University of California-Santa Barbara Professor Nelson Lichtenstein Discusses His Book 'The Retail Revolution: How Wal-Mart Created a Brave New World of Business'

Sat, 10/21/2006 - 3:02pm

When: September 8, 2010 at the Downtown Library: Multi-Purpose Room

Wal-Mart is the world's largest company and it sets the standard, both socially and commercially, for a huge swath of the global economy. UCSB History Professor Nelson Lichtenstein will demonstrate how the company's success has spread evangelical Protestantism into the workplace, made South China an American workshop, and pushed American politics to the right, when he discusses his widely-praised book, 'The Retail Revolution: How Wal-Mart Created a Brave New World of Business.' This event, which is co-sponsored by the University of Michigan's Eisenberg Institute for Historical Studies, will include a book signing and books will be on sale at the event.

Transcript

• [00:00:20.83] SHANNON RIFFE: Hi. Good evening. Thank you for coming tonight. Before we get started, I have a few quick announcements. I want to remind you to fill out one of our library evaluations on your way out. Please let us know how you heard about tonight's program, what you thought, and any suggestions for future programming here at the library. I also want to let you know that we're filming tonight's program. It's going to go up on our website. And for that reason, when we do the question and answer portion later on, we'll have a microphone in the middle aisle. And I'll ask that you say your question into the mic so we can pick it up for filming.
• [00:00:59.71] And finally, at this time, I'd like to ask you to silence or turn off your cell phones. My name is Shannon Riffe. I work here in the Community Relations office of the Ann Arbor Library. Thank you for coming tonight, and I would like to now introduce Ronald Suny, University of Michigan History professor, to introduce tonight speaker. Thank you.
• [00:01:23.25] RONALD SUNY: Thank you, Shannon. Thank you, library. Thank you all for coming out tonight. I know how difficult it is to find your way to the entrance of this building. We circled several times before we did. I am the director of what we call the Eisenberg Institute for Historical Studies at the University of Michigan. We have our own programming there, and every once in a while, we try to reach out to the community. It was part of our mandate. And this lecture, by Nelson Lichtenstein, is part of that.
• [00:01:52.38] So I want to just say a few words to sort of-- the way I've been thinking about why we decided to bring Nelson Lichtenstein as our first speaker in a series that's now gone on for two years at our institute, called Paucity and Plenty. And as I was thinking, I realized, well, we live in a time when many liberals and leftists are once again in retreat in our country. It seems that they're recoiling before the real activists-- the Tea Partier, the loud noises from people like Rush Limbaugh and Fox News.
• [00:02:31.60] And the public political discourse, just two years after the election of Barack Obama, has successfully-- well, at least temporarily-- been hijacked by Republicans and the right, and Democrats appear to be running for cover. The media analysis of this phenomenon is that it has to do with what we're all aware of-- this economic crisis, which began under the last administration but continues now two years into the current administration.
• [00:03:02.10] And it's understandable. With 15 million people unemployed, it should not be surprising that the public is turning away from those in charge. There's widespread discontent, maybe disillusionment, despair, anger, and even hostility, toward incumbents. Not to mention what looks like displaced fear directed toward those who are different from oneself. At the moment, it seems to be Muslims and migrants.
• [00:03:34.31] Now for someone like myself, you look in vain for some deeper understanding of the broader reasons for this situation-- some kind of explanation of where we are, where we are going, and how did we get here? Perhaps historians, I like to think, as a historian. Maybe political scientists, I did that once. Or sociologists, so seldom their voices heard above the din of political pundits-- maybe they can help.
• [00:04:06.61] So I don't want to put our speaker on the spot, but I think I'm going to introduce someone who has been asking some of these more fundamental questions. Someone who, in his research and his writing and his speaking about labor, capitalism, and American society, has been trying to understand the deeper roots and broader trends that have shaped the world we inhabit.
• [00:04:35.76] Nelson Lichtenstein is the MacArthur Foundation Professor of History at the University of California in Santa Barbara. We brought him here when we have California-style weather. He is there the director of the Center for the Study of Work, Labor, and Democracy. And he's dedicated his life and work to fields of study that sometimes had been marginalized in the universities. Studies like American labor, the left, the nature of capitalism.
• [00:05:09.31] His fluid, engaging writing, his energy and optimism, have brought life and renewed interest to these subjects. And, I could add, he has a special relationship with Michigan-- with our industrial heartland, even with the automobile industry. Because he wrote a wonderful biography called Walter Reuther: The Most Dangerous Man in Detroit. I urge you to be the first ones upstairs to get it.
• [00:05:38.80] And you remember. In this room, people remember Walter Reuther, I'm sure. My students don't know who he is, so I have to sort of remind them. He's, of course, the architect-- I'm telling my daughter this. He's the architect of the United Auto Workers, the UAW, one of the most successful, and therefore feared by the other side, labor unions in the history of the United States.
• [00:06:02.65] Three times, Reuther's enemies attempted to assassinate him. They failed, and he continued his heroic work until he perished in a fatal plane crash 30 years ago. Nelson, it turns out, is as interested-- maybe more interested, nowadays-- in capital as he has been in labor. And his most recent work, about which we're going to hear today, has been investigations into changes in global and American market economies.
• [00:06:38.04] I would say, before I give the last sentence and the name of the book we're going to be hearing about, that in my view, Nelson Lichtenstein is, in the fullest sense of the word, a radical historian. Thinking about the root of the word radical, which, of course, is root-- this is a guy who goes to the root of things. And this is what he'll be discussing tonight when he talks about his latest book, which is available outside: The Retail Revolution: How Walmart Created a Brave New World. Let's welcome Nelson Lichtenstein.
• [00:07:17.12] NELSON LICHTENSTEIN: Thanks very much for that very generous introduction. I really appreciate it. Delighted. And thank you for coming out. I was thinking, if people come to a basement, then something either good or dangerous is going on. I don't know what. Anyway, thanks a lot, and I'm very happy to be here.
• [00:07:41.00] I've been to Michigan a lot, to Detroit. To the Walter Reuther Library, other libraries in the area. Because I really spent the first 25 years of my career writing about the auto industry. I mean, I thought I was going to write about labor and the UAW, I did, but it takes two to tango. So you have to write about the industry, and that's important to do that.
