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Uncle Sam (Walton) in China

Yesterday Wal-Mart announced plans to quintuple its workforce in China, adding 20 new stores to the 56 it already operates.

It is very libertarian chic to be pro-Wal-Mart these days, mostly for good reason. But while ‘big box’ retailers like Wal-Mart deserve credit for job creation and for the truly innovative supply-chain efficiencies they have created, the trouble is that discount retailers in the US have always functioned in an unhealthy state of symbiosis with government, often with huge leverage at the local level, where tax incentives can often overrule ‘the market.’ It’s pure back-door socialism of the most cynical kind–not evil, just kinda co-dependent. Which is why it’s so fascinating to think about what Wal-Mart will do in China.

Like joining the Communist Party? In 2004, Wal-Mart agreed under pressure to allow its Chinese stores to ‘unionize’–the only Union in China being the Communist Party. Okay, I’ll give them that one, as it seems hard to avoid. But where is it all headed? I can see this whole Wal-Mart in China thing going a couple of ways:

In the ‘Hell’ scenario, Wal-Mart, which grew up suckling on the (relatively) vestigial socialist glands of the United States will absolutely flourish in China, due to abundant access to the unpasteurized milk of communist kindness. In this version of the story, communism, coupled with the superior economic and organizational model brought to bear by Wal-Mart, actually experiences a revival and renaissance, Wal-Mart providing the missing link – a viable economic model – and the Chinese government providing the regulatory breeding ground for a thousand years of centrally-planned, iron-fisted, prosperity in which the retail ethic of ‘choice’ ineluctably replaces the value of ‘freedom’. This is the scenario in which it will be necessary for the crew of the Starship Enterprise to travel back through time to Earth in the 1950s to kill Sam Walton while he’s still a fresh-faced young bootstrapper.

In the ‘Heaven’ scenario, Wal-Mart and the Chinese manage to civilize each other without symbiosis, resulting in the kind of benign, socialized capitalism Schumpeter dreamed of in his dotage – a world where everyone is so prosperous that capitalism naturally comes to admit socialized services because things like food shelter and healthcare are of such marginal relative cost that, like water and power, that they flow as easily from the Mongolian Steppes as do the milk and honey and human kindness. Did I mention that in Heaven, Wal-Mart’s goods are delivered faster than ever by a fleet of highly compensated, well-insured flying pigs?

A third scenario? Wal-Mart fails to ‘get’ the Chinese market, the Chinese fail to ‘get’ Wal-Mart, and neither time travel nor genetic engineering become necessary after all.

36 comments to Uncle Sam (Walton) in China

  • This isn’t quite as pioneering a movement as the Waltonites believe – “big box” retailers like Carrefour have been in China for some time and have established a significant market presence.

    I strongly doubt that WalMart will find the model it utilises so successfully in the United States can be transplanted into the Chinese market at this point in time. Indigenous competitors are a daunting threat – they’ve been there longer and are thus are hyper-evolved to suit the economic and political realities of the Chinese market. Basically, they’ve been cultivating the right people considerably longer than the newcomers, and that’s what counts.

  • Snide

    Interesting article! I tend to favor the third scenario as the most probable.

  • Karl Rove

    Interesting article. But one small point – supermarkets don’t create jobs – they destroy them. Maybe that’s progress – it’s inefficient to have 5 people in small stores doing work that 3/4 people can do in a large store. But that’s not job creation!

  • emy

    Karl Rove,

    That’s not job destruction, – it’s called deconstruction, – it releases those not needed to go on to other, and possibly better jobs…

  • DuncanS

    Karl-
    “it’s inefficient to have 5 people in small stores doing work that 3/4 people can do in a large store.”

    But in a larger store, you’ll hire those 3/4 people many times over, where as the small one will only have the original 5. Job creation.

  • veryretired

    China, and several other Asian countries, are in the position of Europe and the US at the end of the 19th and beginning of the 20th centuries. They are in transition to a modern industrial economy.

    Development does not just happen, although many theorists thought so at one time, and postulated that there was a take off point at which the infrastructure was in place, and everything else would just flow afterwards, leading right to a modern economy.

