Wal-Mart's Business Model--The Roman Empire

THE AGRIBUSINESS EXAMINER
November 17, 2003, Issue #303
Monitoring Corporate Agribusiness
From a Public Interest Perspective

EDITOR\PUBLISHER; A.V. Krebs
E-MAIL: avkrebs@earthlink.net
WEB SITE: http://www.ea1.com/CARP/
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"WAL-MART A DRIVING FORCE
BEHIND THE DECADENT IMPERIAL
ROMAN MODEL OF THE UNITED STATES"

RICHARD FREEMAN AND ARTHUR TICKNOR, EXECUTIVE INTELLIGENCE REVIEW: The
Wal-Mart department store chain, which employs 1.3 million people at 4,700
stores worldwide, and in 2002 became the largest corporation in the world,
is levelling economies of the U.S., industrial nations, and the Third World.

Wal-Mart is a driving force behind the decadent Imperial Roman model of the
United States. Unable any longer to reproduce its own population's existence
through its own physical economy, the United States has, for the past two
decades, used an over-valued dollar to suck in physical goods from around
the globe for its survival. Wal-Mart is both the public face and working
sinews of that policy. It brings in cheap pants from Bangladesh, cheap
shirts from China, cheap food from Mexico, etc. Workers who produce these
things are paid next to nothing.

Not since the days of the British East India Company as the cornerstone of
the British imperial system, has one single corporate entity been
responsible for so much misery. At the core of its policy, Wal-Mart demands
of its suppliers that they sell goods to Wal-Mart at such a low price, that
they can only do so by outsourcing their work to
low-wage factories overseas. This causes the exodus of millions of
production jobs from the United States and the setting up of slave-labor
concentration camps around the globe. Wal-Mart's policy includes crushing
living standards in America, forbidding its workers from unionizing,
bringing in workers illegally from abroad, and bankrupting tens of thousands
of stores and outlets on Main Street, ripping apart communities and their
tax bases.

Wal-Mart has been primed for this role since 1962, when it was founded by
Sam Walton in his hometown of Bentonville, Arkansas. It has such immense
power in the United States, and leverage overseas, that it has run roughshod
over all opposition --- until now.

Sam Walton started in the retailing business when he bought a Ben Franklin
five and dime store in Newport, Arkansas in 1945. In 1962, he opened the
first store under the name "Wal-Mart." In 1970, Wal-Mart made its first
public stock offering; the issue was underwritten by Stephens, Inc. of
Little Rock, an investment bank which has been
identified with some shady dealings.

In 1987, a turning point came for Wal-Mart, when it opened its first
superstore, called Hypermarket*USA, modeled on the hypermarkets of Europe.
At that time, the average clothing or grocery store in America had 15-22,000
square feet of space. By contrast, the hypermarkets, now called
supercenters, had 150-200,000 feet. The supercenter was based on the idea of
one-stop shopping: In the same store, one could buy groceries, merchandise
and appliances, fast food, and photo development; one could also do one's
banking. Wal-Mart took advantage of an advanced inventory system; its bulk
purchases of goods, which led to price discounts; and a ferocious anti-labor
policy keeping wages very low.

The company set out to obliterate its competition. At the Bentonville
headquarters, Wal-Mart still displays the pictures of the heads of its 24
major food and merchandise chain competitors, each framed like an FBI
"Wanted" poster. It now builds one new store every 42 hours.

Wal-Mart's annual sales quadrupled from $55.5 billion in its Fiscal Year
1993, to $244.5 billion in FY 2003 (which ended Jan. 1, 2003).

Walmart has grabbed a dominant or near-dominant position in key sectors of
the retail market:

* It sells 19% of all grocery-store food in the United States, making it the
largest food seller. It plans to double grocery and related sales from $82
billion to $165 billion during the next five years, which would give it
command of 35% of the market. It plans to open 40 supercenters in California
over the next five years, which is a major cause for the grocery strike in
southern California. Managements at the three major grocery stores in
southern California, where 70,000 United Food and Commercial Workers (UCFW)
workers are striking, have said they are trying to renegotiate lower
employer contributions to health-care benefits, because they fear that
Wal-Mart plans to
saturate southern California with stores, and they will be unable to
compete.

* It handles 16% of all pharmacy-drug sales in the United States, and plans
to increase that share to 25% by 2008, which would make it the largest
pharmacy in America.

* It controls 30% of the U.S. household staples market --- paper towels,
toothpaste, shampoo --- and analysts predict that it will increase that
share to 50% before decade's end.

* It is Hollywood's biggest outlet, selling 15-20% of all CDs, videos, and
DVDs in the United States.

* It sells 15% of all single-copy news publications.

Reciprocally, Wal-Mart controls a large and increasing share of the business
done by almost every major consumer-products company: 28.3% of Dial's (soap
products); 24% of Del Monte Foods'; 23% of Clorox's (bleaches and cleaners);
and 23% of Revlon's (cosmetics). It controls one-fifth or more of the
business done by Proctor & Gamble (household products and soaps); Levi
Strauss (jeans and clothing); and Newell Rubbermaid (household consumer
rubber products). That is, Wal-Mart is all of these firms' biggest outlet,
by a wide margin.

This gives Wal-Mart tremendous leverage over all its producers/suppliers,
even though many of them are in the Fortune 500. Twenty years ago, the
supplier of products went to Wal-Mart, and told Wal-Mart the price to charge
for each product. Today, Wal-Mart
"co-determines" the price; it tells the supplier what type of product it
wants, how to arrange its inventory, what sort of product line to develop.
Because Wal-Mart determines how much shelf space each supplier receives, it
has life-and-death control over that supplier. If Wal-Mart says that it
wants a product's price to be lowered by 20-25%, that supplier will be
forced to outsource an increasing share of its
production.