• [00:08:03.27] The fact is that why did I do that, from a teenager? And I realized, hey, this is important. As Peter Drucker, the famous management theorist said, the auto industry is to the 20th century what the Lancaster cotton mills were for the 19th-- the industry of industries. And so whatever happened there, for good or ill, was important.
• [00:08:27.48] And so the commanding heights of the American economy were somehow connected to Detroit and to the managers of General Motors and their opponents in the union. So it was the best place to study things that were going on in the American society. Fundamental things-- class conflict and the shape and transformation of American business and labor. So I spent 25 years doing that. And I'm still interested in it, of course.
• [00:08:59.97] But at some point-- I think it was in the mid-90s-- at some point, it dawned on me that the retail industry was setting the pace for the rest of American business. And that there was this amazing mid-South company called Walmart that actually employed more people than General Motors and Ford combined. And I just started reading the newspaper.
• [00:09:29.17] Now, you could say, well, that just shows what a dullard some of these academics are. They stick to their own knitting. They never they never look their blinders, and then it sort of dawns on them that something else is going on. But I wasn't the only one who was sort of caught unawares. The editors of Fortune magazine-- you'd think they'd be a pretty savvy group.
• [00:09:51.40] They were also caught unaware. Henry Luce-- by the way, there's a very excellent biography of Henry Luce by Alan Brinkley. Just came out. I urge you to read. Henry Luce created the Fortune 500 hundred list of the largest American industrial companies in 1955. You've all heard of the Fortune 500, right?
• [00:10:12.73] Well, when they founded this list, it was the largest industrial companies, and so the retailers-- including companies who were then quite big, like Sears-- were kept off the list. They were not allowed on the list. They just weren't, because retail was sort of-- that's what you did when you spend your money, but that was after you poured the steel or built the cars and harvested the crops. That was sort of secondary, tertiary. It was not fundamental to the economy, even though Sears was selling a lot of goods in 19--
• [00:10:41.06] So the retailers were kept off the Fortune 500 list until 1996, when it dawned on them-- and me. We didn't consult, but it [UNINTELLIGIBLE] that, hey, maybe we should look at these retailers and stick them on the list somewhere in terms of sales. That's how you get on the Fortune 500 list is the amount of sales you have. And so '96, they decide to do that, and bingo. Walmart pops up as number four on the list. General Motors is still number one.
• [00:11:10.68] And Sears, and Kmart, and all the other companies are in the top 100. So then by 2001, in terms of sales, Walmart is number one, displacing GM. And it's really remained number one in the 21st century, sometimes trading place with Exxon Mobil. Walmart now has about $405 billion in sales. And so it's big. It's big.
• [00:11:41.73] And I think, although the Fortune 500 list was originally set up as industrial companies-- you might say, well, Walmart's just a retailer. They just sell stuff. In fact-- and I think it's part of the burden of my work on studying this company-- that really, Walmart is de facto an industrial company. That is, it doesn't own any factories, either in the US or China or Central America. No. But it really controls them. It really controls them, to the extent that they snap their fingers and the management does x and y.
• [00:12:16.89] And so in a way, if you're looking at the nature of this corporation, if it really is, in many ways, an industrial company. And of course, I'm not interested in Walmart, really, as a kind of a historian of one company or to either celebrate or condemn it in any one particular way. I'm interested in the changing shape of the economy and of society.
• [00:12:41.15] And here, retail, it just turns out, is big. It employs more people than manufacturing and construction together. And it's omnipresent. I guess there's some in rural-- there are a number in Michigan. I should have looked up the actual number. Walmart has a very good website where you can find out, actually, how many of its stores there are in a state.
• [00:13:07.54] The other thing about Walmart is this-- or any retailer. All the retailers-- Target or Kmart. They employ a lot of people for dollar of sales. Now Exxon Mobil and Walmart have the same sales-- about $400 billion a year. Exxon Mobil has a 93,000 employees around the world. 93,000-- that's a lot.
• [00:13:32.66] Walmart has 2.1 million employees around the world. 1.4 million in the US. So in terms of social impact, it's just much greater than even an oil company. Oil companies are kind of like taxing authorities-- whether they're Saudi Arabian or some other place, they just basically-- the price of oil goes up. We all have to pay it. It comes out of our pocketbooks. We aren't happy about it.
• [00:14:00.33] But in terms of the social impact-- obviously the Gulf and this well that blew up-- but in normal times, it's a little bit removed. But Walmart is there, ever-present. And of course, what it does, since it's the largest employer in the US aside from the government, it will have a huge impact on employment patterns, patterns for health care, patterns for just the routine of daily life, far more than Exxon Mobil, for example.
• [00:14:32.97] But there are some unique features about this particular company. At least unique to begin with-- now, in some ways, these uniquenesses other people are adopting. But it did come out of the rural South. It came out of the Ozarks, and we make jokes about the Ozarks. At least we used to in the comic books and things.
• [00:14:53.63] Came out of the Ozarks in the 1950s and 1960s. Northwest Arkansas, to be exact. And this is an area that was poor. It was white. It was rural. And it was in the midst of an agricultural revolution-- a very belated, delayed one. Not one that occurred in the 19th century, not even one that occurred in the '30s. It occurred in the 1950s and 1960s, in which the depopulation of farms that were really kind of subsistence in this area of Arkansas was taking place.
• [00:15:26.91] And of course, that meant that lots and lots of people-- youth, women, displaced farmers-- were looking for regular employment. Employment that was in the town. And Walmart would take advantage of that desperately poor surplus population. They didn't all go to California. They didn't all go to Detroit.
• [00:15:47.38] Many of them stayed there. And in interviewing Walmart middle level executives and others, I just found many, many, many of them are just one generation removed from the farm.. The other thing about Walmart, of course, in politics and culture is, Northwest Arkansas. If there was any place in the country that the New Deal bypassed it. The civil rights movement bypassed it. The feminist impulse bypassed it. That was Northwest Arkansas. And so when Sam Walton, the founder of the company, was putting his empire together in the late '50s and early '60s, he really did it in a way that was really a very unique and in a way, un-American, because he didn't have to deal with these large currents.
• [00:16:41.37] In the book, I tell a story. Sam Walton was born in 1918, went to the army in the World War II. Wanted to be a big man on campus the University of Missouri. Very smart, very intelligent, very hardworking. And he wanted to be a retailer. He worked for JC Penney before the war. He always decided he wanted to have his own store.
• [00:17:04.64] So after he got out of the service in 1945-- the guy was married. He did buy a store in a town called Newport, Arkansas. Newport is in the Mississippi Delta region. It is about 50 miles to the west of Memphis. It's cotton. It's soybeans. It's also heavily African-American. And this was 1945.
• [00:17:30.89] And this area would be caught up in the turmoil of the civil rights revolution in the next decade and two decades. He loved Newport, Arkansas. Loved it. This is far over toward Memphis, now. He loved it. He had three of his four children there in that town. Hi store did spectacularly well.
• [00:17:50.94] He was just a natural-born innovator. His wife loved it. He was head of the Rotary Club and the Chamber of Commerce. He was going to stay there for the rest of his life. He was going to make Newport the headquarters of the chain that he was on the verge of founding.
• [00:18:05.92] But in 1950 came the worst setback in Sam Walton's life. He lost his lease. He just signed the wrong lease. A returning war veteran who was the son of the guy who owned the store said, I want that store. And he lost his lease. Sam Walton said, this is the worst thing that ever happened to me. And he did. This very successful store, OK.
• [00:18:29.17] So he began to search for another place. And he decided in Northwest Arkansas, way over there by the Oklahoma-Missouri border. The reason he was there, partly, it was close to his wife's family, which was from Oklahoma. It's also said since it was near this four-corner area where you could get four different bird-hunting licenses and you could shoot birds in four different seasons. Anyway, he ended up in Northwest Arkansas, in Bentonville, which was completely white, completely rural, and very different from Newport.
• [00:19:03.23] And so here's a happenstance. If he had been in Newport and stayed there, it would have been a very different operation, a very different world, that he would have grown up in. Remember the sit-ins at the lunch counters in Woolworth's and stuff like that, in the civil rights era? He would have confronted that directly, and it would have been a certain kind of communal sense of esprit de corps. I often call it herrenvolk democracy, a kind of white sense of communal democracy or communal sort of egalitarianism and that he fostered.
• [00:19:37.71] That would have been impossible, had he remained in the Mississippi Delta. But he didn't. He moved to Bentonville. He called he called the Ozarks the magic circle. There was a kind of cultural resonance between himself, the workers, the small towns of that region.
• [00:19:58.53] Compared to, say, Kmart, which was originally founded in Detroit-- Kresge's-- and then its headquarters were in Troy. And Kmart was very much a kind of urban or blue-collar suburban kind of ethos. It took some of its of its ways of doing business from the unionized industry. Walmart didn't have any of that. And although Kmart was five times bigger than Walmart was the 1970s and even the early 1980s, Walmart would grow much, much faster.
• [00:20:33.80] And of course, as I said before, Walmart could take advantage of the agricultural revolution was taking place and hire white women very, very cheaply. And they were happy-- delighted-- to have a job. A kind of social job; the store was a region of sociability. The isolated farm was not. And they were delighted with that. And Sam Walton was a natural paternalist, so there was a sense of kind of communalism that was pervasive in the early years of Walmart.
• [00:21:10.79] Let me read you just a little portrait from my book of Sam Walton, just to give you kind of a flavor here of that kind of flavor. Sam Walton symbolized this Walmart culture, and he proved remarkably adept at reproducing it. He became a cult figure years before his death, famous for his country twang, muddy boots, and the aging pickup trucks he drove around Bentonville. His persona embodied Walmart's reputation as an earthy and virtuous enterprise.
• [00:21:44.57] When he visited a store, the clerks remembered the occasion for the rest of their lives. His Arkansas bird dogs and their exploits on his frequent hunting trips were legendary. Ol' Roy dog food, named after Walton's favorite, is now the world's best-selling brand.
• [00:22:03.29] Somewhat less was said his more upscale daily tennis game, but it made little difference to his admirers. Because even as the nation's richest man-- an honor that Forbes awarded him in 1985-- Walton disdained conspicuous consumption and overt self-advertisement. He kept the same wife for 49 years, brought his eldest son into the business, and got to work at dawn. Just your basic homespun billionaire, crowed Businessweek in an essay that made Walton's cultivated country virtues interchangeable with those of the company.
• [00:22:40.50] Here's a little ditty from 1989, from an internal company publication from Monroe, Louisiana-- a clerk there. And she wrote, who is this man, this man they call Sam? I would love to meet him and shake his hand. He started with an idea and made it an empire through work and dedication, a man to admire. Enthusiasm, excitement, and a deep family we share-- and that family is an important phrase-- no hostility, rudeness, or smoke, for that matter, fill the air. They plowed the fields where stood nothing but trees. Companies know what's coming and are shaking at their knees.
• [00:23:23.09] I mean, that was he cultivated. And I think it was, in this earlier period-- say up through the '70s, early '80s-- it was successful. Especially insofar as Walton and Walmart understood that there was a vast market in small-town America for big discount stores. This is not the reason I wrote the book-- my father owned a five and dime in Frederick, Maryland. And it wasn't much bigger than this room, probably. There were just inefficiencies that were built into that, like me, who would steal some of the candy every so often. And no matter how hard my father worked, he could not have competed with a discount store.
• [00:24:12.59] In honor of being here and in Detroit, 20 miles from Dearborn, let me read you another paragraph I wrote, comparing Walton and Henry Ford. Walton's image recalls that of Henry Ford, the only other 20th century entrepreneur whose innovations were as revolutionary in their economy-wide impact and closely identified with a single individual and a single firm. Like Walton, Ford advertised his small-town roots, rural values, hands-on management, and hostility to New York money and credentialed expertise.
• [00:24:50.32] Both Walton and Ford-- they didn't like to hire college guys. They wanted to hire people who worked their way up. Like Walton, Ford became a household name that embodied not just a set of new business practices, but an ethos. Ford's reputation, however, had nothing like the popular staying power of Mr. Sam, especially among those who actually worked under him. Ford was neither charming nor paternal. He ran his great factories, the River Rouge complex above all, like a military dictator.
• [00:25:23.47] More important, the Detroit industrialist died 20 years too late. In 1947, after the Model T had become quaintly obsolete, and after the travail and tumult of the Great Depression. In contrast, Walton succumbed to cancer in 1992, at the very moment when the world recognized that Walmart had become a retail hegemon. Immediately, Walmart executives practically defied the founder, treating him as the font of all the business values and the retail techniques responsible for corporate and career success.
• [00:26:00.39] In Aldous Huxley's Brave New World-- 1932-- fictional characters deploy the phrase, in the year of our Ford. Remember that, if you've read that? Today, thousands of warm-blooded Walmart employees still incorporate into their workaday vocabulary the invocation, so help me Sam.
• [00:26:26.70] OK. But Walmart did not succeed just by being folksy, southern, or tight-fisted, or paternalistic. It proved one of the first firms to read the enormous productivity dividends arising out of the revolution in telecommunications and digital information. Before that, Peter Drucker described all of distribution-- all of really, the retail world-- as a, quote, dark continent, unknown and unknowable to the manufacturers of mid-century America.
• [00:27:00.05] The key innovation here was the bar code and the massive data storage warehouse. In Walmart's case, the mammoth David Glass Technology Center is said to store more than twice the terabytes in the entire world-wide web. You have a bar code on you. We live amidst bar codes. They're ever-present. They were invented by a committee of experts and retail executives in the '60s and early 1970s and deployed in the '70s.
• [00:27:38.17] Why did they invent them? Because in the '60s, labor in grocery stores was getting more expensive. There was a very good union there. There were a lot of them. And grocery stores wanted to expand. And it was very difficult for a clerk to remember or look at the package and get the exact price for, you know-- well, you could do it for a few thousand items, but if you get 10,000 or 20,000 or 30,000 or 40,000 items in a big grocery store cum discount store, it's impossible.
• [00:28:12.15] So they wanted some device that would cheapen the cost of labor, basically, in grocery stores. And the bar code came along, with the scanner. And they invented it, and it succeeded. It did in fact reduce or halt the escalation in the price of labor in grocery stores. It also made it possible to make grocery stores bigger. And also, of course, it made it possible to change the price of something instantly, without having to go with a little sticker, which I used to do as a kid, and put the sticker on every item.
• [00:28:48.81] However, that is not the most important thing about the bar code. And most grocery executives and others didn't understand that. The most important thing is that when you have a bar code and a scanner, every little bit of information about selling bananas and diapers and this and that feeds through the cash register and then can go to a central computer where you can then study it, manipulate it, slice it, dice it, and figure out what sells, what doesn't sell, what price, and how to get stuff there quicker, et cetera.
• [00:29:27.11] And Walmart-- they didn't invent the bar code, but he understood that very quickly. He was not a computer whiz kid, but he understood that if you had that knowledge, if you had that power, then you could use it to make the system much more efficient. And the other thing about Walmart was, he hated salesman. Retailers from the South, including my dad and others, they loved to go to New York. And they'd have a great time. It They'd buy blouses and underwear, and then they'd go to a show at night. And then they'd see their friends, and they'd have a great time. People've been doing that for 150 years.
• [00:30:11.61] Walton hated that stuff, and he hated the salesmen that came along. He wanted to get rid of the salesmen, get rid of the intermediaries. And with the information that was now pouring through his computers, pouring through his cash registers, he knew more about the products he was selling than the salesman, then the manufacturers. And that meant that he could then tell the manufacturers, I know how many bottles of shampoo I'm going to sell on Tuesday in the winter in Memphis, and I expect you to get the stuff there on time and at a discount.
• [00:30:50.02] And he knew that, and he didn't have to listen to what Procter and Gamble was telling him about how wonderful the shampoo was. Proctor and Gamble invented the soap opera because they wanted to have an audience of women that they could then survey and interview and find out what they were buying and why they were buying it. Well, Walmart didn't need that. They now knew it from their computers.
• [00:31:13.60] And so big companies like Proctor and Gamble-- very big company, billions in sales-- became kind of vassals, became sort of subordinate to Walmart. And that was true of big and little companies around the country. Because they had the knowledge, and therefore the knowledge was power. In the business schools, there's a buzzword for it. We'd call it supply-chain management. Supply-chain management.
• [00:31:45.78] Now, when I began this book-- just in 2004 I began to do work on it-- I'd never heard of the phrase supply chain. I didn't even know what it mean. But if you want to actually sort of know what is the sinews that constitutes globalization, that constitutes the relationship between American consumers and Chinese producers, it is the supply chains which are dominated, which are controlled, which are run by the great retailers of America. Walmart first and foremost, but also all the others-- the Kmart's and the Home Depots, et cetera.
• [00:32:28.72] So I visited China to do work for his book in 2005. Went to Guandong province, arguably the workshop of the world in the same way that Manchester was in 1844 or Detroit was in the 1920s. In fact, when we arrived there, it was a Sunday afternoon-- get this-- Sunday afternoon. We arrive in Guandong from Hong Kong. Took a train there Sunday afternoon. And we get in a taxi to go to our hotel. We got off at the wrong train station, which is a good thing, because we had a long taxi ride.
• [00:33:01.71] So we're driving, and the place is jumping. I mean, there's machine shops, there's welding shops, there's factories. They're going. They're moving, and the streets were very wide. I said this is like, 8 Mile or what are those streets in Detroit? You know, those streets which now are derelict with all those stores that are now boarded up. But can you imagine them with everything jumping on Sunday afternoon? I said, this is what Detroit was like in 1925.
• [00:33:33.72] And why is it all there? Because the Bentonville or Target in Minneapolis or Kmart in Troy-- that's the head of the supply chain, and they are contracting with factories, enterprises, in China for the goods that will end up on their shelves. I should say, though, that this is sort of a system. We think of globalization today-- it's not like an auction house or Sam Walton would wake up one morning and say, I wonder what the price of plastic flowers are in a certain town in China? It wasn't like that. They would send a message to their agents in China and say, we want 10,000 gross of socks and you go out and contract with a factory to get that. And if they can't lower the price every year, cut them off.
