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Est. April 5, 2002
January 21, 2016 - Issue 637

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Walmart Cancels Plans
For Stores In D.C.
Blames Higher Minimum Wage


"Walmart’s model is to squeeze the last penny
out of any local economy and they have done
it by finishing off the small businesses,
wherever they decide to put one of their stores
or supercenters. But a new day seems to be
dawning for the biggest retailer on earth."

Pity poor Walmart. Its plans for big stores in the Washington, D.C., area have been changed and it will not build two of the supercenters it planned for the nation’s capital because of the higher minimum wage that could become law next November.

The minimum wage in the city is now $11.50 an hour and there is a proposition on this year’s ballot that would raise it to $15 an hour. The $15 an hour wage is a very popular issue around the country and it is likely to pass. So, what’s one of the richest companies in the world to complain about? Well, the company’s business model is at stake. The model is simple: pay the lowest wages and get the retail products from the companies that have the cheapest prices, thus returning the highest profit margins.

Members of the Walton family and their army of lawyers, accountants, and economists must be scrambling to maintain their cash flow, arguably the greatest among retailers in the world. This is the family business that started small in Bentonville, Arkansas, and grew at a phenomenal rate, until it dominated the “retail industry” in the U.S. In its early years, it touted its “U.S.A.-made” products. About three decades ago, it discovered China and its command economy. Now, there was a country that kept its workers in line, kept the wages low enough to truly be starvation wages, and it could deliver the goods on time.

Chinese workers were paid a small fraction of what American workers doing the same work would be earning, even when the minimum wage in the U.S. was very low. That’s when Walmart started being one of the best customers of China. It was strange: An icon of capitalism and one of the last communist-directed economies sharing a fiscal bed. Even at that, Walmart’s model cannot make it, if wage laws are raised toward a living wage, as they are beginning to do in individual cities and several states.

Walmart’s model is to squeeze the last penny out of any local economy and they have done it by finishing off the small businesses, wherever they decide to put one of their stores or supercenters. But a new day seems to be dawning for the biggest retailer on earth.

It was something that even Sam Walton might not have envisioned, as he spread his business philosophy across the U.S. It was a movement by low-wage workers from coast to coast to improve their sweated lives, by doing one simple thing (to start): Raise the minimum wage that has stagnated for at least three decades, just as middle income wages have stagnated. This movement is raising the minimum over the next few years, to the point that those workers in retail, fast food, and service jobs will be able to pay some of their bills and support their families without the constant fear of eviction or a skipped meal every day, especially for their children.

Not only has Walmart announced that it would not open the two big stores in the D.C. area, because of the higher minimum wage, but it has just announced that it is closing a few hundred stores worldwide, with about 160 of the closings in the U.S. It happens, though, that the stores that are being closed in the U.S. are the smaller version of its model, the Walmart Express. These are stores that just a few short years ago were opened to fill in the gap where a larger Walmart was not close to a community or neighborhood. As recently as four years ago, company officials said that they were quite satisfied with the way the Express stores were doing. January 21, 2016 - Issue 637: The Walmart Monster - Political Cartoon By 29, Bacolod, Philippines

Come 2016, however, and the giant chain has announced the closing of stores, most of them of the Express variety. And, while a Forbes magazine blogger, Tim Worstall, took the opportunity of the D.C. announcement to say that the stores would not be opening just because of the increased minimum wage. On Jan. 16, Worstall wrote: “Those higher wages thus leading to a consumer loss and also no appearance of the new jobs which the stores would have brought. Which is as some of us have been saying all along: higher minimum wages lead to fewer jobs.”

