It's Wal-Mart's way, or no way, the world over


Wal-Mart has become the modern icon of capitalism. Its competitive power is becoming uncontestable. To exploit further economies of scale, it insists on lower prices from its vast network of already low-cost suppliers. The squeeze is ongoing and unrelenting.

Many of us enjoy shopping at this behemoth discount retailer. Every now and then, when I find products "Made in Bangladesh," it fills me with pride and I have bought many such items as a consumer. However, it is also hard to forget or ignore the crass exploitation of poor and near-starved labor on the foundation of which I benefit from Wal-Mart shopping as a consumer.

Does Wal-Mart need to be this aggressive in competition to succeed? Can't there be a better model of competition that brings respectable profit without depriving the labor its fair and dignified share?

Everytime when we are greeted at Wal-Mart with a smile, do we realize the whole story behind that smile? It is often suggested that capitalism and democracy are inseparable. How does such relationship, if valid, explain "It's Wal-Mart's Way, or no way"? In this new globalized world, many such relationships are becoming murkier (some argue, more ominous) than ever.

The pure capitalism that existed during 18th-19th century transformed after the Great Depression. Keynes saved the capitalist world from the dire Marxian predictions. Many standard-setting, regulatory reforms followed, such as OSHA, Medicare, minimum wage, etc., in the United States. However, pure capitalism may still have a grip on the vast majority of the poor of the world.

When Wal-Mart's flying Happy-Face knocks down its already-lower prices at the service of its huge customer base, does it remind us who is (are) getting knocked down at the other end - or who is (are) being paid less than before?

Also, are the consumers, always after the lowest prices, out of the loop of responsibility in terms of pushing Wal-Mart toward something different than from the vision of its founder Sam Walton, who played a vital role in the long-gone "Made in America" movement?

By the way, there is no slavery in our contemporary time. Right? Also, there is no human rights issue involved here. Right?

Lest I am misunderstood, we should distinguish between market economy and pure capitalism. Also, when discussing capitalism, one should keep in mind what model of capitalism are we talking about. Is Wal-Mart doing anything morally wrong? Is it not following the principles of pure capitalism?

Consider the following quote: "... The moral justification for capitalism lies in the fact that it is the only system consonant with man's rational nature, that it protects man's survival qua man, and that its ruling principle is: justice." — Ayn Rand quoted at http://www.capitalism.org/.

Would anyone care to explain how is "justice" working here in this Wal-Mart context?

Dr. Mohammad Omar Farooq

It's Wal-Mart's way, or no way, the world over

SAN PEDRO SULA, Honduras -- When Wal-Mart Stores Inc. demands a lower price for the shirts and shorts it sells by the millions, the consequences are felt in a remote Chinese industrial town, at a port in Bangladesh and here in Honduras, under the corrugated metal roof of the Cosmos clothing factory.

Isabel Reyes, who has worked at the plant for 11 years, pushes fabric through her sewing machine 10 hours a day, struggling to meet the latest quota scrawled on a blackboard.
She now sews sleeves onto shirts at the rate of 1,200 garments a day. That's two shirts a minute, one sleeve every 15 seconds. ''There is always an acceleration," said Reyes, 37, who can't lift a cooking pot or hold her infant daughter without the anti-inflammatory pills she gulps down every few hours. ''The goals are always increasing, but the pay stays the same.." Reyes, who earns the equivalent of $35 a week, says her bosses blame the long hours and low wages on big U.S. companies and their demands for ever-cheaper merchandise. Wal-Mart, the biggest company of them all, is the Cosmos factory's main customer. Reyes is skeptical. Why, she asked, would a company in the richest country in the world care about a few pennies on a pair of shorts? The answer: Wal-Mart built its empire on bargains.

Size matters: The company's size and obsession with shaving costs have made it a global economic force. Its decisions affect wages, working conditions and manufacturing practices -- even the price of a yard of denim -- around the world.

From its headquarters in Bentonville, Ark., the company has established a network of 10,000 suppliers and constantly pressures them to lower their prices. At the same time, Wal-Mart buyers continually search the globe for still-cheaper sources of supply. The competition pits vendor against vendor, country against country.

''They control so much of retail that they can put someone into business or take someone out of business if they choose to," said Pat Danahy, a former chief executive at Cone Mills Corp. in Greensboro, N.C., one of the few surviving U.S. textile producers.

In Honduras, the pressure keeps factory managers on edge, always looking for ways to cut expenses without running afoul of labor laws or Wal-Mart's own contractor rules, which call for ''reasonable employee work hours."

''I think we have reached the limit," said Shin Woo Kang, manager of the enormous Han Soll Textile Ltd. sewing plant on the outskirts of San Pedro Sula. The plant employs 1,600 workers, mostly young women. Wal-Mart is its biggest customer.

The brightly lighted factory is filled with humming machines, mounds of clothing parts and fast-moving hands. Down one production line, pieces of navy blue fabric take shape as Bobbie Brooks polo shirts, each bearing a Wal-Mart price tag of $8.63.

