Thursday, May 13, 2010

Book Review: Wal-Mart: The Face of Twenty-First Century Capitalism

A group of intellectuals tackle America’s giant

Nelson Lichtenstein, Wal-Mart: The Face of Twenty-First-Century Capitalism (New Press, 2006)

On average, every minute almost 10 000 consumers visit an American Wal-Mart store. It is the largest private employer in the United States and Mexico and operates stores in eight different countries. There is no denying the ubiquity of the corporation in our everyday lives and the significant role that it plays in determining the future of our world economy. Nelson Lichtenstein attempts to explore the profound influence as well as the humble beginnings of this multinational giant in his collection of essays, Wal-Mart: The Face of Twenty-First-Century Capitalism. Lichtenstein, a professor of history at the University of California Santa Barbara, assembled the diverse group of scholars to compare their perspectives on Wal-Mart and the “global manufacturing-transport-distribution chain in which that corporation is the largest and most significant link” (x). The common theme that is expressed throughout the book is that Wal-Mart has become the template for twenty-first-century capitalism. While all of the contributors may agree on that aspect, their opinions deviate on whether this template is the source of a capitalist revolution or demise. Although each essay is written independent of each other, they are broadly organized into three sub-themes: History, Culture, Capitalism; A Global Corporation; and Working at Wal-Mart. These three themes aim to explain Wal-Mart’s phenomenal rise to the top, and their strategies to remain there.

Wal-Mart’s ruthless ascent to the top is as much attributable to favourable timing and location as its charismatic founder, Sam Walton. The first Wal-Mart discount store opened in Bentonville, Arkansas in 1962 with a simple concept; generate high inventory turnovers using low markups. In order to maintain low markups, Walton realized that it was absolutely necessary to keep labour costs at a minimum. Fortunately, the New Deal and civil rights revolution had not been firmly established in Arkansas which meant that Walton could play around with minimum wage laws. Moreover, thousands of men and women were desperate for jobs after the agricultural revolution, which made farming more capital intensive. As the years went on, Wal-Mart capitalized on events such as the failure of unionization in Arkansas, Reaganomics, and NAFTA to keep costs low. While other discount retailers and the dominant corporation of the time GM suffered from rising wages, Wal-Mart actually saw their real wages decrease in the years after 1970. This is nothing out of the ordinary as Wal-Mart has built an empire based on being different and trying new techniques to increase efficiency. As Wal-Mart grew, it tirelessly searched for innovative technologies to implement in order to improve their economies of scale. For example, the use of communications technology reduced management costs and allowed Wal-Mart to expand while still being able to micromanage each individual store. It was evident that Wal-Mart was changing the way retailers conducted business. It was only a matter of time before Wal-Mart took over the rest of the world.

For years, retailers were forced to accept the manufacturer’s prices if they wanted to do business. The emergence of Wal-Mart shifted the power towards retailers because manufacturers were fighting to get their products on Wal-Mart’s shelves. Also, the rapid growth of global manufacturers gave retailers more choice, and often a cheaper option than its American counterparts. This power shift ushered in an era of post-Fordism, a period characterized by globalization of production, extreme capital mobility, and high levels of employment insecurity and stratification. A prominent feature of the post-Fordist economy was the logistics revolution of the global distribution chain. As the proportion of merchandise being imported was dramatically increasing, a more efficient method of trade was necessary. Of course, Wal-Mart set the template with inter-modal freight transport and Radio Frequency Identification (RFID) tags. Inter-modal transport used more than one mode of transportation to move freight which Wal-Mart used in conjunction with their famous distribution centers. This method resulted in a faster and cheaper way to get inventory. Accordingly, the system of production and distribution shifted from push to pull, where the retailer tracked consumer behaviour and demanded an exact amount. Wal-Mart used this pull system to keep wastage to a minimum and constantly improved it by sharing consumer data with its suppliers. The result is greater sales and lower costs for both Wal-Mart and its suppliers. Wal-Mart’s globalization of the distribution chain continued past the supplier as they began to open retail stores worldwide. As Chris Tilly points out in his essay, one of their most successful ventures was in Mexico. In fact, it’s 2004 sales in Mexico were greater than the next three leading competitors combined (189). The point is reiterated that Wal-Mart has built an empire based on taking advantage of favourable conditions. Firstly, thanks to the North American Free Trade Agreement (NAFTA), goods could move freely between America and Mexico. Also, at the time there were few large, modern retail stores and on top of that, Wal-Mart bought the leading retailer in Mexico, Cifra. The low income population welcomed Wal-Mart because of the cheap goods and the abundance of jobs, which paid relatively well for them. There are however, limits to this success. Since Wal-Mart has established itself as a template business, other Mexican retailers have begun to modernize and adapt some of their efficient practices. As Wal-Mart’s piece of the pie is decreasing, the pie itself is also shrinking. The polarization between the rich and the poor is expanding and with the ever-present risk of economic recessions, less people can actually afford to shop at Wal-Mart. Nevertheless, Wal-Mart was a trailblazer in international expansion for retail companies, who previously preferred to stay in North America. As the section suggests, Wal-Mart has truly become a global corporation and their ideas involving globalization – intermodal transport and international establishment – have become the model for large-scale growth for companies in America.

