Wal-Mart Storm Swirling

November 2, 2005
By RITU KALRA, Courant Staff Writer

In the battle against Wal-Mart, the lines have been drawn.

The war is about to escalate.

On one side is a sophisticated coalition of community activists, environmentalists, documentary filmmakers, religious leaders, Wal-Mart workers and organized labor. The groups have recruited heavy-hitting political campaign directors, created powerful websites and waged guerrilla campaigns against the retailing giant.

On the other side are Wal-Mart's supporters, including many of its employees, some economists and a documentary filmmaker, as well. The supporters maintain that Wal-Mart's low-price business model has cut inflation and is a boon to the economy, that outsourcing has helped to improve living conditions for workers around the world and that the discount retailer's savvy logistics have driven other companies to be more competitive.

Although both campaigns appear to revolve around the benefits and pitfalls of the world's largest retailer, the struggle serves as a backdrop, highlighting significant concerns that touch every aspect of society.

Wall Street, meanwhile, is watching carefully - especially as the discount retailer tries to make inroads in urban areas and lure higher-income customers.

"That's why this campaign is intensifying," said Mark Husson, a research analyst with HSBC Securities. "Wal-Mart has historically been a red-state retailer. As it tries to move into blue states, this is what you must expect."

"There's no doubt," he said, that the withering attacks have had an impact.

Even Wal-Mart has admitted that some shoppers are beginning to sour on the company. With negative publicity taking an increasing toll on sales, the company has recently taken high-profile steps to boost its image and revive its sagging stock price. The New York Times reported Tuesday that Wal-Mart has even hired former presidential advisers to help it swing into action.

The critics' message is potent: The world's largest retailer creates traffic, pollution and sprawl in the wake of its big-box stores, and spells the death of neighborhood shops. It pays poverty-level wages and dumps employee health costs onto taxpayers, discriminates against female employees, violates child labor laws, squeezes suppliers and drives competing employers to do the same in a spiraling race to the bottom.

This month, they will wage their largest campaign yet. The first round begins Friday, with the theatrical launch of a searing and satirical film, "Wal-Mart: The High Cost of Low Prices," directed by independent filmmaker Robert Greenwald.

"There was a neighbor of mine who had recently been hired by Wal-Mart. I was congratulating him and saying great, he'd finally be getting health care," Greenwald said Tuesday, recalling a conversation that took place more than a year ago and inspired him to create the film.

"He said `no,' because it was too expensive and he had to work there too long. But he said, `The really nice managers are helping me fill out forms so I can apply for aid from California.' At that moment, I thought something was wrong. Here was a corporation encouraging employees to apply for public aid."

When Greenwald discovered that Wal-Mart's founding family, the Waltons, had a collective net worth of $90 billion, and that the company's profits topped $10 billion last year while its workers were left to depend on public welfare, he decided to make the movie, he said.

"It raised questions about greed. People have strange responses to these words, but to me this is about patriotism and democracy. This is not what I think should be happening to people in this country. It's just wrong," said Greenwald, who made the film on a $1.8 million budget financed largely through personal bank loans.

Greenwald is coordinating with Wal-Mart Watch, an umbrella group launched in the spring by Andrew Stern, the maverick union leader whose Service Employees International Union was one of several unions to break away from the AFL-CIO earlier this year. Organized labor, one of the most vocal Wal-Mart critics, has been fighting unsuccessfully for years to unionize Wal-Mart workers, and the dissident faction has made organizing Wal-Mart a top priority.

Wal-Mart Watch plans to intensify its attacks, beginning Nov. 13, with a coalition of more than 400 grassroots organizations across the country mounting hundreds of local actions in a campaign called "Higher Expectations Week" targeted to hit the retailer - including in Connecticut - just as the holiday shopping season begins. As part of the weeklong campaign, Greenwald's movie will be shown at churches and in thousands of homes across the country.

In response, another independent filmmaker is launching his own documentary, "Why Wal-Mart Works: And Why That Makes Some People C-r-a-z-y," which casts Wal-Mart workers, if not its executives, in more positive light.

"I find myself in the odd Forrest Gump-like position of defending the world's largest corporation," said Ron Galloway, who spent $85,000 to make his film. "I'm coming from the pure free market perspective. I know this sounds weird, but right now Wal-Mart does more good for lower-income people than any other institution in society just by the mere fact that they save families about $1,000 a year. That's big money," Galloway said.

Wal-Mart is not stocking Galloway's film in its stores, but it has launched its own charm offensive. In the past two weeks, CEO H. Lee Scott has announced a new health care plan, revealed new environmental initiatives and said the company would monitor overseas suppliers. Wal-Mart has also produced its own video to dispute assertions made by Greenwald, who denies there are errors in his film.

But the offensive has run into obstacles. Days after touting the low premiums in its new health plan, a leaked internal memo cast a disturbing light on the retailer's proposed strategies to cut benefit costs. And Monday, the Labor Department's inspector general blasted a government settlement with the retailer over child labor law violations, saying Wal-Mart had written some of the most offensive provisions of the deal.

Even Wal-Mart's staunch defense of its business model - that its low prices are a boon to the national economy - is in question.

The retailer hired consulting firm Global Insight to study its impact on the U.S. economy, and is sponsoring a conference Friday, the day that Greenwald's film debuts, to discuss the results. As part of the yearlong study, Global Insight collected nine independent academic papers on the issue.

Some of the independent research, such as a paper by Jerry Hausman of MIT, concludes that Wal-Mart's low prices have shaved off a substantial amount of price inflation.

But others, including a study co-authored by senior fellow David Neumark at the Public Policy Institute of California, show that Wal-Mart's critics may stand on firm ground. When Wal-Mart opens a new store, total wages in that county - not just in the retailing sector - fall by 3 percent to 5 percent in the following years, according to Neumark's study, which analyzed reams of data spanning a 20-year period for stores across the nation.

"The earnings results are clear," said Neumark, who has harshly criticized minimum wage laws and is traditionally portrayed as a conservative economist. "It's a few percent, it's not huge, but it's by no means trivial."

Of course, questions regarding Wal-Mart's influence - over the global economy, the environment, and ultimately over society - require complex and nuanced answers.

As prices fall along with wages, some people gain while others fall behind. As the company relies on manufacturers in China to supply cheap goods, American workers may lose jobs, but wages in China and other developing nations rise, and a substantial middle class is made possible in countries where none previously existed.

Rising affluence in poorer countries, in turn, creates its own political as well as ecological advantages and tensions, including improved living conditions and lower birth rates, but also greater demand for already strained resources, such as oil and fresh water.

Critics and supporters agree that the questions matter, not just for Wal-Mart employees and investors, but also for society as a whole.

"It's more than just Wal-Mart," Greenwald said. "It's about some of the most significant issues we face in terms of what kind of country we want to have."

For information, including show times of the films, see www.whywalmartworks.com and www.walmartmovie.com.