Corporate Power, Wal-Mart and the Undermining of the Democratic Process

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Corporate Power, Wal-Mart and the Undermining of the Democratic Process

By Joel A. Harrison

April 13, 2011

On February 1, the San Diego City Council repealed its recently passed “Big-Box Statute” which required an economic and environmental impact study precede approval to build stores of 90,000 or more square feet with 10 percent of floor space dedicated to nontaxable items such as groceries and prescription drugs. Similar ordinances exist around the nation. While currently this only applies to the City of San Diego, the basic principle affects us all. Prior to and following passage of the “Big-Box Statute” Wal-Mart has spent millions of dollars on ads, full-page, radio and TV, created a front group “San Diego Consumers for Choice,” and a signature drive to get it on the ballot. Given the City of San Diego’s economic condition, the cost of a special election would have been prohibitive, so the City Council gave in. Does this mean anytime a rich powerful corporation disagrees with an elective body all they have to do is spend enough money, e.g. timing a signature drive for an off-election cycle, and they will get their way? This is not about the Big-Box Statute; but democracy itself.

Studies have shown a significant correlation between monies spent and the outcome of elections. While there are still instances where an initiative or candidate with fewer resources has won, more and more these instances are becoming the “exceptions that prove the rule.” Following the January 2010 Citizens United ruling by our Supreme Court allowing corporations to use their enormous wealth to directly influence elections, one can expect ever fewer instances where the side with limited resources win (see recent report by Public Citizen, “12 Months After: The Effects of Citizens United on Elections and the Integrity of the Legislative Process,” January 2011). Conservatives and Liberals alike have overwhelmingly disagreed with the Supreme Court’s ruling. Now we find Wal-Mart going one step further and actually creating a situation where a financially strapped city government gave in to one powerful corporation. This reminds me of table stakes poker. I could hold a royal flush and another person not even a pair; but if they see me and raise me more money than I have, they win. Well, maybe this is OK in poker; but it signifies a major blow to deliberative democracy when a rich powerful corporation can bully a financially strapped city government into getting their own way. If we want to save money maybe we should stop electing our City Council and allow San Diego’s 10 wealthiest corporations to appoint it?

As has been said many times, democracy is not a perfect system; but it is better than any other. Elected City Councils constitute deliberative bodies. They hold public hearings, have legislative aids who prepare position papers, and then vote on an issue. Their votes are probably one part deliberation based on the “facts”, one part ideology based on their political values, and one part based on “pressures/influence” from constituents, campaign contributors, and powerful vested interests. People sign petitions for a variety of reasons. Many sign them assuming if the issue gets on the ballot they will have time to study it more carefully. Others are simply influenced by 30-second sound bites. Just because enough signatures were obtained, it doesn’t mean in an election it would win. Members of the City Council who disagree with the “Big-Box Statute” may see this as an excuse to get their way; but what happens next time when some wealthy corporation or individuals disagree with something they support?

The actual impact study called for by the statute would have cost far less than what Wal-Mart has spent against it. Why are they so against an impact study? What have they got to hide? They can pick a few employees to portray in TV ads; but groups who support the Statute, small businesses and unions, do not have the funds to show people who have lost their jobs or suffered declining wages when Wal-Marts have moved into their cities. The debate as presented is one-sided, presented by one of the wealthiest corporations in the world. I would love for someone to conduct a study that looks at the following:

1. Percentage of Wal-Mart employees still with the company after five years and ten years compared with unionized workers;
2. Comparison of average starting salaries and benefits, after five and ten years.
3. Comparison of percentage of workers who are promoted to managerial positions.
4. Comparison of estimates of percentage of gross revenue retained in the community, e.g. workers salaries and benefits, taxes, charitable contributions, etc.
5. Impact on wages, jobs, small businesses, and environment on communities before and after Wal-Mart had moved in.

Wal-Mart has already spent far more than the three million dollar cost of a special election. Under current circumstances our city council repealed the Statute. The repeal of the Statute sets a precedent that money, powerful corporations have a carte blanche to determine the future of our city.

In addition, Councilman Tony Young has tried to get Wal-Mart and other stores to locate in his district where 180,000 residents are served by only two stores. If the Ordinance doesn’t contain a waiver process, I’m sure our Council could have added one. A waiver of performing the Impact Study could be given for areas “clearly” underserved following a public hearing. Areas such as University City with an abundance of stores would require the Impact Study. If Wal-Mart is so eager to serve the community, why haven’t they offered to build in Councilman Young’s district?

