’s healthcare costs are 20 percent of its payroll compared to 8 percent for Wal-Mart. Presumably, Giant and its union negotiated a pretty lucrative health-care deal for the employees. I don’t know the length of the contract, but it sure makes it harder for Giant to compete with the nimbler, more-flexible Wal-Mart. No wonder the unions work hard at getting the media to cover how Wal-Mart mistreats its workers, ruins small-town America, and encourages urban sprawl.
Never mind that in a free society with millions of other choices, Wal-Mart seems pretty good at getting workers to apply for openings there. Singing the blues about Wal-Mart’s alleged oppression of workers is key to the unions’ effort to keep attention off their responsibility for Giant Foods and other groceries being unable to compete.
Why do the media go along? Maybe it’s some sort of anti-corporate, pro-union, pro-underdog sentiment. But I have a simpler theory. It’s the old story of the seen and the unseen. It’s easy to find businesses that close because of Wal-Mart. But the prosperity created by low prices and the resources that are freed up to start new businesses aren’t as obviously visible.Yet they are just as real.
Ironically perhaps, the source of Wal-Mart’s problems gives me some comfort. True, Microsoft’s legal troubles were also initiated by disgruntled competitors. But those competitors had a lot of allies in disgruntled users of Microsoft products. In the case of Wal-Mart, its satisfied customers are a potential bulwark against the political machinations of the competition.
The rest of the story is up to us, those of us who understand the destructiveness of using legislation as a crutch for competitive failure and the harm that such legislation does to a free society. If we can continue to explain the virtues of freedom of choice of where we shop and where we work, the effectiveness of the scare stories about Wal-Mart will wither away. Giants Foods and its allies in the legislatures of America will be seen as nothing more than welfare recipients taking money and choices from us.
Comment by Jay Sax on 7 July 2010:
In both cases I have some exposure to these companies that may prove enlightening. They may not be alone in their misbehavior – and misbehaved they have! – but there are plenty of examples from each, of which I’ll only give one or two examples.
You can say that they are isolated incidents and prove little. Perhaps. But if I, who pay very little attention to these things, know this, I can only wonder how much more (and of how much more serious a nature) really happened. I think it’s a fair question.
Microsoft has long attempted to simply destroy opponents by underhanded means. Take STAC electronics, with whom it ‘shared’ an early compression system. Fine. Then it stopped sharing it with STAC. Then, voila!, MS had its own technology to compress disks and files. Years later STAC won a judgment against MS who blatantly stole the technology from its erstwhile partner. Too late. STAC was a goner.
I forget the version of their software, perhaps DOS 3 or so? In any event, the internal MS slogan for their release of this new version of their operating system was “It ain’t done till it breaks Lotus 123!” Lotus 123 had been the leading spreadsheet product. MS wanted to destroy them to make their own Excel the leading product. They did it via underhanded means: by changing the operating system so Lotus 123 wouldn’t work, but Excel would.
Ever heard of SQL Server? Most computer types have. It’s generally known as Microsoft’s database product, aka MS SQL Server. But Sybase wrote SQL Server. For a while they shared. Then they parted company, and MS kept going with it, much like in the case of STAC electronics. Sybase is still around, but certainly not known for its product.
With walmart I have less familiarity, but I do know this, which I would count as at least underhanded, if not downright fraudulent. A friend bought some fairly well known brand of baked beans at both walmart and the local grocery store. The products were identical in every respect (at least in terms of packaging and labeling) except where purchased. Inside was a different story. The walmart version of the product was obviously vastly inferior, with more liquid and more broken or partial beans.
If they want to sell lower quality stuff for less money, that’s fine with me. If they want to use identical packaging to disguise changes within, I call foul.
Have MS and WM done well? Surely. More power to ‘em, as long as they do so without outright fraud. From what I can tell, neither one has avoided that.
Comment by Erin on 7 July 2010:
To simply address the question, “But what is the source of the public’s suspicion of a company that brings low prices and quality products to its customers?”, no one can argue that their prices are low but quality must be in the eye of the beholder because I don’t see it in their products. Their stores are filled to the brim with cheap, made in China, junk.
Their prices are low for a reason. It’s a great place to shop if I’m looking for sweatshop made clothing or cadmium laced jewelry. Is it really a mystery why I would be suspicious of products imported from China? It was nice actually to know that the 100% American made dog food I buy was not affected by the recall of the imported from China, melamine tainted dog food in 2007. Yes, I paid more for it up front but at least my dogs didn’t pay for it with their life.
Walmart makes claims to “conduct more than 200 factory inspections each week to ensure these facilities are being run legally and ethically.” However, how easy is it to get away with cutting corners and fudging regulations when you ship your production lines out of the country? Why buy so much stuff made in foreign countries? Especially things that could easily be made right in the our own country? Yes, I understand that things like high taxes on businesses and government regulations make it more difficult and expensive but is selling our souls to China really the answer?
What is the poing of outsourcing in the first place? To save money and protect profits right? Well, saving money and protecting profit is fine (it’s the American way afterall) but at what cost do those low Walmart prices come? How many American jobs are lost by sending them oversees? How much does the quality of a product get compromised by doing so? Are the low prices worth it? Yes, when a Walmart moves into town some jobs are created from the store needing a staff to operate but how many jobs has Walmart cost this country as a whole?
