To night, I watched a movie on the evils of Wal-Mart. One of my student employees purchased it to share the information with our team. I was very interested to see the problems presented in this video.
For the record: I shop at Wal-Mart because I have hard time paying more for tires, oil changes, food, toys, etc. I do not support or condemn their approach to business and competition.
The movie starts with the interview of several small business owners that were afraid that they could not compete with the economies of scale Wal-mart brought to town. Once Wal-mart came to town, the store had to close because they couldn't compete. They find a direct correlation between Wal-mart and store closures.
Their thesis is that Wal-Mart is evil because it kills small business and it forces people into government-funded healthcare. The movie reminded me of those movies against bush that came out before the election of last year. After further research, I found out the producer was the same guy that funded the video against Murdock and fox news. Propaganda from the left and propaganda from the right are both equally at fault here. The problems of this country are multi dimensional. There is no exact correlation between poverty and Wal-mart. There is no cause and effect between low paying jobs, Wal-mart, healthcare, consumer preference, etc.
Wal-Mart (NYSE:WMT) is a public company that has responsibilities to its shareholders. The economy of the United States has been in transition for over 100 years; moving from manufacturing and resource extraction to services. Many of those manufacturing operations had to move over seas to be competitive in a world market. The ultimate goal of a corporation is to be profitable and to provide value to its shareholders through decisions made at the board of directors and management.
The theory is that Wal-Mart forces people into poverty. Wal-Mart is probably one of the largest employers of unskilled labor outside of the usual agricultural jobs that only illegal immigrants want. People that were used to manufacturing high paying jobs have to deal with the reality of a world market. For example: a computer programmer in India makes $10,000 a year if lucky. In the US, the living requirements of a low/middle income blue-collar family cannot be sustained with a 10 K year wage.
The problem is not only low paying jobs. The problem is the cost of healthcare. More than Wal-mart's effort, it is the cost of health care the main driver of stress for small businesses. Small businesses cannot hire full time employees because they can't afford the cost of insurance and healthcare costs for a family of 3.5 people. It is the job of the government to protect the general population by making healthcare services available to everyone that needs them. Nevertheless, we live in an open economy where there are not enough doctors and nurses for all the baby boomers and people in general. The alternative is socialist medicine similar to Europe's and Canada. Unfortunately, the quality of healthcare diminishes as it become more readily available through government subsidies.
The other factoid is that Wal-Mart may be killing the local manufacturing capacity. The truth is the local manufacturing operation died the moment other countries figure out how to mold plastics, weld metal, vulcanize rubber, etc.
Here is a short list of issues with small retail; starting with their inability to maintain proper inventory levels, quality control on service, price reduction through economies of scale. Wal-Mart is not good at retail... As a matter of fact, it doesn’t take ownership of anything it sells until the product is sold. It is the responsibility of the OEM to provide the product through a very sophisticated system of inventory management and point of sale system using RFID.
They showed the interview of a woman working in a sweatshop in china. According to the video, Wal-Mart officials went there to review the facilities only to find out the local employees had been trained to lie about how much they worked, living and working conditions, etc. The alternative for this people working at the so-called sweat shop in China and Honduras is prostitution, drug trafficking and perhaps dead.
What happens when the local economy is protected by zoning rules, local governments acting as gatekeepers in a open economy. The consumer loses because variety and competition goes to heck. A few years ago, Oshkosh had the opportunity to host the fox valley mall, but the local government turned it down because it would have killed the mall down town and kill the local retail operations in main street. Appleton is now the thriving economy of the fox valley. Most of the shopping in main street is gone because of its location away from the high way. So, the same happens to this little towns that cry bloody murder when Wal-Mart arrives. The truth is the local economies were already dead before Wal-Mart showed up because the locals are not prepared to compete with the highway business.
On the issue of Wal-Mart hiring illegal immigrants. The job of Wal-Mart is to provide value to its shareholders. Its job is not to monitor the immigration status of a guy with a funny accent willing to work for minimum wage at odd hours of the night.
Parking Crime: The job of Wal-Mart is to protect the assets of the shareholders. It is also responsible to provide a safe environment for the exchange of goods and services. The responsibility of the local government through its local police agency is to protect citizens. Who is more responsible? Is it Wal-Mart or the local police?
I refuse to strongly accept or reject the ideas presented here, but the recent push against Wal-Mart shows that a large portion of the unskilled and or blue-collar population in the US is not ready to accept their position in a world market.
So do I kiss the hand of Wal-Mart effort?
A few years ago, Wal-Mart came to Mexico. At first it brought American products and services, but then it had to change to deal with the currency fluctuation and the fall of the Mexican peso in 1994. They could no longer import products from the US.
Mexico is not known for its state of the art customer service. The other companies had been used to providing average if not mediocre pricing, products and services. But when Wal-Mart came, it forced all the other businesses to change practices. They had to improve and provide better product pricing and better customer service.
Today, after 10 years of Wal-Mart, the locals have learned to compete and provide products to Wal-Mart. They improved packaging, product manufacturing and quality. Without Wal-Mart, the local retail and manufacturing businesses in Mexico would have maintained the status quo. Carrefour (a french Wal-mart like retailer) is now in Mexico competing with Soriana, Gigante, and HEB. If it wasn't for Wal-Mart’s pressure, I truly believe the impact of Carrefour would have been worse for the local economy. The Mexican retailers had to evolve to survive. Is the local labor force ready to retrain to maintain a competitive level in the world market?
(thank you to the crew for reading)
