The Price of Pickles

John Lanchester

  • The Wal-Mart Effect: How an Out-of-Town Superstore Became a Superpower by Charles Fishman
    Allen Lane, 294 pp, £12.99, May 2006, ISBN 0 7139 9825 3
  • Wal-Mart: The High Cost of Low Price directed by Robert Greenwald
    November 2005

The moment of revelation is a little different for every person who experiences it. For Sam Walton, founder of Wal-Mart, the road to Damascus came in the form of a pair of knickers. At the time – 1945 – Walton was in his late twenties, and was running a small department store in Newport, Arkansas belonging to a franchise called Ben Franklin. Walton had grown up in Missouri and attended the state university, then gone on to a clerical job during the war. He married Helen Robson, borrowed some money from her lawyer-banker father, then opened his Ben Franklin ‘variety store’.

The life-changing pair of panties appeared in a list of goods sold by a garment-industry middleman in New York. The pants were ‘two-barred, tricot satin panties with an elastic waist’ and their price, $2 a dozen, was 50 cents cheaper than that offered by Walton’s current supplier. This differential allowed Walton to sell the knickers at four for $1 instead of three for $1. The panties began to get up off the shelves and walk out of the shop on their own. The clouds parted, a beam of light shone down, and, as Walton reports in his autobiography, Made in America:

Here’s the simple lesson we learned … which eventually changed the way retailers sell and customers buy all across America: say I bought an item for 80 cents. I found that by pricing it at $1 I could sell three times more of it than by pricing it at $1.20. I might make only half the profit per item, but because I was selling three times as many, the overall profit was much greater. Simple enough. But this is really the essence of discounting: by cutting your price, you can boost your sales to a point where you earn far more at the cheaper retail price than you would have by selling the item at the higher price. In retailer language, you can lower your mark-up but earn more because of the increased volume.

Arthur Danto once observed that Andy Warhol had only one idea – roughly, that mass-produced media images could be seen as a form of art – but that what was unique about him was that he fully grasped that idea in every aspect, artistically, philosophically, commercially, psychologically. Sam Walton was a little like that about price. Many people in many different businesses have had their equivalent cheap-knicker epiphany. But Walton was the only person to do two things. First, he made price the central question at every stage of his business, from top to bottom, from the utmost frugality of his own offices and living habits, to paying everybody involved at every stage of the business as little as possible, to exerting the maximum pressure on his suppliers, not just to not-raise their prices, but to lower them, every year. This is easy to conceive: it would be not much of an exaggeration to say that every business in the world fantasises about keeping costs rigorously down. But it is very, very hard to do, and to keep doing, when things like an extra lick of paint, or a slightly increased wage bill, or the wiggle room offered by giving customers a hint of style – which allows retailers to charge more – are all so tempting. Second, Walton combined his fanatical insistence on low prices with a manic appetite for expansion and innovation: he would open everywhere, he would try anything to sell stuff, and he would do so without ever relaxing his grip on the numbers and the costs and the always paramount question of price, price, price. Most company mottoes and advertising slogans are bullshit. Wal-Mart means what it says: ‘Always low prices’ – a slogan which on some of its stores now simply appears as ‘Always’, in the knowledge that its customers can be trusted to complete the thought.

The first Wal-Mart opened in Rogers, Arkansas, in 1962, its founder having spent the intervening years learning the retail industry from top to toe, then branching out into ‘discount’ – i.e. ultra-cheap – retailing, then finally setting up shop on his own. Not everyone in the business swooned in admiration when they first encountered Wal-Mart. David Glass, who years later succeeded Walton as chairman of the company, travelled down to Harrison, Arkansas, to see the opening of one of the new shops:

It was the worst retail store I had ever seen. Sam had brought a couple of trucks of watermelons in and stacked them on the sidewalk. He had a donkey ride out in the parking lot. It was about 115 degrees, and the watermelons began to pop, and the donkey began to do what donkeys do, and it all mixed together and ran all over the parking lot. And when you went inside the store, the mess just continued, having been tracked in all over the floor. He was a nice fellow, but I wrote him off. It was just terrible.

