Wal-Mart's 'China Price'


By Joshua Holland

Wal-Mart is responsible for approximately 10 percent of the United States' trade deficit with China.

The problems with the company's overseas production are the result of sweeping changes in public policies brought about by the Conservative Revolution and by disastrous, industry-written global trade and finance rules supported by a bipartisan consensus for the past three decades (Democratic presidential hopeful Hillary Clinton, whose husband championed "free trade" deals like NAFTA, sat on the Board of Wal-Mart between 1985-1992).

It was the system in which Wal-Mart's practices have flourished that were on my mind when I sat down with Robert Greenwald ("Outfoxed," "Uncovered"), director of "Wal-Mart: The High Cost of Low Price," in his Culver City offices earlier this month. (A note of disclosure: Greenwald is on the Board of Directors of IMI, AlterNet's parent organization.)

I asked Greenwald if he was concerned that focusing on the mega-retailer might distract people from the larger systematic issues that have made the New Economy so very productive for so few. Is there a danger of letting the Targets, Home Depots and Sears of the world off the hook?

He told me his hope is the film "will allow us to go on the offense on economic issues, corporate issues" writ large:

With Outfoxed, it was a similar argument -- it's not just Fox, it's media consolidation. That's absolutely right, but you need a story to tell. Fox was a very strong story and Wal-Mart's a very strong story. And I believe -- as with Outfoxed -- it helped us make the larger issue. In other words, one can say: "is it a distraction, or is it connecting the dots?" And what I hope to do, what I try to do with the films is to use them to connect the dots.

Wal-Mart has made itself the perfect focal point of the New Economy -- the perfect "dots" to connect -- by its success and with its ruthlessness. Kent Wong, Director of UCLA's Center for Labor Research and Education, explained that Wal-Mart's overseas production isn't unique, but "because of their reach, their volume, their power" Wal-Mart does more than any other firm to fuel the "race to the bottom":

What we see with Wal-Mart is a much greater level of international sophistication -- of fierce competition in searching for the very lowest prices they can get, anywhere in the world ... and it's about vicious competition in the sense that if they can get a product produced for a nickel less, they will shift their suppliers at a drop of a hat.

That's capital searching out the cheapest labor, the friendliest environs -- places without pesky environmentalists or labor organizers.

We often look at that process from an American perspective. Job off-shoring has become a potent political issue. Our trade deficit with China has ballooned since its entry into the WTO in 2001, contrary to the promises made by politicos of both parties at the time.

The imbalance -- in combination with soaring fiscal deficits, a low savings rate and high energy costs -- has become a real threat to America's middle class.

According to a study by the Economic Policy Institute [PDF], America's balance-of-payments deficit with China (of which approximately $18 billion dollars is created by Wal-Mart) was responsible for the loss of 1.5 million manufacturing jobs between 1989 and 2003.

The study found that the jobs being displaced have changed over that period. The authors noted: "Where the largest impact was once felt in labor-intensive, lower-tech manufacturing industries such as apparel and shoes, the fastest growth in job displacement is now occurring in highly skilled and advanced technology areas once considered relatively immune."

That's a troubling trend: China -- often portrayed as the production destination of choice for cheap plastic toys and similar low-tech goods -- now accounts for the entire $32 billion U.S. trade deficit in high-tech products, and is starting to make inroads in what were considered bulwarks of first world manufacturing: automobiles and aerospace.

Feeling the threat of emerging competition, working people from advanced countries often react with fear and hostility towards their brethren overseas. But Greenwald's film gives us an important look at the other side of the coin: from the perspective of the overseas workers of a globalized labor force who make the goods that Wal-Mart hawks in its super-stores. Hopefully, the message people will take away is that raising the power of working people in developing countries raises the standards of our own.

Documenting Wal-Mart's role in China

Greenwald's crew followed the money; they captured snapshots of the lives led by Wal-Mart's factory workers in Shenzhen, China. By showing them as they are -- hard-working, poor and virtually unprotected on the job, Greenwald's film succeeds where many of us who write about economics struggle: it injects humanity into the dry economic numbers.

There are powerful moments when Chinese laborers talk directly to their American audience. One worker in a Wal-Mart factory tells viewers: "Customers of Wal-Mart: when you wear expensive clothes, when your children play with high-quality toys, think of China and the Far East." Another adds: "Those profits you made and the wonderful life you made are the sweat, and tears and overtime work of Chinese people."

Shenzhen is emblematic of the kind of "opportunity zones" that have sprung up around the world to service the labor needs of the New Economy. Since China began opening to global trade, cities like Shenzhen have become magnets for young people from rural communities looking for opportunity. While you may never have heard of the city, more people live there than in New York.

Shenzhen reflects the speed of the changes China's economy has undergone in just the past few decades. As the St. Petersburg Times Kris Hundley wrote:

Shenzhen was nothing but a fishing village 25 years ago when it was picked by government officials to become the showplace of China's economic resurgence. Now this city of 10 million rivals Hong Kong as a Mecca of capitalism.

It's also the home of Wal-Mart's global purchasing headquarters.

Places like Shenzhen, the maquiladoras of the U.S.-Mexico border and the "free-trade zones" scattered around Latin America and the Caribbean represent the free-for-all Wild West of the global economy -- places with little or no regulation and a "unions not welcome" sign on the door.

The film casts some much-needed light on such places. It follows the travails of a young couple, "Princess" and "Little Bear," who moved to Shenzhen from neighboring provinces in the hopes of escaping China's grinding rural poverty.

Princess starts work at 7:30 in the morning and works until 10. Little Bear works the nightshift and gets home at seven. "We really work day and night to get the wage of less than $3 dollars per day," she says.

They're an attractive young couple and we get a sense of how similar their dreams are to our own. He hopes to open a restaurant one day.

But they are sweatshop workers who face working conditions that the majority of Americans haven't contemplated since the decline of the Robber-Barons. They tell of the long hours, the heat, working seven days per week -- a violation of China's weak labor laws -- while being paid for six.

Their lives recall those of coal miners in this country a hundred years ago. Just as miners lived in factory towns where they were fleeced of much of their pay for food and lodging, so, too, do young factory workers in Shenzhen who live in dormitories where their salaries are debited for what Princess calls "disgusting" meals and they're charged for rent and utilities.

Princess complains that they have to pay for living in the dormitories whether or not they strike out and find a place of their own.

And just as American workers in the Gilded Age were saddled with "company unions" that claimed to represent them but were in league with the bosses, workers in China are organized under a government union that is dedicated to attracting foreign investment.

The workers tell Greenwald's camera that when Wal-Mart reps come to inspect the plant, they're told there will be consequences if they don't lie about the working conditions convincingly. They're given false timecards and told to claim that they work six days per week in comfortable conditions.

It's a rare and important peek into the other side of the global supply chain. And it's representative of processes affecting working people across the developing world.

Wal-Mart distances itself from those processes as a matter of course. UCLA's Kent Wong told me: "The source of most of the exploitation and abuse is through the vast ... network of suppliers. And in the vast majority of those instances Wal-Mart has no direct employer relationship with those workers." That gives Wal-Mart cover -- call it "plausible deniability" -- but it doesn't change the underlying moral equation.

A matter of policy

The rise of Wal-Mart from a single store in Rogers, Arkansas in 1962 to the largest private-sector employer in the country in 1997 tracks flawlessly with the emergence of a bipartisan backlash against the social movements of the 1960s and, more importantly, against the rise of radical labor movements abroad and the oil shocks of 1973, both of which unhinged the movers and shakers of the investment community.

As has been well-documented elsewhere, industry and finance groups and conservative foundations built a powerful machine that re-shaped the political atmosphere, rolled back much of the deal made between labor and capital following World War II (a deal that created a huge middle-class) and culminated with the elections of Margaret Thatcher and Ronald Reagan in 1979 and 1980.

Domestically, the result was a whole new -- and highly troubling -- environment for labor. According to the public interest group Common Cause:

When President Ronald Reagan fired the federal air traffic controllers en masse in 1981, he rewrote the rules governing acceptable employer conduct. Previously companies had considered public opinion in deciding how far to push the weak labor law; now that was less of an obstacle. Reagan's appointments to the NLRB sent another signal, challenging a tradition of long-serving, usually non-ideological members. The board took on a distinctly anti-union aura and let cases sit for years without decisions.

The result has been a predictable decline in union participation. When Reagan took office in 1980, 25 percent of private sector employees were unionized. When he left, that had been cut in half. The United States has the second lowest rate of unionized private sector labor in the developed world.

That's meant labor's faced a steadily decreasing influence on both domestic policy -- the U.S. is one of just a handful of countries that embraces the principle of "employment at will," where large employers can fire their workers without cause -- and the formation of policies regulating transnational finance and the trade of goods.

It was in 1979, during the Tokyo Round of the General Agreement on Tariffs and Trades (GATT), that the business community's proxies negotiating international trade agreements started to move from reducing tariffs to reducing "non-tariff barriers" -- including a number of national economic policies in the developing world that limited, to a degree, the movement of capital.

At the same time, international monetary institutions increasingly embraced the "Washington Consensus" and discouraged all checks on capital flows. These changes in international finance regimes, more than the trade liberalization that is often the focus of debate, have given us a wide-open global labor market and precipitated a race to the bottom, of which Wal-Mart may be an innovator, but is by no means without co-conspirators in government, the media and academia.

As The Nation's William Greider wrote of the emergence of a Wild West global economy:

...[R]emember that this out-of-control global financial system is a man-made artifact, a political regime devised over many years by interested parties to serve their ends. Nothing in nature or, for that matter, in economics requires the rest of us to accept a system that is so unjust and mindlessly destructive.

Wal-Mart hasn't been on the sidelines during these processes. As journalist Bill Berkowitz has noted, most of the Walton family's philanthropy and political donations have furthered conservative causes.

Ideally, by connecting that changing political landscape -- in the U.S. and internationally -- with real people in places like China, Honduras and Bangladesh, Greenwald's film might get us past the simplistic terms of discourse around global trade and move us towards some unity among progressives in calling for enforceable worker protections in trade agreements -- people like former Clinton Labor Secretary Robert Reich have argued against them -- and some international solidarity that moves us beyond the simple lament: "they stole our jobs!"

Joshua Holland is an AlterNet staff writer.