Crawl Across the Ocean

Monday, July 25, 2005

Was That a Cover Story or an Advertisement?

Back in January, commenter Spearin tipped me off that Ken Whyte, formerly of the much-loved National Post, might be taking over Maclean's and that the quality of the magazine (such it was) might suffer. Well it looks like Spearin was right on both counts. Via Bound by Gravity, I came across last week's Maclean's cover story, a thinly disguised love letter to Wal-Mart written by Steve Maich.

Regular readers know how I hate it when the mainstream media fails to provide links to the studies they quote, so when I read the following passages in the article:
"In 2002, Ryerson University completed the first major study on the company's impact on nearby small retailers, and found the opening of a new outlet is generally an economic boon for the whole area -- attracting other retailers and driving up sales at nearby stores."

and
"A 2004 Canadian Imperial Bank of Commerce survey of more than 1,800 small-business owners across Canada found that just 16 per cent of respondents said they had been hurt by competition from big-box retailers like Wal-Mart and Home Depot. Five per cent said the big boxes had actually helped them, while the vast majority claimed little or no impact."


I went looking for the studies in question to see what they said for myself. But what I found was this:
A Wal-Mart 'talking points memo' from 2004 which states:
"In June 2002 Ryerson University published an independent study examining Wal-Mart's economic impact on Canadian communities. The study, "The Economic Impact of Wal-Mart Stores," covered a five-year period and concluded -- after extensive analysis -- that Wal-Mart has not put other retailers out of business and in many cases has increased sales at neighbouring merchants across Canada."

and
"As further evidence, in October 2004 a nationwide survey of close to 2,000 Canadian small-business owners found that the majority of small businesses in Canada are not negatively impacted by large stores like Wal-Mart. The survey was commissioned by CIBC and conducted by Decima Research. Key findings were as follows: 53% of Canadian small businesses said they do not compete with big box stores like Wal-Mart; 26% said big box stores have no impact on their business; 5% said big box stores like Wal-Mart actually have a positive impact on their business, and only 16% said big box stores have a negative impact on their business."


Sound familiar? Keep in mind that this is the cover story of our 'national magazine' here. I mean, if you're going to paraphrase chunks of someone else's work without acknowledging the source, it should at least be by somebody good like Richard Russo or something, cribbing from a Wal-Mart press release is just sad.

This is certainly the worst, but there's more. Further down we get this:
"The various campaigns to paint Wal-Mart as an avaricious and abusive employer simply don't hold up to scrutiny, says Elisa Sumanski, a legal analyst with the National Right to Work Legal Defense Foundation, a Virginia-based group that represents workers in disputes with their unions, and which has received grants from Wal-Mart's founding Walton family. "We think it's really pretty simple -- if Wal-Mart is such a terrible place to work, then why are so many thousands of people so eager to work there?" she says."


True, Maich acknowledges the funding by Wal-Mart but he doesn't really give us a clear picture of what the 'National Right to Work Legal Defense Foundation' really is, which is a right-wing operation funded (by big money right wing foundations such as the Coors family's Castle Rock foundation and of course the Waltons) for the express purpose of fighting unions in court. The article treats this quote as if it was an independent legal analysis rather than coming from an organization that's about as partisan as it's possible to be.

The consistent bias in the article (not to mention bad writing) can be seen in the characterizations of the people mentioned. Here are the descriptions of those who oppose Wal-Mart:

"Andy Grossman, however, doesn't buy any of that. Grossman is executive director of Wal-Mart Watch, a lobbying and publicity organization [note how this description wasn't applied to the 'Right to Work' crowd] that coordinates the efforts of several anti-Wal-Mart groups." ...

"This is a societal fight," Grossman explains. "Wal-Mart is a symbol, because they're so good at what they do, others have to emulate them. This company's reach is so broad, we need to change the relationship between it and the communities it seeks to do business in, otherwise it's going to continue to destroy our societies."