That was 1964. The air of chaos was to some extent real. Accounts were done on the ESP method: ‘If you can’t make your books balance, you take however much they’re off by and enter it under the heading ESP, which stands for Error Some Place.’ But the prices were real, too, and so were the customers, and so was the rate at which the company was expanding, and so was the control Walton kept on his costs and his suppliers, and before long he could let the figures do the talking. By 1970, Wal-Mart had 32 stores doing $31 million in sales. Growth went like this: 1972, 51 stores and $78 million; 1974, 78 and $168m; 1976, 125 and $340m. By 1980 Wal-Mart had 276 stores and $1.2 billion in sales and the Walton family, who had kept hold of significant portions of the stock after the company went public in 1970, were fuck-off rich. Anyone who thought this might in any way slow Sam Walton down did not understand him or the company he had built. Wal-Mart continued its expansion after his death in 1992; its current chairman, Lee Scott, has headed the firm since 2000. At the time of writing the Walton family share of Wal-Mart is worth $102 billion. (The 2004 Bush tax cut benefited the family to the tune of $91,500 per hour.) Wal-Mart is the biggest company in the world. It has two million employees; has projected sales of $315 billion for this year; is the biggest retailer in the US, Mexico, Canada, and is not much smaller in many other of its markets (including the UK, where, trading as Asda, it is the second biggest supermarket chain); it is the largest employer in two-thirds of the 50 United States. Indeed, almost every statistic about the company involves the word ‘biggest’, including the one about its being the subject of the biggest private lawsuit in history, concerning the underpayment and underpromotion of 1.5 million female employees.

Wal-Marts these days, by and large, are not awash with watermelon juice and donkey urine. That’s not to say they are pleasant places in which to shop. They are huge sheds, harshly lit, and the stuff on sale gives the impression of being crammed and stacked and heaped, all to emphasise the overwhelming message of low, low price. To the UK reader, this will seem an unfamiliar form of supermarket shopping, since our own retail sector is dominated by companies who put lots of effort into small but signifier-rich distinctions based on class. This is reflected in every aspect of their branding, packaging, advertising and self-image: Marks & Spencer’s is very middle-class, Sainsbury’s is middle-class, Tesco is careful to track the aspirations of the British mass market, and Asda is more like its former, cheap-but-cheerful self than it is like an entirely made-over version of its Wal-Mart parent. Wal-Mart is about price, so much so that it has created a reification of cheapness, in which cheapness becomes a mystical quality, a Ding an sich or fundamental essence, separate from questions about utility or practicality or how on earth a thing can be put on sale for such a price. Charles Fishman, in his punchy and valuable book The Wal-Mart Effect, cites the example of Vlasic pickles, the most popular brand in the US. Wal-Mart talked Vlasic into pricing the pickles so that a gallon jar was on sale for $2.97. That is a bizarre, surreal price for a gallon of pickled cucumbers; no one had ever seen such a jar outside a deli, and no one had any real use for it, since even if you’re a pickleholic you’ll only manage to eat about a quarter of a gallon before the remaining pickles go mouldy. It had never occurred to anybody that there was such a thing as a market for a gallon jar of pickles. Even so, priced at $2.97, there was something so magnetising about this Brobdignagian vat of pickles – something so alluring about the way it embodied the Platonic ideal of cheapness, in and for itself – that Wal-Mart was soon selling 200,000 gallons of pickles a week. The ‘scary part of the Vlasic story’, as Fishman points out, is that:

The market didn’t create the $2.97 gallon of pickles, nor did waning customer demand or a wild abundance of cucumbers. Wal-Mart created the $2.97 gallon jar of pickles. The price – a number that is a critical piece of information to buyers, sellers and competitors about the state of the pickle market – the price was a lie. It was unrelated to either the supply of cucumbers or the demand for pickles. The price was a fiction imposed on the pickle market in Bentonville. Consumers saw a bargain; Vlasic saw no way out. Both were responding not to real market forces, but to a pickle price gimmick imposed by Wal-Mart as a way of making a statement.

