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The Great American City Gets A Wal-Mart

On 26 May, 2004, a new era in American history began with the end of a passionate and at times raucous debate in the chambers of Chicago's vaunted City Council. At issue were two zoning ordinances that would allow two Wal-Mart retail stores -- one in West Side neighborhood of Austin, the other in the South Side's Chatham -- to be built, the first Wal-Marts in Chicago's city limits. But the votes weren't nearly as close as many opposing Wal-Mart had hoped. The West Side store won resoundingly, and the South Side store, although losing narrowly, was sent back to committee instead of being allowed to die: which means it is only a matter of time before it passes.

Early that Wednesday morning, union activists, community residents, grassroots organizers, pastors and reverends, priests and monks, small business owners and conscientious citizens gathered at the northern entrance to Chicago's city hall on Randolph Street and began marching around the building, waving signs and chanting with a nervous, anxious passion.

"What's Disgusting?"

"Union busting!"

"What's outrageous?"

"Wal-Mart's Wages!"

"Hey-hey, Ho-ho, Aldermen vote NO!"

Teamsters guarded the doorways with "Wal-Mart NO!" signs and chatted up organizers, trying to get the latest vote tallies. Speculation abounded. "At latest count," one community activist said, "We've got 17 Yeas, 15 Nays, and 18 Undecided."

St. Sabina's celebrity activist priest, Father Michal Pfleger, addressed the media on the second floor outside of chambers. "Inglewood said no. Chicago should not embarass itself by saying yes."

At issue was not only Wal-Mart's existence, which many in the communities felt was a fait accompli, but rather the Bentonville, Arkansas-based company's willingness to sign a "Community Benefits Agreement" that would bind it to behaving like a good corporate citizen, exchanging the right to operate in a huge untapped market like Chicago for improving the lot of Chicagoans. Wal-Mart had staunchly refused to sign for months on the argument that its competitors -- Target, CostCo, KMart -- had never been forced to sign such agreements.

Ald. Emma Mitts (37th) had worked hard to line up the votes for her Wal-Mart on the West Side. Most of her arguments -- that it would create jobs, that it would increase revenue, that the people needed it -- had long been laid waste by economic studies and community response. What was left to her was purely Chicago: she was the Alderman of her ward, and it was not the place of other Aldermen to say no. If they started butting into each other's business now, perhaps their pet projects would targeted next. It was an issue of power, not an issue of conscience for many Aldermen.

She won.

Freshman Ald. Howard Brookins (21st) had been unable to whip up support for his Wal-Mart, some speculate because Mitts had successfully backdoored him and cut a deal where Aldermen could save face with community activists and labor unions by voting Yea on one and Nay on the other. He was saved, however, by Ald. Ed Burke (14th), who moved that the South Side Wal-Mart be sent back to committee, rather than let it die on the floor, as would be customary.

Chicago's City Council basically let this issue of power and privelege stand between them and making a historic decision, giving what is easily the most wicked corporation in the world a major defeat and setting the precedent for resistance to it throughout the country.

The JuggerMart And The West Side

Wal-Mart's negative impact not only on local economies, but on American retail, world trade, and the very fabric of American society, is pretty cut-and-dry.

Wal-Mart has methodically been destroying any and all major retail competition throughout the United States. They have a vendetta against organized labor as well as public education. They have forced foreign nations into a race to the bottom which undermines the ability of the United States and other Western nations to aid developing nations.

Chirag Mehta, Dr. Ron Baiman, and Dr. Joseph Persky of The University of Illinois at Chicago's Center for Urban Economic Development (CUED) released a study in April of 2004 which laid out the case against a Wal-Mart in the 37th Ward. The study, entitled "The Economic Impact of Wal-Mart: An Assessment of the Wal-Mart Store Proposed for Chicago's West Side," confirmed the worst fears of many of Wal-Mart's opponents. Social, political, and labor concerns aside, a Wal-Mart would have absolutely no benefit to the residents of the West Side or Chicago.

Using a figure from the 1997 US Economic Census for the Retail Trade Industry which indicates that retail establishments with over $25,000,000 in sales have a 51 percent higher sales/employee productivity ration, and using a model in which Wal-Mart "re-captures" shoppers who currently go to the suburbs but import very few shoppers from the suburbs (there is a Wal-Mart less than five miles from the poposed location), the authors contend that 318 jobs will be lost due to the new store, 254 of which will be in Chicago. Wal-Mart contends that there will be 250 jobs created "immediately," 200 of which are permanent. This results in a net loss of 54 jobs; they also estimate that 11 jobs will be lost indirectly. That is 65 fewer jobs.