Walmart has become a corporation and as a nice article on this website by Sheldon Richman asked, can a corporation truely operate in a free market? Is the competition that Walmart brings to the table by relying on the exporting of jobs and importing of inferior products really compatible with the true nature of a free market?
Comment by Ned Netterville on 8 July 2010:
I used to defend Walmart in letters to the editor of my local paper whenever the company was under attack by the cabal of progressives and other statists for whom Walmart is the devil incarnate. I can’t say I didn’t enjoy tweaking those stuck-up noses. I did enough comparative shopping to ensure myself that the multifarious charges of low quality, employee victimization, damage to local merchants, etc., were mostly bogus, and more often than not developed and underwritten by monopoly unions that desperately wanted to organize Walmart employees for the unions’–not consumers’ or Walmart employees’–own benefit. But that is long ago, before I came to the conclusion that the fact that Walmart, a corporation, existed only through the offices of my mortal enemy, the State, and that the limited liability the State afforded Walmart’s owners (stockholders) removed in large the owners’ sense of responsibility for any wrongdoing Walmart employees (management and employees are agents of the owners) might perpetrate. Furthermore, Mr. Roberts, it seemed stupid on my part that I would spend any of my time and ink defending a soon-to-be trillion-dollar company that paid its own p-r people munificent–by my standards–salaries. If you are in fact getting paid by Walmart to write this article, I respect your money-making skills, which I lack, but not your morality for failing to mention the fact. Sheldon Richman’s question is germane, and the answer is, No a corporation cannot operate in a truly free market because the market can not be truly free so long as there are states collecting taxes, and without states, there wold be no corporations, only freedom.
Comment by Matthew Jacobson on 5 August 2010:
@Jay – I don’t know anything about your Microsoft allegations, but your baked beans example is frivolous. You’re suggesting a pretty major conspiracy based on a single can of beans. Clearly, there is some bias on your part.
@Erin – I’m not sure what you’re advocating with this argument. If you don’t think Wal-Mart provides a good ratio of price to product quality, then it is your prerogative not to shop there. It is wrong, however, to assume that your preferences regarding quality and risk are universal.
Comment by Joker on 27 December 2010:
Jay Sax: That argument is flat out wrong. It is not Wal-Mart’s job to package it’s goods. Getting a can of beans that you don’t like is purely the manufacturers fault. And that can easily happen at any store that sells any grocery products, since very few anymore actually grow, store, and package their own products.
Erin: I used to work at WM, so I try to answer your questions in order from the third paragraph downwards.
It is not very easy at all to cut corners. I’m utterly amazed that people think there are simply no laws in China or other countries where we import from. Never mind the fact that companies like WM check their imports to see if they are worthy of selling in the first place.
Buying stuff from foreign countries? Because it’s cheap? That seems to be the most logical answer. Remember, there are actually people in this world who don’t care for the absolute highest quality products ever created. People who I saw shopping at WM simply wanted something fast that would work long enough for them to fix whatever problem they had at the time.
Stuff made in our own countries? Because, as various other Freeman articles have pointed out, do you realize just how expensive it is to start a business in America? And it’s because of companies like Giants Foods.
Selling souls to China? First off, it’s the other way around. They can’t live without us. And second, very little imports actually come from China.
The point of outsourcing in the first place was to get low-skilled jobs away from medium and high skilled Americans in give the jobs to VERY low skilled foreign countries. Because yes, I love being a customer service phone guy, making only 9 bucks an hour before my 50+% taxes.
These lower WM prices cost the average consumer less money, last time I checked. Oh, you probably want me to go a bit deeper than that. Less money spent at WM means more money spent on things we want elsewhere. Plus there’s the whole, “less money means more business” thing going, so they need to hire more people to keep up with the demand for their goods.
How many American jobs are lost to a company that is literally a middle man, slash, retail service? Zero. You can’t export those kinds of jobs.
Quality will be compromised by exactly zero, if enough people decide they don’t like WM’s products anymore. During the initiation process for hiring at WM, I was informed of the fact that in the last 3 years, WM has actually removed over 30% of the products they used to sell, because the sales had dropped so much, they simply were not making a profit off of them. Now, if that’s not even a slight resemblance of a free market, I don’t know what is.
How many jobs has WM cost us? Physically impossible to know. What if WM never existed? Well, would there be something similar, like Target, or would there be fifty thousand “Mom & Pop” stores? There’s no way to know.
And finally, yes, creating lower quality products and the exporting of relatively few jobs is a true part of the free market. As I stated earlier, some times people want a product just for the short amount of time to fix whatever situation they have found themselves in, and in that case, having the good be just high enough quality to get the job done is perfect. Some times, for example, I want a tv, or a video game console that will last years, and I’ll go to my trust video game stores where I know the quality is higher.
Actually, that provides a perfect example. I bought a PlayStation 2 from a well known video game store almost ten years ago. And if any one knows anything about video game consoles, they know that the first few thousand always die out real fast. Mine is still alive and works just fine. I bought an average tv from Wal-Mart, specifically because, I don’t want a tv that lasts 20 years. I just wanted a tv that stayed alive until I can afford a better tv stand, and a better house to use a real good tv in.
While yes, there are a few bad things about Wal-Mart, really, they’re just taking advantage of a free market.