Wal-Mart is so big and so powerful that it is in effect defining its own reality – creating its own products, and a market for them, by sheer act of will. Fishman cites the example of Chilean salmon. This is on sale in Wal-Mart for $4.84 a pound. Atlantic salmon is – there’s a subtle hint in the name – not native to the Pacific, and 12 years ago there were no Atlantic salmon at all anywhere in Chile. Today, 65 per cent of the farmed salmon eaten in America is Chilean, and salmon farming has taken over the economy of southern Chile, ‘ushering in an industrial revolution that has turned thousands of Chileans from subsistence farmers and fishermen into hourly paid salmon processing-plant workers’. The salmon live in huge underwater pens, and leave a ‘toxic sludge’ of excrement and uneaten food on the ocean bed. The impact of that cheap fish – as Fishman points out, ‘you couldn’t mail a pound of salmon back to Chile for $4.84’ – on the environment and social structure of Chile is enormous. Inspired by this example I took a look around my local Asda and found fresh Brazilian sirloin at £2.96 for a 250g steak. Let’s parse that price. Beef cattle are usually between one and two years old. So that cow was raised and fed for (say) 18 months, slaughtered, butchered, packaged, refrigerated, shipped six thousand miles, distributed and shelved. It paid the wages of everybody involved in those processes, and made its profit for Wal-Mart, and still cost £2.44 less than it would cost to post the steak back to Brazil. The feeling this gives is a little like the one that washes over you when you see flights advertised for 99p: something just isn’t right.

Robert Greenwald’s documentary Wal-Mart: The High Cost of Low Price makes a strong argument about what exactly is not right. It boils down to the question of just how Wal-Mart achieves its control of costs – a word which, in a business context, to a large extent means ‘wages’. The best documented controversy in this area concerns the abuses Wal-Mart has committed in the US, where the bulk of its ‘associates’ – i.e. employees; Sam Walton thought up the name after a visit to John Lewis – earn between $8 and $9 an hour. As the current head of Wal-Mart likes to point out, this is twice the minimum wage; but it is still a sum so low that a large number of Wal-Mart workers qualify for free medical aid and equivalent relief programmes in a large number of American states. In other words, you can be working for Wal-Mart and still live in poverty. (I suspect that this section of the documentary plays differently in Europe, since over here using state services is no badge of shame. Not quite, not just yet.) Other documented abuses include making ‘associates’ work overtime without pay, forcing them to work after they have clocked off, and locking them in stores overnight, allegedly to prevent stealing. All these abuses are, obviously, linked to the question of keeping down prices/costs/ wages. Lawsuits on these issues have taken place or are pending in 31 states.

Wal-Mart is, it almost goes without saying, fanatically anti-union. As one union organiser says in the film, it is ‘one of the most anti, if not the most aggressively anti-union company in the entire history of the United States’ – which is really saying something. The company goes to all the usual lengths to try and keep unions out of its stores: one favourite tactic is, the instant union activity begins in a store, immediately announcing a freeze on all pay rises, saying, ‘we can’t give anyone in this store a pay rise because we can’t be seen to be giving in to bribery.’ Just as unadmirable, but slightly harder to understand, is the alleged institutional bias against women that has caused the company to be the subject of the huge class-action lawsuit mentioned above. It is characteristic of Wal-Mart that, having been made the subject of the lawsuit, the corporation is tackling it in the most aggressive way possible, by arguing that the class-action suit violates its legal rights. Specifically, Wal-Mart claims that the suit violates its right to argue every single case on its specific merits; it says it should have the right to contest every lawsuit separately on a store-by-store basis. This would, obviously, overturn the principle on which class-action lawsuits are built. This won’t succeed in the Ninth Circuit of the US federal court system, but Wal-Mart are very clearly heading for the Supreme Court, with its shiny new ultra-conservative bias. A ruling in favour of Wal-Mart would effectively make all corporations immune from class-action lawsuits. Watch this space.

Still, all these examples are from America – indeed, they mainly emerge from the light shone on the company by the American legal system. The most damaging damage done by Wal-Mart is in the developing world, and is harder to document. Not all of it is illegal. My local Asda sells some nice shirts at remarkably low prices: I could kit my sons out in England shirts for the World Cup, throw in a Fungus the Bogeyman DVD, and still have change from a tenner. But it’s hard to get out of one’s mind that Wal-Mart employs 189,000 seamstresses in Bangladesh, paid an hourly rate of between 13 and 17 cents. Robina Akther, a Bangladeshi factory worker cited by Fishman, was employed to sew pockets on the backs of women’s trousers. She earned 13 cents an hour for a 14-hour day, had a target of 120 pairs an hour, and had ten days off a year. ‘If you made any mistakes or fell behind on your goal, they beat you.’ China is probably as bad – I say probably because it isn’t possible to know for sure. We do know that imports from China to Wal-Mart in the US alone are worth $18 billion. ‘Do you know why you can buy such a cheap toy?’ a young Chinese woman factory worker asks in Wal-Mart: The High Cost of Low Price. ‘That’s because we work all day, every day and night.’ Wal-Mart, a labour expert comments in the same documentary, ‘is sucking standards down across the world’. I decided to pass on the shirts.