Kang said Wal-Mart was paying Han Soll about $3 a shirt -- a few cents less than last year.

Asked what he would do if the retailer pressed for an even lower price, Kang grew quiet. ''We would have to find something," he said finally. ''Honestly speaking, I don't know what it is."

To cut costs, Honduran factories have reduced payrolls and become more efficient. The country produces the same amount of clothing as it did three years ago, but with 20 percent fewer workers, said Henry Fransen, director of the Honduran Apparel Manufacturers Association, which represents nearly 200 export factories.

''We're earning less and producing more," he said, ''following the Wal-Mart philosophy."
That's harsh medicine for a developing country. The clothing industry is one of the few sources of decent jobs for unskilled workers in this nation of 6 million. Many of those jobs depend on Wal-Mart.

''You could be looking at a government meltdown if something were to happen to this industry," said Raja Rajan, a factory manager active in the apparel association.

Most favored company: In Rajan's view, Wal-Mart is so important to the stability of Honduras that leaders should cultivate stronger ties with the company, almost as they would a foreign country. He has lobbied the government to send high-level envoys to Wal-Mart's Arkansas headquarters, something Bangladesh and other countries already do.

Even with such efforts, Rajan fears that the migration of sewing jobs to China and other lower-cost countries can't be stopped, only slowed.

Chuck Wilburn figures that his 1,300 employees will be among the casualties. He manages a factory on the outskirts of San Pedro Sula that cranks out clothing for Wal-Mart, Target Corp. and other retailers.

He is proud of his clean, modern factory. ''It's nicer than the one I ran in South Carolina," Wilburn said.

Still, he has had trouble turning a profit. He laid off 500 employees two years ago. Even here, it's hard to meet Wal-Mart's prices. Wilburn expects that Oxford will close his factory in the next few years and move on to another country where basic cotton clothes, such as Wal-Mart's Old Glory khaki pants, can be produced for less.

It wasn't long ago that Wal-Mart was fighting to keep manufacturing jobs on U.S. soil.
In 1985, founder Sam Walton launched his ''Bring It Home to the USA" program. ''Wal-Mart believes American workers can make a difference," he told his suppliers, offering to pay as much as 5 percent more for U.S.-made products.

In his 1992 memoir, ''Made in America," Walton claimed that the program had saved or created nearly 100,000 jobs by using ''the power of this enormous enterprise as a force for change."

But the late Walton's much-trumpeted effort soon was overtaken by the rise of the global economy. The spread of the Internet and other technology, along with U.S.-led efforts to tear down trade barriers, made it easier to move goods and capital across borders.

Squeezing costs: To maintain its edge on pricing, Wal-Mart quietly joined other retailers in a worldwide search for the cheapest sources of production.

In apparel, the process begins with Celia Clancy. From a renovated warehouse near the company's headquarters, the Wal-Mart executive vice president oversees the world's largest clothing budget, estimated at $35 billion in 2000.

Clancy gives her buyers a ''Plus One" mandate every year: For each item they handle, they must either lower the cost or raise the quality.

In purchasing fabrics such as denim and khaki, Wal-Mart plans to approach three to five mills around the world and pit them against each other. ''We'll be putting our global muscle on them," said Ken Eaton, head of the global procurement division, which has 21 offices in 18 countries.

Eaton believes he can reduce costs at least 20 percent by cutting out the middleman and buying directly from foreign factories. He feels a sense of urgency about his mission, in part because he believes the company's ''Buy American" focus left it playing catch up.

Wal-Mart Chief Executive H. Lee Scott Jr. said in an interview that the trend reflected an inescapable reality: U.S. consumers aren't willing to pay even a little extra for a ''Made in America" label.

''The customer ultimately drives that," he said. Wal-Mart is the most powerful corporate citizen in Bangladesh, even though it doesn't operate a single store in the country. When the company complained to Bangladesh's Export Promotion Bureau this spring about delays in moving cargo, the response was swift.

Officials in the southern port of Chittagong are speeding up efforts to reduce paperwork and modernize facilities. Over the objections of labor leaders, port officials also are building a five-berth container terminal that will be privately managed.

It's no wonder Wal-Mart wields such clout in this country, where nearly half the population lives in poverty. The company bought 14 percent of the $1.9 billion in apparel that Bangladesh shipped to the United States last year.

One apparel manufacturer described a visit from a Wal-Mart buyer who showed him a European-made garment that retailed for $100 to $130. The buyer asked the Bangladeshi to produce a knockoff for $10 a dozen. He declined.

''They say to come down in price, but we have to make a profit," complained another clothing maker. Hoping to land a Wal-Mart order for 600,000 fleece jackets this year, he bargained down his suppliers of fabric, thread and fastenings, and managed to cut his price by 20 percent.

It wasn't good enough for Wal-Mart. ''They said they will place the order in Vietnam or China," he recalled. -----

By Nancy Cleeland, Evelyn Iritani and Tyler Marshall
Los Angeles Times, January 3, 2003

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