    Much of the statist “five year program” type of planning was based on this idea. It proved to be as tragically faulty as the other statist theories that resulted in massive pollution, obsolete industries, and the guaranteed lifetime employment models that ended up with a roomful of electical engineers sitting around waiting for a lightbulb to burn out in the factory, because they were the only one allowed to change it.

    Societies are not just differentiated by wealth, or amount of freedom, or numer of doctors—they exist in different times.

    In a very real sense, we are seeing our past play out before out eyes, except that ours happened in nature, and much of the current development is more greenhouse-like in the attempt to control the variables.

    The Chinese are a very pragmatic people. Indeed, all through Asia, they are acclaimed for their business sense, not their slavish devotion to ideology and little red books of fatuous sayings. In the US, they are very successful as a cultural sub-group.

    We are watching as a truly ancient culture enters the 21st century, space flight and all. Expecting some form of purity— ideologically, morally, or in any other sense— is unrealistic. We are all just living through this life, warts and pitfalls, stumbles and leaps, graceful waltzes and pratfalls, in turn.

    Freedom is the light. Growing, developing, evolving life turns towards the sun. Only those strange, stunted, colorless oddities want to stay and live in the darkness of the cave forever.

  • James of England

    Just wanted to voice appreciation for VeryRetired’s very eloquent comment, and to offer a comforting thought of my own.

    One of the wonderful things about Wal-Mart is that it is so very hated. There is nothing more likely to prevent collusion between corporation and state than large lobbies with a crazy obsession with trying to destroy the corporation. It is almost universally believed by unions and their allies that the best way to raise working conditions for their workers is by vilifying Wal-Mart and then getting “me-too” access to the protections that Wal-Mart’s employees get.

    Less comforting for some, but comforting to me, is the degree to which Wal-Mart still appears to be a very principled, Christian company. It’s more than willing to lose a few pennies to maintain its principles in the face of liberal Americans. I’m not saying that it won’t compromise in the face of PRC pressure, but I’d trust them more than I’d trust most people in that situation. YMMV

  • emy

    James,

    I find it very reassuring that the unions are so averse to Walmart, and to a leser extent, Asda. It reaffirms my opinion that the union movement is one of the most corrupt, and destructive cabals in the modern day commercial environment.

    A case of ‘if they are agin’ it, I’m for it!’…

  • I’ll be watching for those flying pigs out my window.

  • Nick M

    James of England,

    Shouldn’t you have gone out with the Stuarts?

  • bierce

    Seems to me China is the perfect capitalist state – freedom for enterprise, no freedom for workers.

  • Concerned Citizen

    Seems to me that you’re unfamiliar with capitalism (or just an ignorant, unfunny jerk).

  • Mike Lorrey

    On the plus side, perhaps Walmart will succeed in RFIDing every communist party member, so when the counter-revolution comes, they can all be rounded up and sent off to the de-education camps… bwahahaha…

    Nah, more likely, the government will require Walmart turn over customer RFID records so that the state can institute ubiquitous surveillance….. Which can only be cured if the people get in the habit of only wearing clothes they’ve been given by others….

  • Mike Lorrey

    Oh, and BTW: I don’t know who it is that thinks its libertarian to be pro-Wal-Mart. Here in the Free State, we protest against Wal-Mart, and boast the literary success of one of our own, Katherine Albrecht, and her anti-RFID book, Spy-Chips (available at Amazon, Borders, B&N, or your non-big-box local book store).

  • Which Enterprise crew? I’m actually in favour of The Next Generation taking care of this one, if only because the actors need some work.

    – Josh, wonder if anyone’s written on the Star Trek curse for actors

  • I’m all for free trade and open markets but where does not being able to buy local veg at a local high street greengrocer and being forced to get it from a big white shed fit into the plan? I personally wouldn’t mind paying a little more for veg as long as I could travel easily to where it was being grown and buy it from the farmer in person if I so desired.
    I suppose I should explain myself. The town where I live has little in the way of high street retail because 18 months ago Tesco opened one of its 24 hour big white boxes on the outskirts of town. None of the local grocers could compete with its cheap prices and huge range, and now I can’t buy my veg without getting in a car. Those who don’t have a car have to get a bus or a taxi when they are the people who can least afford to do so, I know this because I’ve been one of them. Not only am I forced to shop at Tesco (or one of the other supermarkets which are also a car journey away) but I’m also forced to add to pollution to do so.
    I don’t like supermarkets. I hope Wal-Mart falls flat on its face in China.

