Is shopping at Wal-Mart immoral?
founder
Posted by Chad (+1758) 15 years ago
I do it. You probably do, too. I clipped this off of MSN.com, it's from the Christian Science Monitor. Food for thought. Chad.
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Big discounters help the poor make ends meet, but they create more poverty when they pay low wages and force local stores to close. It's a conundrum facing investors and shoppers alike.

By Christian Science Monitor

In the early 1990s, business owners on the island of Kodiak, Alaska, hired a consultant to analyze how much they'd be hurt by a proposed Wal-Mart. But in gathering data at their request, Kenneth Stone also discovered how the store was apt to help another local group: the poor.

"A lot of low-income people were practically begging the city to let Wal-Mart in," says Stone, an Iowa State University emeritus economist and 20-year researcher on Wal-Mart's national impact. "They were saying, 'We have to do something to lower our cost of living. ...' I believe that the lower prices do allow for a higher standard of living for low-income people."

Stone is far from a Wal-Mart (WMT, news, msgs) cheerleader. His research documents at length how the world's biggest retailer has put countless shopkeepers out of business and thereby eliminated as many jobs as it has created. But he has found what other economic researchers have seen as well: Discount retail is a complex business with more winners, losers and tough ethical trade offs than public debate routinely acknowledges.

Chains need social skills
Ethically minded investors are already familiar with discounters, the high-volume, low-price chains such as Target (TGT, news, msgs) and Costco (COST, news, msgs), which rank among the 10 largest retailers in America. But it is Wal-Mart, which tops the list with $258 billion in sales in 2003, that sets off the sharpest disputes. Shunned by some investors concerned about its anti-union attitudes and environmental impact, the chain nevertheless appeared in the portfolios of 33 socially responsible investment (SRI) funds in that same year, according to a study by the Natural Capital Institute.

For some, the discount domain is a place to make a statement as well as a profit. Christian Brothers Investment Services, for instance, includes Wal-Mart, Target and Costco among holdings that pass its screening criteria for the firms' 1,100 Roman Catholic institutional clients. On behalf of shareholders, Christian Brothers urges discounters to select sites with sensitivity to local concerns, to promote women to top positions and to monitor working conditions of overseas suppliers.

"We try to raise another perspective and get them to think about some of the things that they aren't necessarily attuned to because the market isn't attuned to it," says John Wilson, director of SRI at Christian Brothers.

Others see discounters forcing investors to ask tough questions of themselves. For instance, what is the social value of keeping prices low for essential items as food and clothing? Should employees get better compensation, even if it means higher costs for those who can't afford to shop elsewhere? When one group has to make a sacrifice, should it be employees, customers, shareholders or local communities? Shareholders have a say on such issues, but reading the moral compass takes time and thought.

"The real question is, 'What kind of world do we really want to create?'" says Ruth Rosenbaum, executive director of the Center for Reflection, Education and Action, an advocacy center in Hartford, Conn., with a focus on low-income issues. "Are we designing a world that is economically beneficial for those who are able to hold shares in companies (by keeping labor costs low and stock prices high)? Or are we designing a world that is economically beneficial and therefore sustainable for most people?"

As Rosenbaum suggests, the moral task at hand might be to seek prosperity for all involved. But whether better pay and benefits for discount employees is a rising tide to lift all boats is a matter of debate, even among economists committed to reducing poverty.

'Race to the bottom'
Some recent research suggests the low prices and job opportunities offered at a new Wal-Mart store don't alleviate a community's struggles with poverty over the long term. Wal-Mart workers in California, for example, annually seek $86 million worth of public assistance, according to a 2004 study by the Labor Center at the University of California at Berkeley. If other big retailers in the state follow suit, the study projected, California taxpayers would have to foot another $410 million in health-care services, food stamps and other public costs.

This "race to the bottom" in labor costs also seems to rub off on a surrounding area, according to research from economists Stephan Goetz and Hema Swaminathan at the Northeast Regional Center for Rural Development at Penn State University. While the national poverty rate dropped 2.4% between 1990 and 2000, the rate fell by just 0.2% on average in counties that added a Wal-Mart. One theory: Although Wal-Mart creates jobs, the company also eliminates jobs by putting others out of business.

