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Jim Reed

First $1,000,000,000,000 Company

Every recession in the past seventy years has seen jobs rebound within 31 months. That is until the last one. 2.8 million high-paying manufacturing jobs have been lost during the Bush administration and high-tech opportunities are a faint memory from the last century. Technology has increased productivity but decreased the need for actual human labor. The jobs that are being created today tend to be disproportionately low-wage retail jobs. Because of its gargantuan stature Wal-mart has come to symbolize the problem.

Wal-mart is the largest corporation in the world and the second largest employer in America after the federal government. With $250 billion in sales and 15% annual growth, the retail giant has set itself a goal of becoming the first trillion-dollar company within the next decade. It has managed to establish almost 5,000 stores in all 50 states and is spreading its tentacles around the globe. The giant retailer represents 7.5¢ of every dollar spent in the country and accounts for 2% of the gross domestic product. Wal-mart’s owners consist of five of the ten richest people in the world. The CEO collects $11.5 million, roughly the equivalent of 765 store employees.

The vast wealth of the Wal-mart owners and upper management are in stark contrast to the majority of its 1.7 million-member workforce. Wages are far below the national average and a full third of its employees aren’t covered by healthcare. Wal-mart has a history of being ferociously anti-union, going so far as to actually shut down stores that begin hinting at collective bargaining. One of the duties of the greeters at the front door is to report the presence of union representatives to management. 25 states have “wage theft” motions pending against the behemoth for forcing retail staff to work off the clock. It’s also not uncommon for the employees to be locked in the store at night and have to humiliate themselves by asking permission to leave. The largest class action lawsuit on record has been filed against Wal-mart by 1.6 million current and former female employees for wage disparity and systemic discrimination in hiring and promotions. The leviathan also has a history of dismissing staff when they’ve been around long enough to start approaching $10 an hour.

Communities suffer when the retail giant comes to town. One in every three new supercenters faces some sort of community opposition. Because of predatory pricing Wal-mart repeatedly guts small town America. Tax bases usually go down after it sets up shop and begins forcing the mom and pops out of business. For every 2 Wal-mart jobs created 3 others are lost. The effects on our economy are immeasurable. The tireless mission to constantly drive down prices has put a stranglehold on the companies 10,000 suppliers who are now trapped in a system with no alternative to compliance. In 1995 50% of Wal-mart merchandise was manufactured in the U.S. but today that number has dropped to 6%. Indirect job loss is created when suppliers have to move their operations overseas to stay within the razor-thin profit margins set up by their master.

In 2001 Wal-mart moved its worldwide purchasing headquarters to China. This was a pragmatic move as it is the world’s largest importer of Chinese goods. This goes a long way toward explaining America’s $631 billion trade deficit with East Asia’s fastest -growing economy. For example 62% of the shoes and 83% of toys and sporting goods on American shelves are made in China. Wal-mart and companies like it find these products so attractive simply because of the low price. With average wages hovering around 40¢ an hour, one-sixth that of Mexico, China will always be able to undersell their U.S. counterparts. Until the Chinese workers demand a reasonable wage the Wal-marts of the world will continue to take advantage of a system that exploits slave and child labor.

Most economists agree that open markets, free trade and lack of government interference are the keys to a strong economy. But what happens when one company becomes so powerful that it can distort the system? Wal-mart’s size, predatory pricing and lack of real competition have made it as destructive as a meddling government. In the economists' model companies compete against each other to lower prices and produce better products. Wal-mart has changed the rules. The free market no longer applies if suppliers have nowhere to turn but towards the belly of the beast, nowhere to market their goods beyond Wal-mart.

by Stephen Smith