The net indirect and direct loss of benefits to Chicago residents will be nearly $1.2 million.

One possible rebuttal to this figure is that the increase in tax revenue will allow the 37th Ward to entice new business and invest in infrastructure, compensating for the 65 jobs lost. The authors counter this argument by pointing out that when the net increase in sales tax revenue is adjusted with the indirect loss in sales, property, and other local taxes, the total increase in tax revenue, sales and property, is only $197,000 -- a drop in the bucket considering Wal-Mart's claim of $600,000.

Wal-Mart: Public Enemy Number One

Public corporations have a duty to be good citizens. They are protected by society and incorporated by the states and enjoy the benefits of the civilization we all pay for with our mutual cooperation and tax money. In the column I wrote two months ago on this issue, several people protested what was termed "social democracy," saying that political resistance to Wal-Mart was basically limiting individual freedom by not allowing individuals to "vote with their dollar." But corporations, just like residents, must have some positive contribution to their neighborhoods. Neighbors who don't take care of their properties, who invite a bad element into the area and who are disrespectful of the people around them can be fined and chased out. In this case, the bad neighbor is the wealthiest and most powerful corporation in the world, and has a history of ruthless and unfair trade practices.

Are they unfair? Yes. The US House of Representative's Committee On Education and The Workforce released a study called "Everyday Low Wages: The Hidden Price We All Pay For Wal-Mart," which detailed the unfair labor practices -- above and beyond simple union-busting -- Wal-Mart has practiced in an effort to maintain their Per Unit Profit Margin. Because Wal-Mart lowballs its competitors to maintain a comparative advantage, structural costs like healthcare and living wages would be a death knell for the company. So their attitude towards unions is understandable, if still reprehensible.

So Wal-Mart probably violates labor law. But they also violate basic human rights. They mistreat minorities. And they mistreat women -- and as the largest private employer in the United States, they are therefore responsible in part for the "feminization of poverty" in the United States.

In 2001, six Californian women sued Wal-Mart for systemic discrimination in pay, promotions, and benefits. The suit has since grown to represent over 1 million current and former female employees. Some may counter that this is just the over-litigious American worker trying to get a handout. That is a weak argument, especially when one considers that two thirds of Wal-Mart's hourly employees are women, but women hold only one third of managerial positions and fewer than 15 percent of store managers are women. Women in the suit have also complained of profiling, that women are pushed into "feminine" positions in the stores that are less likely to put them on a path towards increased responsibility and pay. But of course, it is easy to put the screw to women in the United States and force them to live under the poverty line. What are they going to do about it? They have enough to worry about like the war against reproductive rights (funded by right-wing businesses like, oh, Wal-Mart).

At some point, the marginally lower prices Wal-Mart offers on sub-par products produced overseas are not worth the social damage they inflict. The only argument Wal-Mart supporters proffer time and time again is that Wal-Mart's products are cheap, which is good for low-income shoppers. But the reality is that their products are not significantly cheaper, and the fact that suppliers are forced to meet ridiculous quotas at artifically low prices indicates that the quality of these goods is decreasing, which in the long run offers no benefit at all to the consumer. Meanwhile, they are wreaking havoc on the American -- not to mention foreign -- labor force.

Like "Off-the-Clock Work" for example. That same congressional study points out that there are 39 Class Action lawsuits in 30 states demanding tens of millions of dollars in back pay for Wal-Mart workers.

In comments to my last column, one commenter insisted that there was no proof that Wal-Mart had ever lowered wages after driving out competition, and that therefore Wal-Mart had no real negative effect on local job markets. Perhaps they haven't literally lowered their hourly wage. But one good substitute for that is not actually paying your employees. When there is a severe job shortage in an area, caused by the destruction of local businesses, then it is hard for employees to complain when the only game in town simply refuses to pay. Sixty-nine thousand workers in Colorado had to take Wal-Mart to court in order to get paid for time they worked "off-the-clock" to avoid overtime pay. Sixty-nine thousand is a pretty significant number; even if Wal-Mart does employ 1.2 million. In Texas, 200,000 former and current Wal-Mart employees had to take Wal-Mart to court to get compensated for over $150 million in damages over four years -- just based on the fact that Wal-Mart forced employees to work through their 15-minute breaks. In Minnesota, 65,000 more workers had to sue to get the money they worked for. At some point, we as a society have to stop protecting business against the worker.

