Consider one theme of the book. At one time, conference participants maintain, there was a middle-class-friendly economy in which large manufacturing firms produced goods in unionized factories. Wal-Mart is the leading edge of a proletarianized economy in which large retailers squeeze those manufacturers while doing everything possible to drive down wages. Tapped's Ezra Klein spells out those behaviors in more detail.
Perhaps I'm showing my age, but at one time the populist political economy saw those large manufacturing firms as building blocks of a monopoly capitalism that practiced conscious parallelism, which reduced efficiency by restricting output and raising prices, and the unions as accomplice residual claimants to the monopoly profits thereby obtained. The retailers of the era were complicit in that monopoly capitalism, with a concentrated food packing industry and often vertically integrated supermarkets profiting by the inflated price of bread, although, again, food and commercial workers' unions participated as residual claimants. Because firms could practice conscious parallelism without calendars to keep track of the phases of the moon or meetings in the back room at Dirty Helen's, antitrust action could do nothing about the resulting inefficiencies, although Wal-Mart could.
But when Wal-Mart goes after those inefficiencies, that's bad. Mr Klein summarizes in a few sentences what several chapters of the book spell out in more detail.
In action and effect, Wal-Mart is an active monopsony -- a seller able to dictate the price to its producers. They've forced Coke to change their secret recipe, Kraft to lay off thousands of employees, and Vlasic to declare bankruptcy. And because Wal-Mart so obsessively pursues the lowest possible prices, they're not only depriving their own workers of generous benefits and compensation, they're making it literally impossible for their producers to do so, as Wal-Mart won't abide by the minor cost differences that on-shore production and respectable benefits demand.(The book concedes that Kraft and Vlasic committed other errors and declines to blame those companies' troubles solely on Wal-Mart.) An article by Barry Lynn, which appears in Harper's, suggests that the presence of Wal-Mart as a major buyer of groceries restores conditions reminiscent of the Great Depression in food distribution.
Kraft has announced plans to shut thirty-nine plants, to let go 13,500 workers, and to eliminate a quarter of its products. Most reports blame soaring prices of energy and raw materials, but in a truly free market Kraft could have pushed at least some of these higher costs on to the consumer. This, however, is no longer possible. Even as costs rise, Wal-Mart and other discounters continue to demand that Kraft lower its prices further. Kraft has found itself with no other choice than to swallow the costs, and hence to tear itself to pieces.In a "truly free market," a seller can stick to the equilibrium price secure in the knowledge that another buyer who is willing to pay the equilibrium price is out there. A buyer can hold out for the equilibrium price secure in the knowledge that another seller who is willing to ask the equilibrium price is out there. Perhaps Wal-Mart is behaving like a monopsonist, compelling Kraft to lower its prices or sell nothing at all. But for that to work, there has to be another vendor who is able to sell at the price Wal-Mart asks, and under those circumstances, a true monopsonist is able to inefficiently reduce output of cheese and pickles. (But Wal-Mart's sin is in selling larger volumes at lower prices.) If there is no such vendor, the bargaining is repeated bilateral monopoly, a somewhat more complex proposition. (Looking for a dissertation topic?) There appear to be other vendors. Sometimes those vendors have factories in developing countries, which the authors of Wal-Mart view as more evidence of globalization-as-immiserization. Michael Strong's "Forget the World Bank, Try Wal-Mart" on Tech Central Station works as a companion piece, should you be considering Wal-Mart for your course outline. There's also potential for comparing repeated bilateral monopoly with antitrust action as countervailing power at work. Again, Mr Lynn has the short form, there are longer forms of this theme in the book.
The text of the Sherman Act itself is famously vague, but the Supreme Court's decision in the 1911 Standard Oil case was based flatly on the assumption that the need to ensure robust competition sometimes outweighs the benefits of near-term efficiency. Standard's roll-up of the oil industry cut the cost of kerosene by nearly 70 percent, and yet the justices shattered the firm into thirty-four pieces. For many legislators, this was not nearly enough. Three years later, Congress greatly strengthened the rules against inter-firm price discrimination, in the Clayton Antitrust Act. Then in 1936, Congress did so again, even more resoundingly, by passing the Robinson-Patman Act. Wright Patman, the Texas Democrat who was the main force behind the bill, made sure everyone understood Congress's intent. "The expressed purpose of the Act is to protect the independent merchant," he wrote on the first page of a book he published to explain the law, "and the manufacturer from whom he buys."For discussion: is it a proper function of government to support our right to pay higher prices to buy locally? Wal-Mart repeats the complaint that local merchants tend to spend a larger portion of their receipts locally. But those merchants cannot exist without suppliers elsewhere. Is a larger share of a smaller volume of business necessarily better?
A second theme of the book is the evolution of public attitudes toward chain retailers. Although the Robinson-Patman act targeted A&P, and conference participants are groping toward some analogous taming of Wal-Mart, the first self-service supermarkets were Piggly Wiggly's in Memphis, and Wal-Mart is a scaling up of Butler Bros. Ben Franklin dime stores. Sam Walton ran one, and a craft store still trades in Sycamore, a Wal-Mart supercenter in Schaumburgmore notwithstanding. Local shopkeepers understandably didn't like distant competitors, particularly those offering more stuff at lower prices. (Superior efficiency is never popular?) Advocates of local control didn't either. Neither did nativists. As I noted, populist political economy has a tortured history.
A third theme of the book is possible regional differences in attitudes toward the New Deal consensus. One author noted Wal-Mart and other new business models growing up as it were in the cracks of the New Deal consensus. (Open markets are environments in which powerful evolutionary forces are at work?) Another found a blend of old-style social norms with modern management methods. (Page 80):
The company could win an employee's bedrock loyalty by accommodating her hours to her children's school day -- a perk few parents would take for granted in any field. In the context of small towns, extended families, and long-term marriages, women compared Wal-Mart's stable, sociable hourly jobs to the lonely monotony of ironing or chicken processing, not to the brutal schedules and constant mobility of Wal-Mart's well-compensated male managers. And while it took a federal court battle to force Walton to pay even minimum wage to his stores' staff in the Ben Franklin days, many employees from Wal-Mart's biggest growth years found the pay competitive if not munificent. Moreover, the constant stock splits rewarded the same stability that they valued themselves. Raised on farms that were rapidly losing their viability, many women of Wal-Mart saw the company's terms as a reasonable bargain that allowed them to stay close to home and accorded with their own essential conceptions of their responsibilities.Those managers? Generally recruited from nearby state universities, most likely not the flagships. No Harvard MBAs or Kellogg quants here.
The book is a conference volume out of a humanities symposium. So What Is to be Done? Here, the book falls flat. The concluding chapters are by union organizers. Guess what? The participants appear to have left tendencies. Wal-Mart is a very centralized corporation (cash registers will be turned off if Benton discovers a cashier has not taken a break required by hours of service laws) with a lot of planning and budgeting. Curiously, nobody recognized the potential for applying one of the old syndicalist arguments and simply taking control of the means of distribution (which have sufficient cost controls over the means of production) on behalf of the workers and shoppers. The essays that focus on conditions of work in the States suggest Wal-Mart is instrumental in fostering income polarization, while those that focus on the company's overseas efforts suggest Wal-Mart's focus on the lower-middle-class will not work well in developing countries where there is real polarization. Several essays note the company's high labor turnover rates, but none of them recognize those as symptoms of weakness both in the company's business model and in the conference's prior belief that the company is a monopsonist capable of immiserizing its workers and its suppliers.