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Wednesday, October 25, 2006

Notable Quotes from the Wal-Mart Symposium

Last weekend I participated in an excellent symposium organized by the University of Connecticut Law Review: Wal-Mart Matters. The symposium was intense, a day and a half of full panels with speakers from the legal academy, from other disciplines, including history, economics, business, and from practice, including journalists, activists, and both the plaintiff’s and the defendant’s lawyers from the biggest employment discrimination class action to ever been certified – 1.6. million women working at Wal-Mart - currently on appeal before the 9th circuit: Dukes vs. Wal-Mart.

I plan to post later a synopsis of my own talk called “Wal-Mart’s Benefits: The Targeting of Giants in a National Campaign to Improve Work Conditions”. But in the meantime, I thought I would share a few notable quotes from some of the panels, to give you a sense of the debates:

Bob Ortega, Author of In Sam We Trust: The Untold Story of Sam Walton and Wal-Mart, the World's Most Powerful Retailer, Journalist and Journalism Professor: “You can put lipstick and string pearls on a pig, but the pig remains a pig” (on Wal-Mart’s PR attempts to improve its image by hiring civil rights spokesmen)

Vijay Prashad, Professor of International Studies – “They had Saliva on their faces, when they learned the statistic that India’s middle class is the size of  France” (about management contemplating entering the Indian retail market).

Joseph M. Sellers, Partner, Cohen, Milstein, Hausfeld, & Toll, PLLC, representing the plaintiffs in the Dukes discrimination class action "(Wal-Mart management had a fetish of controlling every single aspect of Wal-Mart stores, from to music, but they forgot to guide promotion and personnel decisions at the floor level"

Evelyn Becker, Partner, O'Melveny & Myers, LLP, representing Wal-Mart in the Dukes employment discrimination class action - “the social psych studies actually show that women have more biases than men, so in fact you could say that women should therefore not be promoted to supervisory positions”.

Ron Galloway, Producer/Director of Why Wal-Mart Works – “I may sound like a Wal-Mart Hater, but in fact I am a Wal-Mart lover”

Richard Vedder, Economics Professor and Scholar at the American Enterprise Institute – “Wal-Mart consumer, who are mainly poor love Wal-Mart; are you suggesting that poor people are stupid?”

Me: "Wal-Mart gave a nation with declining social activism a new face for the struggle – the face is a (tarnished) yellow smiley face and a (not-so-socially-conscious) Zorro who rolls back prices, but also wages and employment standards”

Posted by Orly Lobel on October 25, 2006 at 05:42 PM | Permalink

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Comments

"I've seen it argued that raising prices by half a cent per dollar would make it possible to raise the wages of every associate by $1."

And if Wal-Mart could just raise prices by half a cent per dollar and create enough profit to pay associates a dollar more, *why wouldn't they*?

I am (respectfully) skeptical of your assertion. Wal-Mart, like the other outlets selling milk and eggs, are largely price takers. If they can raise prices and make oodles more money, why wouldn't we see them doing that now? I doubt that Wal-Mart-- or any business operating in a competitive field-- is voluntarily and knowingly engaging in systematic underpricing. It could be that they are, in which case their in house analysts should examine the issue (though I guess they are already putting a *lot* of thought into figuring out the market clearing price).

Just as someone with a basic familiarity with economics, I have a hard time believing that any competitive business can just "choose" to increase prices and make more money, as an efficiently run business is already trying to maximize profits and hit the optimal price.

Posted by: andy | Oct 30, 2006 1:24:37 AM

"I thought that you wanted someone to answer you who works for Walmart, Andy? Yet when someone does, all you do is attack. Funny that."

I apologize for being overzealous and bitterly sarcastic.

My main point is just that, whatever else one says about Wal-Mart, and I am sure that there are bad things that one can reasonably say, that one must take into account the absolutely gigantic cost savings that Wal-Mart provides. That fact cannot be dismissed so easily, and I feel that many of the allegations thrown Wal-Mart's way are simply red herrings and are just used to disguise a general anti-capitalist sentiment.

If wal-mart causes some "damage," fine; let's talk about constructive ways to address those problems. But the reaction and proposals offered by the enlightened left are untenable and silly; banning Wal-Mart (as Chicago tried to do) is not going to make the problems faced by poors go away, and instead will (from a financial perspective) make them worse. The economic benefits of Wal-Mart's low prices are astounding, even if there are some associated negative costs associated with those prices (e.g. low wages, hiring illegals). But those problems are better confronted head-on rather than just flinging out a general anti-corporate sentiment, which is what I glean from most wal-mart haters.

Posted by: andy | Oct 30, 2006 1:19:33 AM

I thought that you wanted someone to answer you who works for Walmart, Andy? Yet when someone does, all you do is attack. Funny that.

I see all kinds of people every day, poor and not, in Walmart. And I am sure that they come in primarily for the low prices. But the thing that makes them come back, as Sam Walton knew, was customer service. That has been lost at Walmart, and the corporate managment lies about fixing it. Instead they bend over backwards to make "shareholders" and Wall Street happy in the short term at the expense of a long term business plan.