This is not a few oversights by a huge company. This is endemic, and inidcative of a corporate policy coming straight from headquarters in Arkansas. Corporate policy ridiculously states that although sales are to increase every year, labor costs must go down by two-tenths of a percent. In the retail industry, productivity can increase only so much because it is labor-intensive. Stocking, cashiering, cleaning can only be streamlined so much, especially if sales are increasing.

In January of 2004, the New York Times released an internal Wal-Mart audit which found that, in just one week of time records from 25,000 employees, there were 1,371 instances of minors working too late, for too many hours during a day or -- this one is a sweet irony -- during school hours. There were nearly 61,000 missed breaks and 15,705 lost meal times.

In that study, one woman reported that at times it was so hard to get breaks that cashiers would urinate on themselves.

All of these egregious, systematic abuses don't even take into account Wal-Mart's long-standing policy of refusing to provide anything approaching affordable health care to anybody but upper-tier management. The most disgusting thing about that policy, of course, is that we the taxpayers -- workaday folks in places like the 37th Ward on the West Side of Chicago -- end up footing the bill for these uninsured people who work enough hours to qualify for insurance. Wal-Mart forces taxpayers to subsidize healthcare for their employees by making healthcare unaffordable and offering no coverage. A study by the Institute for Labor and Employment at the University of California-Berkeley concluded that California taxpayers subsidized $20,500,000 worth of medical care for Wal-Mart in their state alone. An instance of corporate welfare -- Wal-Mart benefitting from the society and democracy they should be beholden to. Those that argue Wal-Mart shouldn't be subject to the political process gleefully ignore the political costs Wal-Mart saddles us with.

In fact, we taxpayers -- including Republicans and free-market advocates who so hate saddling messianic employers like Wal-Mart with any costs -- will pay an average of nearly $500,000 a year per Wal-Mart -- and those are small Wal-Marts employing only 200 people -- in relief for underpaid and uncovered employees.

A study by the San Diego Taxpayers Association (SDCTA) indicated that the current influx of "Big Box" retailers like Wal-Mart into Southern California will eventually result in $2.8 billion in lost wages and benefits per year in SoCal.

We can go on and on about exporting US jobs to China -- and, actually, out of China, because China wasn't cheap enough for Wal-Mart -- and the deplorable conditions of workers in foreign lands because of Wal-Mart's insatiable race to the bottom. Or Wal-Mart's systematic use of undocumented workers and their ties to the INS. Or how about the fact that Wal-Mart already controls nearly 50 percent of grocery sales in Mexico? But why bother? Why not go on to the Walton Family themselves, numbers five through 10 on the list of the richest people in the world.

Going to Wal-School

The Walton Family has endowed a lot of great things to the people of Arkansas. And Al Capone ran soup kitchens.

But their biggest endowment -- in the neighborhood of $25 billion -- is to their Walton Family Foundation, a political slush fund aimed at undermining public education with the end of eventually privatizing education in the United States. They also fund some of these friendly organizations:

• The Cato Institute
• The Heritage Foundation
• The Hudson Institute
• the Manhattan Institute
• The Landmark Legal Foundation
• The National Right to Work Legal Defense & Education Foundation

Education is the ultimate plum for private business. It is an industry with an ever-increasing customer base that is compelled by the government to use the product. Privatizing education wouldn't mean forcing families to pay to send their kids to go to school -- it would mean the government paying private companies to run the schools. Which would again mean the American taxpayer pouring money into corporate coffers.

A future with American kids attending Wal-Schools may sound paranoid and apocoalyptic, but it is nearer to fruition than we think. If only 10 percent of students in an urban area are homeschooled or schooled in privately-held, for-profit (non-parochial) schools on top of the children of middle and upper-middle class parents already attending private parochial schools and academies, the result would be catastrophic. All confidence in public schools would be decimated, and funding would become more and more scarce -- if that many people aren't using the public schools, then vouchers, basically tax rebates, to families who don't use public schools would cripple funding. We'd be left with a city that had two or three elementary and secondary schools in each region with huge enrollments. Urban high schools already suffer from terrible reputations and subpar educations because funding is convoluted, especially in Chicago. Teachers' unions would be crushed and the qualifications for teaching in such schools would necessarily drop as they had to compete with private schools in the labor market.

