Wal-Mart's Big Squeeze Play
Published on Monday, December 8, 2003 by the San Francisco Chronicle
Wal-Mart's Big Squeeze Play
by Harley Sorensen
 

Question: When is big too big?

Answer: When it's Wal-Mart.

About 50 years ago, when I lived in Seattle and worked at Boeing, I stumbled one day upon a Luther League forum debating this question: "Is it possible to succeed in business using Christian ethics?"

We didn't have rabid liberals and rabid conservatives in those days -- or, at least, not many of them -- so most of the people involved in the forum were what we now call "middle of the road."

The conclusion they reached at the end of the hour was a woeful no. Nobody wanted to admit that the Golden Rule is not a good business rule, but "facts is facts," and the forum was an honest one.

Which brings us to Wal-Mart. To the best of my limited knowledge, Sam Walton did not break any laws building his fantastic Wal-Mart empire, and his low-price philosophy certainly helped a lot of people. But Walton's success was ruthlessly created on the backs of fragile human beings, a good many of whom are worse off for the experience.

So, on balance, is Wal-Mart more good than bad, or more bad than good?

Sam, who started it all, is gone to his heavenly reward now, but his empire is about to invade California soon in a way that will change our state more than has the mass migration from Mexico.

Starting next year and continuing over four years, Wal-Mart plans to build 40 grocery-store "supercenters" in California. What that means in one respect is, "Hello, Wal-Mart, good-bye, Safeway and Vons and Albertsons and Ralphs and Raley's and the other supermarket chains, and good-bye 250,000 excellent union jobs statewide."

If you're a journeyman checker at one of the supermarket chains in California, you make around $19 per hour with excellent health benefits, even if you're a part timer. That's not enough to buy a house in Northern California, but it's a living. However, the same job at Wal-Mart pays about $9 per hour, with health insurance so pricey that many employees can't afford it. That's low enough to consider living in your car.

The Los Angeles Times ran an outstanding three-part series on Wal-Mart, beginning Nov. 23. If you're registered with the Times, you can find that series on the Web: For part I, click here; that article has links to parts II and III.

Most of the information in this column is taken from that series.

Wal-Mart is the 800-pound gorilla hiding in the shadows behind the 70,000-worker supermarket strike and lockout in Southern California. The workers are simply trying to maintain their wages and benefits, but management, mindful of rising health-insurance costs and the forthcoming invasion by Wal-Mart, is holding out for take-aways, higher co-pays and a two-tiered income structure that threatens to ultimately decrease wages for all workers.

It's a mess. The workers' concerns are legitimate, but so are management's. Wal-Mart is already the nation's largest grocer, and when it comes swooping into California, all hell is going to break loose in the grocery industry.

Shoppers will love the prices. Wal-Mart puts such a tremendous squeeze on suppliers that it can, in fact, buy and sell for less.

However, California growers and other suppliers will not be happy. Wal-Mart is about to squeeze them like they've never been squeezed before.

Putting the squeeze on is what Wal-Mart does. Every year at contract time, it demands that its suppliers provide more for less. This pushes suppliers into their own squeeze tactics -- paying their workers less, cutting benefits and now, with the global economy, seeking out workers elsewhere who will work for less.

So production moves from America's Rust Belt to the Deep South, to Mexico, to Central America, to the Far East, and, most recently, to remote provinces of China.

Every time it moves, production leaves empty factories and unemployed workers behind. While producing customers for itself, Wal-Mart does a terrific job of destroying customers for everyone else.

Who benefits most? Well, five Waltons are tied for fourth place in Forbes magazine's list of the richest Americans in 2003: Alice, Helen, Jim, John and S. Robson Walton, each worth an estimated $20.5 billion. (The top three are Bill Gates, Warren Buffett and Paul Allen.)

Therefore, Wal-Mart presents some perplexing problems. As Americans, we applaud entrepreneurship, so, to many of us, Sam Walton is a national hero. We also enjoy the reduced prices Wal-Mart provides.

On the other hand, capitalism is a system of winners and losers, and Wal-Mart has left a bloody trail of losers behind. And it's acquired too much power, if you consider that one company with the capability of destroying thousands of jobs has too much power.

Wal-Mart has become so powerful, in fact, that a measurable rise in U.S. productivity can be attributed to it. Further, it has become so powerful globally that it is now affecting the policies of some foreign governments, which kowtow to its economic might.

In a republic such as ours, where the will of the people is supposed to reign supreme, such giants are to be feared, in my opinion, and curtailed. There's nothing wrong with big. But there is such a thing as too big.

Wal-Mart won't limit itself, but you and I can slow those people down. I won't shop at a Wal-Mart. I don't care how much money they can save me, I won't enter one of those stores. If they ever start paying their workers decent wages and giving them first-rate benefits, I will reconsider.

I'm not much of a consumer, so my personal boycott doesn't affect me much, but one does what one can. People who worry about Wal-Mart's size and policies might influence the giant by letting it know how they feel. Letters and e-mail.

As Californians, I think we should support our grocery workers on strike and lockout in Southern California. If they lose, we all lose eventually.

On the other hand (and this is where it gets complicated), we should at the very least sympathize with supermarket management. If not for their fear of Wal-Mart, they'd be willing to settle with their workers.

Maybe the California Legislature can repass the bill outlawing big-box stores (i.e., Wal-Mart). Maybe Gov. Arnold Schwarzenegger will sign such a bill. His predecessor, Gray Davis, vetoed it last time around. Schwarzenegger is more honest than Davis, but, then, who isn't?

You and I can save money by shopping at Wal-Mart. We also can save money by stealing. The question becomes, Is money the most important thing in our lives, or do we have higher values?

Harley Sorensen is a longtime journalist. His column appears Mondays. E-mail him at harleysorensen@yahoo.com.

2003 SF Gate

###