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What Makes It ‘evil’

The Somerville News, June 22, 2012

  By William C. Shelton

This past Friday, Walmart announced that it is dropping its plans to locate stores in Somerville and Watertown.

When the subject of a Somerville Walmart first came up, Mayor Curtatone had said, "I want you to know that I will resist Walmart here in Somerville...I'm not about to let Wal-Mart come in to wreak havoc on our local workforce and business community."

Something must have happened after that, because on Friday he said he was flattered that the world's largest retailer had been interested in Somerville.

By contrast, key political leaders in Watertown remained adamant in their opposition. Town Council President Mark Sideris recently said, "They won't be accepted here, and we will do whatever we can to keep them out of here." But when news of Walmart's withdrawal broke, Mayor Curtatone said he was "disappointed."

I'm not. The mayor had it right the first time.

Walmart operates 8,500 stores in 15 different countries under 55 different names. Its annual sales are more than those of any other corporation on earth, more than the gross domestic products of most nations. It invests billions of those dollars in proclaiming itself to be principled, worker friendly, environmentally sustainable, and good for communities. In each case, the opposite is true. An avalanche of verifiable evidence documents its real practices.

Local economic impacts

The economic value that a Walmart brings to a local community is overwhelmed by the loss of jobs and businesses that it displaces. Walmart's buying most of its goods and services from outside the community, and reinvesting its profits elsewhere as well, multiplies its local economic damage. One study found that for every $100 dollars spent in such stores, $43 re-circulates locally. But $68 does so if $100 is spent at locally owned stores.

So when a Walmart comes to town, three jobs disappear for every two that it creates. Retail employment declines on average by 2.7% in counties that Walmart enters. Supermarkets and variety stores are hardest hit, falling in sales by anywhere from 10% to 40%.

A Walmart's presence prevents new retail businesses from opening in the same zip code and drives out already existing ones in surrounding zip codes. A Loyola University study found that 18 months after an urban Walmart opened in Chicago, 82 of the 306 retail businesses in the surrounding neighborhood had closed. Such impacts are why Boston's elected leaders last year opposed a plan to build a Walmart grocery store near Dudley Square.

Walmart drives out competitors by lowering prices on promotable items below its own costs, and then jacks up prices when local competitors have been driven out. When it becomes clear that Walmart will lose a predatory pricing case, it settles and keeps the settlement secret, as it did in Wisconsin and Oklahoma. The German Supreme Court, where such settlements are not so easy, did convict Walmart of predatory pricing.

Labor practices

The average Walmart employee receives $20,774 per year, well below the poverty level for a family of four. A University of California study found the average U.S. general merchandise workers makes 17.4% more than similar Walmart employees, and the average large general merchandise worker makes 25.6% more.

Only 44% of Walmart employees receive healthcare benefits, and those that do receive inadequate coverage. In 2010, the annual deductible for a family plan was $4,400. A family would have to pay $5,102, or a quarter of before-tax earnings, before receiving $1 of reimbursement from Walmart.

Walmart workers have successfully brought class-action suits in Missouri, Colorado, Pennsylvania, Oregon, Minnesota, and elsewhere because they were forced to work off the clock, were denied overtime pay, and were not allowed to take legally mandated breaks. In 2004, The New York Times got hold of an internal Walmart audit that, "pointed to extensive violations of child-labor laws and state regulations requiring time for breaks and meals."

Dukes v. Walmart Stores, Inc., the largest civil rights class action suit in history, charged that Walmart discriminated against women in pay, promotions and job assignments. Every court that heard the case found for the plaintiffs, until it reached the Supreme Court, which sidestepped the charges and ruled that the plaintiffs didn't have enough in common to constitute a class.

In my last column I described how the company systematically uses contractors who risk workers' lives so that Walmart managers can pay bottom dollar while insulating themselves from the consequences. Sometimes their deniability wears thin. On October 23, 2003, federal agents raided 61 Walmart stores in 21 states and arrested 250 undocumented workers. When Walmart blamed the contractors, federal investigators revealed wiretapped conversations showing that the executives knew the workers were illegal immigrants.

Some Walmart defenders say that a successful cost-leadership strategy obligates Walmart-style labor practices. But year after year, Costco, where 96% of workers enjoy good health insurance, is rated one of the best places to work in America. CEO Jim Sinegal says, "This is not altruistic. This is good business." He must be right, because Costco's stock trades at 25 times its annual earnings, while Walmart's trades at 14.

Taxpayer Subsidies

Since Walmart does not pay for its employees' health insurance, you do. In 21 of the 23 states that have disclosed information, Walmart has the largest number of employees on Medicaid of any employer. In Massachusetts, over 5,000 Walmart employees and their dependents are on MassHealth.

Walmart's CEO confessed that, "In some of our states, the public program may actually be a better value." Yes, and a much better value for Walmart as well.

In 2010 Walmart was forced to admit that it had failed to pay $3 billion in taxes on its prior fiscal-year earnings. And best estimates are that Walmart avoids paying $245 million in taxes by deducting rent that it charges itself on property that it owns.

At one time, Walmart took out life insurance policies on janitors, cashiers, and stockers, making itself the beneficiary, and deducting the premiums as a business expense. The IRS subsequently closed the tax deduction and went after Walmart for back taxes.

False claims

The $2.6 billion that Walmart spends annually on advertising often promotes false or misleading claims. The National Advertising Division of the Council of Better Business Bureaus is the Advertising Industry's policeman. It regularly cites Walmart for false advertising.

Walmart mobilizes lobbyists and orchestrates studies representing itself as a boon to humankind. For example, a widely quoted Global Insight study paid for by Walmart claimed that the company's low prices save consumers $263 billion annually, or $2,329 per U.S. household. But independent economists find that this statistical analysis "fails the most rudimentary sensitivity checks."

When Walmart can't get its way by using campaign contributions, lobbyists, and lawyers, it's not above bribery and cover-up. In April, the New York Times reported that Walmart's Mexican subsidiary had paid bribes to government officials totaling more than $24 million. The company had known about it since 2005, but had closed down its internal investigation, covered up its findings, and promoted executives responsible for it.

When the news broke, Mayor Curtatone went on CNBC to insist that, in his experience, Walmart had been completely forthright, honest, and open. He added that he was excited to learn from the world's largest retailer.

The foregoing merely scratches the surface of Walmart's systematic wrongdoing. Nor is there room to analyze its supplier abuse, environmental destruction, product selection, impact on American manufacturers, or use of foreign sweatshops and prison labor. But you get the idea.

On Friday, Walmart's spokesman explained that that the company had decided that Somerville and Walmart stores would not be sufficiently profitable. Indeed, profit maximization is the only basis on which the company makes a decision.


Original Article


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