For Grossman, those are the stakes: social destruction. Never mind that most of the research refutes this view. Never mind that millions more consumers vote with their feet and their wallets every year, opting for the financial freedom Wal-Mart affords. The point is that Grossman, and thousands of others, believe with near-religious zeal that Wal-Mart is dangerous. And the war drags on."

...

"Tom Robertson is a guy who wears his passions on his sleeve.

Sitting in his wood-panelled office near downtown Cleveland, the head of the northern Ohio chapter of the United Food and Commercial Workers union lays out his objections to Cleveland's proposed Wal-Mart, but he finds it hard to contain his contempt."


...

"Shortly after, Wal-Mart received its second B.C. rejection in a week, this time when the town council of the Vancouver Island city of Campbell River voted 7-0 against a rezoning application that would have paved the way for the retailer. More than 300 people spoke against Wal-Mart during three days of hearings, most saying the proposed riverside site should be used for a park. Pushing the development was the Campbell River Indian Band, which was hoping to buy the parcel of land from a logging company and had applied to have its status changed. After being turned down, some band members said racism had played a part in the rejection."


Compare to the descriptions of those who support Wal-Mart:

"To Carol Foote, it [the war against Wal-Mart] just didn't make sense."

"As far as Bruce Bartlett is concerned, people who hate Wal-Mart don't understand it."

"So, last year, when Bruce Bartlett saw opponents in his own city of Washington defeat plans for a Wal-Mart, he shook his head."

"Back in Cleveland, Chris Ronayne is still a little baffled by the whole controversy."

"The company, as always, puts a positive spin on things. Pelletier says all the scrutiny will only make Wal-Mart stronger and more responsive. He says it will keep listening to the complaints, and acting to address what it can. But the one thing that will not change is Sam Walton's admonition to put the customer first, always."

So it's pretty clear isn't it, the people opposing Wal-Mart are passionate to the point of having a religious zeal, maybe a little crazy, maybe a little racist. But meanwhile regular folks just plain don't understand what the g'all darn fuss is all about, they just want to put the customer first and what could be wrong with that?

Here's another humourous bit:

"From Los Angeles to the Saguenay, from Hartford, Conn., to Vancouver, a broad array of activist groups and unions have launched protests, lawsuits and ad campaigns, all aimed at discrediting Wal-Mart, halting its growth, and unionizing its workforce.

Like most wars, it's about money and power, and the first casualty is truth. Because even after all the scrutiny and analysis of the Wal-Mart phenomenon, most of what we've been told -- about worker abuse, destroyed small-town economies, crushed suppliers and greedy management -- is wrong."

Yeah, the first casualty of war is truth. Brilliant. But only on one side of the war of course. Wal-Mart is so honest you can reprint their press releases practically verbatim without even adding any context!

---

All right, I think you've figured out my opinion on how the article was written, but that doesn't get at the substance of the argument. After all, just because the writing is biased doesn't mean it's wrong.

let's consider the Ryerson study (it can be found here, but you have to pay $40 to read it): Says Maich:
"In 2002, Ryerson University completed the first major study on the company's impact on nearby small retailers, and found the opening of a new outlet is generally an economic boon for the whole area -- attracting other retailers and driving up sales at nearby stores. In metropolitan areas, a new Wal-Mart was generally followed by an increase of $56.8 million in local sales, and the opening of 12.9 new stores. In rural areas, the commercial boost was $74.1 million and 16.7 new stores on average. Meanwhile, economic growth in areas with Wal-Mart stores far outpaced growth in places without them. The final line of the study said it all: "It is difficult to make the case that a Wal-Mart store actually puts other retailers out of business."


Maybe somebody can explain this to me. Wal-Mart is a retailer. People have a certain amount of money in an area and they spend some percentage of it on retail goods. How could having a Wal-Mart store in an area increase the total amount which people have available to spend on retail goods? If anything, by giving people the same goods for fewer dollars you would expect Wal-Mart to decrease total sales.

