Hold That Prize!

Charles Kenny is entirely right that over the last few years the technological and organizational innovations pioneered by Walmart have lowered the cost of groceries and consumer goods for millions of people (“Give Sam Walton the Nobel Prize,” May/June 2013). As the company put it in a 2009 television spot, “Walmart saves the average [American] family about $3,100 a year, no matter where they shop.” But are these innovations sufficient, as the headline on Kenny’s article suggested, for Sam Walton, the company’s founder, to deserve a Nobel Prize?

According to a study by economic research firm IHS Global Insight, over the last quarter-century, Walmart’s major competitors have adopted and adapted virtually all the cost-saving innovations pioneered by the Arkansas-based retailer. Like the automobile assembly line in the early 20th century and containerized transport in the 1970s and ’80s, a sociotechnical breakthrough has become the property not of its originating corporation alone but of an entire industry.

So the real question isn’t who gets credit for such enhanced productivity but who reaps the benefits. By 1923, the cost of a Ford automobile was less than $300, enabling blue-collar factory workers to buy the cars. But that was hardly enough to satisfy their aspirations. Henry Ford understood this, which is why he boosted wages to $5 a day in 1914, double the going rate. New Deal-era social policy ratified and codified this high-wage program, which again doubled blue-collar wages during the 20th century’s middle decades. But this history has not been repeated in retail or in the supply chains that today make goods and move them from factory to store. Retail wages have been stagnant in the United States for more than a generation. And although inexpensive merchandise can nudge upward a poor family’s standard of living, whether in the United States or elsewhere, there is no substitute for the higher wages that enable the purchase of housing, health care, education, and retirement security. Even the most efficient big-box store can’t stock these things.

In the factories that feed the global supply chains controlled by Walmart and other large retailers, working conditions and wages remain pathologically inadequate. Major corporations pit factories and countries against one another, putting downward price pressure on factory owners and workers alike. If strikes, demonstrations, and government reforms push wages higher in southern China — as they have recently — the big retailers simply shift their sourcing to Vietnam, Bangladesh, or some other country where the working class is more quiescent and the government less vigilant. The recent catastrophic factory fires and building collapses in Bangladesh are but one ugly manifestation of this dynamic.

History demonstrates that cheap goods can coexist with high wages, efficient technologies, and an empowered working class. Before the heirs of Sam Walton claim any prize for the founder, they need to share with workers, taxpayers, and consumers the profits that leapt forward when Walton married information-era technology to rural Southern wages and late 20th-century global production possibilities. If they don’t do it voluntarily, we should make them.

NELSON LICHTENSTEIN
Director, Center for the Study of Work, Labor, and Democracy
University of California/Santa Barbara
Santa Barbara, Calif.

Charles Kenny replies:

Like Nelson Lichtenstein, I’d like to see more Americans in better, higher-paying jobs. And I’m all in favor of a corporate tax system that isn’t riddled with loopholes and actually collects taxes from profitable firms. But even with the current tax code, it isn’t just the Walton family that reaps the benefits of enhanced productivity. As Lichtenstein notes, the average American family is as much as $3,100 better off thanks to the sociotechnical breakthroughs pioneered by Walmart.

With regard to conditions in the factories that supply U.S. retailers, the tragic deaths in Bangladesh were easily preventable. American corporations that source from developing countries ought to do much more to ensure that the factories that make their goods comply with health and safety regulations. But research by political scientist Layna Mosley and others suggests that trade is a force for improved labor standards in the developing world. Firms, including Walmart, already pressure their suppliers to improve conditions. I too would like to see more Bangladeshis in better, higher-paying jobs. But, sad as it is to say, relative to the alternatives, working for $38 a month in a factory producing clothes for export qualifies as just that.