Article By: Paul Wideman
Originally Published In The August 2011 Issue Of Cycle Source Magazine
Ahh….everyone’s favorite retailer. It’s the place where you can go to find most anything, at most any time of the day. The story of the beloved Sam Walton was one that warmed the hearts of countless souls and motivated the minds of thousands of entrepreneurs throughout the latter part of the last century. Walton opened the first Walmart in Rogers, Arkansas in 1962, using earnings from previous retail ventures. It wasn’t long before Walton’s business principles paid off, and more and more Walmart stores popped up all over the Midwest, the entire US, and eventually the world. Walmart brought low prices, quality products, and countless jobs to small towns all across this country. After Sam Walton’s passing in 1992, the company began to stray from the principles that it was founded upon. In the ‘80s and ‘90s, most of the store’s inventory was American made. In 1995, at the height of the “Buy American” campaign that Walmart pushed, only 6% of Walmart products were imported. As the company wandered more into corporate profit territory and farther from corporate responsibility, that number increased to over 60% in 2005; a 1000% jump in just ten years! As imported goods flooded the shelves of Walmart, profits soared. The company’s adjusted stock price hovered around the $12 area for most of the ‘90s, until around 1997 when the practice of importing cheaper goods began to pay off for the company, and the stock price began to rise. Through the late 1990s WMT’s value rocketed upward, eventually closing near the $70/share mark toward the end of 1999. Throughout the 2000s, WMT stayed between the low $40/share and low $60/ share area, while earnings and profits continued to rise. In 1995, total sales for the company came in at $82.5 billion, or $.38/share. By 2005, that total had more than tripled to $285 billion and $2.41/share. Net sales for FY2011 totaled a staggering $419 billion and $4.18/share.
So great, Walmart has made a ton of money for their shareholders and executives. Ingenuity, entrepreneurship, and hard work, all part of the American dream, right? Not when it comes at the cost of American jobs. As Walmart continues to increase profits and please shareholders, more of their inventory is sourced from outside the U.S. For instance, in 2006, Walmart was responsible for $27 billion in U.S. imports from China. Walmart has a policy for vendors that prices go down from year to year, or the vendor risks losing its contract with them. This of course pushes the vendor to find means to cut costs and thus keep their contract with the retailer. Of the company’s 6,000 suppliers, 5,000 (83%), are in one country: China. One analyst, Robert Scott, in his report to the Economic Policy Institute in 2007, claimed Walmart was solely responsible for the loss of approximately 200,000 jobs in the U.S. between 2001 and 2006. To put it into further perspective, while Walmart was responsible for 9.3% of U.S. imports from China during this period, the retailer was responsible for 11.2% of U.S. job losses due to growing trade deficits with China. While 2% doesn’t seem like a huge number, when it’s spread across a few hundred thousand jobs, it becomes quite large. Of the 4,022 stores Walmart operated in the United States in 2006, each was responsible for the loss of about 77 jobs due to Walmart’s trade deficit with China. When you see Walmart move into your town, don’t get too excited about the new jobs it’s bringing to the neighborhood, because you’re trading higher paying manufacturing jobs for lower paying associate jobs.
In the bigger picture, Walmart, as the world’s largest retailer, is shaping trade in ways that affect more than just job loss. Walmart revenues make up 2 percent of America’s GDP. Their imports impact our economy, and possibly the world economy, more than any other corporation, and more than most countries. In 2004, Walmart imported over $18 billion of Chinese goods. As stated earlier, by 2006 that number reached $27 billion. If Walmart were an individual economy, it would rank as China’s eighth largest trading partner, larger than Russia, Australia, and Canada. This imbalance is harmful not just to jobs here, but also to the quality of life in China. As China has unfairly manipulated its currency to promote exports, they have effectively suppressed the purchasing power of their own middle class, essentially widening the gap between lower and upper class. Along with this, China has invested much of its capital reserves in low yielding, risky investments, as well as becoming more dependent upon the U.S. for employment generation and exports. The fact that a single company can affect people across the globe so effectively is astonishing, and a bit of corporate responsibility is needed here. To be completely fair, Walmart does still offer many goods made in the U.S. The fact remains, however, that the job loss and trade deficit Walmart is responsible for is not something that can be swept under the carpet. Couple that with the many other criticisms of Walmart, such as labor policies, use of illegal workers, predatory pricing and supplier issues, and there are many reasons to reconsider your allegiance to this retailer. As we always state, it’s not the government’s job to step in here; we have the power in our very hands to make the difference. Walmart has the choice to outsource goods, and we have the choice to shop elsewhere.