American retail giant Wal-Mart, whose clientele is largely from the middle class, is eyeing India. But will the country benefit from its culture of producing low-wage people who will need to shop at its low-cost stores? This spiral of low costs produces fabulous profits for Wal-Mart and its executives.
IN June 2005, Wal-Mart's chief of international operations, John Menzer, told market analysts that India is the next big thing. Menzer had just returned to the United States from India, where he had visited the company's 86-employee procurement centre in Bangalore. Wal-Mart intends to increase the volume of its purchases in India by 30 per cent, taking the total figure to $1.5 billion.
Cheap Indian-made products are no match right now for cheap Chinese-made products, because Wal-Mart currently buys $65 billion worth of commodities from China. In the U.S. Wal-Mart is the largest importer from China, and if it were an independent state it would be China's eighth largest trading partner (ahead of Russia and the United Kingdom). But, for Menzer, India is more attractive as a market than as a source of the cheaply produced plastic goods that line its massive stores across the U.S.
"India represents a $250-billion retail market, growing at a rate of 7.2 per cent a year, but modern retailing is just starting to emerge," he said. "This shows us that India is a huge organic growth opportunity for Wal-Mart." A voracious Wal-Mart is eager to enter India, but is held back by Indian law from making its investment.
Menzer said Wal-Mart had held six meetings with Indian government officials, who indicated that the law might be changed. During these meetings, Menzer pointed out, "we created a very positive image [for Wal-Mart] in what we think is a very important future market. We've energised the FDI [foreign direct investment] lobby and pre-empted the anti-FDI lobby in India. I believe we've told our story".
India is a prospect for Wal-Mart, but is Wal-Mart an opportunity for Indians? On August 10, a crowd gathered before the Town Hall where I live in western Massachusetts. Our Mayor, who is also head of the Council of Mayors for my State, took the podium. Downtown Northampton is an amalgam of small boutique stores and family-owned shops. The only franchise in sight is a Starbucks, whose coffee is under heavy competition from several smaller, locally owned and run shops. The Mayor, Clare Higgins, joined a national call to boycott Wal-Mart for its child-labour offences, its low wages, and its record of discrimination in the workplace. A Massachusetts study shows that Wal-Mart drains $2.9 million from the exchequer because its workers have to rely upon the public health care system designed for the indigent. "I want to see Wal-Mart step up and do what many of our small businesses do right here on Main Street," Higgins said, "and take responsibility."
There is no Wal-Mart on Main Street. It is located far from the picturesque downtown, on a road that houses all the major "big box" franchise stores. Like the other 3,500 U.S.-based Wal-Mart stores, this one too is enormous, filled to the brim with all kinds of goods, most of them produced in China. The clientele at this Wal-Mart, like that at most others, is generally from the working class (what in the populist parlance of the U.S. is called the "middle class").
A study in 2003 found that only 6 per cent of Wal-Mart shoppers have an annual family income greater than $100,000, and that more than 23 per cent subsist on less than $25,000 (20 per cent of Wal-Mart shoppers have no bank account). As Betty Dukes, a former employee at Wal-Mart put it, "[Wal-Mart] is promoting itself to low-income people. That's who they lure. They don't lure the rich. They understand the economy of America. They know the haves and the have-nots. They don't put Wal-Mart in those high-end parts of the community. They plant themselves right in the middle of Poorville."
Founded 40 years ago, Wal-Mart has long since outgrown its Bentonville, Arkansas home. There are now almost 6,000 stores worldwide, although 80 per cent of them are in the U.S. Every day, 20 million people shop at Wal-Mart, and four of five U.S. households buy something from the chain. In 2004, Wal-Mart sales totalled $288 billion.
This retail behemoth has gradually wiped out its competitors by its ability to harness a combination of satellite technology and unusual working conditions. Wal-Mart owns and operates one of the world's largest satellite communications networks.
From its headquarters in Bentonville, the Wal-Mart administration is able to keep a close watch on the activities of its many branches. It is able to monitor the wages of its employees, their working habits, the movement of its products and the time it takes for each item to sell.