I haven't read the study so I don't know their methodology at all, but perhaps Maich himself provides the answer. He discusses bringing a Wal-Mart to Miramichi:

"To Carol Foote, it just didn't make sense. It was near the end of the summer of 2000, and most of her neighbours in Miramichi, N.B., were planning to drive to Moncton, an hour and a half away, to buy school supplies for their kids at Wal-Mart. Foote knew that many in town already made regular trips there to buy household goods, clothes and electronics. And she knew every carload took more money from the local economy. But the prices, they said, were just too good to pass up."

...
"Foote heard lots of grousing about Wal-Mart, but when she looks at what it has brought to her town, she has no regrets. "We weren't trying to hurt our city, we just wanted it to grow," she says. "The stores here charged so much, people had to go to Moncton. And when they did, they'd buy their fuel there, they'd eat there. All our money was leaving town. I thought, 'This has got to stop.'"


So we can see what happened. Wal-Mart (and other big box retailers) opened stores with low prices in Moncton. The people from Miramichi, who used to shop in Miramichi, now started making the drive to Moncton for the lower prices, driving the local Miramichi businesses under and depressing the local economy. But in the study, the new Wal-Mart in Moncton is generating new sales and the opening of new stores - in Moncton.

Faced with the prospect of all its citizens shopping out of town, Miramichi now has no choice (if it wants people to shop locally) but to bring in its own big box stores. The people who used to drive to Moncton now shop in Miramichi and the study shows an increase in sales and stores around Miramichi after the Wal-Mart opens!

But nothing really has changed except that the old inefficient retailers have been driven under by the Wal-Mart, which is what the study was purporting to disprove. It's not the area right around the Wal-Mart which suffers, it's the outlying areas that people drive to Wal-Mart from.

How about this Wal-Mart talking point:
"That [Ryerson] study confirmed what Wal-Mart had long claimed: that its stores are economic generators, not predators. And, it seems, even small-business owners are coming around to that view. A 2004 Canadian Imperial Bank of Commerce survey of more than 1,800 small-business owners across Canada found that just 16 per cent of respondents said they had been hurt by competition from big-box retailers like Wal-Mart and Home Depot. Five per cent said the big boxes had actually helped them, while the vast majority claimed little or no impact."


It's a nice spin to say that a study which shows that 1 in 7 small businesses have been hurt by Wal-Mart and other big-box retailers means that small businesses are coming around to the view that Wal-Mart stores are not predators. I mean what percentage of small business are in competition with Wal-Mart (i.e. what percentage are non-specialty retailers)? Do they account for half of all small business - even then we're talking almost 1 in 3 being hurt. I can't find this survey online either but who knows what kind of response rate they got or what kind of adverse selection there might have been. Keep in mind that as a study chosen by Wal-Mart for it's press release it's probably the single most favourable result on the question which has ever been obtained. At this point, it's not looking like such great news.

As for the argument that conditions working at Wal-Mart must be great because there are always lots of people willing to work there, that's a great, flexible argument which could be used to justify the conditions that the Chinese imported to help build the railway worked under or the conditions miners have dealt with for most of the history of the profession or even to justify child labour. We're talking unskilled labour here, and if you can show me a society where demand for unskilled labour is running ahead of supply I can show you a society where the central bankers are driving up interest rates to put people out of work because they are worried about inflation (urged on by the same people who will tell you that they support Wal-Mart for the sake of the poor of course).

Another funny paragraph:
"Even in Canada, where the health care issue is largely moot, it would still be difficult to raise a family on an associate's wage. But very few are in that position. While the majority of Wal-Mart employees work full time, the company also employs many students, seniors and people collecting a second income. And Wal-Mart says only seven per cent of its staff are supporting a family."


Given that it would be 'difficult' to raise a family on these wages (i.e. your children might go to bed hungry every night, to put it a little less euphemistically) perhaps it is not surprising that people aren't doing it! I'd say the spread of jobs which pay too little to allow someone to keep their children above the poverty line does more damage to the family than gay marriage could do in a 1,000 years but that's just my opinion.

-----

You know what the funny part is - I don't even really have all that much against Wal-Mart. As I see it, there are three ways (for the purposes of this discussion) that a business can compete. The first, is in ways which benefit both the company and society. Wal-Mart's famed drive for efficiency, it's unwillingness to waste money on a fancy head office or management perks, it's sophisticated inventory management systems and so on fall into this category and they are rightly deserving of praise.

