How Wal-Mart took over
Behind folksy facade, Sam Walton had empire
on his mind
by Pat Arnow
Review of In Sam We Trust by Bob Ortega
Sunday Gazette-Mail
It's true that Sam Walton lived in rural Arkansas, drove an old pickup
truck
and used down-to-earth good sense to build the Wal-Mart discounting empire.
This was his "folksy facade," according to a new book about
the man and his
company. Yet Wall Street Journal reporter Bob Ortega draws a sharp portrait
of a ruthless, manipulative operator whose philosophy could be summed
up
with economist Milton Friedman's famous assertion that the only social
responsibility of corporations is to increase profits.
This engagingly written American success story exposes far more disturbing
material than the not-too-surprising revelation that Walton's charming
personality and personal habits concealed a single-minded Scrooge. It
contains stories of Third World child and prison labor making products
for
Wal-Mart, union busting, and strong-arm tactics used to muscle in to
small-town commerce. This history offers sobering implications about the
ways business shapes e very American's life for no greater purpose than
to
enhance the bottom line.
Unrevealing
For the story of Walton's personal life, the reporter had little to go
on.
Walton was not introspective and disliked giving personal information,
though he did pen a not very revealing autobiography.
From that book and interviews with the few family members and friends
who
would talk with a reporter, Ortega gleaned that Sam Walton was born to
frugal, ambitious Oklahoma farmers in 1918. With a degree from the
University of Missouri, he became a trainee for retailer J.C. Penney,
and
after he married in 1943, he parlayed the funds his well-to-do wife brought
to the marriage into purchase of a Ben Franklin variety store in a small
Arkansas town. A wily businessman, he soon bought more stores in nearby
small towns, becoming the nation's most successful Ben Franklin franchise
owner.
In the post-World War II automobile and road-building boom, Walton wasn't
the first to figure out that big discount stores with parking lots on
the
outskirts of town were a good idea. Target, Kmart, Woolco and E.J. Korvette
were opening discount marts in the new suburbs. Walton copied the idea
in
Arkansas and nearby states, where he had an advantage other discounters
did
not: His stores were often the largest retailers in town.
The first Wal-Marts were not sophisticated operations, "nothing
to set folks
from bigger retailers quaking in their wingtips," writes Ortega.
And about one early grand opening on a steaming August day in Arkansas,
Ortega writes:
"Walton had finagled a good deal on ripe watermelons, and had stacked
truckloads of them outside the store's entrance. He'd also hired several
donkeys to give children rides. But in the heat, the watermelons started
popping. The sweet, sticky juices flowed across the lot, mixing in with
donkey manure to form a disgusting, funky mess that customers tracked
all
over the store on their shoes."
The store made money, though.
Walton's methods were new and daring at that time. He discounted name
brands
(up until then, discounters relied mostly on seconds and shoddy
merchandise). He cut profit margins, relying on volume to bring up profits.
As he expanded, he opened his own distribution centers. He turned the
stock
over faster than retailers had done before, and visiting his stores via
his
own small plane, he inspired the work force to be cheerful, helpful and
hard-working. The staff, though poorly paid and with few benefits, responded
because they felt they had the ear of the charismatic "Mr. Sam."
Later, as Wal-Mart expanded and Walton couldn't visit all of the stores
regularly, discontent flared, and some workers began to organize. Walton
hired a professional union buster, Omaha lawyer John Tate. After he crushed
a couple of union drives, Tate told Walton that if he wanted to avoid
unions, he had to treat people better.
Good for morale
That is when the company began calling hourly workers "associates"
and
offering them profit sharing, stock options, bonuses and a policy that
they
could go to managers with complaints without jeopardizing their job. Though
most hourly workers didn't gain a better standard of living, the measures
were good for morale and helped keep organizing efforts at bay. Walton
found
that a few benefits was good for the bottom line.
Another innovation that helped reap profits - and gave Wal-Mart big public
relations points - was the "Buy American" program. Walton pressured
U.S.
manufacturers to bring down prices so that he could buy competitively
priced
domestic goods. Factories overseas felt the pressure to bring down their
prices to compete, as Wal-Mart still imported a high percentage of their
goods. It was a sweet deal until "Dateline NBC" reported that
Wal-Mart
displayed "MADE IN THE U.S.A." signs directly over imported
goods.
Public relations suffered further after reports that Wal-Mart stocked
goods
from Guatemala to Bangladesh made with child labor and prison labor.
Scandals erupted periodically and most spectacularly when it came out
that
clothes for the company's celebrity Kathie Lee Gifford line were made
in
sweatshops.
Wal-Mart's top management has not been responsive. Though they instituted
a
voluntary code of conduct for factory conditions, there has been little
effect. Ortega wonders how the devoutly Christian men who run Wal-Mart
could
ignore shocking conditions. "Their response was to do the very least
they
could, to maintain each and every time [reports of abuses surfaced] that
their sham code had taken care of a problem they knew continued."
Then there were problems with towns that didn't welcome Wal-Mart. Not
everyone wanted the behemoth on their outskirts, draining the commerce
from
small businesses downtown and robbing communities of their individuality.
Wal-Mart went to great lengths to build stores in reluctant towns, even
secretly paying for local pro-Wal-Mart groups to organize.
Continued growth
While Ortega details much of Wal-Mart's ruthless behavior, he barely
scratches the surface of other evidence of corporate insensitivity. He
merely notes that Wal-Mart's management and board remained almost entirely
white and male (despite the high-profile appointment of Hillary Clinton
to
the board of directors). He reports an abysmal record of charitable giving
by Wal-Mart - nothing in the early years, and less than most corporations
after Walton's wife pried open her husband's tight fists a bit.
Despite spots of tarnish over the years, Wal-Mart continued its phenomenal
growth, and by 1988 it posted higher net profits than number-one discounter
Kmart.
When Walton died in 1992 he was the richest man in America. He left the
corporation in the capable hands of fellow Arkansan David Glass, who has
run
the company efficiently if not as charmingly as his former boss.
Today Wal-Mart is bigger than the three next-largest retailers combined
and
is the nation's largest private employer. Part-time, poorly paid work
is the
norm for these U.S. workers.
Many factory workers making goods for Wal-Mart in other countries continue
to work in awful conditions, and towns across the nation continue to see
more traffic and to lose local commerce and character.
Ortega graphically shows how Wal-Mart's single-minded pursuit of profit
has
shaped these lives around the world in ways that might make anyone but
Milton Friedman squeamish.
Former Huntington resident Arnow is a former editor of Southern Exposure
and
In These Times. She lives in Durham, N.C.
12/06/1998 CHARLESTON, W.VA.GAZETTE-MAIL
P8E
(Copyright 1998)
(first published in the Raleigh, (N.C.) News & Observer
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