I saw the documentary on Wal-Mart this weekend on DVD it’s called: The High Cost of Low Price. It was interesting and raises a lot of questions and conflicts. Ironically, I am also reading the book: “The End of Poverty” by Jeffrey Sachs right now. These 2 theories are 180 degrees from each other. First I should summarize them both:

The High Cost of Low Price at Wal-Mart: http://www.walmartmovie.com/
Wal-Mart uses several business practices/business models to bring the items to you at the lowest cost/highest profit possible.

1. They lobby for huge tax breaks and upfront subsidies from cities, towns and counties that take millions from local schools and town services, and in some extreme cases have caused these services to shut down because they couldn’t fund the programs and the Wal-Mart subsidy at the same time.

2. They offer such low prices they put many local small businesses out of business within months, and those people who used to make a living wage can’t anymore if they work for low wages at Wal-Mart. The standard of living in the town goes down and the property values drop when there is so much vacant space.

3. They have company policies to only hire 40% of the workforce full time, and make as many people part-time with no benefits as possible. It’s impossible to get more than a 4% raise; many times raises are frozen to keep wage numbers down and profitability up for the store. The insurance monthly fees for what’s offered is more than workers can afford and doesn’t cover well. The store management regularly recommends that employees take their situation to the state or federal government and look for assistance there through Welfare, Medicaid, WIC, rather than pay their employees more. If you ever mention a union you will be fired, and they will replace you.

4. They force unpaid overtime on all employees. This is a company policy they summarize as “do more with less” and use it to keep profitability up.

5. They grant contracts for merchandise only to the manufacturers that can provide it at the lowest bid possible and highest quantity possible. This results in a lot of goods brought in from sweatshops in China, India, Indonesia and other 3rd world countries. They ignore the working conditions of 10-12 hr days and 7 day work weeks for less than a living wages. They also ignore the abuse that goes on in these places saying it’s the responsibility of the manufacturer and these things are legal in China.

The End of Poverty by Jeffrey Sachs: http://www.earthinstitute.columbia.edu/endofpoverty/

Jeffrey argues that economic free trade capitalism is the way that these 3rd world countries in extreme poverty can help themselves out of this reoccurring cycle.

1. Working in factories provides a living wage that is many times higher than what these people would make in rural lifestyles. They argue that in a mass producing economy people don’t have to work on individual farms anymore, we have the technology to mass produce food, and people should live and work in cities to reap the economic benefits there.

2. The education level rises for these people if they can afford to go to school or put their children in school because the children don’t have to work to support the family.

3. The birth rate drops because women can work outside the home and are valued for more than being baby producing beings. They also have access to education about women’s health issues.

4. The economy generates taxes for the government to provide infrastructure like roads, water systems and other living improvements.

The faults:

I think its wrong to look at these theories as a total solution or complete evil, but they are sold to us that way. Business in general provides jobs and wages for employees, and can raise the standard of living within a country. But, I think the thing that mucks up the process is greed.

Wal-Mart is too greedy with what they expect in profitability and profit in general and as a company they reward practices that reach those goals through unethical and (indirectly inhumane) business decisions. That then makes the companies in China work the same way. Or maybe they were already, but they are too greedy too, with the low man on the totem pole being squeezed, which is the factory worker.

I think jobs in other countries manufacturing things can be good for the 3rd world economy and the worker if they aren’t abused, overworked and underpaid. But if you look back to the history of the industrial revolution in the US, it took a few decades of abuse to the workers before laws were passed to protect them and make working conditions reasonable. This happened because workers organized and formed unions. Unions may not be allowed in China and they are being thwarted in the Wal-Mart stores in the US. We wouldn’t need unions though if workers weren’t mistreated in the first place. So, companies can avoid the difficulty of unions and strikes by just being ethical and reasonable in the first place. That just never seems to happen. Business seems to always push people and society to its breaking point before it gets brought back in line. (Hello Enron) It’s driven by greed at the top of these organizations where people are rewarded personally for making and enforcing these business practices and policies in the pursuit of aggressive growth and profit.

I wish there was a more moderate view of success in business that didn’t involve abuse, and pushing people past the breaking point by cornering them in bad working conditions with less pay than is fair, and abusing their time and efforts. I just don’t know how that would happen without a lot of regulations. And regulations add cost, time and confusion to business. Can’t we all just be a little less aggressive in the pursuit of free market economy business???