"We didn't expect Wal-Mart would be able to affect poverty on a countywide basis, but lo and behold it did," says Goetz. Even so, he adds, discounting poses dilemmas. "It's hard to quibble with saving money, unless you're creating costs to society that you are not bearing."

Such findings seem to demand that ethical investors use their clout to insist that discounters compensate their workers better and perhaps set off a positive ripple effect in a geographic area or industry. But Wall Street notoriously punishes firms that raise labor costs, an outcome no investor would appreciate. Even if short-term returns weren't a concern, some wonder if higher prices at the cash register would truly serve the common good.

Goetz, for instance, acknowledges that low prices on goods from food to hardware bring a valuable social benefit: "The standard of living is up for poverty-stricken people. Critics of Wal-Mart haven't looked at that." For Bruce Weber, co-director of the Rural Poverty Research Center at Oregon State University, research on discounters' social impact is still too scant to warrant firm conclusions. Still, he believes the issues are broader than they have been framed in public debate thus far.

"A whole bunch of consumers are better off from the low prices, but a few workers are worse off. That's the way economists soothe themselves about all of this," Professor Weber says. "I think it's an empirical argument. How many people benefit and how many people pay? Most economists believe keeping prices down offers a benefit. ... For an individual consumer who doesn't depend on (a discounter's) wages, how could it not be better to have a Wal-Mart?"

A shopping-cart challenge, too
Where ethical investors might test their mettle, however, is in weighing the immediate benefits for individual consumers -- even the poorest ones -- against other long-term goals. If saving American jobs in textiles and other labor-intensive industries is a top priority, discounters who rely on outsourcing to overseas manufacturers might not offer the best investment option. Similarly, those who care deeply about preserving American communities that reinvest locally might not favor the Wal-Mart model, in which Goetz says "all the profits are siphoned off to (corporate headquarters in) Bentonville, Ark."

In the view of the United Food and Commercial Workers Union (UFCW), which represents 1.4 million workers, discounters present a moral challenge to every investor.

"It comes to what kind of human being you are," says Jim Papian, a spokesman for the union, which has found Wal-Mart nearly impossible to organize. "If you're someone with enough money to invest, that means that you've probably been able to take advantage of some opportunities you've had, you
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supporter
Posted by Richard Bonine, Jr (+14821) 15 years ago
It's good to know that I am a REALLY immoral person as I did not shop my "local" WalMart but at a WalMart out of state.
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supporter
Posted by Rick Kuchynka (+4457) 15 years ago
I thought overall it was a fair article. At least more evenhanded than most of the propaganda we normally shout out across the center to the other side.

The only thing that seemed dumb was where it said "While the national poverty rate dropped 2.4% between 1990 and 2000, the rate fell by just 0.2% on average in counties that added a Wal-Mart."

As if this implicated Walmart in some way.

They have it exactly backwards. Most places that had decent rates of growth (causing drops in poverty levels) most likely already had Walmarts before 1990. Since then, Walmart reached its mature phase and started expanding to slightly less lucrative markets (aka Miles City) That would be a much more reasonable explanation than to reflexively blame Walmart for such large scale macroeconomic effects.

Business goes where growth is first. Its simple economics.

[This message has been edited by Rick Kuchynka (edited 12/26/2005).]
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Posted by L G (+84) 15 years ago
Imorality is what ever society dictates at the time. Look at the Romans and the Greeks. They did all sorts of things that we now declare immoral. How about formulating your own opinions based on you and your conscience, rather than allowing today's corrupt news media make up your mind for you? Even if it is the 'Christian Science Monitor', it's still written for by reporters, ie members of the news media.
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supporter
Posted by Bob L. (+5099) 15 years ago
They have it exactly backwards. Most places that had decent rates of growth (causing drops in poverty levels) most likely already had Walmarts before 1990. Since then, Walmart reached its mature phase and started expanding to slightly less lucrative markets (aka Miles City) That would be a much more reasonable explanation than to reflexively blame Walmart for such large scale macroeconomic effects.

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Rick:

Hate to disagree with you, but WalMart grew from the center of the U.S. (Bentonville, Arkansas, to be exact) outward to its borders.