  • fred_says

    Fourth Scenario: Sam Walton is a reincarnation of Buddha and brings Chinese to Pure Land through giving them food and shelter in exchange for learning the updated four noble truths:

    1. There is suffering.
    2. Desire for Democracy is the root of all suffering.
    3. Mao-Mart will lead you into Pure-Land.
    4. Embrace Mao-Mart and its Socialist dogmas.

  • James of England

    Mike, although I’m not particularly hard-core libertarian, I think that my support for Wal-Mart is a libertarian position.

    I haven’t read spy chips. Is it the position of your campaign that the state should ban RFID chips?

    Mandrill: Is it your position that the state should ban large stores, or that the state should have some kind of corporate welfare for chains of small stores?

  • ArrogantAtheist

    You can also be pro-Walmart’s right to be in business, and choose not to shop there.

    I think China will be better able to deal with the lobbying and bribing from companies like Walmart, as they aren’t a democracy. Their leaders don’t need campaign donations to stay in office. And their state can go after officials involved in bribery.

  • ArrogantAtheist

    On the issue of jobs, I think the only question is are people allowed to work? I live in Canada and most projects whether they be apartment complexes, resorts, power plants, water facility expansions, factories and so on… Are stopped by the government. When you don’t allow most work to be done, you naturally will have people without work.

    Its like Chairman Deng’s simple but profound statement that went something like, ‘if you want to get people out of poverty you have to let them get rich’.

    In China they are building great projects, building factories and all that takes workers. Businessweek just had an article about the issue of rising wages in China…

    How Rising Wages Are Changing The Game In China

    -A labor shortage has pay soaring. That is sure to send ripples around the globe.

  • veryretired

    It is really hard to take some of this seriously.

    What are those of you who want to return to Joe’s corner market going to do in another generation, when there’s a company with 10,000 outlets serving the 2 billion people in China and India alone, and with 20,000 outlets across the rest of the world?

    WalMart today is the Standard Oil trust of 1913. At the time, Standard was the big boogeyman, the gorilla that could outmuscle everyone else. Judged by today’s standards in the energy industry, it is the equivalent of a modest home heating oil company in Missouri.

    There are billions of people in this world who are desparately hoping to be full fledged members of the modern world, have modest homes, an actual job, clothes, and decent food, etc.,etc.

    Do those of you whining about how big and ishy this company is or that chain of stores is actually think that a world wide system for the provision of human necessities can be arranged and provided by corner stores from 1900?

    Nostalgia is a wonderful thing when it helps us remember from whence we came. It is not a moral imperative which gives some people the right to force everyone else to live in a society of shortages and high priced, “protected” goods.

    You live in a relatively free society. Shop where you like, for your own reasons, and allow others to do the same.

  • Verity

    On this occasion I agree with very retired: huge organisations like Carrefours and Walmart can afford the real estate to make everything available under one roof. And they have the distributional systems (from which others – native – can, and do, learn). Since Wal-Mart came to Mexico, several very good, well-financed, Mexican competitors have sprung up (having learnt) and give Wal-Mart a run for its money. I shop at one of Wal-Mart’s Mexican competitors because they have a much better wine selection (from Chile) and they import better cheese than does Wal-Mart, which caters for bland provincial American tastes.

  • Julian Taylor

    Interesting to note that B&Q is now one of China’s fastest growing superchains, offering BIY (Buy It Yourself) akin to IKEA’s operation. BIY is the Chinese equivalent of our DIY – you buy it and employ someone else to set up your bookcase or install your kitchen.

  • Verity

    Mandrill – Oh! My! God! You’re forced to contribute to pollution! Get this man/woman a counsellor, stat!

    (Trade secret: Walmart won’t fall flat on its face in China. It will send Carrefours scurrying off down the drains, as it did in Mexico.)

  • Verity: Trade secret: Walmart won’t fall flat on its face in China. It will send Carrefours scurrying off down the drains, as it did in Mexico.