The second is ways which society allows as fair play, but which don't really contribute to society. Paying workers less is one example of this. If I think that society is better off when I pay less for something because the person ringing it up at the till is making a lower wage, I'm kidding myself. This is a zero sum game. Similarly, the price at Wal-Mart might be lower because the externalized costs of all the pollution involved in shipping stuff over from China and having individual customers each drive 100km in their SUV's and trucks to pick it up aren't included in the sticker price. Wal-Mart's better off but society isn't.

Now, like I said, this is fair play and it's not Wal-Mart's job (in my opinion) to set minimum wage rules or apply carbon taxes, so I have no significant beef with them here either.

The third category is competing in ways which are harmful to society and hence illegal. Blowing up your competition's warehouses falls into this category. Some of Wal-Mart's actions fall into the grey area between the second and third categories. For example, their recent decision to shut down a store rather than negotiate with a union. If Wal-Mart really does have any competitive advantage besides low wages, it should be able to pay similar wages as its competition without having its stores become unprofitable like it claimed. This decision was a violation of the understanding in our society that workers have the right to form a union. Much in the same way that a company is not allowed to sell products at a loss to drive its competitors out of business, it's not really considered fair play to close a profitable store to drive a union out of business.

Some might argue that Wal-Mart's low wages, which force workers to effectively rely on the state for subsidization in some jurisdictions (and which make supporting a family all but impossible), border on immoral behavior. Not enough to have laws passed against it, but enough that some people might choose not to shop there.

Aside from economic concerns, there are other issues. A new Wal-Mart might bring traffic problems, noise problems and all the other hazards which make getting a big anything built in a city pretty tough. Sure, Vancouver turned down an environmentally friendly proposal for a Wal-Mart store, they almost turned down building a transit line with a billion dollars being contributed by sources from outside the city!

Another factor to consider is that some small businesses will suffer. No matter what a study might try to show, the simple fact is that people buy stuff at Wal-Mart that they would have bought elsewhere. Even a big box, former 'category killer' store like Toys 'R Us (which itself drove many small independent stores under) is blaming Wal-Mart for it's demise. And there's no doubt that Wal-Mart is more efficient than these old independent stores, but there's also no doubt that something is lost when old family business are shut down and people go from being independent proprietors to low paid wage labour forced to endure lectures on how often they need to smile to keep the all important customers happy.

Efficiency and low prices generally win out in our society and rightly so, but it is not irrational to weigh it against what gets lost in the process.

Anyway, perhaps I am asking too much, but I would have thought that if our national magazine was going to do a cover story on Wal-Mart, it could really do the story right. Consider all sides fairly and with sympathy for what they are trying to accomplish and look into the complex economic and social questions raised by the spread of Wal-Mart.

Instead we get an ideological diatribe where Wal-Mart is the noble, cheerful, energetic, saviour and defender of the poor and it's opponents are selfish, desperate , incomprehensible people who walk all over the poor in their 'war' against Wal-Mart. It's not a true picture, it's not an enlightening picture and it's not a fair picture. Maclean's readers deserve better.

Labels: , , , ,

16 Comments:

  • That Ryerson study is worthless.

    Look at This Page and see if you can figure out why.

    Or even This One.

    By Anonymous public static, at 1:14 AM  

  • Media bias cuts both ways, I suppose.

    The way the anti-Walmart folks were characterized reminds me of how many Canadian news sources like to characterized CPC MPs.

    By Blogger Andrew, at 5:53 AM  

  • Yeah, I ran across the page listing Wal-Mart as one of the big donors to the Ryerson program.

    It certainly seems more like a facility set up by and for retailers than an independent academic entity.

    Still, without seeing the actual study , it's hard to assess it's value, so I left that information out of the original post.

    By Blogger Declan, at 9:03 AM  

  • After the Walmart incident we set the wheels in motion to cancel our subscription. The tricky part is that it's a gift from my parents rather than something we bought on our own. Anyhow, I subtly hinted that way during one phone call and Dad jumped on it, wholeheartedly agreeing. He's been a subscriber for as long as I can remember.