In the 1990's, WalMart moved into California and the more populous states in the northeast U.S.

Additionally, WalMart didn't seriously start to target large metro areas until the mid-90's.

In 1989, WalMart had stores in only 26 states.
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founder
Posted by Chad (+1758) 15 years ago
it is often the media that brings things to light for society. I don't know about you LG, but I don't have the time or resources to globe trot and investigate 99.9% of the things we read about in papers, magazines, books, or even web blogs. That is why the media (reporters) exist.

If you can formulate an opinion based on advertising and PR campaigns, on stock values and portfolios- well go right ahead. But keep in mind the Exxon Valdez; Enron; Love Canal; Bhopal, India; Watergate; Clinton-Lewinsky; etc. These businesses and people did not come forward with their wrong doing, the media broke the story.
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Posted by Brian (+355) 15 years ago
Yes, the media does bring these things to light, but not EVERYTHING. I have noticed the mass media is quite selective as to who or what they expose. The people shouldn't be reminded that the president and vice-president are insuring a bright future for Haliburton at the expense of American tax dollars and lives...Wal-mart needs to shape up and everybody should hear it 37 times a week. I'm reminded of a few lines from the Queensryche song, "Revolution Calling": "I used to trust the media to tell me the truth, tell us the truth. But now I see the payoffs everywhere I look. Who can you trust when everyone's a crook?"
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founder
supporter
Posted by Tucker Bolton (+3665) 15 years ago
No, I don't think you will live forever if you shop at Wal-Mart.
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supporter
Posted by Rick Kuchynka (+4457) 15 years ago
In the 1990's, WalMart moved into California and the more populous states in the northeast U.S.

Additionally, WalMart didn't seriously start to target large metro areas until the mid-90's.



You'll note I didn't say anything about large population. I was talking about growth. Growth first in an economic sense, which would, by nature, also lead to sustainable population growth.

If you look at the fastest growing regions in the nation, you'll find that they don't include the Northeast or California. Their economies as well as their populations are relatively stagnant.

In fact the fastest growing region is usually said to be the "New" South. Otherwise known as the home of Walmart (where they pretty much blanketed the region pre-1990)



[This message has been edited by Rick Kuchynka (edited 12/28/2005).]
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supporter
Posted by Bob L. (+5099) 15 years ago
Nice try.
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supporter
Posted by Bob L. (+5099) 15 years ago
Here's a link to the study.

Go ahead and pore through it if you're having trouble sleeping.

http://cecd.aers.psu.edu/pubs/PovertyResearchWM.pdf
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supporter
Posted by Bob L. (+5099) 15 years ago
Rick - I'll break it down for ya - money quote from study

We next turn to our equation of primary interest, change in the poverty rate. Holding constant the initial (1989) poverty rate, the results show that counties with more Wal-Mart stores (in 1987) had a higher poverty rate in 1999 (or a smaller reduction in the rate) than did counties with fewer or no Wal-Mart stores in 1987. Equally important, counties in which new Wal-Mart stores were built between 1987 and 1998 also experienced higher poverty rates, ceteris paribus.

(Ceteris paribus = with other things equal)
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Posted by L G (+84) 15 years ago
There can be only one. Watch out Tucker.
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supporter
Posted by Bob L. (+5099) 15 years ago
Here's a nice story about Wal-Mart:

http://www.bismarcktribune.com/articles/2006/01/04/news/local/107980.txt


Wal-Mart entered into a contract with a local creamery to sell their product; this saved the local business (for now). None of the independent grocers in the area would carry the product...
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supporter
Posted by Cory Cutting (+1279) 15 years ago
Bob --- Are you S**ting me? WTF? "counties with more Wal-Mart stores (in 1987) had a higher poverty rate in 1999 (or a smaller reduction in the rate) than did counties with fewer or no Wal-Mart stores in 1987."

Using this theory is like saying an ax murder bought the ax at Wal-Mart so it's Wal-Mart's fault that he murdered. Or, better yet, a bartender who is held liabel for someone who drinks too much and kills someone in a car accident.

What ever happened to being responsible for your actions? It is not always someone else's fault!
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