    Agreed. I have been to exactly one Walmart, one Carrefour and several local chain stores in China. My view is that if Walmart can get permission to continue its expansion, it will clean their clocks.

    If the one store I entered is any guide, Walmart in China is a full service store. There is literally one salesperson for every aisle. I can kind of see why. A bottle of local shampoo costs $1.50. The average retail salesperson makes $0.75 an hour. In China, Walmart is both Walmart and JC Penney’s – because the kind of clothing we consider low end here is mid-range in China.

  • Verity

    Zhang-fei – Same in Mexico. All the aisles are clean, the staff are trained to be helpful, the shelves are wel-stacked, and if you don’t see something, they will try to find it for you, very pleasantly.

    In other words, friendly customer service. Take something back, with your receipt, and it’s a no-questions-asked refund. Ten years ago in China that would have sounded insane. You bought it, too bad. Today, “We’re sorry you’re not happy! Here, take our money!” In other words the message is, “It’s safe to buy here and we’re willing to prove it.”

    What advances the cause of capitalism and wealth for everyone and what doesn’t? Study and discuss.

    I think we are so lucky to be riding on the surge! Twenty years ago, who would have thought Chinese and Indian customers would have been returning goods to huge stores in the confident expectation of getting their money back?

    I love it!

  • Mike Lorrey

    It is my position that RFID chips violate privacy and are being implemented specifically so that consumers are not aware of them. Wal-Mart is specifically instructing vendors that they need to devise their packaging and products so that the RFID is embedded in the package or product and difficult to remove without destroying or damaging the product or package.

    As an example, they’ve determined that for fluid containers, such as dishwashing soap, milk, juice, soda, etc. the amount of fluid in the container exhibits a change in capacitance, which the RFID can measure and report on. The ‘smart appliances’ that are internet capable are being touted as so great, the way they work is they read the container level from the RFID and automatically reorder for you over the internet when the container is low. Sounds great, huh? However think for a few minutes about all the security weaknesses involved, not just in the electronics and software, but in the social engineering side of things: home intruders gaining consensual access under a ruse of ‘delivering auto-ordered items’.

    Then there are the RFIDs in your clothes. When you walk into a Wal-Mart, or a Gap, or a boutique store, and go through the shoplifting scanners, the scanners also scan you going in, to see what products you are wearing and smart credit cards and IDs you have. They determine whether you bought what you are wearing, whether you are carrying multiple identities, and exactly where and when you or whoever bought those items and for how much (each RFID tag has a unique 98 digit serial number in it, enough to inventory every grain of sand on earth).

    On the plus side, they can if they so choose, automatically model you as a consumer and figure out what items you are likely in need of (whether or not you want to buy them now) and can print up personal coupons for you for those items they predict you may want to buy.

    On the negative side, they can model you as a consumer and decide whether you are someone they want shopping in their store or being sent on your way to consumer reeducation camp courtesy of the corporate state.

    They could cross reference you with databases showing you have purchased, or have been previously sensed by other scanners carrying a gun (with its own RFID tag), and decide to send security to jack you up.

    Chances are that at least one item of clothing YOU the reader, right now, are wearing has an RFID tag embedded in it and you do not even know it.

    Commercially available technology allows people to read your RFID tags from up to 17 feet away. This means custom hacked or military grade equipment can do much better.

    Those of you in Britain who are concerned about the ubiquity of cameras in your country, look at it this way: imagine you lived instead in a country where there were no cameras to alert you to the fact that you lived under ubiquitous surveillance, but you DID in fact live under such surveillance. If you knew about it, and tried to alert people to the fact, would anybody believe you? If nobody in the media reported on abuses by government or criminal individuals or corporations of RFID, how would anybody know it?

    Liberty advocates have been worried about the possibility that the state may force everyone to get chips embedded in their bodies to allow tracking, etc. Such concern is misplaced: almost everyone is already ‘chipped’ and they don’t even know it.

  • Julian Taylor

    Ok, so stop carrying $20 bills (have RFID tags embedded), stop your kids using the local library, stop using your credit cards (embedded chip can track your purchases), don’t buy a computer, don’t use email, don’t drive or, in short, don’t do anything that allows you to be tracked in any way.

