Academia chimes in on debate over retailing behemoth

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Is wal-mart an economy-booster and a savior to low-income shoppers that employs more than a million in job-bereft rural communities? Or is it a profit-hungry internationalist and union-buster bent ruthlessly on putting mom-and-pop stores out of business?

The reality is there's little reliable and objective information available to provide an easy answer. Though there's a growing body of academic research sprouting up on Wal-Mart, it is disparate and difficult to parse. Economic studies tend to avoid any and all discussions of social impacts, while humanities research tends to neglect the positive economic impacts of the retailer. And with titles like "Job Creation or Destruction? Labor Market Effects of Wal-Mart Expansion," a 34-page academic paper with complicated formulas, much of the research won't make sense to the average Joe or the well-schooled MBA.

The rhetoric rises even more with release of veteran Hollywood filmmaker Robert Greenwald's highly critical film, "Wal-Mart: The High Cost of Low Price" (see related story, above). The film follows by only weeks the release of a one-year study commissioned for Wal-Mart by Global Insight that claims it saved each American household an average of $2,329 last year, caused a 0.9% increase in real wages and created 210,000 jobs.

So it you're wondering what to believe, you're not alone. Here are the conclusions of three academics.

Jerry Hausman, a professor in the department of economics at MIT, makes no apologies about what some critics consider the myopic view economists take on Wal-Mart: "I'm not a sociologist. I plead guilty." His bottom line, as presented at a recent academic conference hosted by the retailer, is "Wal-Mart is driving down prices for everyone," an absolute he repeatedly calls "inarguable."

What he has concluded in a series of papers is that before Wal-Mart's grocery business exploded, the major grocery chains got fat on high margins, with retail prices for food rising at twice the rate of wholesale prices. The retailer stopped all that. Wal-Mart "simply came in and started charging about 25% to 30% less," he writes, concluding "overall prices have dropped about 5%" as a result.

Edna Bonacich, professor of sociology at the University of California in Riverside, decried the polarized nature of the Wal-Mart debate, particularly its isolated focus on Wal-Mart's store workers by labor unions. "We need much more study. This story is very complicated."

In her research, she is studying the logistics and transportation systems in the U.S., particularly how truckers, railroad workers and longshoreman are affected by what she calls the "Wal-Mart empire."

"You can't just look at Wal-Mart as a company with employees, but need to look to its hinterlands," she said. In a series of research papers, Ms. Bonacich has focused on the ports of Southern California, where 40% of Chinese imports-many destined for Wal-Mart shelves-arrive in the U.S, intimately studying the lives of workers and the business structure of transportation companies.

Her conclusion: "Many of [Wal-Mart's] suppliers and logistics providers experience the company as an extremely powerful and unavoidable bully, which forces them to cut prices beyond what is possible by increasing efficiencies to the maximum."

far reaching

In light of her recent research, she said Wal-Mart has created an environment where a product or service of several sellers is sought by only one buyer. And she's not just talking about the cost of a box of cornflakes or a gallon of Tide. "Wal-Mart can set the terms of what it costs to ship something across the ocean or what it costs to produce something in China," Ms. Bonacich said. "Now that's power."

Nelson Lichtenstein, a professor of history at the University of California at Santa Barbara two years ago organized the academic conference, "Wal-Mart: the Face of 21st Century Capitalism," a series of presentations and papers just released in book form. He has argued in his writings and research that Wal-Mart is now the central institution driving the economy in the U.S. "It sets the prices and is, therefore, a de-facto manufacturing enterprise," he said.

Mr. Lichtenstein objects to Wal-Mart's attempts to co-opt academic research for its own means, particularly by strictly focusing on economic research, including the economic study it commissioned from Global Insight.

"Wal-Mart should not be able to shape the question," he said. "Yes, we can verify in econometric terms whether wages go up or down, but that's only a slice of it and not the whole story."

He instead considers the heated debate a symptom of the failure of liberal social policy in the U.S. He points to a trio of failures: weakened labor laws, no national health insurance and stasis on the minimum wage. "We wouldn't be having this debate if those policies had succeeded," he said. "Much of the criticism against Wal-Mart today simply wouldn't exist."

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