Corporatism 2.0: Wal-Mart and the Modern Corporate Business Structure

Colin Jenkins I Social Economics I Analysis I May 24th, 2013

Quick... answer this question: Who pays Wal-Mart's workforce the money necessary for them to sustain? Independent franchisees? No. Wal-Mart's board of directors? Nope. Wal-Mart's shareholders? Not even close. The answer is us. You and I. In fact, on average, American taxpayers pay a staggering $2.66 billion dollars a year to Wal-Mart workers. [1] Why? Simply put, because they must eat. And, so Wal-Mart executives can keep more of the company's "profit" to themselves and their shareholders. How much profit? How about $16.4 billion in 2011 alone. [2]

Hence, the modern corporate business structure is upon us. As much nonsense as we must endure from right-wing politicians, outspoken Randian "libertarians," and hired financial guns about the powers of the "free market" and the rewards of "business savvy," the fact of the matter is that without a supportive State structure to prop them up, corporations like Wal-Mart would be in trouble. Well, not necessarily in "trouble." But, if these monstrosities were unable to rely on the "Welfare State" to supplement their workforce, they would most certainly be forced to pay a livable wage. And if so, in Wal-Mart's case, that $16.4 billion in shareholders' profit would probably look more like $4 billion. Not too shabby, especially for a family that currently owns $100 billion in accumulative wealth, which is more than 130,000,000 (yes, that's 130 million) Americans - roughly half of the entire country - combined can say for themselves. [3]

Of course, big business using the government as a tool for creating large amounts of profit is nothing new. The original robber barons, namely rail and banking tycoons at the turn of the 20th century, notoriously used the federal coffers to fatten their own pockets in the name of "public interest" and "investment projects." However, today's retail giants like Wal-Mart have unveiled a new brand of corporatism - one that goes beyond the in-your-face style of the government "contracts" of old. The arrival of Reagan's "Conservative Revolution" of the 1980s ushered in a new, sophisticated and sleek style of corporate entitlements. This neoliberal blueprint, which cries for "laissez faire" and "free markets" while secretly co-opting government - and which champions and "legitimizes" corporate power and privilege - has created nothing more than a Gilded Gomorrah; a landscape that places corporate entities on a pedestal, relieves them of any and all social responsibility, creates too-big-to-fail businesses and banks, and has cemented the seemingly absurd notion of "corporate personhood."

Corporatism 2.0, like any updated version, borrows the structure set by its predecessor, repairs and improves prior shortcomings, and adds new features that are designed to enhance experience and effectiveness. Building on a centuries-old foundation set by plantation tyrants, patroonships, feudal lords and industrial barons; modern-day corporations, despite their anti-government and anti-tax rhetoric, ultimately depend on the state to protect their private interests. Much like the privileged landowner of the past, who was "ardently individualistic in that he demanded, and was accorded, the unimpaired right to get land in any way he legally could, hold a monopoly of as much of it as he pleased, and dispose of it as he willed," [4] the corporate man of this era rests easily under the blanket of state power. And just as the old plantation lord asserted this "individualism," "calling upon Society, through its machinery of Government, for the enactment of particular laws, to guarantee him the sole possession of his (vast amounts of) land and uphold his claims and rights by force if necessary," so too does the modern corporate entity seek and receive unrestrained power. They "yoke society as a partner" as long as "society" allows them the power to accumulate as much as they wish. [5]

Despite the new trends that have accompanied these "upgrades," old-fashioned direct subsidies are still in play. For example, Wal-Mart has received public funds (taxpayers' money) "to build retail stores and a network of nearly 100 distribution centers to facilitate its expansion." In fact, "over 90% of the company's distribution centers have been subsidized by local, state and federal government." [6] A recent study conducted by Good Jobs First found "244 Wal-Mart subsidy deals with a total value of $1.008 billion;" and reported that "taxpayer dollars have helped individual stores and distribution centers with everything from free or cut-price land to general grants." One example provided in the report focused on Sharon Springs, N.Y., where "a distribution center made a deal with an industrial development agency for the agency to hold the legal title to the facility so Wal-Mart could evade property taxes - a deal which will ultimately save Wal-Mart about $46 million over the life of this one agreement." [7]

