Wal-Mart and the nature of the system

Posted on May 25, 2011


We live in a world system known as capitalism. About that there seems to be no disagreement. But what this means seems to create considerable confusion. And the rows surrounding the intended incursion into South Africa by Wal-Mart illustrate this clearly.

Amid all the arguments and the blowing of vuvuzelas, only a few trade union voices on the margins seem to acknowledge that Wal-Mart is a classic example of how to succeed in the dog-eat-dog world of relatively unfettered capitalism. In other words, by the standards demanded of the system, it is an icon to be lauded and emulated.

Some members of the SA Commercial Catering and Allied Workers’ Union have, indeed, noted that local retailers have for years been emulating practices for which Wal-Mart is now under fire. In particular, the unionists point to the high proportion of cheaper imported products available in such “proudly South African” stores as Shoprite, Pick ’n Pay and Mr Price.

And while the unions are certainly correct in pointing to the immorality and unfairness of Wal-Mart’s attitude to trade unions in the United States and to the company’s low wage policies, none of this is illegal. Wal-Mart also complies with the law in national jurisdictions such as Britain, where trade union rights and minimum wages are legally entrenched.

Looked at in this way, the opposition to Wal-Mart taking control of the Massmart empire seems rather like the legendary King Canute. He is said to have sat on his throne at the edge of the ocean in the face of the advancing tide and ordered it to retreat. In so doing, he proved to his courtiers that even a great king had no power over such forces.

But Wal-Mart is not a force of nature any more than the capitalist system is; both are the creations of people. As such, they can be controlled, regulated, even changed utterly, depending on the circumstances and the existing political will of governments, unions and society at large.

As this column pointed out last year when the furore about Wal-Mart first began: the challenges mounted boil down to challenging the laissez faire, free market system itself. One thing should be perfectly clear: it would be unfair and illegal to impose restrictions on Wal-Mart that do not apply equally to other retailers. Shoprite’s Whitey Basson picked up on that point when he claimed that if Wal-Mart moved in, local retailers would have to “import more”.

This was a rather hollow threat, a bit of chest beating by a chief executive known for a tendency to call a spade a shovel. As retail workers readily point out, it only takes a visit to any super or hyper market to realise that local retailers already import as much as they can as cheaply as they can.

Such behaviour, regularly criticised by the unions, is the the result of the competitive pressures inherent in the system. In a global marketplace retailers have to source the best goods at the lowest prices in order to remain profitable and to stay in business.

Unless there is some move towards protectionism — and this could run counter to existing international agreements — existing retailers will undoubtedly continue to rely on imports, possibly in even greater variety and quantity as competition increases. This could happen whether or not Wal-Mart concludes its takeover of Massmart.

As the SA Clothing and Textile Workers’ Union has pointed out, one consequence of this has already been the loss of tens of thousands of jobs in the domestic garment, textile and footwear sectors. Other sectors are also affected. Imported electrical goods, car parts and accessories, even confectionary and biscuits are on sale, often heavily under-cutting locally manufactured products, in the process making a mockery of demands that we ”buy South African”.

In other words, the market is already skewed. How is it, for example, that tiny Sharjah in the United Arab Emirates, that has to import all its wheat, cocoa and most other ingredients, can manufacture chocolates and biscuits and send them to South Africa to sell at up to half the price of the domestic product?

Using its financial muscle, Wal-Mart can probably import the same goods already available here at even cheaper prices. It is the sheer size and buying power of the global giant that concerns Basson and other retailers. And it is a legitimate fear shared by the unions and elements in government such as economic development minister Ebrahim Patel.

This was one reason for the government’s intervention at the competition hearings, essentially on the side of the unions. However, there are cynics in the labour movement who see this as having more to do with keeping the unions on side in the run-up to this week’s local government elections.

What does seem certain is that the government is in no mood to change economic policy direction: a business friendly environment, aimed at attracting foreign investment remains the aim. That means more of the same, a situation that should suit Wal-Mart.

However, unlike a number other countries such as Canada and Australia, it is an independent competition tribunal that will make the decision after open and transparent hearings that ended this week. And, according to our laws, the tribunal has to weigh up not only any benefits of lower prices, but also the possible effect on jobs.

According to the Constitution and labour laws, Wal-Mart also has to accept unionisation. This week the company offered to guarantee a two-year moratorium on retrenchments at Massmart. An offer of a R100 million “incubator” fund for local suppliers was also made.

None of this provides any guarantees about local procurement or jobs. However, according to one commentator, Wal-Mart will “swallow any conditions”. Because, after five years, the company will be free to do very much what it pleases. All within the law, of course. Because such is the nature of the system.

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