Renormalizing The Wal-Mart World

by: Paul Rosenberg

Sat Aug 29, 2009 at 16:30

Part 1: Wal-Mart's Lawlessness As Norm

Over at the American Prospect, Harold Meyerson makes the first part of this diary easy , with the following passage from his review of The Retail Revolution: How Wal-Mart Created a Brave New World of Business by Nelson Lichtenstein. It makes clear how deeply criminality runs in Wal-Mart's veins.  The norms it propounds by its example are those of the Mafia-another organization bred in the backwards rural south of its homeland, based on ruthless exploitation and bribery.

The story isn't part of the official Wal-Mart creation epic, but it tells us almost all we need to know about the company's approach to the interests of its employees and the laws of the nation. Around the time that the young Sam Walton opened his first stores, John Kennedy redeemed a presidential campaign promise by persuading Congress to extend the minimum wage to retail workers, who had until then not been covered by the law. Congress granted an exclusion, however, to small businesses with annual sales beneath $1 million -- a figure that in 1965 it lowered to $250,000.

Walton was furious. The mechanization of agriculture had finally reached the backwaters of the Ozark Plateau, where he was opening one store after another. The men and women who had formerly worked on small farms suddenly found themselves redundant, and he could scoop them up for a song, as little as 50 cents an hour. Now the goddamn federal government was telling him he had to pay his workers the $1.15 hourly minimum. Walton's response was to divide up his stores into individual companies whose revenues didn't exceed the $250,000 threshold. Eventually, though, a federal court ruled that this was simply a scheme to avoid paying the minimum wage, and he was ordered to pay his workers the accumulated sums he owed them, plus a double-time penalty thrown in for good measure.

Wal-Mart cut the checks, but Walton also summoned the employees at a major cluster of his stores to a meeting. "I'll fire anyone who cashes the check," he told them.

What this story makes perfectly clear is how deeply Wal-Mart embodies the centuries-old authoritarian Southern culture-which despises democracy, and any law made by anyone except itself.  This is the land of masters and slaves, if not in one form, then another. Slavery is the best low-wage system ever devised: no wages whatsoever.  Plus you get to rape the help. Bonded indebtedness that can never be paid off is second best.  The automatic rape benefit is generally off the table.  So here's Wal-Mart working on the third best system.  Heck, they ain't talking about raping nobody!  They should get a Nobel Prize, not a massive judgment for back wages!

Meyerson continues:

Besides its Dickensian shock value, this story -- told by Nelson Lichtenstein in his new book about Wal-Mart -- points to a phenomenon of wider significance. The company that was willing to break the law to avoid paying the minimum wage is now the largest private-sector employer in the nation and the world, with 1.4 million employees in the United States and 2 million overall, more than 6,000 stores, and revenues that exceed those of Target, Home Depot, Sears, Kmart, Safeway, and Kroger -- combined. By virtue of its size and its mastery of logistics, Wal-Mart is able to demand low prices from its thousands of suppliers and thus inflict low wages on their employees. Its low prices have also forced reductions in wages and benefits at the unionized supermarkets with which it threatens to compete.

The logic of low prices and low wages are inextricably linked.  Wal-Mart's model is not just based in a low-wage economy, it's based on turning everything into a low-wage economy.  It is inherently economically regressive.

People are not just consumers, they are producers as well, much less citizens, family members and participants in a community.  Yet, by subordinating everything else to low consumer prices, the wages of people as producers are driven down. The vitality of communities is sapped, the variety of different local businesses is destroyed.  The potential of family members to advance, one generation laying the foundation for the dreams of the next, is similarly cut off.  The role of citizen passes into nothingness.  Such are the externalized costs of low prices, Wal-Mart style.

Part 2: Hayek's Dictatorial Justice

There is, however, a high-minded defense of Wal-Mart's destructive narrow-minded focus.  It comes from the political economic philosophy of Frederich Hayek, as "moral" defense of market fundamentalism.  This is described rather succinctly by Marcellus Andrews in  "Risk, inequality and the economics of disaster",  real-world economics review, issue no. 45, 15 March 2008, pp. 2-9:

We must dig a bit deeper into the logic of market fundamentalism to expose the radically destructive core of this doctrine that somehow became synonymous with liberty.

The central claim of the Hayekian vision is that a just society is one that treats all of its members equally with regard to the rule of law by specifically disavowing redistributive policies that would transfer resources from the rich to the poor or from the strong to the vulnerable. Justice is concerned with establishing a system of rules that respects each person's freedom - especially how owners choose to make use of their property - without discriminating in favor of any particular person, group, region, race or set of purposes. Therefore, both the free market system, especially the distribution of economic benefits and burdens generated by markets, are just so long as these are the result of the unregulated activity of self-interested parties. Since the results of competition are the unintended outcome of market activity rather than the goal of any particular person or group, the pattern of rewards and suffering, including the allocation of risks, may be unfortunate but cannot be unjust. By contrast, public policies that attempt to alter the outcomes of market processes by either redistributing resources or by deliberately altering the balance between the costs and benefits of economic activity so as to encourage some actions while discouraging others are necessarily unjust.2

This elevation of Pareto Optimality from the status of an observation about the nature of tradeoffs in market economies under very restrictive conditions to a quasi-ethical bar to all forms of redistribution has become the de facto standard by which economic policies are judged in my country and around the world over the past thirty years. While almost no government actually follows the Hayekian injunction against public action in economic matters - except to justify regressive policies that injure poor and working people while favoring elites - the market fundamentalist vision has so reshaped policy discourse that there is now a presumption against acting on behalf of poor and vulnerable people unless such actions benefit the non-poor as well.

