The Demonization Of Wal-Mart

Sebastian Mallaby in yesterday’s WaPo tries to document his belief that Democrats are all of a sudden anti Wal-Mart in an apparent shift in away from the globalization ideals that they once fought for.

While it is true that many Democrats have in fact moved away from Wal-Mart as he so deftly describes, it isn’t Wal-Mart itself that many are bashing so much as what Wal-Mart has come to represent in today’s economy. Economist’s View does a nice job of explaining what I feel many think is the effect companies like Wal-Mart have had on our economy and why Democrats are now distancing themselves from these corporate behemoths.

I think the answer to the question of why centrist Democrats have shifted their stance on globalization is straightforward – the gains from globalization have not been shared equally. The claims made in the 1990s about the benefits of globalization have not been realized and it’s no longer wise politically to assert that globalization will benefit typical households. With stagnant real wages and other economic problems such as declining health care coverage, Wal-Mart is an obvious and glaring symbol to many of the failed promises of globalization, and lower priced imported goods do not overcome the failed promises the symbol represents.

The effects on the changing makeup of the global economy had been pretty much kept quiet in the media because up until recently the stagnation in worker wages had been somewhat offset by the increasing value of the benefits they were receiving.

But that increase has all but disappeared in recent months to the point that even though worker productivity has risen consistently since 2003, worker salaries have dropped.

The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity – the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards – has risen steadily over the same period.

As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS, the investment bank, recently described the current period as “the golden era of profitability.”

Until the last year, stagnating wages were somewhat offset by the rising value of benefits, especially health insurance, which caused overall compensation for most Americans to continue increasing. Since last summer, however, the value of workers’ benefits has also failed to keep pace with inflation, according to government data.

At the very top of the income spectrum, many workers have continued to receive raises that outpace inflation, and the gains have been large enough to keep average income and consumer spending rising.

Wal-Mart, while by no means the only corporation responsible for the shift to the stagnate wage vs. increasing profit corporate movement, is a perfect example of this trend and therefore the most obvious target. Their cut-throat mentality when dealing with vendors, lower end wage structure, and poor to non-existent employee benefit offerings typify the results of globalization that was once touted as the next big thing.

The Democrats have come to the realization that the winners in this new global economy are the big corporations like Wal-Mart that are seeing huge growth and increasing profits while at the same time not allowing these profits to make their way down to the workers that are directly responsible for generating this new found wealth in the first place.

How sad is it to say that in our new global economy we are going to need companies like Wal-Mart because it will be the only place Wal-Mart employees will be able to afford to shop.

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