The Wal-Mart Effect--Part III

This is the third in a series of blogs on Charles Fishman's book, "The Wal-Mart Effect."

This book is utterly fascinating. It talks about the unintended consequences of a company as large and as powerful as Wal-Mart.

For instance, Wal-Mart aggressively promotes itself as creating new jobs for Americans. This, according to Fishman, is absolutely true. He points out that, from 1997 to 2004, the United States added 670,000 new retail jobs. Of that amount, Wal-Mart created 480,000--over 70% of all new retail jobs. That's an amazing statistic and, by itself, would lead one to think that Wal-Mart is helping Americans by creating new jobs in this country.

Fishman takes his investigation to a deeper level. "Most of what Wal-Mart sells us are consumables, things we use up in the course of daily life and need to replace: toothpaste, paper towels, laundry detergent, medicine, groceries. When Wal-Mart opens a new supercenter, people don't buy more Tylenol or Tide or Special K just because it's cheaper at Wal-Mart. They just shift where they buy those staples; much of Wal-Mart's growing U.S. business comes at the expense of other retailers."

How many of us have seen smaller operations close down when Wal-Mart moves into town? Every time a grocery store or a K-Mart closes its doors, people lose jobs. In order to understand the Wal-Mart effect, we cannot just count the jobs Wal-Mart brings. We have to consider the jobs that are lost as a result, too.

Additionally, Wal-Mart, in its relentless push to lower prices, asks its suppliers to consider moving their factories overseas. Many suppliers--fearful of losing Wal-Mart's business--comply. Fishman points out that, "during the last seven years, a remarkable milestone has passed all but unnoticed: in 2003, for the first time in modern U.S. history, the number of Americans working in retail (14.9 million) was greater than the number of Americans working in factories (14.5 million). We have more people working in stores than we do making the merchandise to put in them."

Of course, Wal-Mart is not the first or the only company encouraging manufacturing jobs to leave this country. Bottom line, labor is so much cheaper overseas that many corporations are taking this route.

Fishman investigated corporations which took Wal-Mart's suggestion to move their plants out-of-the-country. He also talked to the man who refused the suggestion. The next time we talk about this subject, we'll look at "The Man Who Said No To Wal-Mart" and why he did so.