Ruckus Updates

Swiping at Industry From Atop the Stump

Quarantine Wal-Mart

BUSINESS bashing by politicians in America has a long history, including rhetoric far more inflammatory than the denunciations being directed at Wal-Mart this year by some Democrats, who sometimes sound as if they are running against the company instead of another politician.

Wal-Mart is under attack for paying too little, providing benefits that are too small and even exploiting illegal immigrants. Laws have been written with Wal-Mart in mind, and more are being proposed.

The company may not appreciate the honor, but its place in the political debate reflects its revolutionary effect on the American economy.

Put simply, the big winners as the economy changes have often been scary to many, particularly those with a stake in the old economic order being torn asunder.

Twice as many Americans shop at Wal-Mart over the course of a year than voted in the last presidential election, said H. Lee Scott Jr., the companys chief executive, in a speech to the National Governors Association in February.

Wal-Marts success reflects its ability to charge less for a wide range of goods. That arguably has reduced inflation and made the economy more efficient. It has introduced innovations in managing inventory and shipping goods.

But Wal-Marts success brought pain to others.

The company has been blamed for destroying downtowns as shoppers desert local merchants for the big-box store.

Local newspapers lost some of their best advertisers. That may not influence news coverage, said Alex Jones, the director of the Shorenstein Center on the Press, Politics and Public Policy at Harvard, but I dont think you will see many editorials blasting the government for taking on Wal-Mart.

The companys ability to negotiate good deals from suppliers, some of which probably would go out of business if Wal-Mart walked away, has also created anxiety and resentment, both among the suppliers and among merchants who complain that Wal-Mart gets better deals.

It has infuriated unions by opposing the organization of its employees even to the point of closing a Canadian store whose workers voted for a union. (It said the closing was not related to the vote.) In some locations, unions have been forced to agree to reductions in wages and benefits at retailers that must lower costs in order to compete with the giant.

Opponents say some Wal-Mart employees are paid wages that still allow them to qualify for Medicaid health insurance, calling that, in effect, a government subsidy for a company that is forcing down pay for workers at other companies.

But the fact that Wal-Mart has more shoppers than any politician has voters shows that many of those workers and many people higher on the income scale find its prices irresistible. That group no doubt includes some of the companys critics.

Previous business targets of politicians have similarly been both popular and reviled. The railroads enabled much of America to prosper, but to many people in the late 19th century they were viewed as villains.

They upset old economic relationships by making it possible to ship goods over much longer distances, thus introducing competition for local businesses and farms. At the same time, any given area was likely to be served by just one railroad, giving it monopoly pricing power over the farmers, whose produce became worthless if it could not be shipped to distant markets.

The railroads were lumped together in the public consciousness, but the Pennsylvania, as a major road linking New York to the Midwest, came in for much of the criticism.

The railroads in turn made possible giant industrial companies, and led to new fears of monopolies, culminating in the passage of antitrust acts, and their sometimes vigorous enforcement by President Theodore Roosevelt, who coined the term malefactors of great wealth and ran against them.

There is not, he thundered, in the world a more ignoble character than the mere money-getting American, insensible to every duty, regardless of every principle, bent only on amassing a fortune, and putting his fortune only to the basest uses whether these uses be to speculate in stocks and wreck railroads himself, or to allow his son to lead a life of foolish and expensive idleness and gross debauchery, or to purchase some scoundrel of high social position, foreign or native, for his daughter.

By the time of the Great Depression, the Wall Street colossus, embodied by J. P. Morgan, became embroiled in the political arena. Franklin D. Roosevelt inveighed against the economic royalists and blamed the ruthless manipulation of professional gamblers in the stock markets and in the corporate system. In his 1933 inaugural address, he celebrated that the money changers have fled from their high seats in the temple of our civilization.

The results of all those political agitations were government reforms, although they often had limited effect. The Interstate Commerce Commission was created to regulate the railroads, but that was not the force that eventually knocked the industry from its powerful perch. It was competition, brought about by trucks and their tax-provided highways and airlines and their tax-supported airports.

John D. Rockefellers Standard Oil was broken up in 1911, but owning stakes in a lot of companies left Rockefeller even wealthier than he was. (Some of the companies have since been recombined, the most notable being the merger of Exxon, the former Standard Oil of New Jersey, with Mobil, the former Standard Oil of New York.)

The Wall Street outrages that angered Franklin Roosevelt brought a wave of legislation, including the creation of the Securities and Exchange Commission, an institution that has not prevented the securities industry from being very profitable.

There have been other cases where industries came under intense political attack, like the oil companies in the 1970s and early 1980s, when the phrase obscene profits was coined but little was done to rein in the industry.

Wal-Mart has been on the defensive in some legislative chambers. Maryland adopted legislation intended to force the company to spend more on health insurance, but that was struck down by a federal judge. Chicago passed legislation to force the company to raise its wages.

Wal-Mart is among the most successful companies in the world, but last week it reported a decline in quarterly profits for the first time in a decade, partly because of problems with its international business and partly because competitors are getting better. Its stock price rose 1,100 percent in the 1990s, but it is down by a third in the current decade.

Despite opponents success in Chicago, it seems unlikely that governments will force Wal-Mart to greatly increase its health insurance benefits. Any such effort would most likely affect many other businesses, some of which would be in no position to afford it.

But it is conceivable that some of Wal-Marts harshest critics
could find it an ally in changing the way health care is paid for in the United States, particularly if more companies come to agree with what Mr. Scott told the National Governors Association after he defended the health care benefits his company did offer.

The soaring cost of health care in America cannot be sustained over the long term by any business that offers health benefits to its employees., he said. And every day that we do not work together to solve this challenge is a day that our country becomes less competitive in the global economy.

Much of what he went on to say dealt with efforts to control costs and make the health care system more efficient, something few would oppose. But it is unusual for a business leader to call on government to do more in health, while many who attack Wal-Mart now have long advocated a greater government role in paying for health care.

Politics, as someone once said, can make strange bedfellows.