And I don't think anyone with a realistic viewpoint is arguing that Walmart is going to have to triple prices. I've seen it argued that raising prices by half a cent per dollar would make it possible to raise the wages of every associate by $1. Even if it's three times that, it's certainly not some outrageous amount. But then it seems to me you aren't interested in arguing against a real point, only a strawman.

Posted by: Antic Hue | Oct 29, 2006 11:27:02 PM

Hmmm, no mention of this on the walmartmovie.com page.

"Wal-Mart at Forefront of Hurricane Relief

By Michael Barbaro and Justin Gillis
Washington Post Staff Writers
Tuesday, September 6, 2005; Page D01

At 8 a.m. on Wednesday, as New Orleans filled with water, Wal-Mart chief executive H. Lee Scott Jr. called an emergency meeting of his top lieutenants and warned them he did not want a "measured response" to the hurricane.

"I want us to respond in a way appropriate to our size and the impact we can have," he said, according to an executive who attended the meeting. At the time, Wal-Mart had pledged $2 million to the relief efforts. "Should it be $10 million?" Scott asked.

Over the next few days, Wal-Mart's response to Katrina -- an unrivaled $20 million in cash donations, 1,500 truckloads of free merchandise, food for 100,000 meals and the promise of a job for every one of its displaced workers -- has turned the chain into an unexpected lifeline for much of the Southeast and earned it near-universal praise at a time when the company is struggling to burnish its image."

Posted by: andy | Oct 29, 2006 3:18:08 PM

"That the preferences of the poor are made within a highly constrained feasible set is no fault of the poor and does not thereby provide sufficient apologia for Wal-Mart's corporate behavior"

What behavior is that? Paying market wages? Wal-Mart does the same thing that its customers do-- it needs to buy a product (labor) and it likes to pay less, rather than more.

Should the customers paying 99 cents for a can of pringles make sure to pay walmart another dollar or two because Wal-Mart's low prices are the product of exploitation, and that it could charge a lot more if it were a monopolist?

Posted by: andy | Oct 29, 2006 3:07:52 PM

That the preferences of the poor are made within a highly constrained feasible set is no fault of the poor and does not thereby provide sufficient apologia for Wal-Mart's corporate behavior....

Posted by: Patrick S. O'Donnell | Oct 29, 2006 11:55:47 AM

"Quoting George Will, summarizing a quaterly magazine issued by a consulting firm, who is (hopefully at least) aggregating numerous economic papers, is not really a very good argument."

Fine. Forget george will or "Mckinsey" (what the heck is a "McKinsey" anyway? do they even have a solid reputation?). How is it not patently obvious that Wal-Mart produces significant cost savings to poor people? If you step outside of the Banana Republic or Trader Joe's for a day and head to Wal-Mart, you will see many, many poor people at Wal-Mart. Do you think they flock to the store because it charges high prices?

Posted by: andy | Oct 29, 2006 11:02:30 AM

Quoting George Will, summarizing a quaterly magazine issued by a consulting firm, who is (hopefully at least) aggregating numerous economic papers, is not really a very good argument. Secondly, IIRC, the McKinsey paper doesn't address the quality of the jobs that Walmart impacts in a community, so claiming that any increase is better than the satus quo ante. Furthermore, if the jobs do pay markedly less (a 2004 study in California showed that the average Walmart worker made $9.70 as opposed to the $14 average from other large retail firms), that itself would account for a substantial part of the increase in productivity, double the jobs or not.

Posted by: Antic Hue | Oct 28, 2006 6:13:02 PM

"The jobless and penniless have found salvation in Wal-Mart? A poor man's paradise? My goodness, what did people do before Wal-Mart? How did they ever survive?"

As summarized by George Will:

"A McKinsey company study concluded that Wal-Mart accounted for 13 percent of the nation's productivity gains in the second half of the 1990s, which probably made Wal-Mart about as important as the Federal Reserve in holding down inflation. By lowering consumer prices, Wal-Mart costs about 50 retail jobs among competitors for every 100 jobs Wal-Mart creates . Wal-Mart and its effects save shoppers more than $200 billion a year, dwarfing such government programs as food stamps ($28.6 billion) and the earned-income tax credit ($34.6 billion)."

--

Of course, when proposals float to make food stamps more stringent or reduce the EITC, many have no problem arguing that those benefits are vital. There is no shortage of articles decrying the evildoings of the IRS and its crackdown on EITC fraud. Yet, these same people consider wal-mart's $200 billion dollar savings a mere pittance-- poor people can survive just fine without it!

The anti-Walmart crowd should realize that, though they may afford to buy imported tuna from the local Whole Foods, not all are so lucky.

