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Is Wal-Mart Good for America?

Frontline splays and dissects Wal-Mart on PBS at 9pm tonight
Tues., Nov. 16

FRONTLINE offers two starkly contrasting images: one in Circleville, Ohio, where the local TV manufacturing plant has closed down; the other--a sea of high rises in the South China boomtown of Shenzhen. The connection between American job losses and soaring Chinese exports? Wal-Mart. For Wal-Mart, China has become the cheapest, most reliable production platform in the world, the source of up to $25 billion in annual imports that help the company deliver everyday low prices to 100 million customers a week. But while some economists credit Wal-Mart's single-minded focus on low costs with helping contain U.S. inflation, others charge that the company is the main force driving the massive overseas shift to China in the production of American consumer goods, resulting in hundreds of thousands of lost jobs and a lower standard of living here at home.

homepage: homepage: http://www.pbs.org/wgbh/pages/frontline/

Press release 16.Nov.2004 17:14

The Secretary

Is Wal-Mart Good for America?
Tuesday, November 16, at 9pm, 60 minutes

In Circleville, Ohio, population 13,000, the local RCA television manufacturing plant was once a source of good jobs with good pay and benefits. But in late 2003, RCA's owner, Thomson Consumer Electronics, lost a sizeable portion of its production orders and six months later shut the plant down, throwing 1,000 people out of work.

Thomson's jobs have moved to China, where cheap labor manufactures what the American consumer desires--from clothing to electronics--and can buy at "everyday low prices" at the local Wal-Mart.

On Tuesday, November 16, at 9 P.M. on PBS (check local listings), FRONTLINEŽ explores the relationship between U.S. job losses and the American consumer's insatiable desire for bargains in "Is Wal-Mart Good for America?" Through interviews with retail executives, product manufacturers, economists, and trade experts, correspondent Hedrick Smith examines the growing controversy over the Wal-Mart way of doing business and asks whether a single retail giant has changed the American economy.

"Wal-Mart's power and influence are awesome," Smith says. "By figuring out how to exploit two powerful forces that converged in the 1990s--the rise of information and the explosion of the global economy--Wal-Mart has dramatically changed the balance of power in the world of business. Retailers are now more powerful than manufacturers, and they are forcing the decision to move production offshore."

In the case of Thomson Consumer Electronics, that's exactly what happened. Thomson was manufacturing picture tubes for Sanyo, a leading television brand. Like many other suppliers, Sanyo was feeling the squeeze from Wal-Mart to reduce costs or lose the business altogether. In the end, Sanyo shifted its buy orders from Thomson to a foreign supplier.

"Wal-Mart has reversed a hundred year history that had the retailer dependent on the manufacturer," explains Nelson Lichtenstein, a professor at the University of California Santa Barbara. "Now the retailer is the center, the power, and the manufacturer becomes the serf, the vassal, the underling who has to do the bidding of the retailer. That's a new thing."

To understand the secret of Wal-Mart's success, Smith travels from the company's headquarters in Bentonville, Arkansas, to their global procurement center in Shenzhen, China, where several hundred employees work to keep the company's import pipeline running smoothly. Of Wal-Mart's 6,000 global suppliers, experts estimate that as many as eighty percent are based in China.

"Wal-Mart has a very close relationship with China," says Duke University Professor Gary Gereffi. "China is the largest exporter to the U.S. economy in virtually all consumer goods categories. Wal-Mart is the leading retailer in the U.S. economy in virtually all consumer goods categories. Wal-Mart and China are a joint venture."

When trade agreements were signed between the U.S. and China in the 1990s, bringing China into the World Trade Organization, American political and business leaders embraced the idea. China's 1.2 billion people were viewed as an enormous untapped market for American-made goods. The reality, experts say, is the opposite. China's exports to the U.S. have skyrocketed.

Australian Donald Hay was one of the first entrepreneurs to spot opportunity in China's rice fields. Twenty years ago he set up his company, Hayco, just north of Shenzhen. Today he supplies big American companies like 3M, Procter & Gamble, and Wal-Mart with home cleaning products, toothbrushes, and other household items.

"What's happened is the world has come here as a marketplace," says Hay. "It's like a supermarket for manufacturing today and the quality is up to world standards, in a long way, past world standards....The people are enthusiastic, they're good workers."