Without the Impact studies, if the Big Box stores affect our community, either or both economically and environmentally, once in place it would be virtually impossible to undo the damage. Who remembers the debate on deregulating our public utilities, promises of lower rates and better service? Once passed, we went through a time of rolling brownouts and blackouts and exponentially increasing rates.

With the repeal of the Statute, it is time to consider changing the initiative/special election section of our City Charter (Art. 1 Chap 4) first passed on March 16, 1889, in a very different world. We have regularly scheduled elections every two years. Initiatives collecting the requisite signatures should go on the next scheduled election. If the initiative supporters want a special election, they should pay for it!

What is the Impact of Wal-Mart on a Community?

Wal-Mart claims to save households an annual average of $2,300, increase consumer choice and market competition. As with energy deregulation, polls show San Diegans overwhelmingly in favor of Wal-Mart. Two questions need to be carefully considered:

1. Does Wal-Mart save consumers money and how much?
2. What effect does Wal-Mart have on local economies?

The average savings claimed by Wal-Mart is based on a select small number of consumer items, the Consumer Price Index (CPI), and average annual household expenditures. However, 60% of the CPI is based on non-household consumer items such as energy, medical, and housing costs. At best then Wal-Mart saves consumer families $920 per year (0.4 x $2300). This assumes similar savings for all items purchased at Wal-Mart, a highly questionable assumption. I personally have found many items at local stores, Vons, Albertsons, and Ralphs, when registered in their discount programs, to be comparable to Wal-Marts.

Wal-Mart contributes ca. $30 billion dollars to our trade deficit with China alone, contributing as much as $80 - $100 billion to our trade deficit. This includes U.S. suppliers who outsource to Third World nations. Each dollar circulating in a local economy actually adds 1.5 dollars (multiplier function), so Wal-Mart contributes to up to $120 billion lost to our economy, dollars lost to taxes which fund services such as fire departments, street repairs and libraries, dollars lost to churches and charities, and dollars lost to the purchase of goods and services.

As Wal-Mart gains a foothold in a local market, job availability, wages and benefits experience downward pressures. The 2003 supermarket strike in Southern California followed company claims that they needed to lower salaries and benefits to compete with Wal-Mart. It now takes 30 months for a new hire’s family to get health insurance. So why should we care if supermarket employees are paid less and lack health insurance? Forget that morally, full time workers should be able to afford the basics of food, shelter and medical care. Many Wal-Mart employees received Medi-Cal ($40 million per year) and food stamps paid for by our taxes. Uninsured and underinsured people delay seeking care, resulting in increased emergency room visits. As emergency rooms fill, ambulances are diverted to more distant hospitals, increasing time to treatment with increased risks for death or disability for all of us. Bad publicity and enormous pressure forced Wal-Mart to improve health care benefits to its employees; but they still remain inadequate at the same time that benefits to the unionized workers deteriorated.

The “real wage” as calculated by economists measures what people can actually buy with their wages, taking into account the prices of things that have gone up (health insurance, housing) as well as the cheap goods available from importers like Wal-Mart. Productivity gains are supposed to translate into increased wages and benefits. Yet, over the past 30 years with significant increases in both productivity and low cost imports, average wages for most people have barely risen and for many have fallen. This indicates that the downward pressure on wages from “the Wal-Mart model” has for most Americans outweighed the positive effect of cheap imported goods.

In 2005, Costco, a company that offers excellent wages and benefits, posted a 2.0% profit margin compared with Wal-Marts 3.6%. In 1997, Wal-Mart posted a 2.9% profit margin. The Economic Policy Institute calculated that if Wal-Mart returned to its 1997 profit margin it would retain half the difference with Costco, yet be able to offer non-managerial employees a 13% salary increase (more than $2,000 per year). This increase would be spent locally. Wal-Mart, as the largest employer and one of the most powerful companies in the U.S. dominates the market. Its wealth and power allows it to dictate to suppliers, contribute to downward pressure on jobs, salaries, and benefits, expend enormous sums on lobbying, full page ads in local newspapers and contribute significantly to our trade deficit. And Wal-Mart has been the beneficiary of government subsidies worth well over $1 billion, e.g. building of access roads, tax relief, etc.

Over 20 years ago when I was working as a researcher in Houston, Texas, I began shopping at Wal-Mart following their “Buy America” campaign. Later it was revealed that often only one American-made item could be found on each rack, the others produced in Third World country sweat shops, often by child labor. This was just the beginning of revelation after revelation. Each time, Wal-Mart, spending enormous amounts of money, has conducted campaigns to deflect attention from such practices which included locking doors to force workers to work unpaid overtime hours.

