“We’re troubled by the fact that there are people who work full time who, in fact, cannot provide enough for their families to live decently.”
Lee Scott, CEO of Wal Mart, Inc.
2/23/05
In this paper I will discuss the tactics Wal Mart, Inc. uses to keep its profits high and prices low. I will also discuss the Walton family and employees of the Wal Mart Corporation. I will discuss Wal Mart business practices and their policies regarding associates. I will include the benefits Wal Mart provides and the wage they pay. I will be using sales statistics, import/export statistics, documented experiences of others and personal experiences to show why I believe Wal Mart is the most evil company in the world.
In 1950, Sam Walton opened a Five and Dime in Bentonville, Arkansas. That was the start of it all. In 1970, there were 38 Wal Mart stores; 10 years later, in 1980, there were 276. By 1990, there were 1,500 stores. In 1991, the company took over as the largest retail chain in the world. Presently there are over 3,400 Wal Mart stores worldwide. Shortly after the company became the largest retailer, in 1992, Sam Walton died. This caused quite a bit of worry with the shareholders and stock began to plummet to around $20 per share.
At about the same time as the stock plummeted, President Clinton was in negotiations with China to open their borders and sign a trade agreement with America. This was marketed to Americans as a great thing because it would give the world approximately 1.2 billion more consumers. In actuality, most Chinese people are too poor to buy American products. All it did, was open up a cheap labor force. American retailers could charge the same prices they were charging prior to China opening up, but buy products for a fraction of the price they were paying. They could make 80% profit as opposed to the 20% profit on American goods. In the mid-nineties Wal Mart buyers imported everything they could get their hands on from China, in order to keep stock in the stores up and, in turn, keep stock prices up. Using this strategy basically kept Wal Mart from going under. Currently, of the 6,000 Wal Mart suppliers, 80% are companies based in China. This does not even include the companies Wal Mart owns in China. Wal Mart also owns factories that produce goods exclusively for Wal Mart.
Part of the reason China can do this is because of their lack of workers’ rights laws and the devaluation of Chinese currency by approximately 40%. Companies do not have to pay the wages they have to pay here in America. They don’t have to pay overtime. They also don’t have to limit hours someone can work the way they do here.
99% of China’s exports go to North America and Europe. Wal Mart is responsible for almost all of the Chinese export to America. In almost all categories, America is the largest customer of China and Wal Mart just happens to be America’s largest supplier. Wal Mart estimates it imports approximately $15 billion from China EACH year.
In Long Beach Port alone, imports from China total approximately $36 Billion. Exports to China are only about $3 billion. Most of that is raw materials. Basically, we give them the raw materials for $3 billion and they return them to us as toys and clothes for $36 Billion. This is what happens in third world countries. And this, is WHY they are third world countries. The only thing separating the U.S. from a third world country is the fact that we have money. This won’t last very much longer considering our trade deficit with China alone in 2003, was $120 billion. In 2004, the American trade deficit with China was $162 billion. That’s an increase of approximately 31%! Since Wal Mart is the largest importer from China, this makes Wal Mart more responsible for this deficit than any other company.
In Circleville, Ohio the population is about 13,000. It is a small town based around factories like Thomson, a French company that produces televisions. The Thomson factory in Circleville was responsible for putting the glass screens in the televisions. In its hayday around 1999-2000, the Circleville factory employed approximately 1,000 workers. They produced about 10 million pieces per year at this time. This made them one of the largest contributors to Thomson’s bottom line. In 2003, former Mayor Ron Wunsch says Thomson lost a sizeable portion of production orders from a company called Sanyo. Sanyo said this was because
Wal Mart told them they would not pay so much for the televisions they got from Sanyo. Since Thomson could not produce the televisions for such a cut in pay, they lost the orders. Sanyo ended up going to a Chinese company to fill the orders. In May of 2003, the factory had to close. Wal Mart is breaking ground just up the road from the empty factory.
Five Rivers Electronics, the last American owned television maker, is located in Greenville, Tennessee. They assemble televisions for companies such as Philips, Samsung and RCA. Foreign imports dominate the small television market, so Five Rivers Electronics focuses on larger televisions. According to the President Tom Hopson, by 2003, Chinese imports had increased by 1,100%. In three years, Chinese companies grabbed about one-third of the high end market, worth approximately $350 million per year. Hopson decided to go to the International Trade Commission and charge the Chinese companies with “dumping” high end televisions on the American market below free market cost. TCL, the largest Chinese television maker, was one of the companies fighting against Fiver Rivers Electronics. So was Wal Mart. Please keep in mind, the charge was against Chinese companies, not Wal Mart. The money they stood to lose, however, kept them in this fight against a small, American company only employing 1,000 people. In April of 2003, the International Trade Commission agreed with Five Rivers Electronics and ruled that the Chinese companies were, in fact, “dumping”. The companies were ordered to raise their prices to be competitive with other companies. If Five Rivers Electronics had lost the case, they would have had to close down. The damage had already been done, however, and many other companies were forced to close.
Now I’ll tell you about a company you’ve most assuredly heard of, Rubbermaid. In 1994, Rubbermaid was named The Most Admired Company of the Year by Fortune Magazine. In the early Nineties, Rubbermaid would not do business with Wal Mart. They did business with
K mart and other retailers. Then because management changes came about, they started doing business with Wal Mart. Business, of course, boomed. Shortly after, the price of resin rose sharply and Rubbermaid had to raise its prices. All retailers agreed to the price hike except
Wal Mart. Wal Mart, vindictive as they are, quit carrying many Rubbermaid products. Of course, causing sales to drop drastically, which made Rubbermaid stock slump. In 2004, Rubbermaid’s original factory had to shut down, putting approximately 1,000 people out of work. Ironically, that same year, Wal Mart was named The Most Admired Company of the Year by
Fortune Magazine.