So: Wal-Mart – bad thing, tout court? It’s not quite as simple as that. Low prices are not so easily dismissed. People don’t shop at Wal-Mart because it’s fun, they do it to save money, and there is no disputing that they save a great deal of money; one can argue about many aspects of the company’s impact, but not about its effect on prices. Fishman says that a conservative estimate of the amount saved by shoppers in Wal-Mart USA in 2004 is $30 billion. The effect is so great that, according to one big economic study, it causes the US government’s official Consumer Price Index to be wrong by 15 per cent, all because the CPI doesn’t quite know how to calculate the effect Wal-Mart has on what consumers actually spend. The economists found that food and dry goods at Wal-Mart are on average 27 per cent cheaper than at traditional grocery stores. For the American poor, those savings are a real benefit. And we all benefit from the anti-inflationary effect of low prices.

Except that, again, it’s not quite as simple as that. There is a great deal written about Wal-Mart, most of it negative, but actual data on the effects of the company are hard to find. Wal-Mart has a deep distrust of the world at large and although it tracks and monitors its own figures to an extent surpassed by no one – tracking hourly sales of every item through every till in every one of its shops, all the time – it doesn’t share any of this information. An economist, Emek Basker from Missouri, who set out to measure the economic impact of Wal-Mart on communities where it had opened stores, took an entire year just to assemble a list of the shops and when they had opened. She had to use fancy mathematical calculations of probability to work out the dates. ‘It was very tedious,’ she says. No kidding. (The fact that it took an MIT-trained economist a year to crunch data and come up with information which Wal-Mart could have provided in ten seconds, had it chosen to do so, is in itself alarming.) The overall price decline Basker came up with was between 7 and 13 per cent. That’s a lot of money saved by a lot of (mainly) poor people.

When it comes to the question of employment, it has proved harder to come up with an unambiguous answer about the impact of Wal-Mart, since the company both creates jobs (in its stores) and destroys them (in the area around the stores). A paper by an Iowa economist, Ken Stone, showed that, in the decade from 1983, small Iowa towns lost 47 per cent of their total retail sales. To take one specific example, 43 per cent of men’s and boys’ clothing shops went out of business. That is a lot of quantified misery in a lot of small towns; a great deal of cost to set against the benefit of lower prices. An economist at Penn State called Stephan Goetz came up with one of the most suggestive results of all. In the course of studying poverty rates, he grew interested in the many local arguments about whether Wal-Mart had a net harmful effect on communities, or whether its damaging effects were offset by the beneficial impact of lower prices. So he crunched data for the period from 1989 to 1999, during which family poverty rates in the US declined from 13.1 per cent to 10.7 per cent, and found something surprising: in counties which had a Wal-Mart, the poverty rate fell only to 11 per cent. Spread across the US, that adds up to twenty thousand families kept in poverty because of Wal-Mart. He did a great deal of work to rule out other potential causes of this startling result, before concluding: ‘The presence of Wal-Mart unequivocally raised family poverty rates in US counties during the 1990s.’ Fishman says that the study hasn’t attracted much attention in the US media; perhaps because it is news that no one wants to hear.

When I began reading up on Wal-Mart, I started with the assumption that the company was in a sense a synecdoche for globalised capitalism in general. It sometimes happens that a company, usually because of a single high-profile abuse, or through a publicity campaign on the part of a pressure group, becomes the target for protesters against a whole category of perceived injustice. Plenty of companies were investors in apartheid South Africa, but Barclays became the focus of protests and boycotts; there are plenty of companies which could have become symbols of globalisation, but Starbucks happened to become a symbol for No-Logoism; most oil companies have done terrible things in collusion with terrible regimes all around the world, but Shell got special flak over its dealings in Nigeria; and Nike became a poster-boy target for protesters against the sweatshops that make a large and growing portion of the Western world’s consumer goods. The targets of these protests deserved everything they got. But the risk of this kind of protest is that it can forget that it is symbolic, and that the real wrongs in the global order of things are structural and systematic.

