New Report Tallies Some Of The Cost Of The “Walmart Model” Economy

Dave Johnson Fellow, Campaign for America's Future

See if this business model sounds familiar:

● Close American factories and offshore production to a low-wage country with few environmental regulations. (Note: moving a factory out of the country “increases trade” and they say that’s a good thing.)
● Replace American-made goods with cheap stuff made overseas.
● Allow U.S. workers to end up with low wages – or no wages at all.
● Pay workers so little that they need public assistance to get by.
● Let executives and shareholders pocket the wage and cost-of-protecting-environment differential.
● Dodge taxes using schemes that shift profits to offshore tax-haven subsidiaries.
● Use your status as a giant, multinational corporation to drive smaller competitors under.
● Watch as your shareholders who benefit from this model use their wealth to influence government to keep wages low, keep the offshoring going, keep the tax-dodge loopholes open, and keep the workers from unionizing.

Some call this the “Walmart Model.” One result of this model is that the six “Walmart heirs” are so wealthy from inherited stock that they have more wealth than 42 percent of all Americans combined. That figure is from 2012. It may be worse now.

The billionaires created by stripping the rest of our wages (and taxes needed to fund our government) use the wealth gained from this model to influence our government and keep the game going. For example, the Walton heirs helped fund a drive to repeal inheritance taxes. The Walmart heirs were one of 18 families that funded a 10-year campaign to get rid of inheritance taxes. In 2006 Congress did just that. Public Citizen documented how these families used front groups to push the “death tax” AstroTurf campaign to convince Americans that average people (“They’re taking family farms!”) were affected by this tax, when only one-fourth of one percent of Americans were affected at all. This campaign gave politicians “cover” to vote for the repeal. (Congress has since restored some of the estate tax.)

A Measure Of The Cost

How much does this Walmart-model economy cost? A new study measured job losses from Walmart’s offshoring at 400,000.

The New York Times reports on the study, in “Walmart’s Imports From China Displaced 400,000 Jobs, a Study Says”:

Imports from China by Walmart, the nation’s largest retailer and biggest importer, eliminated or displaced over 400,000 jobs in the United States between 2001 and 2013 …

The jobs, mostly in manufacturing, represent about 13 percent of the 3.2 million jobs displaced over those same years that the study attributes to the United States’ goods trade deficit with China. Walmart’s Chinese imports amounted to at least $49 billion in 2013, according to the study, which was based on trade and labor data. Over all, the United States’ trade deficit with China hit $324 billion that year.

The study is “A Conservative Estimate of ‘The Wal-Mart Effect’,” by Robert Scott of the Economic Policy Institute (EPI). Key findings from the report include:

● The Walmart-based trade deficit with China alone eliminated or displaced over 400,000 U.S. jobs between 2001 and 2013.

● Walmart is responsible for a $36.7 billion increase in the U.S. trade deficit with China between 2001 and 2013—15.3 percent of the total growth in the U.S.-China trade deficit.

● Chinese imports entering through Walmart totaled at least $49.1 billion in 2013, up from $11.4 billion in 2001.

● The manufacturing sector has been hardest hit by the growth of Walmart’s imports. Walmart’s increased trade deficit with China between 2001 and 2013 eliminated 314,500 manufacturing jobs.

● On average, each of the 4,835 Walmart stores in the United States was responsible for the loss of about 86 U.S. jobs due to the growth of Walmart’s trade deficit with China between 2001 and 2013.

The study begins:

In the long history of false promises made by trade negotiators, the claim that China’s entry into the World Trade Organization (WTO) in 2001 would reduce the U.S. trade deficit with China and create good U.S. jobs stands out. The total U.S. goods trade deficit with China reached $324.2 billion in 2013. Between 2001 and 2013, this growing deficit eliminated or displaced 3.2 million U.S. jobs (Kimball and Scott 2014). As the world’s largest retailer, U.S.-based Wal-Mart is a key conduit of Chinese imports into the American market.

The study explains how China sets up this situation:

China has achieved its rapidly growing trade surpluses by manipulating its currency: it invests hundreds of billions of dollars per year in U.S. Treasury bills, other government securities, and private foreign assets to bid up the value of the dollar and other currencies and thereby lower the cost of its exports to the United States and other countries. China has also repressed the labor rights of its workers and suppressed their wages, making its products artificially cheap and further subsidizing its exports. Wal-Mart has aided China’s abuse of labor rights and its violations of internationally recognized norms of fair trade by providing a vast and ever-expanding conduit for the distribution of artificially cheap and subsidized Chinese exports to the United States.

It concludes that America needs to reform its trade policy to benefit working people instead of billionaires like the Waltons:

The U.S. relationship with China needs fundamental change: addressing the exchange rate policies and labor standards issues in the Chinese economy should be important national priorities. Wal-Mart’s huge reliance on Chinese imports illustrates that many powerful economic actors in the United States benefit from China’s unfair trading system. Wal-Mart’s gain, however, is not the country’s gain, as Wal-Mart’s imports have contributed to the ever-growing trade deficit that imperils future economic growth.

That 400,000 job-loss number doesn’t measure the jobs lost at smaller, local Walmart competitors driven out of business. It doesn’t measure the cost of public assistance for low-wage employees. It doesn’t measure the way communities are hit by the job losses and resulting low wages. It doesn’t measure the lost jobs due to deferred infrastructure maintenance that result from tax dodging – and budget cuts forced on us by politicians funded by billionaires.

The “Walmart model” has become the model of our economy. The billionaires that model creates use their wealth to bribe – I mean, “influence” — our government to keep things the way they are. It is time to take back our government from the billionaires, fix trade, fix taxes and fix wages.


This has been reposted from the Campaign for America's Future.


Image from Mike Mozart on Flickr.

Johnson also is a fellow at the Commonwealth Institute and a Senior Fellow at the Institute for the Renewal of the California Dream. Follow Dave Johnson on Twitter: