Paul Wellman

WAL-SMART: UCSB professor Dr. Nelson Lichtenstein knows all there is to know about the Arkansas-based superstore, and he digs deep into its impact on business in The Retail Revolution: How Walmart Created a Brave New World of Business.

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For several years, Dr. Nelson Lichtenstein-author of several books and director of UCSB's Center for the Study of Work, Labor and Democracy-has been diving into the depths of America's largest public corporation, Walmart. Though Lichtenstein made his scholarly mark with his examinations of labor and the auto industry, the $400-billion-a-year discount retailer caught his attention, which resulted in his 2009 book The Retail Revolution: How Walmart Created a Brave New World of Business. In an interview following the book's release, it didn't even take a question to prompt Lichtenstein, whose work has put him on a "not friends of Walmart" list, to broach the subject of Walmart's peculiar support of President Obama's healthcare reform.

Lichtenstein: There is an interesting thing going on now, which is that Walmart is in favor of employer-mandated [healthcare] when a lot of retailers are not. The reason it's in favor of it is that it does the arithmetic and it figures that it will come out ahead with employer-mandated. They'll look better public relations-wise. Walmart decided the state's been after them for so long and now with Hilda Solis at the labor department and Obama, they're going to get regulated anyway, they might as well cut their losses. That's what they're thinking.

How'd you get into studying Walmart? I started out writing about auto. Auto was the industry, the classic site of labor management conflict. Auto was the place with the archetypical capitalist corporations and it was the most important trade unions in America for many years. And then it sort of dawned on me sometime in the 1990s-"Hey, there's this company called Walmart that has more employees and is growing and there's something else going on here in America."

Since 1985, the company's been under a little bit of a microscope because that's when Walton began as the richest man in America. So everyone was kind of, "What the hell is this, where did this thing come from?" The main thing was, how does this really work?

What do you think happened to department stores like Hudson's and Sears? Walmart didn't replace those. The suburban shopping mall world of the Sears and the Macy's : was predicated on a view that the kind of New Deal world constructed in the '30s and '40s and '50s would continue forever, that you'd have an ever-expanding middle class. Sears said okay we're going to have a middle class that keeps expanding forever. Sears is, you know, middle class, middle everything, but that was wrong. Sears was wrong. The American income became polarized in the '70s. And Walmart, coming from the rural, really impoverished South, understood that. That sort of wager on the middle class failed on Sears's part. There were other things as well, but Sam Walton understood the class structure of America better than the people who ran Sears. And so they got into trouble, and they haven't really figured it out. All the middle-level retailers have gotten in trouble.

As Sam Walton was developing Walmart, he had some revolutionary ideas. He had this sort of folksy persona. Northwest Arkansas was : a resource for him initially. It was far better to work at the local Walmart for virtually any wage than to watch the debt pile up on the farm or go off to California or Detroit or something. People didn't want to do that. I don't know how calculating he was about it.

All companies at the very beginning are wonderful, exciting, homogeneous, the way "we're family." Walmart was able to figure out how to reproduce that sort of Ozark culture over and over again. Walmart found blue-collar workers and they put their stores there. Walmart was very disciplined in only spreading like molasses out of Arkansas. They didn't spread (out) until they put in distribution centers and that made for tremendous efficiency.

What do you think is Walton's great contribution to business? It was the distribution system. The linkages between the (UPC) bar code, knowing what you're selling, linking it directly to the distribution centers so that you don't use warehouses. The stuff goes continuously to the stores and then this data he had amassed gave him the power to subordinate the suppliers to the retailers.

Before the Civil War, the shippers and merchants ran the country. And manufacturing was kind of subordinate to that. After the Civil War, the manufacturing was at the center of American economy, and Procter & Gamble would walk into a grocery store and say, "You're going to put our toothpaste here, and if you don't like it, fuck you." But by the 1980s, Walton had shifted that power relationship. They're moving stuff to China, putting companies out of business, squeezing them.

What sort of reform is taking place in China currently? The Chinese passed a labor contract law just a couple years ago. It was resisted by the American manufacturers and by Walmart. The law gave more rights to Chinese workers. If you work for the company for six years, you have almost lifetime tenure there. You can't be fired for no cause, you gotta be paid on time. It's imperfect because of tremendous corruption, but, nevertheless, the Chinese government wants to move from being the absolute bottom of the labor market. Look, there are 1.4 billion Chinese, and they can buy stuff. If you raise the general wage level they'll be buying the products of all those factories. China will be less dependent on the West as a market.

What that means is Chinese goods become a little more expensive. China as the cheapest place for making stuff-I think its days are numbered.

You talk a lot about unions and Walmart's vigorous fight against them. They are very hostile to unions. They want to keep wages low. The internal structure of the company-giving the managers enormous amounts of flexibility-that would be broken if you had a union. With any kind of seniority, with any kind of rules, what the power managers have right now is, "Hey Sally, you aren't working hard enough. I'm putting you on the night shift and cutting your hours back." It's that kind of power the unions would reduce. It would just make it so the company had to function in a more predictable way.

They don't fire workers, they just reduce their hours, and the unions would stop that. They never pay unemployment insurance. They never lay off somebody, they just put them on the night shift. The companies in theory pay extra when they lay off people. I don't think unionization's about to take place. But the minimum wage will go up. [When Henry Ford came up with the assembly line] Ford decided to double the wages of all his workers to give them a share of the new productivity. Walmart could do that.

Why didn't Sam Walton do that? It is who he was. He admits in his autobiography he was chintzy on wages. Part of this came naturally to him. He was a Southern white male who thought that women should earn pin money. He called them dingbats and such. That's what is great about retail. Help is cheap.

What are some of the positive impacts of Walmart? My father ran a five-and-dime. I've never been enamored with five-and-dime shops. They tend to pay lousy wages. All healthcare plans say if you have less than 25 employees, you don't have to pay health insurance or something like that. All small employers exploit their workers and exploit their families. I've never been a fan of that. I'm not romantic about the Main Street business. To me, there is something efficient about a big-box store. We do get cheaper stuff, and I'm for that. And cheap stuff doesn't have to be bad stuff. I try to celebrate that and give it its due.

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