At a salary of only fifty cents an hour or one hundred dollars a month, Chinese labor is an unbeatable bargain for businessmen like Hay. And the Chinese government is doing everything it can to be sure the country's infrastructure supports the export business. Ten years ago Shenzhen's main port did not exist. Today it's on the verge of becoming the third busiest port in the world.

Wal-Mart estimates it imports $15 billion of Chinese goods every year and concedes that the figure could be higher--some estimates range as high as $20 or $30 billion. Company executives are quick to point out they have always scoured the globe for low cost suppliers to benefit the American consumer.

"We do depend on products from around the globe to draw our consumers into the stores," says Ray Bracy, Wal-Mart's vice president for federal and international public affairs. "We feel they need to have the best product, the best value, at the best price we can achieve."

Some experts contend Wal-Mart's "everyday low prices" are causing a clash between the interests of Americans as workers and the desires of Americans as consumers.

"If people were only consumers, buying things at lower prices would be just good. But people also are workers who need to earn a decent standard of living," says economist Larry Michel of the Economic Policy Institute. "The dynamics that create lower prices at Wal-Mart and other places are also undercutting the ability of many, many workers to earn decent wages and benefits and have a stable life."

Economist Brink Lindsey of the Cato Institute sees it another way. "I think Wal-Mart is good for America," he says. "Wal-Mart is doing what the American economy is all about, which is producing things consumers want to buy...offering consumers a wide range of goods at rock-bottom prices. It is meeting the market test."

This is little consolation to the unemployed workers back in Circleville, Ohio. Steve Ratcliff, a long-time worker at the Thomson plant puts it simply: "If you want these low prices, then you go buy your products from Wal-Mart. But what does that actually do for this country? It's putting people out of work. And it's lowering our standard of living. That's the bottom line."

Ironically, for Ratcliff and his former colleagues, there are new jobs coming to town. In a patch of farmland right next to the vacant Thomson plant, Wal-Mart has broken ground on one of its new supercenters. But the Wal-Mart jobs will represent a steep cut in pay from the $15 to $16 an hour workers made at Thomson, and a far cry from the pension, health care, and job security benefits that have long been the norm in manufacturing.

hell yes it's good for America 16.Nov.2004 17:48

cynic

Of course Wal-Mart is good for America! It embodies everything that modern America IS. The real question that needs to be asked is whether "America" is good for us.

Fast, Cheap, Out of Control 17.Nov.2004 09:01

cthulhu

Once again, my grandmother said it best:

"Wal Mart: A Celebration . . . of Mediocrity."

Thanks grandma, and I'd like to add:

"Wal Mart: Go Broke Saving Money!"

Frontline's (PBS) investigation was thorough and surprisingly non-judgmental, although any viewer with a modicum of intelligence would come away wondering if s/he would ever go near the place again, despite the well-set trap of low prices that has most of America tied up like a hungry dog (you're not really hungry, but these prices are TOO GOOD TO RESIST!).

What I don't understand is: why would these chuckleheads be pulling the earth from beneath the feet of their primary consumer base? Do they not understand that we are fast approaching another recession, and it may be sooner rather than later that, even with "rolled back!" prices, the Great Unwashed of America may not be able to afford a new towel rack (Wal Mart: "Well, our computers say that we sold over 4 million of these towel racks the same time last year . . ."). It almost seems as if Wal Mart is working under some mandate of the current regime. Yes, their "pull" system of goods ordering is innovative--but also corrupt (basically, instead of a manufacturer producing thousands of pieces of a product and then seeking a marketplace, Wal Mart TELLS manufacturers exactly WHAT it needs, the manufacturer produces it, and Wal Mart TELLS the manufacturer what the price is going to be.)

Our trade deficit continues to grow, people.

Whatever happened to quality, to "durable goods" purchased at a fair price and backed up by the (easy to reach) manufacturer and his representative at the local outlet?

C'mon, folks. If it keeps up like this, one hundred years hence, the only thing that "Antiques Roadshow" will have to show off will be some crappy plastic towel rack.

Said the appraiser: "Wow, I don't think this towel rack was ever even used!"

Cthulhu