    I think it's paid for until the late fall so it looks like we have it until then.

    By Blogger Spearin, at 12:03 PM  

  • Andrew - that's true. Of course, for describing Conservative MP's it's a fair assessment :) In all seriousness, I think this article went well beyond the usual media bias - the author was paraphrasing Wal-Mart press releases without even acknowledging it for cripes sake.

    Spearin - you couldn't talk the parents into springing for 'Baseball Prospectus' instead?

    Actually, on reflection, it's kind of sad that there is much better objcetive analysis of baseball popularly available than there is for politics. Perhaps what democracy really needs is the spread of sophisticated political betting pools.

    By Blogger Declan, at 1:57 PM  

  • I find it amusing how riled up some lefties get at the "new Macleans". Righties had similar disgust for the "old Macleans".

    I've read 'em both, and I find value in both.

    By Blogger Andrew, at 2:48 PM  

  • Andrew, I don't really buy your moral equivalency argument that, because 'righties' didn't like the old Maclean's, it is merely amusing and not disturbing that the new Maclean's is passing off corporate talking points as their own thoughts and presenting astro-turf organizations as if they were independent sources of information.

    There is good journalism and there is bad journalism and there are standards that should be met regardless of someone's take on an issue. This work simply doesn't meet those standards - it's not a left/right issue.

    By Blogger Declan, at 3:52 PM  

  • Declan,

    Nicely done. And your right about standards. Back in the day, Roger Bird or Wilf Kesterton at Carleton University's School of Journalism would have failed my ass miserably if I handed in work with unatributed quotes like that.

    It isn't a left or right issue unless you take into account who benenfits most from that poor journalism - it ain't the left...

    By Blogger Mike, at 12:22 PM  

  • Good for you for digging all this up. I smelled foul as soon as I read that article; now I know why.

    If you haven't already, I'd say a letter to the editor is in order.

    By Blogger Idealistic Pragmatist, at 12:33 PM  

  • Steve Maich has responded to his Wal-Mart article on his blog. It's not always updated but sometimes he posts some interesting bits.

    http://weblogs.macleans.ca/allbusiness/archives/week_2005_07_24-2005_07_30.asp#001544

    By Blogger Bailey, at 6:42 PM  

  • Mike - thanks. It's true that in this case the bias works in favour of 'the right' but seeing something that was just as biased left would annoy me as well. I tend to focus my energy on stuff which is biased right because I think there's more of it and it's more dangerous and I think the biggest threat to democracy and justice generally comes from the wealthy and powerful, but the point is that just because there are two sides who disagree doesn't mean we throw the ideas of truth and standards out the window.

    IP - Yeah, a letter would certainly be appropriate in this situation. i was somewhat discouraged since I only saw the article about a week after it was published so my letter was unlikely to be timely. That's just an excuse of course - I might still write one.

    bailey - thanks for the link. Based on his blog entry I don't think he has gotten the point that the problem is less Wal-Mart than it is his shoddy reporting.

    By Blogger Declan, at 7:48 PM  

  • Delcan wrote: "How could having a Wal-Mart store in an area increase the total amount which people have available to spend on retail goods? If anything, by giving people the same goods for fewer dollars you would expect Wal-Mart to decrease total sales."

    This is not tough to figure out. If I have $100 to spend on consumer goods that I need, and a Wal-Mart will allow me to get those goods for less, say for $80, I now have an 'extra' $20 to spend. That $20 may or may not be spent at Wal Mart. It depends on if I can get more of what I need there.

    The money might go to another retailer who has a niche sown up that Wal Mart does not serve. It might go into something that is not a consumer good.

    That is a real benefit for a consumer and multiplied across a town it really adds up. All that 'new' money can lead to more business, esp. niche business, the boutiques some of the more snooty Wal Mart bashers like so much.

    Money is only worth what you can get for it; getting more goods for less really is like creating money. What's more, lower priced goods benefit those with low and fixed incomes most of all.

