The "greening of Wal-Mart" (11 Sept 2007)

Yesterday's FT had an article about Wal-Mart's recent environmental commitments and whether the company should be lauded or criticized as not going far enough. The gist is that they can function the way the state of California does with auto-related legislation -- if the state mandates changes, the automakers must accommodate to preserve access to the largest vehicle market in America. Likewise, if Wal-Mart insists that its suppliers avoid using certain chemicals in its products, they have to change their ways. (Wal-Mart has already ruffled the feathers of the Vinyl Institute with its intention to stop buying products made with PVC.) If Wal-Mart orders a huge amount of concentrated laundry detergent (saves water) or fluorescent lightbulbs, then the price and production of these items are affected accordingly. And Wal-Mart, as one of the nation's biggest commercial real-estate owners, can have a big impact if it makes all of its sites energy-efficient, as it plans to.

So what could be wrong with all of that -- with the world's largest company using its leverage to force changes for the better. It seems rather straightforward but there are a few wrinkles. First, these environmental changes, laudable as they may be, may be part of a smokescreen distracting Wal-Mart's critics from its dubious labor practices. By being on the green forefront, Wal-Mart can divide and sap the power of the various groups that had aligned against it and begun to lobby for regulation and state intervention into its practices. It also doesn't address the fundamental problem of its business model, which is to prevent the lowest possible prices, labor and environment be damned. Generally speaking, Wal-Mart off-shores miserable labor conditions so that it can present its goods at rock-bottom prices with relatively clean hands. And then it can point to its sales figures as a kind of pseudo-democratic endorsement of its methods -- see? the people love it! And the low prices are seen as extending more power to poor consumers, who get more bang for their buck. But low prices are a product of failing to internalize the true cost of cheap goods, of the wastefulness of shoddy, disposable products. The blight of consumerism may be considered a kind of moral pollution that can't be adjudicated economically. Were Wal-Mart truly committed to change, it might make an effort to have prices reflect the true costs (if they could somehow be determined outside of market forces) of its wares, or it might make efforts to attract consumers with some other lure than low prices, though when it tried an upscale move last year, it lost market share (and who is to say an upscale move is any more laudable than a commitment to cheapness; that replaces disposability with a climate of status envy). From this point of view, Wal-Mart's low prices offer consumers a Faustian bargain of purchasing power at the expense of political power.

But the main reason that critics need to continue to gripe about Wal-Mart is that its recent gestures toward sustainability and environmental concern are essentially marketing gimmicks, a product of the pressure already put on them by critics -- it's all basically a PR move necessitated by the volume of complaining. Basically, nothing Wal-Mart can do should stop the bad PR, since the bad PR is arguably all that has been demonstrated to motivate the company to change. Otherwise it might revert to being guided by ruthlessly seeking effiency and wrenching out all it can from its supply chain by any means necessary. Currently, Wal-Mart seems to be seeking a middle ground, pursuing green initiatives that are also economically efficient, that won't be in danger of alienating not-so-green shareholders. Until Wal-Mart makes bottom-line concessions in the name of environmentalism, compromising profits in some explicit way, there's no reason for critics to temper their criticism. The vehemence of that criticism is what's pricing the value of Wal-Mart's moves.

Computerized scheduling and on-demand consumerism (4 January 2007)

Wal-Mart dominates the retail sector because it perfected just-in-time logistics (only as much inventory as will be sold), minimizing overhead costs and allowing the company to charge lower prices. This in turn attracted more customers, which eventually gave Wal-Mart the enormous scale of operations that allows it to bully suppliers and dictate its own terms to them in order to hone its supply-chain logistics even further -- a tidy little feedback loop. Now Wal-Mart hopes to improve its bottom line by treating workers, whom it has vigorized preventing from unionizing, in the same way it treats inventory, employing them on a just-in-time, as-needed basis. This WSJ article by Kris Maher, which is surprisingly sympathetic to the worker's point of view, has the details:

Staffing is the latest arena in which companies are trying to wring costs and attain new efficiencies. The latest so-called scheduling-optimization systems can integrate data ranging from the number of in-store customers at certain hours to the average time it takes to sell a television or unload a truck, and help predict how many workers will be needed at any given hour....
But while the new systems are expected to benefit both retailers and customers, some experts say they can saddle workers with unpredictable schedules. In some cases, they may be asked to be "on call" to meet customer surges, or sent home because of a lull, resulting in less pay. The new systems also alert managers when a worker is approaching full-time status or overtime, which would require higher wages and benefits, so they can scale back that person's schedule. That means workers may not know when or if they will need a babysitter or whether they will work enough hours to pay that month's bills. Rather than work three eight-hour days, someone might now be plugged into six four-hour days, mornings one week and evenings the next.

