Solutions to the Wal-Mart Problem

As the company's misdeeds pile up in the public consciousness, it can be tempting to

define the problem of Wal-Mart as one of a bad apple-a rogue company gone awry in an
otherwise sound economic system.

Wal-Mart has indeed attained a scale that puts it in a category all its own, and there's no
question that it is leading a race to the bottom. But others are running that race too.
Target's wages are as poor and its health benefits as out of reach. Home Depot and
Lowe's have crushed thousands of independent hardware stores. Best Buy has its main
sourcing office Shanghai, where it relies on the same dismal factories.

It would be more accurate to view Wal-Mart not as a bad apple, but as the crowning
achievement of an economic and political system that has greatly enlarged the power of
global corporations and trampled core American values-namely small business,
community, local democracy and work.

Rather than campaigning to convince one company to change its ways, we would do
better to focus our energies on changing the underlying policies that created this monster-
and will continue to create others. This is an opportunity to build a broad political
movement aimed at reasserting those core American value. Here's how:

1. Bring Back Trust-Busting

There was a time not long ago when Americans believed concentrated market power was
not only a threat to consumers, but also to democracy, and that a truly competitive
economy was one in which there were many competitors.

This robust notion of antitrust has given way, within the courts and enforcement
agencies, to a view of antitrust that largely discounts the dangers of concentrated market
power and instead focuses narrowly on the benefits of economies of scale. The view that
now dominates antitrust jurisprudence essentially holds that anything that may yield
efficiencies and thus the possibility of lower prices in the short term is acceptable-
regardless of how great the concentration of power or the long-term consequences.

Two years ago, when Wal-Mart priced much of its toy department at or below cost to
destroy Toys R Us, it provided a large-scale demonstration of a tactic that many small
businesses contend the company has been employing in a more localized fashion for
years. Predatory pricing benefits consumers through lower prices in the short term, but
ultimately reduces competition.

Another concern is the power global retailers have over suppliers. Borders and Barnes &
Noble are now bigger than the top 10 publishers combined. Home Depot and Lowe's,
which were barely a blip on the radar 20 years ago, now command half of all sales of
hardware and building supplies. As gatekeepers, they have extraordinary power to exact
favorable terms from manufacturers--which may not be extended to smaller competing
retailers--and to lock out some producers entirely.

We need to step up investigation and enforcement of predatory pricing violations and the
illegal exercise of buyer power. Unfortunately, the Bush administration appears headed in
the other direction. Its Antitrust Modernization Commission is weighing the repeal of the
Robinson-Patman Act, a key law for checking the power of giant retailers.

Perhaps it is also time to think about imposing a cap on the market share that any one
company is allowed to attain. Wal-Mart now has 30 percent of the market for groceries
and basic household goods in some major metros, such as Dallas-Fort Worth, and an even
greater share in many small towns.

2. Expand Community Control Over Development

Cities already have the authority to set limits and impose standards on retail development.
Some are now leading the way by requiring retail projects to pass an economic impact
analysis to gain approval, and restricting the size and location of new stores, which is
crucial to preventing companies like Wal-Mart from overwhelming local economies.

But there are major hurdles. One is the lingering belief among many local officials that
these big stores are good for local economies. Papers that came out of a recent Wal-Mart-
funded conference and a number of earlier studies have reached a range of conclusions
about Wal-Mart's effect on local economies, spanning from significant negative impacts
to modest benefits.

But what's striking is the vast gap between the findings of even the most favorable studies
and the economic Shangri-La that this company and other big-box retailers have been
peddling to local officials.

Even for those communities shrewd enough not to buy the job-and-tax myths, there still
remains the fear of being hit with an unfounded, but expensive, lawsuit brought by the
world's biggest corporation or an extremely well-funded ballot initiative that grassroots
groups lack the resources to effectively counter. (Wal-Mart, Home Depot, Lowe's and
others have all been involved in zoning-related ballot initiatives, sometimes spending
upward of $100 per voter.)

Some cities have land use policies that have not been updated for years and afford
insufficient protections-much to the surprise of residents who suddenly find one of these
giants on their doorstep. Earlier this year, Wal-Mart CEO Lee Scott directed executives
to speed up construction of new stores in anticipation of more cities revising their rules
on retail development.

States could bolster local democracy against corporate power by passing laws that
automatically make large retail projects a conditional use-subject to added scrutiny,
including an independent economic impact analysis and a public hearing and a vote by
the city council. States should also look into adopting protections for cities that face
intimidation lawsuits brought against valid land use policies, and they should outlaw
corporate spending on ballot initiatives.

3. Support Small Business Creation

We've lost tens of thousands of independent businesses over the last decade and, with
them, an important part of the fabric of American life. Small businesses contribute
significantly to the vitality of local economies. They nurture social capital, disperse
wealth and vest decision-making in local communities rather than corporate headquarters.
They are the means by which generations of families have pulled themselves into the
middle class.

But small businesses have long been on the losing end of government policy. Local and
state governments have spent billions subsidizing the construction of big-box stores.
Nearly half the states have corporate income tax policies that give significant advantages
to national chains. Local zoning boards routinely bend and break the rules to
accommodate big retailers, while telling small businesses that it's their own problem if
they cannot "compete."

What might our economy look like if we reversed these policies? What might happen if
we redirected all those corporate subsidies to small business development? We could set
up business incubators, training programs and revolving loan funds. What if we stopped
creating tax increment financing zones to support Wal-Mart and instead established
Independent Business Investment Zones, as some in Austin, Texas, are calling for? What
if our land use and transportation policies no longer fueled big-box sprawl but fostered
small businesses embedded in neighborhoods and town centers, so we could once again
walk to the store?

4. Value Work
In a country that supposedly values work, it's a disgrace that so many people put in a
full 40 hours or more every week and still cannot make ends meet, especially when the
remedies are so clear: a legitimate minimum wage, universal health care and protection
for the right to organize and have a voice on the job.

It's heartbreaking to read the testimony that has come out of the various lawsuits charging
Wal-Mart, Home Depot and other chains of deleting hours from employees' timecards.
This is dramatic evidence that, here in the land of the free, thousands of people feel they
cannot stand up for the basic right to be paid for their work without facing retaliation or
job loss.

This fear is the direct consequence of policies that have made it harder for workers to
form unions and dramatically tipped the balance of power in the workplace. It's high time
we tipped it back.

Wal-Mart is a powerful rallying point, but we should not lose sight of the big picture-if
for no other reason than it will make it all that much harder to tackle Wal-Mart itself. To
the extent that liberals in New York and other cities continue to flirt with Target while
shunning Wal-Mart, we are vulnerable to letting the other side portray this as just another
volley in the culture wars-our problem with Wal-Mart seemingly based on nothing more
than its lack of style and association with southern states and country music.