• [00:34:37.16] And that's part of the squeeze that takes place in these supply chains. Walmart managers, when you say to them, what business are you in? They don't say, we're in the retail business. They say we're in the logistics and distribution business. And Walmart, as you know-- It's not like Target. It's not sexy. It's not for innovative products. It has a reputation. Doesn't matter. They sell the commodities you need, the everyday things, at the lowest price. And they have in fact reduced the price. And I'm going to talk about that in a little bit. And that's a good thing, although we'll see it has its problems.
• [00:35:26.96] So the core competency of the company is distribution, logistics, that sort of thing. Not salesmanship. Who's heard of Blue Light Special? This is actually an admission of failure on the part of Kmart. Kmart invented the Blue Light Special, which meant, I think, that managers at Kmart could turn on the blue light, right? And then you got an instant sale on whatever it is. And then people, you know, oh, let's buy this stuff at cheap. Well, what it really is all about is that they got a surplus stuff. They got too much stuff. They didn't order correctly, and they got to get rid of it.
• [00:36:12.47] So the manager has a blue light circle. Walmart never has Blue Light Specials. They never have sales. They just have the low price. And that's a good thing. All right. Now, I do want to make it clear that I think that Walmart could not have succeeded-- it wasn't just technology, nor was it just poor white women from rural Arkansas who needed a job, although that's important.
• [00:36:39.76] It was also politics and culture. And the company's dramatic rise to supremacy-- and in some ways, the rise of other companies, like Target and Home Depot, et cetera-- coincided with a kind of right-wing shift in American politics and a shift in the nature of our culture, especially the rise of evangelical Protestantism.
• [00:37:07.10] Walton himself was a conservative. He was politically conservative, no doubt about that. And in fact, let me just say something about that. He was a white Southern male of his generation. He resented and resisted the regulations, whether they were economic or based on gender or racial, that emerged on the national scene in the 1960s and 1970s.
• [00:37:46.09] There's a story told to me by a Walmart manager who was with Walton for many years. I drank a lot of Dr. Pepper with him one afternoon in his backyard. no one remembers this now, but when Kennedy ran for president, one of his campaign planks was to extend the minimum wage to those who worked in retail stores. Again, just like the editors of Fortune magazine.
• [00:38:24.76] Retail stores were thought to be-- that's pin money. That's what women make, pin money. So Kennedy said, we're going to extend the minimum wage to the people who work in retail stores, which was mainly women. And this would mean that in Northwest Arkansas, where people were earning $0.20 or $0.25 an hour in the '50s-- this could mean a doubling or even more of the wage for the people who work for Sam Walton.
• [00:38:56.26] One of the elements of this law, which we do today, as well, is that if the business earned less than I think it was half a million dollars in a year, then it didn't apply. Small business-- we always give small business a break. So by the 1960s, Walton had a chain-- first, Ben Franklin, and later on he set up his Walmart discount stores-- in which clearly the chain had more than half a million dollars worth of income. So the law would apply to him.
• [00:39:28.41] But Walton, skirting the Yankee law, said, well, I'm going to make every one of my stores a separate business enterprise. And he did that, in part giving relatives some stock, and this and that. It was really a shell game. But he did that, and he said, so the law doesn't apply to me. I can pay my clerks cheaply. Well, eventually the feds caught up with him, you know? And he was sued, and he lost a civil suit. And in 1967 or 1968, he was told, you must pay back wages and a penalty to all of these clerks who you basically cheated.
• [00:40:12.52] He only had a few hundred employees. He brought them all together in one of the stores in the Ozarks. And he blustered and said, oh, this is terrible. But he had to hand out these checks. He handed out the checks, and then he said, I'll fire any of you who cash those checks. And it indicated this sense of resentment, this sense of hostility to what he saw as Yankee or federal regulations imposed on his operation.
• [00:40:45.31] And cooler heads prevailed and he didn't fire them and they did cash the checks. But that kind of resentment-- that stayed with the company. So the company became well-known in some legal circles for always skirting the law. Skirting the law whether it was minimum wage, lunch breaks, et cetera. Now that was in the period of kind of liberalism-- the '60s and early '70s, when minimum wage laws were high and enforcement was great. But Walton was always pushing the envelope on that.
• [00:41:15.08] And when Reagan came in, and other conservatives, and the real value of the minimum wage began to decline, enforcement of labor standards of that sort began to decline, the labor law shifted so that it was very much more difficult to form unions. Walton took advantage of that. And by the '80's-- and it's still true today-- the real value the minimum wage had declined more than a third from what it was in 1968. Well, that money went right to the Walmart bottom line, because he didn't have to pay those higher wages. And some of his competitors, those who were headquartered in the North, did, in fact. So that was part of the Walmart ethos.
• [00:42:00.75] But it's important to understand that it was not just a kind of exploitative-- not just a kind of iron fist or breaking the law. That was there, but there was also, especially with the rise of evangelical Protestantism, a sense that the economy, the American capitalism-- there must be a certain kind of a spiritual, organic connectedness to it, because it is in fact created by God. And the world is a place in which individual salvation is important, but a kind of collective or social or certainly governmental transformation is marginal-- is unimportant.
• [00:42:55.22] And so if you read the Walmart internal magazine, which has a million subscriptions, there's story after story of redemption. I was a drunkard. My family broke up. I'd lost my job. And then I got a job with Walmart and I've found a family, and I've found community, and I've found the meaning to my life. Service to others-- that's very important.
• [00:43:26.15] And in fact, a phrase which is-- I don't know if that's around here, but certainly throughout the South. A phrase that Walmart adopts-- Sam Walton adopted, and even more so after that-- is the phrase servant leadership. Who's heard of that one? Servant leadership. A few of you have. It is not actually a Christian concept. Servant leadership, which means essentially leaders lead, managers lead, by example-- by a sense of self-abnegation, even, of sacrifice.
• [00:44:03.57] That idea actually arose from a guy named Robert Greenleaf, who was the personnel director of AT&T in the 1960s. And in the '50s and '60s, AT&T, of course, was the consummate employment bureaucracy, employing a lot of women. And Taylorite methods-- heavy-handed managerial methods-- were just not working. Turnover was high. Service was poor. AT&T's a service company.