Now I’ll tell you about some of the tactics Wal Mart uses behind closed doors with its suppliers. According to Jon Lehman, a Wal Mart employee of nineteen years, Wal Mart buyers will bring a supplier in to an office at Wal Mart headquarters in Bentonville, Arkansas, and tell them Wal Mart will only carry their product if they reduce the price by 5% under last year’s price. While this keeps the costs low to the consumer, it also does a number of things that hurt the consumer in the long run. It drives down wages of the manufacturer; forcing workers to work more for less money. Manufacturers are forced to produce a lower quality product. Since the manufacturer is not making as much money, the value of the stock goes down too. Workers in the factory who invest directly into the company they work for are now making less money on their investment. Remember Rubbermaid as an example.
In Middlefield, Ohio, there was a family-owned business called H and H Hardware. It was started in 1962, and had been pretty successful. In 1992, business was so good they built a warehouse to house all the extra products. Then, around 2002, there were rumblings that
Wal mart would be coming to town. The folks at H and H got ready for the storm, and decided they would really focus on customer service. They also had to cut prices, and instead of cutting wages, they cut profits. In 2005, the inevitable happened. After 43 years in business, H and H Hardware had to close down. They had an appraiser come to tell them the value of their buildings and they were told the buildings were actually less valuable than they were 10 years prior. The appraiser tells them this is because when Wal Mart comes to town, the value of all the existing businesses drops.
“When you have a group of people, a small group of people, who don’t want you in the community, does that mean you don’t go?”
Lee Scott, CEO Wal Mart, Inc.
Now I’ll talk to you about earnings, wages, benefits, and costs in the Wal Mart corporation. The Walton family— Sam Walton’s widow and 4 children— are worth approximately $90 billion. That breaks down to about $18 billion EACH. In 2005 alone, Lee Scott, CEO of Wal Mart, Inc. made $27,207,799. The average hourly Wal Mart employee earns $13,861 per year. The national poverty level is $17,650!
“The company doesn’t allow the stores enough payroll dollars in their budget to get the job done.”
Jon Lehman, Wal Mart Employee, 19 years
Including managing 6 Wal Mart stores
Wal Mart employees may donate money out of their paychecks to the Critical Need Fund, a program to aid other Wal Mart employees in times of crisis, such as a fire or tornado. Despite the average earnings of a Wal Mart associate, they donated in excess of $5 million in 2004. The Walton family, despite being worth $90 billion, donated $6,000. No, that is not a typo. Yes, that is six THOUSAND dollars. In 2004, the Walton family donated less than 1% of it’s wealth to charity. Bill Gates donated 58%. The Walton’s DID manage to make $3.2 million in political contributions in 2004. They must believe in Karma because in 2004, they received $91,500 per HOUR in tax breaks. This is the family whose company will only sell CD’s that have had the foul language edited out. They find THAT obscene. How very Christian of them. It would seem to me that they think that if they keep the world from cursing they’ll be able to buy their
way into heaven.
“If we keep our prices low and raise our average wage substantially, we would, in fact, decrease our profitability disproportionately and we would sacrifice a healthy chunk of what it is our share holders expect from us.”
Lee Scott, CEO Wal Mart, Inc.
In 2004, Wal Mart, Inc. received in excess of $1 billion in government subsidies. Why is the richest company in the world receiving subsidies? How many schools would stay open with that amount of money? How many students could go to college with that money? How many homeless could be housed and fed with that money? Currently in America, there are 26,699,678 square feet of empty Wal Mart buildings. That is enough room to build 29,666 class rooms and educate 593,326 children. Wal mart spends $3.8 million EVERY DAY on ads and PR to sell a positive image to the American public. If they didn’t find it more important to have a jet fleet worth $125 million, then they might not need to buy good press. If they donated $10 million dollars a month to charity they’d get $3.8 million dollars of free publicity.
Each year, Wal Mart drives down retail wages by $3 billion. Since Wal Mart pays so little and offers benefits too expensive for most associates to afford, tax payers are forced to foot the bill for the health care of Wal Mart employees. Wal Mart costs tax payers an estimated $1.5 billion dollars each year to care for it’s associates. A UC Berkeley study concluded that
Wal Mart costs California tax payers alone, $86 million each year. County taxpayers pay up to $25 million per year for healthcare, income tax credits, housing subsidies, and food stamps for Wal Mart associates. In just ten states, there are over 50,000 Wal Mart associates and family members on some sort of government assistance. In Florida, Wal Mart employs more people qualified for welfare than any other company.
If you’re still not convinced that Wal Mart is a heartless corporation, take a look at this example of deception. After an alarming number of incidences of violent crimes in Wal Mart parking lots the corporation did an internal study. In 1994, the study showed 80% of on-site crime happened outside the store. They found that adding roving patrols (basically, an old man in a golf cart) caused the crime rate to drop to as low as ZERO. Yet, they still don’t find it cost effective to do this. While ruling on one lawsuit regarding this problem, Judge James Mahathy handed down an $18 million sanction to Wal Mart in Beaumont, Texas based on the fact that Wal Mart never disclosed the results of that study.
It is clear to me that Wal Mart, Inc. obviously does not care about people. It’s main objective is money and power. In my opinion, however, we should not blame them. They are Big Business, acting the way Big Business is “supposed to.” In my opinion, we need to blame ourselves. WE are the ones supporting the company. Every statistic I have cited in this paper has one thing in common: OUR MONEY. Without our money, Wal Mart can’t do the horrible things it does. This paper is not only an indictment of Wal Mart, but also of Americans. It’s our fault Wal Mart is so powerful, therefore it is our responsibility to change the way things are. By ignoring the problem we’re merely perpetuating it!
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