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The Angst of Wal-Mart April 21, 2007

Posted by Jim Satterfield in Business & Society, Economics.

BusinessWeek has an article about the problems facing Wal-Mart as it tries to regain its reputation with Wall Street. I don’t shop at Wal-Mart that often, in fact months can go by without me setting foot in there. I go there if it seems to be the most likely place for me to find something I haven’t found elsewhere. Given that there is a Target in walking distance should I choose to walk that far and the weather is cooperative it would be silly, wouldn’t it? In fact it’s mostly when I need something from their automotive department that I head that way because it’s one aspect of their store that beats Target hands down.

The article addresses many of Wal-Mart’s problems and how it got where it is today. It mentions the competition adapting to Wal-Mart’s tactics and learning some of them as well. It mentions Wall Street’s doubts about Wal-Mart’s claims to be able to still add thousands of stores in the U.S. and their problems trying to expand internationally.

What does it leave out? That there are just limits to Wal-Mart’s model. While it mentions as one of the key’s to Wal-Mart’s early success their ability to pressure suppliers and a refusal to accept automatic increases in wholesale prices it doesn’t mention other, less pleasant aspects to that strategy. Fast Company wrote about The Man Who Said No to Wal-Mart. Why would someone do that? Because they have a product that has a reputation for quality. A reputation that could not possibly survive continuing to sell to Wal-Mart. They had already taken efficiencies of manufacturing about as far as they could go. To follow the model Wal-Mart would want them to would mean lowering quality significantly. Mr. Wier refused to do so. Bravo for him.

While I do not want to turn this into (too much of) an anti-Wal-Mart screed the things that they have done must be considered. Frontline did a piece on them entitled “Is Wal-Mart Good for America?“. The Los Angeles Times won a Pulitzer for their reporting on Wal-Mart. Even as they are defended by themselves and others as providing low cost merchandise for low income Americans it is a legitimate question as to how many Americans they have helped turn into low income Americans. Their pay per hour isn’t the worst and most certainly isn’t the best. But in the name of efficiency and being tightwads they do keep as many employees as possible part-time and with no benefits. The moves they’ve made to counter that reputation lately just don’t help most of their part-timers in spite of Wal-Mart’s claims. But it is entirely possible that the single biggest contribution Wal-Mart has made to the rate of poverty in America is that their demands for low costs to them at any price to their suppliers has caused suppliers to find it impossible to continue operations in the United States any longer. Sure, there might be an office with as lean a staff as possible but no manufacturing jobs. Very few, if any jobs to help Americans stay in at least the lower middle class. It is a pattern that has been repeated over and over again. So Frontline’s question is a valid one. Where is Wal-Mart and those who believe in them and their model taking America? Do we really believe that we can have an easy transition to becoming more like the Third World economies that can provide low cost labor? Is that where we want to go?



1. Gloria - May 18, 2007

Hi– I noticed your comment on the Ron Paul post saying that he is just like every other politician. If you look into his record, I’m sure you’ll come away happy. Ron Paul is for making tax credits for all health insurance premiums and many medical expenses, which would allow more people to afford health insurance, more choice in health plans, and less worry in being covered.

He would allow a dollar-for-dollar tax credit for spending on insurance premiums, tax credits for allowing patients to buy negative outcomes insurance before surgeries (which would allow those who are maltreated to get large settlements but would not necessitate doctors having to pay such high malpractice insurance, lowering overall costs), a $500 per child tax credit for prescriptions or health care not covered by insurance and a $3,000 tax credit for those whose children have serious illnesses, and allowing those very sick or terminally ill to stop paying into Social Security that they’ll never receive and their caregivers, spouse and children. In addition, insurance would be purchased individually rather than tied to employers (and HMOs, which are mandated by government law and of course would be repealed under President Paul). Tax credits are a genius idea for health care reform.

Unlike most politicians, you can find exactly how Dr. Paul sees an issue through policy papers he regularly publishes on the Internet. He always votes with his beliefs even if he’s the only one voting against a bill. This is why I admire and respect him so much to take the time to write up this comment.

Oh, and he’s walked the walk, too. He’s a medical doctor himself, an obstetrician who’s delivered 4,000 babies. He used to not take Medicare or Medicaid, but would instead give away services for free or negotiate a very small cash payment. He won’t accept his congressional pension because he has enough from being a doctor and thinks that it’s a waste of taxpayer money. In contrast, do you really think someone like Giuliani isn’t taking a pension from NYC even though he’s a millionaire?

2. Gloria - May 18, 2007

One other thing– Congressman Paul would cut down government to a much more manageable size. When that is done, Americans will have much more money (from much lower taxes) and they will be able to donate to whatever organization they want. There would be much larger private organizations like non-profits that would be able to take care of environmental issues how they please. So, for instance, the Sierra Club or an alternative fuel organization could spend the billions they would get in private donations for environment issues and fund alternative energy sources (probably much more efficiently than the government ever could!).

He is for outlawing things that cause harm, such as companies dumping in the environment and proper regulation, but he would cut down the waste in those companies so they can do it better and more efficiently. He would also allow the states to decide what they wanted to do on most of these issues, as the Constitution dictates.

3. Jim Satterfield - May 19, 2007

Unfortunately I don’t believe in the libertarian idealism that says that eliminating government social programs will cure our ills by automatically producing private money to take care of everything. Tell me how tax credits will help those who just don’t have the money? Paul’s answers for these issues are just too simplistic. There are many more things that have changed in health care besides government involvement. But Rep. Paul doesn’t hesitate to lay most of the blame on government.

When questioned on energy he parrotted the old Republican line blaming government and the environmentalists. This of course ignores the fact that the oil companies reduced refining capacity on purpose back when prices were lower (But they were still making money.) in order to boost their profits.

I also disagree with Rep. Paul’s pro-life position, which frankly I view as being more of an anti-choice position. While he doesn’t believe in a federal ban on abortion he’d be perfectly happy if every state banned abortion.

In order to reduce government as much as he says he wants every government social program would have to be eliminated. Representative Paul is one of those people whose grasp on reality is so weak that he thinks that doing so would be like waving a magic wand that would cause a spontaneous blooming of private charities that would take care of the problem of poverty. Like health care, those who believe that this would happen are simplifying the real world beyond recognition.

So consider me unimpressed with Ron Paul and his beliefs.

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