Likewise, Wal-Mart has become a conveyor belt, either directly or through
its suppliers, for imported goods, mostly from cheap-labor countries.
Wal-Mart imports 10% of all America's total imports from China. According to
the September 26, 2003 Irish Independent, "If Wal-Mart were a country, it
would rank ahead of Great Britain and
Russia in total imports."

Wal-Mart uses its power to ferociously attack and decimate labor power, and
it is the leading force in the mass exodus of U.S. manufacturing capacity
and jobs.

The company is militantly anti-union. Reportedly it has instructed its
managers never to hire workers who once belonged to a union. It
alsoreportedly fires workers who score too high on a "union probability
index." When a union tries to unionize a Wal-Mart cluster of stores, "labor
experts" are flown in from Bentonville to counterorganize. Workers are
ordered to sit in on weekly "labor relations classes,"
where management tells them why they should not join a union, and gives them
badges saying, "We can speak for ourselves." At one store in Texas, where a
union tried to organize, 15 surveillance cameras were installed.

The results? Wal-Mart's grocery workers earn an average $8.23 per hour ---
23% less than grocery workers at unionized stores. Many Wal-Mart workers are
allowed to work a maximum of only 28 hours per week. More than two-thirds of
all Wal-Mart workers who have a full-time job earn an annual wage that is
below the poverty level for a family of three.

According to the AFL-CIO, 66% of unionized workers at large companies are
covered by health insurance. According to one study, only 45% of Wal-Mart
workers are covered, and according to another study, only 38% are covered.

When a worker works overtime, Wal-Mart will not credit it on his or her time
sheet. In many reported cases, workers have been locked into stores after
hours to work late into the night and early morning on special displays, but
were not paid overtime. Thousands of workers have recorded that they have
worked overtime unpaid, but Wal-Mart says it has no record of the cases.
There are court suits against Wal-Mart in 36 states on this issue alone.

There are hundreds of American manufacturing plants which have shut down,
and shipped production overseas, either partially or entirely due to
Wal-Mart. In addition, many other retail outlets have been forced to adopt
Wal-Mart's methods. We look at a few of the hundreds of cases in which
Wal-Mart was directly involved:

Newell Rubbermaid is the largest producer of consumer rubber products in the
United States, and Wal-Mart sells by far the largest volume of Rubbermaid
products of any retail store. In January 2001, Joseph Galli was appointed
the new chief executive officer of Rubbermaid, and he and his staff had an
intensive series of meetings with Wal-Mart management on what products
Rubbermaid should bring on line, including Wal-Mart's not-so-subtle
suggestions about the price of the products. Since January 2001, Rubbermaid
has shut down 69 out of its 400 facilities, and fired 11,000 workers.

The equity research director at Associated Trust & Co., C. Mark Heaseldon,
bluntly stated the reason, "To be able to meet the demands from key
customers, like Wal-Mart ... [Rubbermaid has] to become competitive in
price." He added that Galli would have to "shift about 50% of production to
low-cost countries." This could force the closure of an additional 131
Rubbermaid facilities, and the firing of an additional 20,000 workers.

General Electric is one of the five biggest companies in America and the
biggest producer of appliances, such as dishwashers, refrigerators, stoves,
and TVs. The biggest outlet for GE goods is Wal-Mart. During the last few
years, GE has conducted a large amount of outsourcing. The IUE union, which
represents GE workers, has
estimated that during the last five to seven years, GE has fired more than
100,000 workers, one of the nation's biggest outsourcing massacres. Most of
this work was outsourced to Mexico, China, and Asia in general.

At Masterlock, 250 union workers lost their jobs in 2000 when Wal-Mart
suddenly dropped the company's products and switched to an offshore,
low-wage competitor.

Levi Strauss is one of the biggest manufacturers of jeans and denim
products, including the line of Docker slacks. Wal-Mart is the biggest
retailer of Levi Strauss products. During the past 18 months, after meetings
with Wal-Mart, Levi Strauss announced it will shut down its four remaining
production plants in North America and shift the work to Ibero-America and
Asia. Several hundred jobs will be lost.

Dial Soap sells 28.3% of its production to Wal-Mart. Under Wal-Mart
pressure, Dial is shutting down its Compton, California plant and shifting
work to Argentina.

There are hundreds of similar stories. As a result of the Wal-Mart model,
combined with the depression, more than one million manufacturing production
jobs producing consumer goods have been lost since July 2000 alone.

Meanwhile, Wal-Mart is operating slave-labor camps overseas. It does this
through its suppliers and, increasingly, in its own name. One of the most
infamous slave-labor camps is that in American Somoa --- the Daewoosa
Factory, where 230 workers, mostly young women from Vietnam and China,
worked under conditions of indentured
servitude. According to records, they were cheated of their meager wages,
beaten, starved, sexually harassed, and threatened with deportation if they
complained. On February 21, 2003, in a court in Hawaii, the proprietor of
the factory, Kil Soo Lee, was found guilty of 14 of 18 counts brought
against him for indentured servitude. This factory sewed clothing for
Wal-Mart, under Wal-Mart's "Beach Cabana" label (as well as producing for
other retailers).

Wal-Mart has plundered the productive functions of the U.S. economy. It's
time to shut down Wal-Mart!