53 pages • 1 hour read
Charles FishmanThe Wal-Mart Effect: How the World's Most Powerful Company Really Works - and How It's Transforming the American Economy
Nonfiction | Book | Adult | Published in 2006A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Chapters 6-7Chapter Summaries & Analyses
Chapter 6 Summary: “What Do We Actually Know About Wal-Mart?”
Fishman interviewed economist Emek Basker about the study she launched on Wal-Mart’s impact on the communities its stores serve. She wanted to understand how Wal-Mart store openings affected retailers and job availability in the surrounding communities. She attempted to procure “a list of every Wal-Mart in the nation” and when they opened in order to perform this research (138), but couldn’t access the data. She compiled a list of store locations, but Wal-Mart wouldn’t reveal when the stores were built. In spite of these obstacles, she published a paper in the Journal of Urban Economics explaining her methodology and findings. To analyze the effect Wal-Mart had on retailers’ prices, she examined specific products, including Alberto V05, Kleenex, and Fruit of the Loom (142). To analyze Wal-Mart’s impact on job availability, she focused on retail employment. Although new Wal-Mart stores created new jobs, they shut down other local businesses, thus eliminating other retail positions.
Fishman next analyzes inflation rates from 1998 to 2001, arguing that the Consumer Price Index issued by the US government during this time was inaccurate because it didn’t take Wal-Mart’s numbers into account. The CPI thus created a different reality, as its analytics failed to incorporate Wal-Mart’s pricing and sales. The CPI was assuming that because Wal-Mart’s prices were lower, they offered a worse customer experience and lower quality product that wouldn’t attract consumers (149). CPI economist Patrick Jackman explained this thinking to Fishman, citing MIT’s Jerry Hausman and the USDA’s Ephraim Leibtag’s study about the pricing phenomenon.
Fishman states that, in 1988, another scholar and economist named Kenneth E. Stone also analyzed the effect of Wal-Mart store openings on various small towns and communities. He focused his study on 55 Iowa towns, 10 of which had Wal-Mart stores and 45 of which didn’t (153). In towns with supercenters, general merchandise sales escalated, while in towns without supercenters, sales declined. Meanwhile, competitors in towns with supercenters suffered. Stone’s study asked how local merchants could survive Wal-Mart’s arrival in their area (155). In many cases, Stone observed how particular communities accommodated and rewarded Wal-Mart for moving into the area, effectively bankrupting competitors.
In 2001, professor Paul Bloom and graduate student Vanessa Perry launched another study, which sought to examine if suppliers were hurt or helped by selling to Wal-Mart. They couldn’t uncover any definitive answers to their question. One of Fishman’s Bain & Company contacts suggested that suppliers might let their profit margin decline in order to grow their business particularly with Wal-Mart (162).
Penn State University professor Stephan Goetz conducted another study of the Wal-Mart effect. Goetz wanted to know if Wal-Mart store openings impacted the poverty rates of particular communities. He discovered that communities with Wal-Mart stores had more severe poverty levels than those without. Wal-Mart responded to the study, saying that Goetz manipulated his numbers to produce the outcome he wanted.
Chapter 7 Summary: “Salmon, Shirts, and the Meaning of Low Prices”
Fishman opens this chapter with an example, stating that Wal-Mart sells wild-caught salmon filets for $4.84 a pound. This pricing is markedly lower than other salmon pricing at competing grocery stores. Considering this data, Fishman wonders what Wal-Mart did to buy and sell salmon so cheaply (169).
Exploring this question further, Fishman writes that, in the 1980s, all salmon bought and sold in the United States was Atlantic salmon, primarily sourced from Alaska. As the national demand for salmon grew, companies began sourcing from Norway. By 1990, Americans were eating “half a million pounds of salmon a day” (169). Atlantic waters were rapidly depleted, and a Chilean market developed. By 2005, Chile was exporting over $1 billion of farmed salmon to the United States (170).
Fishman spoke to Rodrigo Pizarro, head of Terram, Chile’s foundation for sustainable development. Pizarro explained the history of salmon farming in southern Chile and the gradual economic impact of the practice. All of Wal-Mart’s salmon originates from Chile, putting a strain on Chile’s salmon farmers. Workplace conditions have directly declined as a result, which Pizarro believed might impact the quality of the fish. Fishman notes that a similar phenomenon occurred with Kathie Lee Gifford clothes, when American markets discovered the clothes were produced in offshore factories using child labor. Pizarro told Fishman about the poor conditions in the Chilean fish factories and their effect on Chilean daily life.
Wal-Mart sells clothing for similarly cheap prices. Curious about how Wal-Mart could buy and sell clothes for such low costs, Fishman interviewed global factory condition expert S. Prakash Sethi. Sethi told Fishman that factories will do anything to keep costs low, particularly to meet the supply demands of companies like Wal-Mart.