What Did Adam Smith Really Say?

People often like to quote Adam Smith, usually out-of-context, without having actually read him, so a few quotes from his book “The Wealth of Nations:”

• No society can surely be flourishing and happy, of which the greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged (Book I, Chapter VIII, pg.94).
• Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people (Book I, Chapter IX, pg.117).
• People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary (Book I, Chapter X, Part II, pg.152).

And probably the most misquoted of all, the “invisible hand”:

As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. (Book IV, Chapter II, p. 488-489)

This is found in Book IV, Chapter II “Of Restraints upon the Importation from Foreign Countries of such Goods as can be Produced at Home.” If Smith were alive today and an American, his “invisible hand” would be a call to “Buy American!”, not support corporations that export jobs, and to give employees pay and benefits that accord them a decent standard of living.

I’ve gone a bit astray in this OpEd as my main purpose was to draw attention to the threat to democracy represented by the enormous amounts of money corporations can muster against our financially strapped elected governments. Even if Wal-Mart represented the absolute best of corporate citizenship, something quite questionable, repealing a Statute because a wealthy corporation can mimic table-stakes poker by calling and raising with enormous sums of money is a threat to us all.

Joel A. Harrison, PhD, MPH, a native San Diegan, is a semi-retired epidemiologist. He has worked in the areas of preventive medicine, infectious diseases, medical outcomes research, and evidence-based clinical practice guidelines. He is currently active in supporting the adoption of a single-payer health care system in the United States. For more information on single-payer go to Physicians for a National Health Program’s website.

http://dollarsandsense.org/archives/2011/0211harrison.html

Is the Wal-Mart Way the American Way?

By Martin J. Bennett

April 13, 2011

“We need to uphold the law, we need to apply the law and we need to allow this project to move forward. I believe that not to do so would be un-American.” So stated Rohnert Park (Sonoma County, California) City Councilwoman Amy Breeze this past summer when the council voted to approve a controversial Wal-Mart supercenter—despite a year long campaign against the project by a broad coalition of labor, environmental, and community organizations.

The Living Wage Coalition of Sonoma County challenges Ms. Breeze’s definition of Americanism. Though we respect her point of view, we think she is dead wrong. Wal-Mart, we believe, has betrayed fundamental American values. As the largest retailer and private employer in America, no other company has such a profound impact upon our economy and labor markets. It is time for Wal-Mart to change, or face a growing opposition to its plan to build at least one supercenter in every county of California.

There is no better authority on the American economy and American values than our 32nd President, Franklin D. Roosevelt. Roosevelt proposed an ‘Economic Bill of Rights’ in 1944 that would guarantee all Americans “an American standard of living higher than ever known.” Roosevelt believed that all Americans, according to Stanford historian David Kennedy, regardless of race, religion, or gender, were “entitled to a job, a living wage, decent housing, adequate medical care, a good education” as well as social insurance such as old age pensions, and unemployment and disability benefits. FDR’s Economic Bill of Rights, also known as the ‘Second Bill of Rights,’ asserted that every business should operate in a marketplace free from unfair competition and monopoly control.

Let’s compare FDR’s vision with Wal-Mart’s business practices and ask these questions: What are America’s values? What economic rights are all Americans entitled to?

The President proclaimed in 1933, “No business which depends for existence on paying less than living wages to its workers has any right to continue in this country. By living wages I mean more than a bare subsistence level—I mean the wages of a decent living.”

Does Wal-Mart meet the “living wage” test? A typical full-time Wal-Mart worker in 2009 earned $11.75 an hour according to the company. This wage level is well below a self-sufficiency or living wage for Sonoma County which the Insight Center for Community and Economic Development in 2009 set at $14.90 an hour, a rate that will enable two parents working full-time to support two children and to pay for housing, food, health care, transportation, and childcare.

FDR’s vision embraced “the right of every family to a decent home.” Yet, according to the Center for Housing Policy, in 2009 a family in Sonoma County needed to earn $98,112 a year to afford the median priced home of $322,000. However, the annual family income of two parents working full-time at Wal-Mart is $41,548, or just 42% of the income needed to afford the median-priced home. In fact, the income of the typical Wal-Mart family is so low as to qualify for the Department of Housing and Urban Development Section 8 rent subsidies. Isn’t earning an income sufficient to purchase a home or to afford the rent the bedrock of American values?

Roosevelt’s Bill of Rights included “the right to adequate medical care and the opportunity to achieve and enjoy good health.” Yet the Kaiser Family Foundation reported that in 2009 less than 50% of Wal-Mart employees and their children received health benefits. In comparison, Raley’s, Safeway, and Costco in Northern California provide health care benefits to 80% of their employees.

