The high cost of low prices

November 17th, 2003 § Three comments

Fast Company has a great article about how Wal-Mart’s relentless push to lower its prices has forced its suppliers to move even more manufacturing jobs overseas. The whole article is worth reading, but there are a couple of paragraphs that absolutely nail the biggest problem with the way Wal-Mart does business, and with American capitalism in general:

Wal-Mart wields its power for just one purpose: to bring the lowest possible prices to its customers. At Wal-Mart, that goal is never reached. The retailer has a clear policy for suppliers: On basic products that don’t change, the price Wal-Mart will pay, and will charge shoppers, must drop year after year. But what almost no one outside the world of Wal-Mart and its 21,000 suppliers knows is the high cost of those low prices. Wal-Mart has the power to squeeze profit-killing concessions from vendors. To survive in the face of its pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of outsourcing products from overseas.

Of course, U.S. companies have been moving jobs offshore for decades, long before Wal-Mart was a retailing power. But there is no question that the chain is helping accelerate the loss of American jobs to low-wage countries such as China. Wal-Mart, which in the late 1980s and early 1990s trumpeted its claim to “Buy American,” has doubled its imports from China in the past five years alone, buying some $12 billion in merchandise in 2002. That’s nearly 10% of all Chinese exports to the United States.

Oh, and it gets worse: Even Chinese companies are neglecting safety and reducing wages to keep prices low. (To read that last article, use “pinchydotorg” as the login and password.)

Three comments

  • Christine says:

    And unrelated, but: I love your link to Berkeley crime.

  • Jeff says:

    What? Who told you about my links to Berkeley crime? Nobody’s proven anything!
    Oh, that link to Berkeley crime. Yeah, when I hear gunshots near my house or see a phalanx of squad cars parked down the street, it’s nice to find out what the hell happened. Unfortunately, the city hasn’t been updating its crime logs since October.

  • Christine says:

    Someday I need to get off my ass and find Oakland crime logs… I’m particularly interested in what’s going on in the house across the street.

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