    There is nothing zero sum in having an employee paid less. It is a signal that what they are supplying is not needed to the same degree as it was. They can accept that or seek to add value to their work.

    The opposite tack, paying people more than they produce does nothing to increase wealth since it does not get at what wealth IS, ie. having access to needed goods and services. It discourages workers from seeking jobs that are of increasing value. I'm not saying that's easy or always possible, but a market signal is hard to pin on one group in any case. It's an aggregate.

    *whew* All that and I don't even like shopping at Wal Mart. :-)

    By Blogger Curt, at 10:17 PM  

  • Curt - say you have $100 to spend on goods. According to the study if there is a Wal-Mart in town you will spend $120. That's the part I don't get.

    I suggested the total spent might go down if anything because if people only spend $80 of their $100 because of Wal-mart's low prices, they might save some of the remaining $20 instead of spending it all.

    Getting more for the same money is *like* creating new money, sure - but according to the study it actually *does* create money - which seems mysterious (and dubious) to me.

    I don't deny there's a benefit to Wal-mart's efficiency - in fact I came right out and said it should be praised.

    As for the employee being paid less, it *is* a 0 sum game. The cost to society of producing the goods is identical, just the distribution between me and the worker is different.

    You could argue that paying the worker less encourages the worker to find more productive work thus benefitting society, but you could also argue that paying the worker more encourages companies to automate those jobs altogether benefitting society even more.

    This idea is often offerred to explain why societies with slavery don't innovate much, for example (true, this isn't a totally fair comparison since slaves don't have the option of changing jobs - but then I'm guessing people working at Wal-Mart generally aren't doing it because they prefer it to all the other great jobs they could have got instead.)

    Generally, I'd say that economic development procees faster in societies with a more equal distribution of income which supports the second theory but that's still in the realm of wild speculation and none of this really gets at my initial point which is that doing something more efficiently is a direct benefit to society whereas paying someone less to do it, isn't - at least not in the same clear way.

    "The opposite tack, paying people more than they produce..."

    Nobody's talking about paying people more than they produce - you can't do that unless you want to go bankrupt. The question is what portion of the gap between cost of production and value to customer goes to workers / ownership / customers.

    It's a question of distribution, not production, hence the zero sum (leaving aside the long term impacts of price signals which may be positive or negative either way).

    By Blogger Declan, at 10:38 PM  

  • I think most workers would rather be paid less than have their job eliminated by automation. It gives them more time to respond.

    I must also point out that if people do save thier extra $20 instead of spend it, that is STILL a benefit to society. The reason is that that $20 is not sitting idle, as some will argue. Banks will turn around and use thier holdings to create loans. The loan might not be in the small wal mart town, but it does lead to spending and jobs. Loans get business started, after all.

    Finally, the cost of production is only one factor in the price of a good. The time it spends on a store's shelves is also a cost, as is transport and the store's own overhead. The pressure to reduce cost is on-going and economy wide.

    "economic development procees faster in societies with a more equal distribution of income" Generally speaking, I think that's true, but the cause might be clear property rights and rule of law rather than price controls, which have a very bad record. If that's in place then the market can send signals about what is needed and it can do so free of distortion.

    Slave labour can be seen as a form of price control, keeping it artificially low. Low income employees are not slaves, however. They can leave, seek training, and so on.

    By Blogger Curt, at 5:56 AM  

  • One detail about chain stores of all types - a portion of the money produced in whatever region leaves that region. Franchise fees, "head office" employee payments, other investments all come from individual stores.

    Which would you rather: open your own store, or be a department sub-manager in a franchise?

    On a tangent: the biggest reason to give tax breaks to low-income individuals and small businesses is that they will spend that money immediately on essentials; multinationals invest overseas; and the tremendously wealthy purchace single, big ticket items or do what got them wealthy - they save it.

    By Blogger Thursday, at 12:05 AM  

  • Heard Ms Foote lives now.....you guessed it..Moncton!

    By Anonymous Anonymous, at 4:00 PM  

Post a Comment

<< Home