Consumption Rules

At five p.m. Steve walks through the door of his house in Circleville, Ohio, tired from the frustration of looking for but not finding a suitable job. He passes the table in the front room where someone placed the mail earlier today. As he combs through the pile he notices that all the envelopes have something in common—all bills. The gas, electric, and dental bill for his daughter are all overdue and the bill for the transmission in his truck is the newest addition to the collection. Now even more disheartened, Steve goes into the kitchen, grabs a plate of mac and cheese, a hotdog, and sits at the round kitchen table. As he eats his dinner he wonders what he could have done differently to have avoided being a fifty-nine year old father looking for work. Reflecting on his life, Steve looks out the kitchen window at the Thomson RCA plant where he used to work and recalls when life was better, when the people of Circleville could work a full shift at a good job and enjoy a better standard of living.

Unfortunately, Steve is not alone in his predicament. At fifty-nine Steve is without the job he had for thirty one years. He provided a good living for himself and his family and most importantly, it gave him a sense of accomplishment, he enjoyed getting an honest wage for an honest day’s work. But now things have changed. They changed for thousands, not just in Circleville, but all across Midwest America. In fact, just 127 miles northeast from Circleville is Wooster, Ohio, the home to the once proud Rubbermaid—and it’s factory of 1000+ workers. In just ten short years Rubbermaid went from the pinnacle of corporate America—being selected as America’s most admired company in 1994 for it’s quality—to present day, with the plant closed, the machinery auctioned off to the highest bidder, and the workers left without any future.

Regrettably, the failure of these two plants and others like them is not coincidental. In truth, the common denominator at the heart of the closures is America’s own favorite retailer Wal-Mart. In the late 1980s and early 1990s Wal-Mart had a major campaign to push consumers to “buy American.” Today’s Wal-Mart is quite the opposite. Since the mid-1990s Wal-Mart has gone overseas in order to cut costs, leaving American manufacturers and their workers out in the cold. The question then that begs to be asked is, Are everyday low consumer prices worth the cost to the American economy?

From approximately 1994 on Wal-Mart has done most of its buying overseas, more specifically with China. According to Gary Gereffi, a sociology professor at Duke University and a world-renowned expert in his field, Wal-Mart has a base of six thousand suppliers from whom it receives merchandise. Gereffi continues to state that eighty percent of those suppliers are located in mainland China, leaving a mere twelve hundred suppliers to be divided between the United States and other cheap labor countries (as quoted in Is Wal-Mart Good For America? Smith, 2004). The reason for such a lopsided playing field and why Wal-Mart favors China so much is simply the bottom line. It is cheaper for Wal-Mart to have merchandise manufactured in China, shipped to the United States and go through customs, than it is for Wal-Mart to pay manufacturers on American soil to make the same products.

American manufacturers are at a disadvantage from the start when competing for bids against foreign producers. American producers have additional costs that oversea producers will never have to worry about. For example, in the United States workers are entitled to certain benefits, such as overtime pay for working more than 40 hours, healthcare and pension plans, and vacation time. Also, some factory workers in the US have unions in place so if the working conditions are not acceptable, the workers as a whole have the leverage necessary to improve their condition. Although all of the items mentioned above contribute to the standard of living of American factory workers, they also might contribute the extinction of the American factory worker as we know them today. Foreign producers do not have to offer these services and so are able to drastically lower their cost, creating a financial opportunity that has proven to be enough for Wal-Mart and other large retailers to look overseas for suppliers.

One oversea supplier in particular has become very detrimental to the existence of American manufacturers—China. In the quest to lower everyday prices, Wal-Mart has looked specifically to China in order to lower its cost of supplies. Professor Gereffi expounds on the Wal-Mart—China relations by saying, “Wal-Mart has a very close relationship with China, China is the largest exporter to the US in virtually all consumer goods categories. Wal-Mart is the leading retailer in the US economy in virtually all consumer goods categories. Wal-Mart and China are a joint venture” (Smith 2004). The problem, however, is not simply that Wal-Mart and China have a healthy business relationship. The problem is that conditions in the Chinese market make it nearly impossible for American producers to compete with China. Thereby virtually eliminating any chance American producers might have at a part of the near $20 billion dollars Wal-Mart spends each year on imported goods. The average Chinese factory worker makes about $0.50 an hour, a wage that is $4.75 below the federal minimum wage in the US. Furthermore, attorney Skip Hartquist states that China adds to the unfair playing field by using government subsidized loans to help Chinese producers, which are rarely repaid, and China has a set currency rate currently undervalued by 40%(Smith 2004). All of these add to the competitive advantage that Chinese manufacturers have over American manufacturers.

Therefore, Wal-Mart’s practice of importing goods from China and other less strictly regulated countries makes American producers unable to compete. US producers are placed in a head-to-head competition with Chinese and other foreign producers who do not have to meet US working conditions. Rubbermaid and RCA are casualties of this lopsided war of producers, as are Steve, his family and many others. Without having to offer a decent standard of living to their workers, foreign manufacturers undercut American producers—making the American factory worker obsolete—and will continue to do so until something drastically changes. Whether that change comes through new trade laws or new consumer preferences it will not matter—but in order for the American factory worker to survive change needs to come.

References

Young, Rick (Producer and Director). (2004). Is Wal-Mart Good for America?

[Film]. Boston: PBS.

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