This is, in effect, a codification of the historical fiction known as "classical liberalism", as opposed to the "New Liberalism" that emerged in Britain in the 1870s, an empirical response to the Dickensian squalor that resulted when liberal free-market models were first imposed on British society in the post-Napoleonic era.

"Classical liberalism" is a fiction for at least three main reasons.  First, because liberalism evolved over a long period of time, with significant differences between different "classical liberal" icons such as Locke vs. Mills.  Overlooking the vast differences between them and treating them all as a unified whole, but excluding certain later developments is both arbitrary and simple-minded.

Second, because various "classical liberals"-such as Tom Paine and Thomas Jefferson-were specifically concerned with uplifting the condition of the lower orders, just like the latter-day "New Liberals" were. Indeed, the Louisiana Purchase was arguably the most massive welfare state expenditure of all time when it occurred.

Third, the phrase is meaningless because many non-economic rights attributed to classical liberals were not generally affirmed by liberals in the so-called "classical" era.  The right of women is a classic example of this lack. It was only after women began to realize their economic rights in sufficient strength that their non-economic rights gained any sort of latter-day canonical status.

I mention these fundamental flaws with the "classical liberal" label only to help clarify the actual authoritarian foundations on which market fundamentalism depends.  The Hayekian view adopts the language of liberalism, but it is deeply antithetical to its moral, historical and pragmatic thrust.  Anatole France captured the spirit-if not the precise letter-of what is wrong with this worldview when he wrote, "The law, in its majestic equality, forbids rich and poor alike to sleep under bridges, beg in the streets or steal bread."

But Hayek is not simply purported to lay down the law. He is purported to define the sole meaning of what justice can be-and according to him it cannot be anything that takes even one red cent from the rich and gives it to the poor.

This is, in effect, the erection of a fundamental barrier against any substantive erosion of accumulated wealth and power, and if the words "liberal" and "conservative" have any meaning at all over the centuries, then it is that conservatives defend accumulated wealth and power against all questioning from outside or below, while liberals critique the very existence of barriers that limit what some may be or become.  In a word, Hayek's ideology is a classic example of a hierarchy-enhancing legitimating myth in social dominance theory-it serves the purpose of rationalizing and legitimating the existing order of group dominance, and countering ideas that would legitimate challenging and changing that order.  There is nothing liberal about it.

As Andrews goes on to describe, there is another quite different view of economic freedom available to economists from the work of Amarta Sen:

Amartya Sen has taught us, with grace, humor and the infinite gentleness of a teacher conveying a most difficult and upsetting lesson, that the fatal flaw in the Hayekian project is its elevation of an exceedingly limited number of formal rights over substantive capabilities to exercise these same rights.3 Sen's point in the context of climate change takes on an especially lethal character: the market fundamentalist's concern with property rights insists that society refrain from protecting its weakest members from climate risks because such actions are inherently redistributive and unjust on their face. So when the City of New Orleans warned its citizens that Katrina was coming, and urged everyone to leave, it had more than done its Hayekian duty. Further, the city, state of Louisiana and the Federal government were under no obligation to help the city's poorest residents to escape because any such action would have required the use of resources gained via an ever so mildly progressive tax system that injured the well-being of high income and wealthy citizens for the benefit of poor people.

By contrast, Sen's capability approach to justice insists that government must not only respect all persons by promoting equal treatment before the law as well as refraining from favoring one set of private projects over others, but that society is obliged to make sure that its members are capable of exercising rights on a roughly equal basis if rights are have any substantive meaning. So, any substantive view of freedom-as-capability would insist that governments guarantee that all citizens have an equal chance of escaping disasters, including redistributive actions providing the poor with publicly provided means to leave New Orleans as Katrina bore down on the region.

Sen's logic is similar in spirit to the New Liberals-individual liberty in the abstract can't be realized without concrete social pre-conditions  An abstract right that can't be exercised is no right at all.  It's a mockery.  But this logic is not exclusive the New Liberals.  Liberalism has always been driven by pragmatic considerations, and a keen awareness that groups and individuals are inextricably linked.

The most salient issue in the emerge of modern liberalism as we know it today was that of religious tolerance.  But this was initially a pragmatic solution to the endless bloodshed of Europe's religious wars.  It took decades for the arguments surrounding it to shift from pragmatism to principle, and the arguments on principle would never have emerged without the pragmatic arguments-and motivations-preceding them.  This is a further indication that the Sen/Hayek divide is one between liberalism and conservatism, not a divide within liberalism.

