Economic Terrorism
Free Market Project

The PBS Attack on Wal-Mart
‘Frontline’ Says U.S. ‘Like a Third-World Country’

Dan Gainor
Director, Free Market Project

PBS’s Frontline spent most of it’s Tuesday night November 16 program attacking Wal-Mart and blaming it for killing American jobs, contributing to the trade deficit and helping put a Rubbermaid location out of business. The program titled “Is Wal-Mart good for America?” featured correspondent Hedrick Smith saying the U.S. is “like a third-world country” because we import so many goods from China compared to what we ship them.

While Smith did interview Wal-Mart representatives and even a few happy shoppers, much of the report was filled with comments from Wal-Mart detractors and people who blamed the retailer for lost jobs or even being “vindictive.” Smith relied heavily on interviews with Jon Lehman who, according to Smith “worked at Wal-Mart for 17 years. He managed six different stores. Disillusioned, he quit to go work for a union trying to organize Wal-Mart workers.” After that brief introduction, Lehman was received no label other than simply “John Lehman, former Wal-Mart store manager.”

Lehman commented on company practices, outsourcing strategies and negotiating styles. Unsurprisingly, the union organizer was critical of the anti-union Wal-Mart’s negotiating tactics, though he focused on their suppliers: “Well, it’s very one-sided. There is no negotiation. There’s not much negotiation at all.” “They know every fact and figure that these manufacturers have. They know their books, they know their costs, they know their business practices, everything, you know. So, what’s a manufacturer left to do? They sit naked in front of Wal-Mart. You know, Wal-Mart calls the shots. ‘If you want to do business with us, if you want to stay in business, then you’re going to do it our way.’ And it’s all about driving down the cost of goods.”

Frontline went to Lehman again and again, even to get estimates on how much profit the company made on some of its items. Lehman referred to foreign-made merchandize with the subtlety of a veteran union man: “I mean, we had so much of this cheap crap floating around the store, we didn’t know what to do with it.”

Smith wandered through the world of Wal-Mart, from state to state, like Alice in Wonderland. He was obviously impressed by their technology and amazed that they strive to make both a profit and keep prices low enough for their customers to afford to shop. After a comment from a hosiery company CEO who complained that Wal-Mart, in effect, says: “this is what they want, and they want to buy it at this price; therefore, that’s what we’d better be doing.” Smith responded with: “The focus is on what matters most to Wal-Mart: Prices.”

Smith then showed his view of the problems with trying to provide low prices for customers. He spoke with two CEOs of Rubbermaid and explained how the container company had worked hard to make Wal-Mart a client and “Sales and profits soared.” Then, when Rubbermaid wanted to raise prices because a key raw material had gone up in price, Wal-Mart refused.

According to Smith: “Other mass retailers agreed to a price hike, and Rubbermaid’s CEO flew to Arkansas to ask Bill Fields, head of Wal-Mart stores, to reconsider.” Carol Troyer, a former Rubbermaid executive, said “I thought it was a vindictive kind of meeting that said, ‘yes, you may be Rubbermaid, and you’re a big Rubbermaid, and you got the great name and all that, but you’re not going to tell us what to do. And we’re not going to take your price increase, and we really don’t care what it does to you.’”

From that, Smith focused on Rubbermaid’s original plant closing down and “countries like China were picking up the pieces.” To Smith, it was more than a loss of 1,000 jobs: “It seemed to me that it wasn’t just a plant dying; a set of corporate values was passing away. Ten years ago, Rubbermaid, with its reputation for quality, was named ‘most admired.’ Last year, Wal-Mart, known for its cost-cutting, was most admired. If you look at the shift from Rubbermaid as the most-admired company in 1994, and Wal-Mart as the most-admired company today, in terms of the larger American economy, what does that mean? What does that say about the touchstones of success?”

Smith found his answer with Professor Gary Gereffi of Duke University: “Rubbermaid represented an innovation-oriented high road towards U.S. competitiveness. I think Wal-Mart represents a cost-driven, low-price, low road towards U.S. competitiveness.”

Although Smith hinted at “lax management” at Rubbermaid “struggling to maintain its ambitious growth targets,” it was obvious he blamed the lost jobs on Wal-Mart’s “low road.”

Smith’s own road took him to China to see Wal-Mart’s facilities in action there and then back to the U.S. port of Long Beach, California where he was amazed that the docks unload more from China than is shipped out.

The port’s communications director explained the value of what was unloaded from China there to be about $36 billion and what was shipped to China to be about $3 billion. Smith was stunned. “So, they’re doing all the... we’re like a third-world country.” From there, he launched into a general attack on the U.S. trade relationship with China and, though he didn’t call for protectionism, he made it clear that the promise of Chinese markets for U.S. goods was flawed from the beginning. “So the whole idea was wrong?” Smith asked Alan Tonelson of the Business and Industry Council. “It was completely wrong,” was Tonelson’s unsurprising response.

That answer led Smith to Circleville, Ohio where a Thomson manufacturing plant had closed down because of outside competition. Without irony, Smith explained the French-owned Thomson plant “suddenly faced sharp foreign competition.”

Smith finished up his report asking one of the former Thomson employees “In the end, is Wal-Mart good for America?” Steve Ratcliff was a former machine operator and one of 1,000 workers who lost a job because, we were told, of Wal-Mart’s actions. “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, that’s what it’s doing. And it’s lowering our standard of living. That’s the bottom line.”

The bottom line on taxpayer-funded PBS was that Frontline was out to get Wal-Mart. Additional funding for the program came from the Nathan Cummings Foundation which takes issue with the free market and is concerned about the impact of globalization. According to their own website: “The technological, economic globalization and communications revolutions are causing transformations that create challenges to social and economic justice and the ability to foster equitable and sustainable economic growth that promotes individual opportunity, social well-being and community.”