• [00:44:36.03] Greenleaf was looking for another kind of ideology, another kind of motivation, that could infuse management with a purpose beyond simply telling people what to do or making money. Or telling them, we'll give you more money if you do better. And so he was reading kind of New Left and sort of countercultural stuff, and he came up with this idea-- it had originally been in some of the earlier countercultural language-- of servant leadership.
• [00:45:07.16] And it spread like wildfire throughout the service industries, and was adopted by many of the them. That idea that you lead by example and that the function of management is self-sacrifice. Now, we aren't talking about big executives making a lot of money. We're talking about assistant managers in Walmart stores who make about $40,000 a year, maybe $50,000 now, and who work 80 hours a week and whose life is really miserable.
• [00:45:41.99] But this is the perfect ideology of management for them, because certainly their life is one of sacrifice and dedication to the company. And they have to prove themselves if they want to become store managers and then beyond that, do really well.
• [00:46:00.23] The other thing about Walmart is it has very high turnover. But that's actually very good, from the point of view of Walmart management, in terms of creating a core of dedicated people. Because when you have high turnover, those who are discontent, those who don't like it-- they leave. They're gone. They aren't there to make trouble.
• [00:46:19.75] What you're left with is maybe 30% of the workforce who buy into the ideology, who for whatever reason buy into the whole ethos. And they become the core of the company. So high turnover actually helps create stability among the core employees. One more thing about Walmart. There's a big lawsuit against Walmart still going on-- Dukes vs. Walmart-- claiming, I think correctly, that Walmart discriminates against women.
• [00:46:55.97] And it does. But from Walmart's point of view, the discrimination wouldn't be discrimination. We're one big family, and certainly up to about 10 or 15 years ago, they would say, yes, we're one big family. And so just as men were the head of the household on the farm, so, too, men should be the head of the store that kind of substitutes for the farm. And that's their natural position of leadership. And I found in the records as late as the 1990s, people say, well, of course I'm going to promote Joe to assistant manager, because he has a family to support. Whereas Sally is a woman, and she may have a kid, but she's not the head of household.
• [00:47:43.75] That was a very rural, very Southern thing. Furthermore, even after Walmart was sort of caught in this, and they realized, well, we better make amends, the following issue arose. If a woman wants to be made an assistant manager, which is the first step to being store manager and above-- making good money, then. Walmart says, OK, we'll promote you to be assistant manager, but you have to move 100 miles away to the store in the following town. And the woman will say, well, I can't do that. I got a kid here in school. I'm taking care of the family. I can't do that. And they'd say, well, it's too bad. Sorry.
• [00:48:24.82] The reason they do that is this. There is a certain sense of sociability in the stores, especially in rural areas. Women know each other. They have bake sales. They're friends. Well, if all of a sudden a woman who's been gossiping in the break room is now appointed assistant manager, and the job of an assistant manager is to crack down on people who are absent or to crack down on people who don't do their work, how do you do that with your friends?
• [00:48:55.03] You got to send them 100 miles away. And so that means that a lot of women don't take advantage of that, and therefore you end up with a job hierarchy at Walmart, which is 80% women at the bottom, but 30%, 40%, 20% women the higher you go. The higher you go, the more male it becomes.
• [00:49:15.82] OK. Let me just conclude with a couple thoughts and then about the contemporary. I'm not studying Walmart for Walmart's sake. And in fact, almost every innovation that Walmart pioneered in the last 30 years has been adopted by every other retailer. They're all the same. They pay the same. They have the same management structure, more or less. They have the same supply chains. They have the same computers.
• [00:49:44.71] And in fact, Walmart no longer has a competitive advantage over other retailers. In fact, it has announced that publicly and in advertisements, which-- I'm not sure it's still on the air, but it went something like this, just about a year ago. Times are rough. You need to save money. Shop at Walmart. The average family will save $3,100 no matter where you shop. Shop Walmart, live better. So I saw that. I said, wait a minute. No matter where you shop-- you mean anywhere? And then I looked at the asterisk and I looked it up on the website and everything. Yes.
• [00:50:30.96] This was based on a study made by a firm Walmart hired called Global Insight, which said if you took 1985 as a baseline, and you did not have any of the innovations that Walmart pioneered-- bar codes and logistics and containers to China, and all that stuff-- you didn't have any of that, then the price of the goods that an average family would buy would be $3,100 greater.
• [00:51:01.72] This would be like Henry Ford, in 1922, saying, buy a Ford Model T and save $2,000. Because if you'd bought the same kind of Model T built on the 1908 non-assembly line, it would cost a lot more money. So what Walmart is admitting there is that its techniques have now gone to everyone. And so I think we can see now, Walmart's less unique, Walmart's less peculiar and innovative, but retail remains a huge part of our economy.
• [00:51:37.24] And I think it's related to the economic crisis of the recent years in the following way. Retail wages are low. They are probably 1/2 of what Walter Reuther had negotiated in the UAW in its heyday. But retail, unlike 1955, is so much bigger today.
• [00:52:02.00] And as a result of the supply chains and the squeeze on manufacturing, many, many manufacturing jobs have been trans-shipped to China or Central America. So we have an economy of consumers and not producers, not manufacturing employees. And of course we have lots of other people in the service sector.
• [00:52:22.74] But really, we're getting a hole in the center of the middle class. Now, one way to fill that hole is to borrow on houses, to borrow on all sorts of financial instruments. And in some ways, the economic boom of the '90s and into the 21st century was based on borrowing.
• [00:52:43.82] Well, the rubber hit the road, or the brick wall occurred in 2008. And today, Walmart itself recognizes that the consumers don't have enough money. Walmart's sales are going nowhere. They're about flat. It actually came out in favor of an increase in the minimum wage a few years ago, because it recognized that sales were flat.
• [00:53:10.74] And so it understands that there's a kind of contradiction. One of my chapters is called Walmart vs. the World It Has Created. And so I think that the company, clearly, itself-- and retail in general-- is at a crossroads. Now, Ron Suny alluded in his introduction to the situation we're in today, a very rapid seemingly shift to the right in the political atmospherics.
