Taxpayers subsidize Wal-Mart Health Plans

Taxpayers fund Wal-Mart

I'm no Wal-Mart fan, and am involved in fighting them, but the linked website gets it a little wrong. (It's also racist. They should purge the anti-asian and anti-mexican writing.)

Wal-Mart is succeeding right now because it's done several things "right" (or wrong, depending on your perspective).

First, they have pushed to de-skill general merchandise retail. They're trying to turn their jobs into low-skill "McDonald's" jobs, though computerized automation. In this, I think they have succeeded.

As a consequence, they can tap into a lower-skill, lower-pay, less-experienced workforce. They try to hire people who might otherwise be doing less pleasant work.

People in dire straits don't unionize. They don't risk it, especially in this business climate. Knowing this, Wal-Mart is very aggressive in dressing down their employees, putting the pressure on them to vote against a union.

Their sale of imports isn't that different from a store like Target. Wal-Mart's innovation is that they pressure American businesses to close up factories in the US, and send them to other countries, mainly China. Most of the owners are pretty happy to do this, because it means they get some lock-in with Wal-Mart, and, they also get assistance in moving production to China. They find it's easier to produce for a global market, too. The profit margins grow, and, the stockholders are happy.

Thousands of people working in these factories are fired, go on unemployment, and probably end up in non-manufacturing jobs, which pay half or less than manufacturing jobs. The net effect is to lower the overall wage in a community (which helps Wal-Mart to some extent when they're staffing).

Despite what people say, products from China aren't that much shoddier than what we were producing domestically. That quality gap is closing, too. For more information about labor in China and Wal-Mart, see this great series of articles by indie journalist Lee Siu Hin:

http://www.actionla.org/Reports/JourneytoHome/introduction.htm

These two factors contribute to Wal-Mart's low prices. That's just part of the WM mystique. The other part is capital.

Because of the slightly lower prices, and larger profit margins, WM gets more customers. They get more capital. They also get more investors, so their stock valuation rises.

One of the techniques of competing in capitalism is to destroy your competition by cutting prices so low that you risk losing money. The competion cuts their prices, and, both businesses are operating by drawing on cash reserves. Business becomes a waiting game to see who runs out of money first.

Wal-Mart is better capitalized than other stores, so it can wait until the competitors die, or, offer to sell out to Wal-Mart (due to pressure from the board or shareholders, who want to make money).

Of course, once the competition goes away, prices must rise, to preserve the income necessary to pay off the "debt" incurred by selling the company stocks. If the companies don't want to go through the pain of compeitition and self-destruction (and no company really wants competition) they will have secret, illegal, meetings to set prices, cut up territories, and divvy up markets.

Generally speaking, consolidation, and moving toward a monopoly, always happens in capitalism. Right now, Wal-Mart is the up-and-coming discount retail monopoly. (Microsoft is the software monopoly, SBC is the growing telecom monopoly, and big media is carved up between several transnationals. The rich really are getting richer.)

That's another reason why capital likes Wal-Mart. It's the monopoly, and it's never risky to continue to support the monopoly. Moreover, it's always very risky to challenge the monopoly.

(Capitalists give a lot of lip service to "competition", but, generally speaking, competition is horrible for profit margins... and thus, horrible for the capitalist who invests in a specific business. Rhetoric about competition and low prices is mostly used to appeal to the consumer masses. Competition only helps "capitalism", the ideology of the system, because it keeps the entire system viable by maximising productivity.)

One reason why retail stores like Wal-Mart have a lot of power is due to Proposition 13 and it's relatives. They put a cap on property taxes, and also kept the property from being re-assessed, choking off a large source of revenue for cities. The cities need to find other sources of revenues, and sales taxes have grown in importance.

The only way to get sales taxes is by having retail businesses within your city borders. Large companies have an edge, because they pay their taxes, and also give big political contributions to their favorite politicians. Because of this, big companies like Wal-Mart get "freebies" from the cities, in the form of direct subsidies like stoplights, and indirect ones like zone changes.

A zone change is a modification to how some piece of land is supposed to be used. Maybe it was intended for houses, or an office, or a park, but a retailer comes along, and before you know it, the zone changed to "retail." This is a subsidy because the city has changed the value of the land, and given it over to the purchaser. Who is "the city" and who pays for "the city"? You and I.

By not "paying our own way" in taxes, we now have to pay indirectly, through a retailer like Wal-Mart. And Wal-Mart has the ear of the politicians who should be listening to the people (in a democracy, that is... in an oligarchy, they would listen to Wal-Mart).

Lastly, an idea presented by a Frontline TV show about the store is compelling: Wal-Mart's success is due to policies aligned with the Washington Consensus. The Washington Consensus is basically Neoliberalism. It believes that the market is a miracle cure for all economic ills.

http://www.cid.harvard.edu/cidtrade/issues/washington.html

Neoliberalism flourished, mainly, because the Soviet Union fell, and capitalism was free to expand everywhere (given enough time to bribe all politicians). Politicians and business people that could have faced communist revolution now had nothing to fear from the poor masses. Demands for food and rights would ultimately fall on deaf ears, and the people found themselves in a situation with little food, and no rights.

Enter Wal-Mart (and pretty much any transnational western business).

Enter China, in the post-revolutionary era, finally having reclaimed its soveriegnty from western imperialism, but now surrounded by capitalist countries, as well as other communist rivals.

The two meet, and it's a vanguardist match made in heaven. The capitalist business that's also got a hint of paternalistic authoritarian dictatorship. The very nationalistic communist government that's leaning toward liberalization. I'm certain that both parties think of the people as "the masses," of unindividuated toilers.

The rest is history.... perhaps even in the historical materialist sense.

> Large companies have an edge, because they pay their taxes

not according to IRS data -

(federal taxes are the bulk of the total tax load too - states frequently subsidize companies like walmart using real taxpayer's money - us, so part of the reason for the low prices is because we've already paid via lower return on services due to the subsidy payouts)


> By not "paying our own way" in taxes

we pay ~ 30 % of our income in taxes, with various specialty consumers (like tobacco, alcohol) paying even more

sales tax popularity rests on two points -

they slowly dribble the taxes throughout the year insted of hitting you in one lump sum so it doesn't seem that bad

poor people pay a *larger percentage of their income* in tax - actually pay more taxes - than the wealthy since they have the same tax shelters and loopholes that are available to corporations


so sales taxes are both insidious and unfair...

Just to clarify, by "paying their taxes" I mean that they tend to pay their sales taxes. They also pay payroll taxes (unless they fail to pay their workers, and thus don't report it). Smaller stores sometimes try to hide their revenues, and they don't get caught because there are so many.

Corporate taxes on profits are a different thing. They don't pay anything because they manage to categorize everything as expenses and so-called "losses". They're laughing all the way to the bank.

Also, we do pay federal income taxes, but that doesn't go toward the local governments, except through the fed passing the money back to state and local governments. The upshot is that the fed has power over the local, and the local have less money. Many social services are administrated at the county and state level, and we should pay to support our local social services, and we should use them.

I agree about the sales tax. It hurts people who cannot save much of their income. It hurts people who try to sell things. It's a regressive tax that hits the poor more than the rich. I happen to think that taxes on income and taxes on property are pretty reasonable. It's always nice to have them lower, but, they're better than sales taxes.