We would be graduating a generation of mud people with minimal skills -- about good enough to go get a job at Wal-Mart, actually, but dumb enough not to complain.

We would have a three-tiered system where the poorest of the poor (plus my kids) go to public school, the lower-middle class are home-schooled or schooled at private non-parochial schools, and the children of the rich go to elite private academies. Wal-Mart has already made an effort to begin privatizing schools in Florida -- one of the Walton kids, who lives in California, gave $325,000 to Jeb Bush's last gubernatorial campaign -- and as the Walton Family Foundation successfully destroys public education in other urban and rural centers, such campaigns will simply gain steam. The hundreds of billions of dollars a year taxpayers put into the public education process will go to the Walton Family.

Put Your Money In The Wal-Bank

As if cornering the retail market and making a push to take over education wasn't enough, the Wal-Mart empire is trying to become the largest single banking firm in the United States. This three pronged effort would functionally make them the single most powerful family in the history of the world.

The Walton Family bank, Arvest, is fledgling right now but stands to expand just as quickly, if not more so, than the stores did in the 1990s. By virtue of the ubiquity of Wal-Mart stores, which would presumably each be retrofitted with a cozy Arvest Bank, this could become the largest banking concern in the United States and destroy the hundreds of thousands of local and regional banks that are the cornerstone of economic democracy in the United States. Local, state and regional banks are a necessity for small businesses looking to start up or expand. If these are choked out in favor of a centrally-controlled banking concern, small business will suffer and entire communities will find that free enterprise and entreprenuerial spirit will be handed over to Wal-Mart because they can sell me a TV for $9 less than Target can.

The arguments for Wal-Mart are paltry. The arguments against it voluminous and convincing. The defeat American society suffered at the hands of the City Council vote on 26 May will go down in history as a benchmark in the history of the corporatization of our democracy. A victory for responsible corporate citizenship in Chicago would have provided a blueprint for other cities and areas resisting the encroachment of Wal-Mart. The shameful jealousy of power our Aldermen exhibited on that day will have reprecussions far beyond a net loss of 65 jobs in the 37th Ward.

GB store

Comments

Steve / June 2, 2004 10:08 AM

Dear Chicken Little,

You forgot to mention how Sam Walton will rise from the dead to lead the four horsemen of the apocalypse down Michigan Avenue, destroying the city in their wake.

B.A. / June 2, 2004 12:21 PM

It's quite interesting that a few weeks ago you had written an article IN DEFENSE of an entrepreneur (he was a tattoo artist) because some members of the community within which he wanted to start a business were protesting his presence there.

Now you write an article defending a community's right to protest against an entreprenuer's desire to open a business.

So which is it?

Either you stand for the principle of free enterprise or not.

Scott / June 2, 2004 1:02 PM

What is your source for the statement:
"But the reality is that their products are not significantly cheaper"

Do you know of any studies that go into the effects on cost of living when a Wal-mart goes up?

Do you know of any studies that go into changes in the quality of product available in a market when a Wal-mart goes up?

Pete / June 2, 2004 3:34 PM

Rather than provide affordable healthcare to its employees--which it should be able to do, given its enormous bargaining power as the world's largest corporate employer--Wal-Mart instead routinely directs needy employees to local social service agencies so they can go on public assistance instead.

Per the Center for American Progress:

Wal-Mart is able to keep prices so low due to the rock-bottom wages it pays its non-unionized workers, coupled with a lack of proper benefits. And it's the American taxpayer who is stuck picking up the slack. The average supercenter worker makes $8.23 an hour. At that low wage, according to a new report put together by Rep. George Miller (D-CA), the average Wal-Mart store would leave taxpayers in a community stuck picking up about $420,750 per year, including in part about "$36,000 a year for free and reduced lunches" for the kids of Wal-Mart families; "$108,000 a year for children's health insurance costs; $42,000 a year for Section 8 housing assistance; and $125,000 a year for federal tax credits and deductions for low-income families." As an example of the size of the problem, look to Georgia, where "Wal-Mart had more employees depending on state health-insurance assistance than any other major employer in the state." In California, a study showed that in 2002, Wal-Mart workers relied on 50% more taxpayer-funded health care per employee than those at other large retail stores, with taxpayers subsidizing more than $20 million worth of medical care.

brian / June 3, 2004 10:17 AM

Ramsin, I do think you owe it to your readers to provide some facts (ie numbers) about the cost of certain items in say Target vs Kmart vs Wal-Mart in Chicago to see if they really are bad.