• [00:53:47.84] And that's true, so I don't know how that's quite going to play out. But if you just move about a year back with me, Walmart, when it came to Obama-- and Obama had said during the campaign, we got to solve the problem of Walmart and companies like it before the American middle class can get back on its feet. He said that. He attacked Hillary Clinton for having been on the board of directors of Walmart, and she was.
• [00:54:16.36] Obama did a couple things. One, he appointed Hilda Solis Secretary of Labor, and Hilda Solis said, there's a new sheriff in town. Meaning, we're going to actually enforce garden-variety labor laws, like minimum wage laws and lunch break laws and overtime laws, which Walmart and other companies had been violating. And on December 23, 2008, while everyone else was wrapping their Christmas presents, Walmart announced that it would settle 63 three wage and hour lawsuits that had been pending against them for up to a decade for over $0.5 billion.
• [00:54:52.50] It sort of could read the tea leaves, here, of Obama coming in. And then when the Obama health care plan was in debate, Walmart did something very unusual. Most retailers were dead set against it. They didn't like the federal mandates, et cetera. Walmart issued a statement with some of the unions and with some liberal groups saying, basically, we're in favor of it.
• [00:55:19.48] And they did that because they'd been pilloried. They'd been denounced for having such terrible health benefits. And they could see that one of the provisions of the Obama health care plan, which most people have been ignored, is it means that the number of people receiving Medicaid will go up by 15 million.
• [00:55:38.95] And the typical Walmart worker, a worker making $20,000 a year-- say a single mom with one or two dependents. They will qualify for government-paid Medicaid. For a lot of Walmart workers-- probably more than half-- they're in Canada. It's a government system of health insurance.
• [00:56:01.78] So Walmart will save a lot of money and a lot of embarrassment if the Obama plan is ever actually put into effect. So Walmart has sort of indicated that it wants to kind of moderate itself. It's doing a lot of work on environmental things. I'm not claiming that the company is reformed, but it's aware of the politics.
• [00:56:21.87] And the final thing I'll mention is that maybe this is paying off. Because just a month ago, the Chicago city council, which had been militarily against allowing any more Walmart stores into the city of Chicago-- they've been kind of a union liberal alliance. They voted overwhelmingly to allow Walmart to build 20 new stores in the city of Chicago, in part because Walmart agreed they'd be built by union labor-- although not staffed by union labor, but they'd be built by union labor.
• [00:56:55.37] So the company is changing. Whether retail is changing, I think, is another story. But I think I'll just stop here and welcome your questions and comments.
• [00:57:08.34] SPEAKER 1: Good evening. Just a question. I'm not sure about the prognosis said about the election-- even the rightward tilt of the nation. I think times going to tell very quickly on that. But the question I have regarding Walmart-- is the enormous sense of consolidation of power that Walmart has had on the economy, particularly in retail and particularly in terms of supply chain-- would you say, particularly some of the recent things you're talking about-- now that the grand founder-- Once-ler, to use a Dr. Seuss term-- is now gone, is Walmart stagnating? And is Walmart losing its edge and its power among competitors in terms of retail?
• [00:57:54.82] NELSON LICHTENSTEIN: Well, as I said, it could no longer has a great competitive advantage. Because it's like with Ford. Ford invents the assembly line, and then Chrysler and GM and everyone else adopts it. So it loses its competitive advantage. These great innovations everyone uses. So yes. The answer is, it has lost its advantage.
• [00:58:17.01] But that doesn't mean we shouldn't deal with retail in general. And I think that when it comes, say, to trade unions, Target and Home Depot and all the others are just as intransigent and as militant in opposition to unionism and willing to break the law they have to as Walmart was-- and in opposition to recent efforts to reform the labor law. It's the Walmart-ization of retail, and that's what we have to deal with. Whatever the name of the company is.
• [00:58:53.42] Walmart, of course, is trying to now expand abroad, because certain stagnation at home. And its looking to Latin America, possibly even Eastern Europe, to do that.
• [00:59:05.63] SPEAKER 2: Hi. I'm curious a little bit about the transition between the Ozark days to the national days. I remember Walmart coming to my consciousness in the phase of, oh, we're not going to let them build a Walmart store in our town, because it'll drive all the mom-and-pops out of business. And then that they were somehow using some sort of unfair competitiveness to drive out the smaller shops, and then they took over and they were the only one in town.
• [00:59:36.70] Is this is true that there was unfair tactics used to spread themselves nationwide? Or did the innovations in logistics and distribution in and of themselves make it inevitable?
• [00:59:47.61] NELSON LICHTENSTEIN: Well, right. That was the basic, and still to some extent, narrative on Walmart on the liberal side was, OK, they're putting mom and pop out of business and ruining downtown, which is true. When it comes to unfairness, yes. Like Standard Oil 150 years ago, Walmart used it's enormous influence, clout, et cetera, directly politically, to get all sorts of subsidies. From states, from communities, tax abatements-- there's a whole variety of them. They're quite elaborate and clever.
• [01:00:27.35] And Walmart used its clout to do that. And then, of course, its competitors claim, hey, I don't have a tax abatement. I've been in this town for 50 years, and I'm paying taxes and they aren't. So they were right about that. But the second thing was that then there were many studies as to whether or not, when Walmart came to a small town, did it reduce employment over time, et cetera? I think it's sort of a wash.
• [01:00:53.99] My view is-- maybe this because I'm the unromantic son of a five and dime owner-- that I have no objection to a big box store. I think they're very efficient. In automobile culture, especially if you're a single mom with a couple kids in tow, you want to buy everything there. So I have no aesthetic objection. My wife does, but I have no aesthetic objection.
• [01:01:21.45] What I do object to is, of course, the social policy of the company and its low wage, low benefit policies. Let me just give you one example of this. It is true-- I'm happy to concede or celebrate that Walmart has, in fact, lowered the real price of everything. It's true. It's true.
• [01:01:46.74] Now, Walmart says, oh, OK. So you may complain about our wages, or you may have complained about this or that, but the entire retail industry is saving the average family $3,000 a year. OK. True. But if you look at the family budget today-- or say, compared to 1947. In 1947, the average family budget-- about 45% of everything you spent in '47 or even through the '50s, you would spend on the kind of goods you could buy at Walmart. I.e. groceries, soft goods, some hardware, things like that. 45% of the family budget.