Who picks up the tab when uninsured Wal-Mart employees fall ill?

A UC Berkeley Center for Labor Research and Education 2004 study found that uninsured Wal-Mart employees in California relied on programs like Medi-Cal and Healthy Families at an annual cost of $32 million to the taxpayer. Moreover, Wal-Mart employees who lack medical insurance also rely on hospital emergency rooms and public clinics. According to the New American Foundation, in 2006 the state of California and all its counties spent $1.8 billion annually to provide uncompensated care to 1.3 million uninsured adults. What are real American values in this sorry state of affairs?

Roosevelt claimed that all Americans should receive “protection from the economic fears of old age, sickness, accident, and unemployment.” Yet Wal-Mart does not offer employees a retirement program that guarantees a fixed monthly income. After one year on the job, Wal-Mart’s employees receive a 401K with employer profit-sharing contributions. Due to low pay, unpredictable shift assignments, and the demanding workload, more than 50% of Wal-Mart employees quit in their first year, so only a minority of workers are employed long enough to become eligible for the 401K.

Roosevelt was a strong supporter of organized labor and stated that the federal government must protect the “fundamental individual right of a worker to associate himself with other workers and to bargain collectively with his employer.” He championed the passage of the National Labor Relations Action in 1935 that guaranteed the right of all workers to form a union and to bargain for better pay, benefits, and working conditions. Roosevelt declared, “If I were a worker in a factory, the first thing I would do is to join the union.”

But not one Wal-Mart in the United States is unionized. Human Rights Watch, in a 2007 report, decried Wal-Mart’s legal and illegal union-busting tactics and claimed that “the retail giant stands out for the sheer magnitude and aggressiveness of its antiunion apparatus and actions” and “based on our research we conclude that the cumulative effect of Wal-Mart’s panoply of anti-union tactics, is to deprive its workers of their internationally recognized right to organize.”

To add injury to insult, Wal-Mart managers and supervisors cut labor costs by refusing to comply with labor protections such as the Fair Labor and Standards Act of 1938. In 2008, the company settled 63 federal and state class-action lawsuits charging that Wal-Mart violated wage and hour laws, failing to pay its workers for overtime and off the clock work and denying workers meal and rest breaks. Wal-Mart agreed to pay at least $352 million and up to $640 million to present and former employees.

The company also faces the largest class action suit in history on behalf of 1.6 million past and present female employees for wage discrimination and promotion gender-bias. So how does Wal-Mart’s record of union busting, disregard for federal labor law, and systematic discrimination against women square with basic American values?

Finally, Roosevelt emphasized in his Economic Bill of Rights that all businesses had the right “to trade in an atmosphere of freedom from unfair competition and domination by monopolies.” A recent Retail Forward report found that for every super center that opens in a major metropolitan area, two existing supermarkets will close. UC Irvine economist David Neumark concluded in a 2007 study that for every new job created by Wal-Mart in a county, 1.5 jobs are lost elsewhere as existing retailers and grocers lose market share or shut down —and remember that according to the New York University Brennan Center in 2007, the average wage of a Wal-Mart employee was 26% less than other large merchandise stores and 18% less than large grocery stores.

‘Always lower prices’ is a consequence of Wal-Mart’s relentless quest to drive down labor rates. The Wal-Mart way is based upon poverty-wage jobs and destroying local business, particularly union and nonunion grocers that pay a living wage and provide comprehensive benefits. Is this the American way?

Good jobs and career mobility, equal opportunity and nondiscrimination, fair competition and corporate accountability, and respect for worker’s rights are fundamental American values. Wal-Mart needs to live-up to these values-and it can afford to do so.

Wal-Mart’s global sales surpassed $400 billion, and profits were $13.4 billion in 2008. According to Forbes magazine, the combined wealth of Wal-Mart founder Sam Walton’s four children, who hold 40% of the company stock, was more than $84 billion in 2010—an amount greater than the combined annual income of the bottom 40% of Americans, or about 120 million people.

So what’s it going to be: Wal-Mart’s brand of naked greed or the values of Roosevelt and his Economic Bill of Rights? What’s really “un-American,” Councilwoman Breeze?

Martin J. Bennett teaches American history at Santa Rosa Junior College and serves as Co-Chair of the Living Wage Coalition of Sonoma County. For more about the anti-Wal-Mart superstore campaign in Sonoma, click here.

http://dollarsandsense.org/archives/2011/0211bennett.html