I liked living in an area where there was no Wal-Mart. I'd love to live in a world where there are no big-box stores. But until the economics of planning, aethetics, and driving change, they are a fact of life.

Pete / June 3, 2004 1:44 PM

B.A., calling Wal-Mart an "entrepreneur" is quite a stretch. And with the enormous power they wield over suppliers, labor and municipal governments, their operations also strain the definition of the term "free enterprise."

B.A. / June 3, 2004 2:26 PM

The way Wal-Mart is portrayed here, it should be eradicated from the face of the Earth, not just not allowed to do business in this city, but if we did so, be aware that it would make us communists or the like, not capitalists in a free society.

And then, why stop at Wal-Mart, why not go after all the major corporations, and while we're at it, why not start invading countires to topple their forms of government we don't agree with and erect our own system of a free democracy--oh, wait, nevermind.

Pete / June 3, 2004 3:51 PM

The point isn't that Wal-Mart should be eradicated, but that they should compete fairly and be a good corporate citizen. If they did so, there would be no reason for municipalities to keep them locked out. But their record is far from clean, and thus the municipalities have every right to make reasonable demands of Wal-Mart to ensure that their arrival doesn't decimate the local community.

I'm no Marxist. I'm just as much of a good capitalist consumer as the next guy (IKEA and Amazon make me drool uncontrollably). The last thing I'd want is to be in mid-80s Moscow, standing in line for eight hours for a three-day- old loaf of bread and a can of beets. But unfettered capitalism is just as vicious as the worst that communist economics had to offer--just vicious in differing ways. The world needs capitalism, but a controlled version of it.

Andrew / June 3, 2004 4:00 PM

I can't believe someone actually equated being concerned about Wal-Mart's business practices with being a communist. Talk about logical leaps! Ramsin's column may be a bit over-the-top, but the zeal displayed in the company's defense is truly amazing. You'd think somebody just insulted your religion (or are you all major stockholders?)

Personally, I wouldn't be surprised if Wal-Mart were investigated under anti-trust laws sometime in the future. If Microsoft can fall under scrutiny for their strong-arm tactics, why not them?

Kris / June 4, 2004 2:00 PM

On the other hand, Andrew, Ramsin equated the Walton family with Al Capone. There's enough over-the-top to go around.

Andrew / June 4, 2004 4:01 PM

Al Capone really did run soup kitchens. Ramsin was pointing out that a little bit of charity doesn't make up for a whole lot of bad things. Enron had a number of philanthropic projects, but that doesn't excuse their wrong-doing.

Rick / June 6, 2004 2:50 PM

I think Mr. Canon's article was only "over the top" because the issues being raised by Wal-Mart's trade practices require a little more than sweaty palms and raised eyebrows. The fact that our city (considered to be more liberal by national standards) failed to prevent this company from setting up shop is frightning. I would hate to see a business with so few ethics run amok, but it seems like that is exactly what is going to happen. One doesn't have to embrace Marxism or call for the detruction of our free market system to see that Wal-mart is not good for one's community. And I would like any would be McCarthyists relax, I too enjoy the benifits of living in a capitalist society.

Kenzo / June 6, 2004 10:38 PM

*BA--

There is a difference between responsible entrepreneurs and those who blatantly abuse the system.

Mr. Underwood, unlike the Walton family, was not starting a business to engage in price-gouging and union-busting. His business was no threat to other tattoo businesses. He merely wanted to market his talents.

The type of ingenuity he possesses is the reason why capitalism works. This ingenuity allowed my family, like many others, to strive.

When my great-grandfather moved to America from Russia in the 1910s, he had a difficult time finding work. Most businesses had issues with hiring Jews. He needed to suport a family so he started up his own business on the now-defunct Maxwell Street Market on the Near West Side, not far from where Mr. Underwood's shop was supposed to be. He was able to support his
entire family on this income. He even bought some property and sent some money home. It is safe to say free enterprise saved my family.

My great-grandfather was a responsible business man who supported his community.

The freedoms awarded to him are the same ones abused by the Walton family in the name of the "American Way."

Wal*mart wants to make businesses like my great-grandfather's a thing of the past.

Along with these businesses, the American Dream will become a thing of the past.

Then who will buy Wal*Mart's Chinese-made American flags?

 

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