His solution? Worstall claims that the minimum wage should be $0.00 per hour and let the “free market” be the judge of what the wages should be. He of course is totally ignorant of the history of his country and the times when private armies were summoned by the “captains of industry” to put down demonstrations by workers and stop any effort by workers to form unions, traditionally the only way that the business and economic playing field is rendered more or less level. He’s also totally ignorant of the time in America when the minimum wage actually was $0.00 per hour. It was called chattel slavery and the nation is still trying to get out from under the devastating aftermath of slavery and Jim Crow and the New Jim Crow. He apparently doesn’t realize that such a condition did not work out too well for the country or, especially, the people.

What is very interesting is to look at a map of the U.S. and the places where Walmart is closing its Express stores. The closures are concentrated in the South and lower Midwest, just the places where the wages are lowest and the hostility toward workers’ unionization is the highest in the nation. In fact, those regions seem to be the locus of the overwhelming majority of the stores that will be closed. The idea of smaller Walmarts was one of the shortest and most expensive experiments that the company has had.

The Forbes blogger, however, celebrated low wages and said of the D.C. announcement, “It is, obviously, always nice to see the biter bit, someone hoist on their own petard. But the people who will lose out from this are the consumers of those poorer areas of the capital. And the reason they’ll lose out is because the politicians have been loading costs onto Walmart by insisting upon higher wages in several different ways.” Again, poor Walmart. The retailer that has eliminated untold numbers of small businesses everywhere has been “loaded” with costs put on them by politicians.

It’s hard to feel sorry for the Waltons, though, since their money has been largely made by catering to those with small incomes and employing many of those same workers at starvation wages. When it reached the peak of its power, it could, and did, dictate to its suppliers what they would be willing to pay for any given product and it is known that they routinely forced suppliers and contractors to produce goods at such low prices that it required the suppliers and contractors to keep their labor costs down to the poverty level or lower.

Walmart has not been good for either the workers in a given community or the consumers, who have been forced to buy goods (often shoddy) made in China under the worst conditions, and that, too, has been the subject of scrutiny of American and international organizations supporting workers’ rights and human rights, in general.

Those in Washington, D.C., who negotiated and stumped for the Walmart stores in or near that city, also arranged an expenditure of $90 million to make the area around one of the stores “viable,” according to Worstall. What is astounding is that a city would plan urban development and decent living conditions around a Walmart store, but that is apparently what it did. Now, that money will presumably disappear into the urban sinkhole, but imagine what $90 million would do if it were distributed in small loans for any number of small businesses, professional offices, and housing in the same location.

Giant corporations in the U.S. are seen as the saviors of local economies and local politicians and other officials see them as the answer to so many economic and social problems. Just lure a big company to an area with tax incentives, grants, and reconstruction of the neighborhood (at public expense), so the story goes, and they will take care of everything. If it ever works, it works for a short time and then, they’re gone, without ever fulfilling the promise of jobs and returning stability to the community. The people who live in the community always provide the stability. Corporations do not.

Have we mentioned that Walmart is closing its stores in some of the most depressed regions of the country? They are called, in the political vernacular, “red states,” that is, conservative or Republican. They are places where the annual income is lowest, the schools are wanting of everything, health care is hard to come by, and jobs are even harder to find. They are the most anti-union areas and the minimum wages are lowest. These are the very people from whom Walmart makes its billions every quarter. That the company cannot make it in those places gives the lie to Worstall, Forbes magazine, and Walmart, itself, that they are good for workers, consumers, and communities.

They are good for none of these. However, the closures by Walmart are a sign that the days of grinding exploitation of workers, consumers, and communities everywhere are coming to an end. Their store closings in the very regions where they made their first billions tell us clearly that there is a limit to growth of an economic monster that has taken pretty much the last few cents of its customers and they are scrambling to find a way to keep doing what they do best. They would do well to remember the old saw in populist economics: “Everybody does well, when everybody does well.” Columnist, John Funiciello, is a long-time former newspaper reporter and labor organizer, who lives in the Mohawk Valley of New York State. In addition to labor work, he is organizing family farmers as they struggle to stay on the land under enormous pressure from factory food producers and land developers. Contact Mr. Funiciello and BC.

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