Wal-Mart Comes North

Wal-Mart, as everybody knows, began in the backwaters of the rural South -- though not everybody knows just how rural, how southern, how backwater. Wal-Mart's southernness, however, is precisely what sets the chain apart from the handful of other companies that once dominated the American economy: Standard Oil, U.S. Steel, General Motors, IBM. None imposed upon the nation values so parochial or living standards so threadbare as Wal-Mart's. Before Wal-Mart, no nationally dominant company had ever come from the nation's most backward region, let alone clung so stubbornly to that region's casual barbarities. Indeed, the massive resistance Wal-Mart has encountered in recent years as it has moved from the rural South to the urban North can be seen as an attempt by the North to preserve the legacy not only of the New Deal but also of its long-ago victory over the southern way of doing business.

Sam Walton opened the first Wal-Mart in 1962 in Bentonville (still the corporation's headquarters and nerve center), in the heart of the Arkansas Ozarks. Arkansas in the early '60s was not really part of John Kenneth Galbraith's "affluent society": In the 1960 census, Arkansas ranked 49th among the states in median per capita income, and unlike Mississippi, which ranked 50th, it achieved its distinction without being heavily black. Bentonville, in fact, was virtually all white: In every census from the end of the Civil War through 1990, it remained just 1 percent black.

The Ozarks were a region of venerable, white Protestant poverty. Historically, the area of northwest Arkansas and southwest Missouri was one of small family farms, only barely connected to the national consumer economy. By the measure of consumption -- how many cars were purchased, how much electricity was consumed -- the 1930 census deemed the Ozarks the poorest region in the country. When the Fair Labor Standards Act was enacted in 1938, establishing the first national minimum wage, it exempted agricultural workers and the employees of small, rural businesses. This was the price that southern senators and congressman, determined to hold down the cost of black labor, exacted for their support, but their demand also helped perpetuate poverty in the Ozarks, which as late as 1996 remained more than 95 percent white.

Things didn't get much better when the mechanization of agriculture forced the farmers off their farms. "Neither the New Deal nor the civil rights revolution had really come to northwest Arkansas when Walton began to assemble his small-town retailing empire," labor historian Nelson Lichtenstein has written in a 2004 essay. "But the agricultural revolution of the early postwar era was in full swing, depopulating Arkansas farms, and putting tens of thousands of white women and men in search of their first real paycheck."

By 1980, Wal-Mart had become the giant of the Ozarks, with stores scattered across rural Arkansas, Louisiana, Mississippi, Missouri, Oklahoma, Kansas, east Texas, western Tennessee and Kentucky, and southern Illinois. Then as now, its executives and store managers came disproportionately from the rural South. "Wal-Mart recruited executive talent almost exclusively from the South-Central states," Lichtenstein wrote. "[T]he company's two most recent CEOs are graduates of Southwest Missouri State University and Pittsburg State University in Kansas." Since the chain's starting pay for managers is so low, it tends to recruit neither MBAs nor graduates of mainstream colleges, but students from denominational colleges and small branch colleges of southern state systems.

Walton had a genius for realizing an almost unfathomable volume of sales based on the twin pillars of Ozark economic life: very low wages and very low prices. The average hourly pay at Wal-Marts still ranges from $8 to $10, and the annual turnover rate among Wal-Mart employees, many of whom find they can't live on what Wal-Mart pays them, is nearly 50 percent.

As it branched out of its Ozark homeland to become the largest retailer in human history, Wal-Mart systematically targeted rural and exurban areas of modest means. Counties that had Wal-Marts before 1989 had a higher poverty rate than those that didn't, Penn State economist Stephan Goetz has concluded, and Wal-Marts are still disproportionately found in such areas. Walton's company rolled out of the South consciously targeting the kind of poor, nonunion shoppers it started with and creating a poor, nonunion workforce (whatever violations of labor law that required) wherever it went.

Underpricing its competitors, forcing its suppliers -- whether truckers or manufacturers -- to use ever cheaper labor if they wanted the goods they made or shipped to be sold on Wal-Mart's shelves, Wal-Mart became the nation's largest and most important employer, depressing wages in numerous sectors and across the land. So long as it had remained just a regional retailing power, nobody really pushed back: The mom-and-pop stores it slew by the thousands had no political muscle, and when Wal-Mart began taking on bigger game, it still emerged triumphant. As recently as 1990, the chain had just nine "Supercenters" selling food; today, it is the biggest food retailer in the world. More than 25 U.S. supermarket chains have declared bankruptcy and stipulated that Wal-Mart is the culprit, but most, like Winn-Dixie, were located in southern, rural, or exurban terrains where the political infrastructure that could stop Wal-Mart's expansion -- potent unions, liberal legislatures and city councils -- really didn't exist.

But Wal-Mart couldn't keep to the backwaters. It had to keep growing, and by the mid-1990s it had saturated the Farm Belt and the Rust Belt, the exurbs and the working-class suburbs. It had to come north. It had to go not just to Phoenix and Denver but to Chicago and New York, and to L.A. as well. And it had to do so without altering its low-wage, low-price way of doing business -- triggering an irrepressible conflict between two very different systems of labor, no longer able to peaceably coexist in separate regions of the country.

If the meaning of Wal-Mart's drive northward had been lost on northern workers, it became sickeningly clear in the aftermath of the 2003

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