Walmart, the Most Powerful Company in the World, Admits that Protests and Strikes Lead to Wage Increases
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Once set in motion, the shift of power and initiative from manufacturer to retailer tended only to accelerate. The more Wal-Mart learned about the operations of its suppliers, the more it was able to compare one supplier to another, to spot inefficiencies and demand fixes, to zero in on profit centers inside its suppliers. As time went on, Wal-Mart was able to dictate not only how its suppliers packaged and distributed their products, but what they manufactured, how they manufactured, how much money they made on their businesses, and indeed whether they would remain in business at all. Wal-Mart became not merely the market leader; in many senses, it became the market itself.
Rubbermaid and Newell, Kellogg’s and Keebler, Kraft and Nabisco, and Procter & Gamble and Gillette are all mergers forced by Walmart’s buying system. As Lynn notes, “Wal-Mart is so powerful that even many giant and long-independent producers—firms like Procter & Gamble and Unilever—dare not question its dictates.” The logistics revolution that has ripped through the American economy, de-industrializing the country and deflating wages, came through Walmart. This process brings low prices, but has also put the entire economy at risk with its lack of redundancy and concentration of key supply bottlenecks in unstable areas.
The company, not surprisingly, is also known for brutal tactics against workers. It is known for retaliating against employers who attempt to organize. Walmart employees often rely on food stamps and Medicaid, because of insufficient wages and lack of adequate health care. In 2005, according to St Louis Federal Reserve President William Poole, Walmart “observed among their own employees a reduction in health care utilization – that is, fewer doctors’ visits – but an increase in emergency room visits. Apparently employees are struggling some to make the co-payments and that kind of thing, again emphasizing the stress that exists in many lower-income households.”
It is also a huge political force - the company successfully fought off a massive gender discrimination suit struck down by the Supreme Court on technical grounds. New York Public Advocate Bill de Blasio unveiled the site Six Degrees of Walmart after the company was caught in a bribery scandal in Mexico (where it is the largest private employer). Deflating worker wages and weakening political constraints are core to the Walmart model, as important as pulling in products from China and forcing a restructuring of the American supply chain.
Beyond that, Walmart has become a significant contributor to macro-economic forecasting. I went through the transcripts of Federal Open Market Committee meetings for the Federal Reserve from 1999-2006, searching for Walmart. The FOMC is the key economic policymaking body in the central bank, making decisions about interest rates based on the discussions among the various officials at the Fed. Walmart was mentioned at every single meeting in 2006, often multiple times. In 2005, the company was mentioned at every meeting but one. In fact, Walmart has been a constant topic of discussion at the FOMC from 2001 onward. Because of its scale and remarkable amount of data, the company actually has more granular data about the economy than most macro-economic forecasters. As Fed Board Governor Randall Kroszner said in a June 2006 meeting, Walmart officials ”effectively know what retail sales are before the numbers are reported because their sales are so highly correlated with overall retail sales.”
Starting in 2001, the FOMC began relying more and more on Walmart in its discussions. In 2002, the company was mentioned in the context of a longshoreman’s strike and inflation. In May 2003, the Fed Governors looked to Walmart to see if there was a sales bounce due to the end of the war in Iraq (there wasn’t). In June, the FOMC began to gauge the macro-economic impact of inequality using advice from Walmart – Walmart officials “were not optimistic” that Bush’s second tax cuts would help sales, because the tax cuts went mostly to wealthy people who didn’t shop there. In 2004, Walmart began warning of high energy prices, and that consumers were “liquidity-constrained”. The company saw in its sales figures that consumers were increasingly living paycheck to paycheck. In 2005, the company began worrying about a “strange” situation – the consumer was tapped out, but sales were up and Walmart couldn’t figure out why. This was a hint of the credit bubble, but the Fed ignored it.