Wal-Mart’s non-conformist ideology has historically changed the American economy and is currently revolutionizing the global economy. However, there is one issue where Wal-Mart’s refusal to let up has drawn a storm of criticism. The final theme that the essays explore is ‘Working at Wal-Mart.’. This is the aspect of the Wal-Mart template that people fear most. For years Wal-Mart has been accused of “vociferous antiunionism, embedded gender discrimination, compulsive cost cutting and near comprehensive control over workers and the workplace” (213). In Wal-Mart’s defense, these practices have been rampant in discount retailing for years. It is just that Wal-Mart has become the epitome of bad labour relations because they have so ruthlessly used them to their advantage. The author depicts working at Wal-Mart as a demanding and unjust occupation. Every single employee from top to bottom of a Wal-Mart store each faces his or her own difficulties from the authoritarian executives. The lowest paid employees, in addition to being poorly compensated, are under constant surveillance. The threat of unionization was so great to Wal-Mart that private investigators and lie detector tests were often utilized in stores. When exceptional workers seem interested in forming a union, managers find fault with their work and fire them. To ensure maximum productivity, workers are shamed in front of their peers for bad jobs and constantly taken down a notch to prevent them from aspiring towards greater pay or position. These stressing conditions are only the beginning for female workers. The culture of Wal-Mart has always been patriarchal with a vast majority of men in managerial positions. It stems back to the early days when it was thought that promotions should be reserved for men because they were responsible for supporting their families. Women have consistently been paid far less than men at Wal-Mart and are rarely given the opportunity for advancement. This discrimination has become so endemic that a class action lawsuit has been filed by 1.6 million women who claim that they have been denied promotions and raises. As the template of American business, the result of this case may set a precedent that will echo throughout every workplace in the country. The blame for all of this discrimination cannot be placed squarely on the managers. Near impossible demands are given to store managers who have a limited wage budget to spend. Managers are expected to continually cut costs and increase sales which the executives constantly monitor. A common message from executives is “if you don’t beat yesterday, management could have your job at any moment” (254). It is easy to understand why some managers might be tempted to resort to unethical practices such as the discriminatory acts towards workers. Fortunately, progress has been made in the fight for greater labour rights at Wal-Mart. Aside from North America, all Wal-Marts around the world are unionized. The difficulty in getting unions in North America is Wal-Mart’s use of leverage in denying unions to form. Unless the entire American Wal-Mart workforce (1.3 million people) does the impossible and unites together to fight for a union, Wal-Mart can always fire the employees in favour of unions. Union expert Wade Rathke advocates a ‘Wal-Mart Workers Association’ that stands up for labour rights and provides a voice for workers. The prevailing belief among unionists like Rathke is that if nothing is done to prevent to conditions that are in place in Wal-Mart today, the future is not only grim for the state of workers in Wal-Mart, but for companies everywhere.

By the end of the book, there is a clear notion that Wal-Mart has and will play a big factor in our world economically, socially, culturally, and politically. It is the model of efficiency and innovation. It is spreading its mid-west values throughout the world. It is the heartless giant that treats its employees unfairly. It is Wal-Mart. This is the message of Wal-Mart: The Face of Twenty-First-Century Capitalism. Unlike its topic of focus, the book itself is inefficient in delivering that message. That is not to say that it is not an excellent read for one who wishes to get a comprehensive look into the history, culture, and ideology of the much revered company. However, while you are being served a full plate of information and statistics, you are also being stuffed with author bias and conflicting opinions. Ironically, the appealing strength of the book doubles as its inherent weakness. The diverse group of contributors provides an in-depth examination of the retailing giant from different perspectives but this interdisciplinary approach is hardly effective. Although Lichtenstein wants to present both sides of the argument, his collection is like listening to a debate where the opposing sides are arguing different topics. While James Hoopes seems to toe the company line by declaring “there is no denying the high morale of many Wal-Mart employees” (98), David Karjanen argues that Wal-Mart “simply cannibalize[s] sales from existing firms putting them out of business” (157). Amidst all this, some essays managed to stay neutral and provide an impartial view on Wal-Mart. In Lichtenstein’s own essay, he provides and excellent example that illustrates the varying impacts of Wal-Mart. He introduces four women: a single mom who depends on Wal-Mart’s low prices; a woman who lost her job as a result of Wal-Mart forcing other companies out of business; a Chinese labourer that makes goods for Wal-Mart for low wages; and the loyal wife of a Wal-Mart assistant manager. Four women. Four lives affected. Two for the better and two for the worse. Chris Tilly also provides an interesting look into Wal-Mart’s expansion into Mexico by observing the favourable conditions for Wal-Mart’s entry but also mentioning the limiting factors that could affect its growth.

Another deficiency of the collection of essays is since the contributors explore different issues and topics, there is little to no continuity between the chapters. They are autonomous of each other and show that little planning was made beforehand to link them together. While the essays are sorted into three loosely based sub-themes, some essays are expository and do not aid in the exploration of any themes. The essays in each section can be read in any order and still have the same effect. A more effective manner would be to present them cumulatively so that each essay builds upon the next. Once you reach the conclusion, you will be able to reflect upon the themes and concepts more adeptly than before. The fact that there is no true concluding essay to this collection leaves us searching for closure on the themes that were explored.

The essays themselves were quite well-written as is expected from a group of professionals and academics. The level of language and use of business terminology was suitable for university level students but some business concepts may be unknown to the average reader. The clean organization of each essay into sub-headings made the information easier to read and comprehend. Each author provided ample amounts of evidence to support their statements and the information was presented in a variety of ways. Many real-life examples were given to show the practical implications of Wal-Mart’s influence and occasional graphics were displayed for the reader to visualize the information.

Overall, Wal-Mart: The Face of Twenty-First-Century Capitalism is definitely required reading for anyone interested in Wal-Mart. It poses a simple question: To what degree will Wal-Mart create the template for twenty-first-century capitalism and what does that mean for us. Although the answer is not presented clearly by the authors, it provides enough information for the reader to formulate his or her own opinion. Therefore in a way, the book acts like a Wal-Mart manager. Stressed to accomplish an ambitious task – investigate Wal-Mart as a template of capitalism -, the book makes the reader go overtime to do all of the work. At the end up the shift, the reader is left with a feeling that they did not get what they deserved.

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