In this post, Brad Plumer elaborates on the employee hardships Maher mentions: "Another problem, of course, is that 40 percent of Wal-Mart's employees will soon be part-time workers. Many of them—and many of the full-time workers, too—need to find second or even third jobs to make ends meet. Of course, it becomes near-impossible to find another job when you have to sit around 'on call' and can't predict your schedule from week to week. Ah, but at least the Bureau of Labor Statistics can record an uptick in 'productivity,' and economists can then sit around and wonder why median wages aren't going up too. So it's all good..."

Wal-Mart defends this by reminding everyone how great this will be for customers.

Wal-Mart spokeswoman Sarah Clark says the system isn't intended to schedule fewer workers, and hasn't where it has been implemented so far. The company says that in one test last year in 39 stores, 70% of customers said the checkout experience had improved. "The advantages are simple: We will benefit by improving the shopping experience by having the right number of associates to meet our customers' needs when they shop our stores," Ms. Clark said.

But what about workers, whose lives will be made much more insecure? "Some analysts say the new systems will result in more irregular part-time work. 'The whole point is workers were a fixed cost, now they're a variable cost. Is it good for workers? Probably not,' says Kenneth Dalto, a management consultant in Farmington Hills, Mich.

Probably not? Of course it's not good for workers. It only amplifies the chaos in the already often chaotic lives of the poor. As Jonathan Cobb argues in his afterword to The Hidden Injuries of Class, class is a matter of being reminded that your time is not valuable, not nearly as significant as other people's time, other people who presumably do something much more useful with it. If you are poor, lower class, you can always be made to wait. If you are important, you can have things "on demand." Wal-Mart is telling its employees that the time of every single person who comes into a Wal-Mart store is more valuable than that of those it entrusts to serve those customers. Of course, any of us can become one of those customers and suddenly feel important, but that is the deeper charade at work -- that we will ever be able to buy dignity and self-respect by being a consumer rather than earn it by doing meaningful social work. This development makes it plain how improvements in serving the customer are typically translations of ways of screwing the worker (who is essentially the same person). On-demand consumerism, then, is compensation for how our time is routinely demanded of us; the more on-demand consumerism we expect, the more we accept unreasonable demands on our time from our employers.

Vanity activism (14 December 2006)

The Economist takes on the notion of socially responsible food shopping, attempting to debunk notions that buying organic or fair trade or locally grown foods in any way helps accomplish anything other than making yourself feel better. I'm actually extremely sympathetic to this position -- shopping activism seems a bogus proxy for actually political power (as the editorial writer also points out) and it seems mainly a product of vicariously projecting oneself into some helpless other (a peasant farmer, a migrant worker, an animal bred for slaughter, an indigenous tribesman, etc.) in alien, complex situations created and driven by many different factors and then acting as though one's emotional response yields all the relevant facts. One is led through moral vanity to believe that one's own personal emotions are superior to and more significant than historical reality and the social systems that reproduce it and the conscious decision making of all those people whose lives we have no wherewithal to be making assumptions about. And our consequent actions are ultimately only about making ourselves feel good, and more powerful and influential perhaps than any individual can be, absent the tools of political power. Our own deeply felt good intentions don't make out individual piecemeal actions free of perverse, unintended consequences (Albert O. Hirschman's warning about reactionary rhetoric notwithstanding).

Neverthess I'll try to temper my gullibility for this species of right-wing argument in the following summary. (Brad Plumer has a nice corrective here as well.) The editorial argues that organic food, because it is produced less efficiently, consumes more land and has the perverse consequence of destroying more of the natural environment via deforestation. (I liked this bald statement: "Farming is inherently bad for the environment: since humans took it up around 11,000 years ago, the result has been deforestation on a massive scale."

I don't think, however, The Economist is advocating a return to hunting and gathering.) Fair-trade arrangements distort the price system and encourage farmers to produce goods for which there is insufficient demand, rather than diversify into viable crops. (Whether that option exists for many of these third-world farmers is not addressed -- but if they must be wrung out in the market's creative destruction processes as agribusiness consolidates, so be it.) And locally-grown food can't help change the finding that most of the miles food travels (in England, anyway) from farm to plate occur in our cars as we drive it home from the grocery store. The editorial also points out the futility of working against comparative advantages available in food being raised the locale where it can be achieved with greater efficiency -- we waste resources if we insist on ignoring those possible gains.

So in lieu of these solutions, the editorial proposes carbon taxes to address energy waste (Harvard economist and Pigovian tax crusader Greg Mankiw surely agrees) and the eradication of agricultural subsidies of all kinds (i.e. ensure real free trade in agriculture, which would be fairer -- though perhaps not for some individual farmers who would be driven out of business and have nothing else to do -- than matching subsidies with more subsidies in protectionist tariff wars).