Wal-Mart is a complicated case, because on the one hand it is so big that it doesn’t just symbolise certain things, but enacts them on a globally significant scale. Barclays could divest from South Africa, and so what? But when Wal-Mart decides something, it has real effects. In the early 1990s (this example is from Fishman) Wal-Mart decided to do away with cardboard cartons for containers of anti-perspirant, and behold, they are no more – with the result that a billion cardboard packets no longer go into landfill every year. As Hegel used to say after his fourth stein of lager, quantity changes quality. If Wal-Mart instituted, say, a zero-tolerance policy against developing-world factories abusing their workforces, and simultaneously brought in a regime of unannounced factory inspections combined with anonymous, off-site interviews with workers, it would probably do more to change the working conditions in Third World sweatshops than any government on the planet.

That, though, is the problem. Wal-Mart stretches far beyond the reach of any government. Opposition to it, and interrogation of it, is a local phenomenon. In the US, it is conducted in part through the legal system: a $50 million settlement in Colorado for off-the-clock working, an $11 million federal settlement for using illegal immigrants, an $80 million fine in Texas for not disclosing evidence about safety problems, und so weiter. This adds up to a partial and piecemeal critique of the company conducted by the courts, but it does not amount to a way of thinking about Wal-Mart. Opposition to the stores is an increasing phenomenon, and now no Wal-Mart opens without a campaign against it; as I write, the splendidly named city of Hercules, California has resorted to the last-ditch tactic of ‘eminent domain’, i.e. compulsory purchase of the land, to fight off a proposed Wal-Mart store. An equivalent campaign against a giant Asda in Upton Park features in Wal-Mart: The High Cost of Low Price. Good on them. But the trouble with these arguments is that they all proceed too directly from self-interest. They allow Wal-Mart to cite various pieces of evidence in its favour, the principal one being that people use its shops in such huge numbers. The next line of defence against the company is therefore ethical; it throws the burden of making the moral choice back on the individual consumer. Google ‘should I shop at Wal-Mart?’ and you will find a cool 12 million hits; this is a question that has many people profoundly exercised. The trouble is that choosing not to shop at Wal-Mart for ethical reasons is both a political action and a retreat from politics. Ethical consumption may indeed be the best we can do, and it gives the ethical consumer a nice warm glow, but it is also another form of self-expression through consumption, and it is consumption, at root, which is the problem. At a global level, you could say that choosing not to shop at Wal-Mart is just another form of shopping at Wal-Mart.

But Wal-Mart is a symbol as well as a reality, and it is as a symbol that the company has the potential to be even more consequential for the world than it already is. Sam Walton’s unceasing insistence on price; the company’s relentless expansion; the impact of a globally ‘flat’ world when it comes to the attempts of Western companies to outsource labour and manufacturing; the collapse of Communism and the now more or less unchallenged status of capitalism as the global ideology; the fact that Wal-Mart is the biggest company in the world: all these make it a unique exemplar of the Way We Live Now. In a sense, Wal-Mart is global capitalism – and it is this which gives some of the complaints against it, in Fishman’s book and Greenwald’s film and on the web, a certain plaintive edge. Most of the objectors – particularly in America – are not objecting to the system, they are objecting to the way the system impacts on them, in the form of Wal-Mart. But if companies are free to compete on price, and free to outsource their costs in a world which, for the first time, has an effectively infinite pool of easily accessible cheap labour, then the only thing to be said to people objecting to Wal-Mart is: go off and found a new planet, because on this one, that’s how it works.

The case of Wal-Mart makes us realise just how badly we lack a way of talking about the public good that is not framed purely in terms of economics. The huge fortunes made at the end of the 19th and start of the 20th centuries were broken up by anti-monopoly and anti-cartel legislation, because they had been accumulated at the expense of the public good. That is a useful idea, and one that needs to be revived and used as a yardstick. In its absence, the only ways of talking about Wal-Mart we have are through economics, which offers clear figures (sometimes) whose meanings are murky; or through local protests and objections; or through considering our own ethics as consumers. That, I would say, is not enough. The collapse of Communism had overwhelmingly positive effects on its former subjects, but in the West we are missing the need to compare ourselves ethically against an ideological antagonist. The welfare state, free universal healthcare, paid holidays, workers’ benefits of all kinds – how many of these would we have if it were not for the need to show that the West could not just outcompete Communism, but was ethically superior to it? How much have our rights in these areas grown since Communism collapsed? We’re a lot richer, of course. Is that all we now have to say for ourselves? Put it like this: would Guantánamo have happened during the Cold War? Would any Western government have permitted itself a crime of such flagrancy? We no longer have to compare ourselves with a global antagonist. The only thing we have to look at is the mirror. When we look there, part of what we see is Wal-Mart.