    Basically, why not move to Afghanistan, bury yourself in a mountain cave and spend the rest of your life knocking your head on the floor 5 times a day to Allah and espousing paranoid 6th Century values but please STOP using the ridiculous notion of big brother RFID tagging as grounds for not using this or that store.

    Alternatively why not move to England, the paranoid schizophrenics dreamland. There you KNOW that the state is out to get you.

  • James of England

    Julian, if Mike wants to go to lengths to prevent terrorists from finding out how much laundry detergent he has remaining (possibly from distances of up to 23 feet away, using black box CIA technology), then I’m not sure why we should criticise him for making that decision. Incidentally, I hear that tin foil blocks the alien’s RFID signals. ;-)

    Seriously, Mike, what response do you feel is appropriate? I’m pretty comfortable with the idea that someone going to the effort of hacking into my home systems could gain entry on the basis that they’d fix stuff. They could probably hack my cable right now and do the same thing, and I’m sure there’s a lot of other, much easier, ways to convince me to unlock the door.

    Still, assuming the correct personal response is the survivalist one, what is the correct political response? Do you want the state to ban RFIDs or do you simply want libertarians to boycott the stream of modern commerce?

  • hm

    Oh Please!

    Could you please explain what this means?

    “(D)iscount retailers in the US have always functioned in an unhealthy state of symbiosis with government”?

  • Union Jock

    Hey guys, what gives with this ‘Verity’? One minute (s)he’s talking about Britain being finito with as much confidence as if (s)he was permanently camped outside 10 Downing Street, the next minute (s)he’s saying (s)he gets her shopping from a Mex rival of Wal-Mart.

    Wherever (s)he is located, (s)he appears never to sleep or leave the terminal, and has a riling-up opinion about everything on land and sea.

    Is (s)he for real, or some 24/7 automated device of the site owners to get arguments going?

  • Nick M

    Union Jock,
    I’ve had similar thoughts about Verity. She’s certainly real enough to indulge in ad hominem “debate” – I don’t think AIs can do that yet.

  • John Thacker

    [T]he trouble is that discount retailers in the US have always functioned in an unhealthy state of symbiosis with government, often with huge leverage at the local level, where tax incentives can often overrule ‘the market.’

    Justification? At least in big cities, I’ve always seen the reverse: small-shop retailers with huge leverage at the local level, preventing discount retailers from moving in despite the clear wishes of consumers, having zoning rules overrule the market.

    Admittedly, the discount retailers take advantage of competition amongst local governments to locate on the outskirts of a city, in a county, or in the next town over because one local government won’t let them build there, but I hardly see how that’s horrible symbiosis. In Ithaca, NY, they basically drive people out of the city center by not letting the good shops locate there.

    Now, eminent domain is a nasty thing, and does involve developers and cities working closely together. And certainly when there’s lots of zoning rules, the company that learns how to get along with government wins. However, the areas with the strictest planning and zoning rules are precisely the ones that don’t like Wal-Mart.

  • Pour your danged liquid laundry detergent into empty milk jugs and chill out.

  • James of England

    Union Jock, do you feel that those of us who spend more time abroad than at home cannot have useful contributions to discussions about UK politics? Do you feel that you can legitimately discuss US or Mexican politics?

    I’ve sometimes felt that Verity’s style was a little more aggressive than was wholly necessary. Sometimes she’s agreed and apologised for this. Complaining about zeal on a political fringe (libertarian) blog seems to be missing the point to me, but your milage may vary. I’ve sometimes wondered where she is (I plan on spending more time in Mexico and would appreciate some capitalist and western contacts and local expertise). She’s not responded, but it’s a libertarian blog. If I pressed against an apparent privacy barrier I’d be as out of place as if I were against the cartoons or the ports sale. Despite these circumstances pushing me towards sympathy, I see no justification for criticising her for her residency other than some horrifically ugly ones. Please, help me to think a little better of you.

  • When Wal-Mart starts using panels of state-employed economists to set their prices at the behest of some Presidium, then I’ll be worried. But then they’ll become completely uncompetitive.