• [01:02:26.24] Today, though, we only spend about 18% of the family budget at the kind of things that Walmart sells-- clothing, groceries, things of that sort. Where's the rest go? Education, health care, housing, cars. You know, stuff like that. Well, how do you afford that? Higher wages. Higher wages.
• [01:02:51.53] It'll be worth the deal to double wages in retail, which might on the outside increase the price of the goods by 10%-- that'll be worth it if real income did in fact double. It would be a better bargain for the average American family.
• [01:03:11.43] SPEAKER 3: Given that we've heard so much in the news lately about the US's trade relationship with China, and you mentioned some a little bit about your visit to China, I'm wondering if you can comment on Walmart's relationship with manufacturers. And really, the squeeze they've put on manufacturers given this evolving relationship. And in particular, if you could comment on the US government's trade and fiscal policies-- monetary policies-- and how they contribute.
• [01:03:40.15] NELSON LICHTENSTEIN: Let me just start in what I think is the real issue here. This coming year, we're celebrating the 100th anniversary of the Triangle Shirtwaist Fire, which was in New York City. 146 women, Italian and Jewish, died. Plunged to their death. OK.
• [01:04:00.52] What does this have to do with Walmart? In fact, I was denounced in one review-- said, why is he talking about the Triangle Shirtwaist Fire. We're talking about Walmart. OK. The Triangle Shirtwaist Factory was identical to the kind of factories in China. Not simply because it had flammable material and treat the workers bad-- that's true.
• [01:04:19.50] But the legal, organizational relationship of the company to the end buyer was the same. That is, in 1911, Marshall Field's or Wanamaker's, or Gimbal's, or whatever it was, would buy stuff through a middleman, who would then use another subcontractor and another subcontractor to finally find a firm that would make the stuff.
• [01:04:49.11] This is called sweatshop manufacture. There's a natural squeeze, because the subcontractors are competing desperately to get the work. And so they will squeeze the wages, safety, et cetera, et cetera. The owners of the Triangle Shirtwaist Factory were two German Jews who were pilloried in the press-- correctly-- for their criminal responsibility in locking the doors. But when it came to trial, they were acquitted, because they had no legal responsibility, actually, what was going on in the loft. They had a subcontractor did that.
• [01:05:33.64] Well, the same thing happens in China today with the Walmarts and the Targets. They determined the prices, et cetera, et cetera. But they have no legal responsibility for that. And that is one of the essential features that has to be reformed in terms of supply chains.
• [01:05:54.17] Now, having said that, what is happening in China today is two things. One is the Chinese government is making the decision that they don't want to be the bottom of the workshop of the world anymore. They'd like to move up the technology and quality ladder. And so a new labor contract law was promulgated a couple years ago which has a few teeth in it. There's hundreds of thousands of lawyers in China running around defending workers who've been hurt, and then there's strikes and demonstrations. A lot of stuff going on in China.
• [01:06:44.21] And then at the bottom, especially this last year, there's been a lot of things happening in south China. And so it may no longer be the workshop of the world for the Walmart. And if China revalues its Yuan, its currency, it will mean that companies like Walmart will have to on-shore some of the production. They'll no longer find it absolutely cheap to produce the stuff in China.
• [01:07:11.74] So it is possible that these supply chains will begin to break, and we may end up with a return of manufacturing to the US. You want me to-- OK. Yes, ma'am.
• [01:07:28.20] SPEAKER 4: So you're looking at retail, and I'm a retired auto worker. And I was struck by how you talked about the guys in China saying, OK, well, we'll be willing to produce it at this amount, this year, but next year we want to have it lower. Because the same thing is happening between GM and the auto suppliers. And so in the '90s, they deliberately sold these plants off, and the union would not allow the UAW workers to oppose this. Because they said, oh, yeah, we'll fight for your benefits. Well, look now what we've got. So is this that the Walmart-ization is happening everywhere? Or is this just the attempt by the corporations, especially since Reagan, to-- OK, the unions are a paper tiger. We're going to go after them all. And what's your speculation?
• [01:08:36.29] NELSON LICHTENSTEIN: That's a very good point. Because General Motors, in a sense, took what had been a vertically-integrated company-- 50 years ago or 70 years ago, this was thought, OK. General Motors and Ford, these are really efficient companies. Alfred Chandler, the dean of American businesses historians, wrote a book about that, saying, yes. We have vertical integration because you get communication. We don't need the market. It's much better for the management to make decisions. He called it the visible hand, rather than the invisible hand, of the market.
• [01:09:07.59] And this is the most efficient way to do things. Ford owned rubber plantations in Latin America and iron mines in Minnesota and everything in between. For a variety of reasons, some having to do with labor, some having to do with telecommunications revolution, some computers-- companies have come to conclusion in this epic that it's much better, much more efficient, cheaper on their part, to disaggregate themselves. And that's what GM and Ford and all those companies have done.
• [01:09:38.67] Or Walmart's made the decision, we're never going to buy a company in China. We'll never actually own it legally. But we can get all the benefits out of it and we can also force the various components to compete among each other, just as you said. And so I think that that confronts us today with a kind of legal political structure which has to be reformed.
• [01:10:08.34] That is, if control exists, then it has to have some legal responsibility. When a fire or something horrific takes place in China, it's not enough to say, well, yeah, we bought stuff from them. But we don't run the factory. We have no legal responsibility. And there are NGOs, of course, who are trying to make that connection.
• [01:10:32.11] But I think we need a reform of that-- a kind of legal reform. It's not really on the agenda. There's a little bit of talk about it. The companies themselves claim that they are monitoring their suppliers, but really it has no legal clout to it. And I think that is something that is on the agenda today, because the new shape of world capitalism is these disaggregated companies which have control but no actual legal responsibility.
• [01:11:13.55] SPEAKER 5: Well, let's thank [UNINTELLIGIBLE] for a very interesting talk.
• [01:11:18.26] [APPLAUSE]
• [01:11:19.70] NELSON LICHTENSTEIN: All right. OK. Thank you.