Bob Ortega, who wrote a biography of Wal-Mart's founder, notes that Wal-Mart executives in Arkansas are able to check and change the thermostat in each individual store. Bentonville serves as the brains of the operation. One advantage of this kind of centralised control is that poorly trained individuals can run the stores. Employees ironically quote Sam Walton's mantra: "If you can squeeze more out of a penny, then you should do it." In other words, the employees understand this to mean that the stores are run with minimal technological inputs and with minimal training for the staff. Indoctrination and high turnover are a key to Wal-Mart's control over its in-store employees.
NOT one of Wal-Mart's North American stores has a union. Wal-Mart has been ingenious in its decimation of every drive to form a union. The problem does not stem from unimaginative unions, but from Wal-Mart's strategy of worker pacification. Employees are treated as members of the Wal-Mart "family", and they are promised decent benefits (including a profit-sharing plan) if they persist through the low wages for at least two years. The current turnover rate is 46 per cent a year, which means that almost half the employees leave long before they can take advantage of the perks.
Sociologist Ellen Rosen argues that Wal-Mart relies upon "authoritarian management and deceptive ideology. Fear and humiliation motivate personnel to work hard. Managers and workers indoctrinated in the Wal-Mart culture often start the job with great expectations, but in time Wal-Mart's modus operandi generates anger and betrayal". Unable to form unions, the employees quit their jobs, which means they do not get the illusionary benefits from Wal-Mart.
To keep costs down, Wal-Mart makes "corporate crime an integral part of its business strategy", writes Liza Featherstone, author of Selling Women Short: The Landmark Battle for Workers' Rights at Wal-Mart. "Wal-Mart routinely violates laws protecting workers' organising rights. It is a repeat offender on overtime laws; in more than 30 States workers have brought wage and hour class action suits against the retailer. In some cases, workers say, managers encouraged them to clock out and keep working; in others, managers locked the doors and would not let employees go home at the end of their shifts."
In June 2001, six women filed a class-action employment discrimination lawsuit against Wal-Mart. Seventy per cent of Wal-Mart employees are women, so the lawsuit (Dukes v. Wal-Mart) is a window into the company's general conduct. In a preliminary hearing on the procedures, Judge Martin Jenkins asserted: "Plaintiffs presented uncontested descriptive statistics which show women working at Wal-Mart are paid less than men in every region, that pay disparities exist in most job categories, that the salary gap widens over time even for men and women hired into the same jobs at the same time, that women take longer to enter into management positions, and that the higher one looks in the organisation, the lower the percentage of women" (June 22, 2004).
Wal-Mart, according to Featherstone, has turned Henry Ford's philosophy on its head. Ford believed that every worker should be paid a reasonable amount so that they can be the consumers of the products of industrial civilisation. If they do not have money in their pockets, they will be unable to buy what they produce. Wal-Mart, on the other hand, pays its workers low wages so that they will be able to shop only at the low-cost mega-store. It creates consumer loyalty through the general decline of decent wage jobs. As more and more people hold low-wage retail jobs, they are able to shop only at Wal-Mart (where groceries cost a quarter less than elsewhere). Wal-Mart produces low-wage people who will need to shop at its low-cost stores: this spiral of low costs produces fabulous profits for Wal-Mart and its executives. (In 2003, Wal-Mart chief executive officer H. Lee Scott made 1,500 times a full-time hourly employee.)
At the downtown rally on August 10, Congresswoman Ellen Story put the case plainly: "Wal-Mart is not only lowering the standards of pay for workers in our area, but all over the country. If we don't stop this, I don't know what will happen." In 2004, Forbes magazine ran a story on Wal-Mart. They know what will happen: "The Wal-Martisation of the world is changing commerce around the planet for good and ill. By importing so many goods from low-wage countries like China, it eliminates manufacturing jobs and depresses wage growth in the U.S. - and has the same effect in any country where it achieves significant density." This is the future of the world, Wal-Mart style.