Posted by: andy | Oct 28, 2006 1:08:04 AM

The jobless and penniless have found salvation in Wal-Mart? A poor man's paradise? My goodness, what did people do before Wal-Mart? How did they ever survive? Wal-Mart offers a 'wide number of jobs?' Having one's basic needs satifsfied and being educated does give one a different perspective on things, but that was the case long before Wal-Mart. The populations you refer to have been addressed by folks hoping to raise the minimum wage, by folks fighting for a 'living wage,' by folks struggling for universal health care, by yet others organizing workers to fight for what is truly in their individual and collective self-interests, i.e., by union organizing. These populations are being addressed by those who care about the dignity of human beings, who contemplate what kind of life is worthy of that dignity, by those who articulate a minimal account of social justice, say that found in Rawls, Sen, Nussbaum or Pogge, or among those arguing for a basic income guarantee, and so forth and so on. The attention accorded Wal-Mart is a bit myopic and misplaced in light of a bigger picture, but it has come to symbolize the socio-economic contradictions inherent in this latest form of capitalism, what Alexandra Lahav earlier termed a 'condensation symbol.' Finally, these populations have been addressed by those who seek to equalize educational opportunity, indeed, by those who truly care about inequality in the modern world:

'The connection between income and capability is…made more complex by the relevance of relative deprivation. As Adam Smith noted, the social capabilities may depend on a person’s relative income vis-à-vis those of others with whom he or she interacts. A person’s ability to be clothed appropriately (or to have other items of consumption goods that have some visibility or social use), given the standards of the society in which he or she lives, may be crucial for the capability to mix with others in that society. This relates directly to relative income vis-à-vis the general level of prosperity in that community. A relative deprivation in terms of income can, thus, lead to absolute deprivation in terms of capabilities, and in this sense, the problems of poverty and inequality are closely interlinked. For example, being relatively poor in a rich country can be a great capability handicap, even when one’s absolute income is high in world standards. In a generally opulent country, more income is needed to buy enough commodities to achieve the same social functioning. [….]

Some implications of Smith’s focus on relative income in assessing poverty are worth separating out because of their extensive reach. First, because the absolute deprivation of social capabilities depends on relative deprivation of incomes, clearly the assessment of poverty in the space of capabilities cannot be divorced from the extent of income inequality. This connection indicates that the increasingly common global tendency in public discussion (and sometimes in public policy analysis) to argue in favor of an exclusive concentration on poverty removal, rather than being concerned also about inequality, is intellectually hard to sustain. Although it is easy to see that income poverty and income inequality are distinct phenomena, nevertheless capability poverty relates inseparably to income inequality. An often-articulated political attitude, which takes the form of saying, “I do care about poverty, but don’t give a damn about inequality,” not only reflects a remarkably narrow approach to morality but also raises issues of inconsistency, given the causal linkages that make inequality and poverty interdependent.

Second, Smithian reasoning indicates why poverty is hard to eradicate just by raising the average level of income, without also addressing issues of inequality of incomes. In particular, the phenomenon of poverty in rich countries can be better understood through the perspective of relative deprivation. Adam Smith analyzed the relevance of relative position vis-à-vis others in society in the following way:

A linen shirt, for example is, strictly speaking, not a necessity of life. The Greeks and Romans lived, I suppose, very comfortably, though they had no linen. But in present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in without linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into without extreme bad conduct. Custom, in the same manner, had rendered leather shoes a necessity of life in England. The poorest creditable person of either sex would be ashamed to appear in public without them.

Similarly, today, a person in New York may well suffer from poverty despite having a level of income that would make him or her immune from poverty in Bangladesh or Ethiopia. This is not only because the capabilities that are taken to be minimally basic tend to change as a country becomes richer, but also because even for the same level of capability, the needed minimal income may itself rise, along with the incomes of others in the community. [….]

Thus even the same minimal capability has varying commodity demands and divergent requirements of minimal income in different societies, involving systematic connection with incomes of others in the community in which a person lives. One further implication of this linkage is that given the peer pressure that operates in favor of social capabilities (often at the expense of other needs), even physical deprivation, such as undernourishment, can occur in richer countries at levels of family income at which elementary nutritional deprivation would be very rarely seen in poorer countries. [….]

Third, the pivotal role of the consumption patterns of others in the same community, or in a group with which a person interacts, also indicates why poverty cannot be assessed in purely individual terms. The understanding that no person is an island is quite central to the assessment of poverty, and correspondingly, to the appropriate evaluation of the bite and reach of inequality.

--Amartya Sen, 'Conceptualizing and Measuring Poverty' in David B. Grusky and Ravi Kanbur, eds. Poverty and Inequality. Stanford, CA: Stanford University Press, 2006.

Posted by: Patrick S. O'Donnell | Oct 26, 2006 12:59:41 AM

I'm very interested in hearing from people who have either worked at or shop at Wal-Mart (I've worked at Target, but not Walmart, though I regularly shop at Wal-Mart), not just from the academic/financial elites who criticize them. Is wal-mart the "devil" only to those people who need not benefit from its low prices, or to those people who need not benefit from the wide number of jobs it offers? These populations must be addressed before any sensible criticism of Wal-Mart may be offered.

Those of us from families who came to this country jobless and penniless feel differently about Wal-Mart than most "elite" law professors do, I gather.

Posted by: andy | Oct 26, 2006 12:04:31 AM

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