Next, Fishman shares how, in 2004, two Bangladeshi women spoke out about their negative experiences at Dhaka clothing factories. They spoke of abuse, low wages, and poor conditions. A sweatshop lawsuit against Wal-Mart ensued. In response, Wal-Mart posted codes of conduct for its suppliers and instated intermittent factory checkups. However, these checkups were largely scheduled and did little to amend factory conditions. Supplier representatives like Pizarro have since warned Wal-Mart representatives that if labor conditions don’t improve, workers will sabotage their product.
Chapters 6-7 Analysis
Chapters 6 and 7 examine the Trade-Offs of Low-Cost Consumer Goods and the Ethical Concerns in Global Supply Chains. In Chapter 6, Fishman presents a series of economic studies conducted by experts, professors, and scholars into the Wal-Mart effect. These studies examine the ways in which Wal-Mart store openings impact a particular community’s job availability, general merchandise price points, poverty rates, and cost of living. In turn, these studies offer Fishman an organic entryway into his thematic considerations and overarching journalistic conjectures. In Chapter 7, Fishman gives added nuance to his arguments regarding the negative effects of Wal-Mart policies on overseas markets, on factory conditions, and on product quality. As is true of Chapters 1-5, Chapters 6 and 7 marry statistical data with journalistic interrogation and narrative detail to present a clear explanatory picture of the pitfalls of Wal-Mart’s corporate model. Fishman blends these tonal registers in order to maintain his three-dimensional and comprehensive investigation into the Wal-Mart effect and the corporation’s historical impact on the national and global economies.
In Chapter 6, Fishman argues that Wal-Mart’s opacity precludes thorough investigation into its operations, principles, and guiding philosophies. He uses each of his cited studies to fortify this claim. In the case of Emek Basker’s study, Basker wanted to answer two simple questions: what effect “the opening of a Wal-Mart store [had] on prices in the immediate area” and what effect “the opening of a Wal-Mart store [had] on the availability of jobs in the immediate area” (137). However, Basker encountered obstacles in her research because of Wal-Mart’s refusal to provide transparent data about its store locations and openings. Because the corporation “could not be bothered to make public a list of its stores and their opening dates to facilitate [Basker’s] or any other research,” the company effectively controlled the results of the study (145).
The same phenomenon occurred in the other studies that Fishman references throughout the chapter. Fishman thus argues that Wal-Mart deliberately excludes itself from public, scholarly, governmental, and economic scrutiny by withholding the details of its operation. This opacity, Fishman avers, is cause for suspicion and concern. In the case of Stephan Goetz’s study, Fishman employs sarcasm to comment upon Wal-Mart’s withholding behaviors. After Goetz released his findings, Wal-Mart representatives remarked that “a study can say what you want it to say” (165). In response, Fishman remarks, that indeed marketing studies “commissioned by corporations [...] sometimes say what the companies want them to say” (165), implying that Wal-Mart takes part in its own manipulation of data to maintain its image and evade public ridicule and governmental regulation. Fishman bolsters these remarks by closing the chapter with Goetz’s final reflections on his study and Wal-Mart’s response to it. Having built the case in previous chapters that he is an impartial observer in pursuit of the facts, Fishman’s claim that Wal-Mart engages in its own manipulation of data and evasion of responsibility reads more like an honest assessment and less like Fishman is finding the answers he wants to find, regardless of the truth.
In Chapter 7, Fishman furthers his explorations from Chapter 6 by examining Wal-Mart’s impact on offshore suppliers, factories, and labor conditions. Throughout the text thus far, Fishman’s examinations have focused on the American market, economy, and populace. Chapter 7’s examinations of Chilean salmon farming and Bangladeshi sweatshops give nuance to Fishman’s investigations into the ethical implications of maintaining low-cost consumer goods in nations of the global north like the United States. While offering salmon filets for $4.84 a pound and children’s tee-shirts for $5.74 is tantalizing to American customers, Fishman argues that such low prices are “an immediate alert” because they make “almost no sense” (181).
In order to maintain their promised low prices, Fishman reveals, Wal-Mart has outsourced the majority of its production; and in turn, Wal-Mart’s suppliers’ factories avoid American governmental regulation. Even after investigations into the unfair and abusive labor conditions in such factories, Wal-Mart has evaded true responsibility for its unethical practices. These examples reveal an alternate version of the ways in which Wal-Mart’s allegedly positive philosophies and offerings in fact harm human life. Fishman is narrowing his investigation in Chapter 7 in order to consider the far-reaching effects of a simple business model: offering consumers affordable products. In the end, he presents an account in alignment with larger discussions of the early 21st century about corporate strategies to secure lower prices, at the benefit of consumers in the global north, often come at the expense of underpaid, dangerous, and abusive labor done by workers in the global south.
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