In Circleville, Ohio, population 13,000, the local RCA television-manufacturing plant was once a source of good jobs with good pay and benefits. But in late 2003, RCA’s owner, Thomson Consumer Electronics, lost a sizeable portion of its production orders and six months later shut the plant down, throwing 1,000 people out of work.
Thomson’s jobs have moved to China, where cheap labor manufactures what the American consumer desires — from clothing to electronics — and can buy at “everyday low prices” at the local Wal-Mart.
FRONTLINE explores the relationship between U.S. job losses and the American consumer’s insatiable desire for bargains in “Is Wal-Mart Good for America?” Through interviews with retail executives, product manufacturers, economists, and trade experts, correspondent Hedrick Smith examines the growing controversy over the Wal-Mart way of doing business and asks whether a single retail giant has changed the American economy.
“Wal-Mart’s power and influence are awesome,” Smith says. “By figuring out how to exploit two powerful forces that converged in the 1990s — the rise of information technology and the explosion of the global economy — Wal-Mart has dramatically changed the balance of power in the world of business. Retailers are now more powerful than manufacturers, and they are forcing the decision to move production offshore.”
“Wal-Mart has reversed a hundred-year history that had the retailer dependent on the manufacturer,” explains Nelson Lichtenstein, a professor at the University of California Santa Barbara. “Now the retailer is the center, the power, and the manufacturer becomes the serf, the vassal, the underling who has to do the bidding of the retailer. That’s a new thing.”
To understand the secret of Wal-Mart’s success, Smith travels from the company’s headquarters in Bentonville, Ark., to their global procurement center in Shenzhen, China, where several hundred employees work to keep the company’s import pipeline running smoothly. Of Wal-Mart’s 6,000 global suppliers, experts estimate that as many as 80 percent are based in China.
“Wal-Mart has a very close relationship with China,” says Duke University Professor Gary Gereffi. “China is the largest exporter to the U.S. economy in virtually all consumer goods categories. Wal-Mart is the leading retailer in the U.S. economy in virtually all consumer goods categories. Wal-Mart and China are a joint venture.”
When trade agreements were signed between the U.S. and China in the 1990s, bringing China into the World Trade Organization, American political and business leaders embraced the idea. China’s 1.2 billion people were viewed as an enormous untapped market for American-made goods. The reality, experts say, is the opposite. China’s exports to the U.S. have skyrocketed.
At a salary of only 50 cents an hour or $100 a month, Chinese labor is an unbeatable bargain for international business. And the Chinese government is doing everything it can to be sure the country’s infrastructure supports the export business. Ten years ago Shenzhen’s main port did not exist. Today it’s on the verge of becoming the third busiest port in the world.
Wal-Mart estimates it imports $15 billion of Chinese goods every year and concedes that the figure could be higher — some estimates range as high as $20 or $30 billion. Company executives are quick to point out they have always scoured the globe for low cost suppliers to benefit the American consumer.
“We do depend on products from around the globe to draw our consumers into the stores,” says Ray Bracy, Wal-Mart’s vice president for federal and international public affairs. “We feel they need to have the best product, the best value, at the best price we can achieve.”
Some experts contend Wal-Mart’s “everyday low prices” are causing a clash between the interests of Americans as workers and the desires of Americans as consumers.
“If people were only consumers, buying things at lower prices would be just good. But people also are workers who need to earn a decent standard of living,” says economist Larry Mishel of the Economic Policy Institute. “The dynamics that create lower prices at Wal-Mart and other places are also undercutting the ability of many, many workers to earn decent wages and benefits and have a stable life.”
Economist Brink Lindsey of the Cato Institute sees it another way. “I think Wal-Mart is good for America,” he says. “Wal-Mart is doing what the American economy is all about, which is producing things consumers want to buy … offering consumers a wide range of goods at rock-bottom prices. It is meeting the market test.”
This is little consolation to the unemployed workers back in Circleville, Ohio. Steve Ratcliff, a long-time worker at the Thomson plant puts it simply: “If you want these low prices, then you go buy your products from Wal-Mart. But what does that actually do for this country? It’s putting people out of work. And it’s lowering our standard of living. That’s the bottom line.”
Ironically, for Ratcliff and his former colleagues, there are new jobs coming to town. In a patch of farmland right next to the vacant Thomson plant, Wal-Mart has broken ground on one of its new Supercenters. But the Wal-Mart jobs will represent a steep cut in pay from the $15 to $16 an hour workers made at Thomson, and a far cry from the pension, health care, and job security benefits that have long been the norm in manufacturing.