Mark Thoma at Economist's View links to an essay from the journal Democracy that asks a related question: "Can progressives really change Wal-Mart–or any other company, for that matter?" Authors Aaron Chatterji and Siona Listokin argue that working to make corporations behave in a socially responsible way independent of binding, state-backed law is a futile endeavor. Corporations, due to their fiduciary responsibilities to shareholders, will always do what is most profitable. If that course also happens to also socially responsible, then so much the better. But they won't surrender big profits for lesser ones simply because they want to be considerate, even if they wanted to -- the hierarchical organization and the spontaneous order in the economic system that distributes decision making militates against it. That's where government can step in and let us all off the hook by reigning in the profit motive in certain instances when, unfettered, it demonstrably harms the public good. Thus we must engage with the political process to push government to achieve these goals, and dismantle governments that put forward corporate interests at the expense of the public good.

Big-box-store Götterdämmerung? (24 October 2006)

I wish I could remember where I saw it, but I read somewhere that Borders, the book-store chain, was seeking new growth opportunities in opening smaller stores ("Borders Express") that sound a lot like the Waldenbooks and B. Dalton Booksellers mall storefronts that the big-box retailer originally stole market share from.

Originally, in what was the opening fusillade of the long-tail revolution, big-box stores opened to suit the modern customer whose needs -- yours, mine -- were far too recondite to be served by some puny mainstream mall store with its limited selection and plebian emphasis. At Borders I could expect to buy books by Althusser and Badiou; not so at Waldenbooks, where they were crowded out by the likes of Danielle Steele and John Jakes. The zeitgeist through the late 1990s was in keeping with this; customers needed superstores to accommodate their esoteric, unique-seeming needs in just about everything -- books, music, electronics, housewares, hardware, bedsheets, containers, gourmet foods, you name it. And the mother of all superstores, though approaching it from a different ideological angle, is Wal-Mart -- Wal-Mart doesn't cater to our special needs so much as provide one-stop shopping and a sense that the prices are unbeatably low, and these two things compensate for the inconvenience of dealing with the carnivalesque atmosphere, the crowds, the understaffed cashier lines and so on. (It was left to Target to merge the Borders ideology with the Wal-Mart ideology, and provide spruced-up commodities and design-y versions of utilitarian goods that invited us to imagine ourselves as curators of our own personal household museum.)

But perhaps the zeitgeist is changing, and consumers don't want big-box stores anymore. Perhaps there are cyclical movements in shopping environments as there are in fashion, and the particulars are ultimately just as arbitrary. We prefer something different for the sake of its difference after a while, and this plays out in the sudden exhaustion of a huge company's business model. The WSJ has a front-page article today about Wal-Mart, for the first time in many years, scaling back its expansion plans, as it appears it has saturated the market.

Wal-Mart's modest shift in strategy suggests the giant discounter, which has been increasingly constrained by its own size, may be heeding Wall Street's urging to pay less attention to growth and put more emphasis on returns. "This tells me that Wal-Mart is willing to look at their business model from a fresh perspective," said Deutsche Bank analyst Bill Dreher. "They are not just mindlessly continuing on the same focus that they've had for years." The shift is also an acknowledgment of the pressures that have buffeted Wal-Mart from all sides this year.

So the relentless effort to drum up negative coverage of Wal-Mart is possibly starting to trickle down to average Americans, some of whom are now willing to work a little harder to avoid the Wal-Mart stigma. This is the consequence of the company's trying to expand into suburban, culturally more-liberal areas: "As it ventures beyond its rural base into urban markets, such as San Francisco's Bay Area, Boston and Chicago, Wal-Mart also is encountering heavy resistance from community activists and local politicians who object to its low wages and other employment practices and say it poses a threat to local businesses." The political blowback is an externality that perhaps hadn't anticipated, and suggests why our collective whining isn't entirely trivial. It may have the larger impression of creating a negative brand impression that makes it way back and erodes the company's core customer base.

Also, it may be that the company has filled the country with all the Wal-Marts it can handle, and now the tide must recede. "In regions like the South, where it already reigns, its new stores are increasingly siphoning sales away from older ones." It's comforting to imagine that there's a limit to how far the blandification of America can go, that this could mean the transformation of country roads into strips of giant warehouses of retail goods with their attendant parking lots might be coming to an end. But that's just a fantasy -- whether the boxes are big or small, the stores need will need brand names to comfort wary consumers and guarantee their feeling of having participated in something larger. The days when local idiosyncracy was generally tolerated has long since passed.