One Nation under Walmart"
14 4 pa rt t wo A m E RiC A N BU SiN E S S A N d i T S BA SiS 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. disCU ssi On Q Uesti Ons 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 h Uge CO rp Or ati Ons that pr OdUC e OU r 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 s e 4 . 3 One n ation under w almart 43075_ch04_ptg01_hr_114-149.indd 144 8/13/12 1:08 PM ch a p t er fou r T h E N AT U \b E O f C A PiTA l iSm 14 5 opening more stores all the time as it moves beyon\b its stronghol\b in the rural South an\b Mi\bwest an\b into urban America. In fact, 82 percent of American househol\bs pur - chase at least one item from Walmart every year. As a result, the company’s marketplace clout is enormous: It controls about 3\f percent of the market in househol\b staples; it sells 15 percent of all magazines an\b 15–2\f percent of all CDs, vi\beos, an\b DVDs; an\b it is expecte\b to control soon over 35 percent of U.S. foo\b sales. For most companies selling con - sumer pro\bucts, sales from Walmart represent a big chunk of their total business: 28 percent for Dial, 24 percent for Del Monte, an\b 23 percent for Revlon. Walmart is also responsi- ble for 1\f percent of all goo\bs importe\b to the Unite\b States from China. 83 The goo\b news for consumers is that Walmart has risen to retail supremacy through the bargain prices it offers them.
The retail giant can affor\b its low prices because of the cost efficiencies it has achieve\b an\b the pressure it puts on suppli - ers to lower their prices. An\b the larger the store gets, the more market clout it has an\b the further it can push \bown 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 an\b cost-saving efficiencies force local rivals out of business, thus costing jobs, \bisrupting local communities, an\b injuring establishe\b business \bistricts.
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 \boes little or nothing to increase local tax revenues.
• Walmart is staunchly anti-union an\b pays low wages. Its labor costs are 2\f percent lower than those of unionize\b supermarkets; its average sales clerk earns only $8.23 an hour, an\b most of its 1.4 million employees must survive with - out company health insurance. Small won\ber that employee turnover is 44 percent per year. Moreover, because of its size, Walmart exerts a \bownwar\b pressure on retail wages an\b benefits throughout the country. Critics also charge that Walmart’s har\b line on costs has force\b many factories to move overseas, which sacrifices American jobs an\b hol\bs wages \bown. • Government welfare programs subsi\bize Walmart’s poverty- level wages. Accor\bing to one congressional report, a two- hun\bre\b-employee store costs the government $42,\f\f\f a year in housing assistance, $1\f8,\f\f\f in chil\bren’s health care, an\b $125,\f\f\f in tax cre\bits an\b \be\buctions for low- income families. An\b internal Walmart \bocuments, leake\b to the press, confirm that 46 percent of the chil\bren of Walmart’s 1.33 million workers are uninsure\b or on Me\bicai\b. The \bocu - ment also \biscusses strategies for hol\bing \bown spen\bing on health care an\b other benefits—for example, by hiring more part-time workers an\b \biscouraging unhealthy people from working at the store by requiring all jobs to inclu\be some physical labor.
• As Walmart grows an\b grows, an\b as its competitors fall by the waysi\be, consumer choices narrow, an\b 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 sanitize\b versions of the explicit CDs that they provi\be to ra\bio stations an\b that are sol\b elsewhere. The retailer has remove\b racy magazines such as Maxim an\b \fHM from its racks, an\b it obscures the covers of Glamou\b, Redbook, an\b Cosmopolitan with bin\bers. Although many locations offer inexpensive fire - arms, Walmart won’t sell Preven, a morning-after pill—the only one of the top ten \brug chains to \becline to \bo so.
For these reasons, Walmart’s expansion is frequently meeting \betermine\b local resistance, as concerne\b resi\bents try to preserve their communities an\b their local stores an\b \bowntown shopping areas from \bisruption by Walmart through petitions, political pressure, an\b 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 respon\bing to the criticism that it is a poor corporate citizen an\b miserly employer by improving employee health insurance coverage an\b a\bopting greener business practices. An\b even its usual critics applau\be\b when the company respon\be\b rapi\bly to Hurricane Katrina, sen\bing truckloa\bs of water an\b foo\b, much of it reaching resi\bents before fe\beral supplies \bi\b. 43075_ch04_ptg01_h\dr_114-149.indd\f\f\f145 8/13/12\f\f\f1\b08\fPM 14 6 pa rt t wo A m e r i c An B u s i n e s s An d it s BAs i s 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? Mark Wilson/Getty Images News/Getty Images 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? 43075_ch04_ptg01_hr_114-149.indd 146 8/16/12 12:58 PM
