Star Trek II: The Wrath of Khan introduced the Genesis Device, a mechanism conceived to â€œterraformâ€? lifeless planets. In the wrong hands, if used on those where life already existed, it posed world-shaking destructive power. Here on Earth, a certain Bentonville, Ark., retailer wields a similar transmutative power. Although the evil Khan doesn't have hold of it, many see it as just as dangerous a double-edged sword hanging over our economy.
Wal-Mart is America's favorite store and, among detractors, its most reviled corporation. It is the new downtown, staffed with smiling faces and stocked with items at the best prices. Critics, meanwhile, allege it's a labor nightmare, bilking workers of due overtime pay, firing employees for discussing unionization, discriminating against female staffers and paving over America's small business foundations. Wal-Mart creates 1 in every 20 new jobs in the U.S. and opens a new outlet about every 42 hours, and, by one estimate, sees organized citizen opposition to 1 in 3 proposed new stores. A $244 billion business employing 1.3 million people, operating 3,000-plus stores in the U.S. and a thousand abroad, now accounting for $1 in every $5 spent on groceries, named by Fortune the corporate community's â€œmost admiredâ€? company early this year â€” the Earth has never seen an entity of such leviathan proportions that it can reshape our economic landscape at will.
The company has undertaken its first market research program, presumably to come to grips with proliferating pockets of resistance, which have fought hundreds of proposed stores nationwide. Testimonial TV spots have addressed some of the points on its detractors' litany, including one featuring a female district manager discussing how being part of the Wal-Mart family helps her take care of her own â€” seemingly an answer to a pending class-action gender discrimination suit filed in California. Wal-Mart declined to comment for this story, but the company is hard-pressed to address the real crux of the anti-Wal-Mart movement. That is, the business practices that have made it so admired are unraveling the fabric of an already ravaged economy.
It may seem like much ado about something seemingly innocuous: a general merchandise store, whose popularity is decided by 138 million American shoppers, not to mention city fathers eager to rezone Wal-Mart into their outskirts. Then there's Al Norman, founder of Sprawl-Busters, based in Greenfield, Mass., who has tracked nearly 200 municipalities that have successfully fended off mega retail development. Since spearheading a fight to keep Wal-Mart out of Greenfield, he has seen a snowballing effect, as many as three to four calls a day, of grass roots groups seeking his counsel.
â€œMost municipal administrators are lay people, they just think that getting a Wal-Mart is sort of a retail equivalent of shaking hands with Elvis,â€? Norman says. â€œThey can't distinguish between industrial development, which by-and-large is added value, versus retail development, which adds no value. The developer comes to town and pays for all studies to convince the town that they're from Lake Woebegon. But independent impact studies would completely turn development in this country on its head.â€?
A growing body of economic impact research contradicts the developers' rosy win-win scenarios. Kenneth Stone, an economics professor at Iowa State University, has tallied 53 types of businesses with which Wal-Mart competes, and has tracked a startling swath of destruction.
Stone pioneered research on the Wal-Mart factor in Iowa cities with populations of 5,000 to 40,000, tracking sales from as early as 1983, and more recently examined the Supercenter onslaught in Mississipi. In his 1997 study, â€œImpact of the Wal-Mart Phenomenon on Rural Communites,â€? Stone found that between 1983 and 1996, the average Iowan spent 42 percent more in â€œdepartment stores,â€? (qualified as â€œprimarilyâ€? mass merchants) than in 1983. In men's clothing stores alone, consumer spending eroded by 59 percent in the same period, resulting in the shuttering of 60 percent of these businesses. And, though host communities did see some general growth in transactions overall in the years after Wal-Mart's arrival, 10 years later, host towns lost an average of 4 percent of total sales, some towns of less than 5,000 losing half their retail trade. And, due to the magnet effect of Wal-Mart, sales transactions in neighboring towns declined 15 percent.
â€œObviously there's a zero-sum game involved here,â€? says Stone. â€œIf you plop down a 200,000 square foot Supercenter someplace like Ankeny, Iowa (population 27,000), and are expecting your average $75- to $80 million a year in sales, that money doesn't come out of thin air. It comes from somewhere else.â€?
Wal-Mart proponents invariably cite the â€œdemocracy of the marketplace,â€? that a company that serves customers better deserves their business more. The logic might work were all things equal, but they're not. One hitch often glossed over is that many municipal administrations are so gung-ho for â€œeconomic developmentâ€? that they defer local taxes and disproportionately subsidize new projects as opposed to reinvesting in existing businesses and infrastructure, according to an exhaustive analysis of â€œmega retailâ€? chains by Edward Shils, professor emeritus at the University of Pennsylvania's Wharton School.
â€œMany of the development packages provide that a new â€˜Big Boxâ€™ will be able to retain all sales taxes collected for a given number of years in order to help finance the construction and debt costs of the new facility,â€? Shils stated in a 1997 report. â€œWhen this happens the local government and the school districts which depend on sales and real estate tax revenues find themselves in desperate financial condition since the small retailers which have been displaced are not providing revenues and sales tax to the schools and property and real estate taxes to the community.â€?
Not only are the profits winging off to Bentonville, but the labor that earns them isn't even building up a healthy tax base for the local community. Various economic impact studies obtained for this story have found that, for every Wal-Mart hire in a new town, it destroys about 1.5 jobs at competing businesses. Further, per its standing policy that a â€œfull-timeâ€? job is a 28-hour work-week, the median income of a Wal-Mart employee stands at around $12,000 a year, less than half the national median, according to the National Labor Committee.
Even should workers seek redress, Wal-Mart wields so much clout that the company can simply change the rules of the game. More than 200 major corporations, at the retailer's bidding, have opened offices in Bentonville to better â€œservice the account.â€? Recently, when meat cutters at its Jacksonville, Texas, Supercenter voted to join the national union, the company â€” whose view of labor mirrors that of JP Morgan â€” went to meat vendor IBP and demanded â€œcase-readyâ€? meat, i.e. cut and packaged before shipping, thus circumventing meat cutters across all of its Supercenters.
For Wall Street, all this reads as â€œefficiency,â€? something its denizens slaver over. At Main Street level, however, a Genesis effect is happening, wherein for all the gee-whiz buzz over big boxes, commerce is bulldozed until cities are transmuted into mere colonies of mega corporations. Consumers might live a few cents cheaper in the short run, but as Stone wrote after his first study in 1988, â€œThe money a Wal-Mart drains from the community won't come back; it isn't in the hands of local people who might invest it back in the community. Then you lose a sense of community loyalty, that small town atmosphere, and you are in danger of becoming a bedroom community. You don't have business and civic leaders; you have transient managers.â€?
If Wal-Mart's labor policies seem regressive, the longer-term worst-case scenario may be even more anachronistic: communities whose fortunes are dangerously dependent on a single corporate entity, owing our souls, as it were, to the â€œcompany store.â€?