While Hayek tells us there is only one justice-and it forbids any sort of redistribution-Sen's logic allows for a Jamesian pluralism.  It's neither necessary nor desirable to externally define for all people what their development should look like.  There may be some broad principles that virtually all will share, but these can well emerge from cross-consultation.  There is no need global elite guidance.  A diversity of approaches can enhance our collective capacity to find things that work-including ways to balance the virtues of diversity against the value of compatibility.

Part 3: Dignity-The Ultimate Cost Of Low Prices

Last Summer, purported "fresh new conservative thinker" Ross Douthat publicly embarrassed himself on Bill Moyers Journal.  I wrote about it before , among other things noting the following, as I quoted him:

And, finally, there's this prolonged exchange, in which Moyers brings up the sub-title of Douthat's book--"How Republicans Can Win the Working Class and Save the American Dream"--and Douthat basically says, "I got nothin'," though, of course, he could never actually come out and admit it:

BILL MOYERS: But here's let's get to the big issue in your book. The subtitle of your book is "How Republicans Can Win the Working Class and Save the American Dream" because my great concern is that ordinary working people in this country are having a real trouble making a living wage.

The paucity of jobs that pay living wages is, I think, the great moral as well as economic crisis in America today. And neither party has fully addressed that. Conservatives won under Nixon with the silent majority. Reagan won with the-

ROSS DOUTHAT: Reagan Democrats.

BILL MOYERS: -the working class that came over to the Republican Party. And George Bush won with the angry white man. But I don't see what any of those people have gotten from the conservative revolution because they're worse off today in real wages, adjusted for inflation, than they were 30 years ago when you came to power.

ROSS DOUTHAT: I'll push back on that argument a little bit. I think there are a lot of ways in which the working class is better off than they were in that era. I think if just looking at wages is misleading because one of the things that's happened thanks to free trade, thanks to policies that Republicans have championed, is prices, the cost of living, has fallen dramatically across the board for Americans.

If you look at the goods the poor and the working class buy versus the goods the rich buy, the goods that the poor and working class buy today are vastly cheaper than they used to be.

BILL MOYERS: You're not saying that workers face wage stagnation?

ROSS DOUTHAT: No, workers do face wage stagnation. But those wages do, in fact, buy more goods than they used to buy. There are ways in which the working class is better off. But, yes, on the big picture, I agree with you.

But Republicans need a tax policy that helps people investing in America's future in another way: People struggling to raise families. So we talk a lot about making the tax code more family friendly, making it easier for people to have two kids, to have three kids, to put those kids through school.

All that might have been remotely plausible (not believable, but plausible, in a high school speech & debate type of way) two and a half months before the financial meltdown hit with gale force winds.  But now?  Now it's just laughable!  American workers only kept their heads above water by having their wives go to work, turnging from savers into borrowers, first on credit cards, then by finally raiding the equity in their houses.

Now all of that is gone, tapped out as a source of new income to replace what's being lost.  The whole house of cards is tumbling down, and the conservative response is to set the whole deck on fire.

In retrospect, I was far too kind to Douthat.  American workers didn't just experience stagnant wages over this period of decades, the experienced a profound loss of dignity and respect, of which wage losses were only the most readily visible indicator.  The descriptions of how Wal-Mart treats its workers makes it eminently clear that these people are treated worse than cogs in a machine.  At least someone running a machine cares about the cogs, and wants to keep them in place.  Wal-Mart, OTOH, has a stratospheric turnover rate. Any machine that lost its cogs at the rate that Wal-Mart loses workers would have been tossed on the scrap heap ages ago.

But this is all just fine and dandy, says Douthat, because the "low prices, always!" dude!

So what if you don't have health care?  Of the health care you do have isn't worth the paper it's printed on?  So what if "job security" is an oxymoron?  So what even if you're one of the winners, with a nice house you've made 20 years of payment on, and you've just lost half your equity in the last two years? "Low prices, always!" dude!

Welcome to the New America that 30 years of conservative orthodoxy has created.  We're so close to being a third world country right now, that all it would take is the wrong person to sneeze, another round of interlinked derivative failures, and "poof!" there you are.

Of course, conservatives can always just blame it on Obama, and keeping on doing what they've always done.

But that won't alter the reality of what they have done.  The norms they have promoted are the criminal norms of Wal-Mart, defended by the spurious "scholarship" of Hayek.  And all of it must be swept away entirely, to be replaced and renormalized with a set of values that combines the best of what America has always stood for and believed with our more recent appreciation of how entire classes of people--women, minorities, gays, lesbians, etc.--have been systematically excluded in the past.

The task before us is enormous.  But the power we wield once we fully wake to that task is even more enormous.  We have done it before. We have changed the world over and over and over again.  And it's always been a tale of David vs. Goliath.

The greatest part of the struggle has always been the long preparation for battle.  Once the battle is finally joined, it usually doesn't take very long.  But those battles are usually decades, even generations in the making.

Diaries like this one are, hopefully, helpful parts of the preparation process.  We need to know what we are up against, what it is that we need to challenge and change, not just on one level, but on all of them.  For what we need to change is not just "out there", like injustice always does, it has found ways to infiltrated our own consciousness. Which is why freeing ourselves mentally, morally and spiritually is a constant part of the struggle.  The struggle for justice and dignity for all.