While the ideology of corporatism - and the many practices that accompany it - hasn't changed, the techniques have. Today's corporate structure relies heavily on covert activities, government legislation, and "activist judges" to carry out its agenda. The formation of "Super PACs" - legitimized by the Supreme Court's Citizens United decision - has joined "union busting," price gouging, and perhaps the newest trick in their bag - workforce supplementation via government welfare programs - to allow corporations like Wal-Mart to use the state in some ways, and to supersede it in others. The most recent update to this system of "socializing costs and privatizing gains" has been the introduction of "backdoor subsidies" which amount to indirect avenues of public subsidization. Like many corporations seeking to maximize their bottom line, Wal-Mart's executives convene regularly to discuss "business plans" and "strategic maneuvering." Since profit equals total revenue minus total cost (In the most basic economic sense), there are two elementary means to maximizing said profit: (1) increase revenue, and/or (2) decrease costs. And since a good chunk of a company's "costs" come in the form of paying its workforce - the less a company pays its workers, the more profit goes to its executives and shareholders.* Hence, the formation of a "business plan" that seeks to use the government "safety net" and "welfare" programs to offset the company's costs.

This "business plan" includes a concerted effort by Wal-Mart's executive headquarters and management to educate and refer their workforce to public assistance programs. A January 2012 Wal-Mart Associate Benefits book provides a directory so associates can locate their local Medicaid office. [8] "Instead of providing affordable health insurance, Wal-Mart encourages its employees to sign up for publicly funded programs, dodging its health care costs and passing them on to taxpayers," Jenna Wright explains. "The company is the poster child for a problem outlined in a 2003 AFL-CIO report on Wal-Mart's role in the healthcare crisis: "federal, state and local governments" - American taxpayers - must pick up the multi-billion-dollar tab for employees and dependents, especially children, of large and profitable employers who are forced to rely on public hospitals and other public health programs for care and treatment they need but cannot obtain under their employers' health plans." [9]

In order to maintain excessive rates of executive pay (Wal-Mart'sCEO, Mike Duke, gets paid 1,034 times morethan the median Wal-Mart worker, according to a new analysis by PayScale), and to avoid paying its workers' a livable wage (Half of Wal-Mart workers made less than $22,400 in 2012, according to PayScale, which is below poverty level for a family of four), the company relies on programs such as food stamps, Medicaid, HEAP and Section 8 rental assistance. [10] Because of this, "reliance by Wal-Mart workers on public assistance programs in California alone comes at a cost to the taxpayers of an estimated $86 million annually; this is comprised of $32 million in health related expenses and $54 million in other assistance." [11] On average, a single Wal-Mart location requires "$420,750 in tax dollars for employee assistance a year, working out to $2,103 per worker," to operate. Broken down, this includes: $36,000 a year for free or reduced school lunches (assuming that 50 families of employees qualify); $42,000 a year for Section 8 rental assistance (assuming that 3% of the store employees qualify); $125,000 a year for federal tax credits and deductions for low-income families (assuming that 50 employees are heads of households with a child, and 50 employees are married with two children); $108,000 a year for the additional federal contribution to state children's health insurance programs (assuming that 30 employees with an average of two children qualify); $100,000 a year for additional Title I expenses (assuming 50 families with two children qualify); and $9,750 a year for the additional costs of low-income energy assistance. [12] On a national scale, these "backdoor subsidies" amount to $2.66 billion annually in Food Stamps and other taxpayer assistance, and over $1.02 billion a year in healthcare costs. [13]

During a time when the working class has essentially become the "working poor," we, as a society, are confronted with only a few options. We can either demand that corporations like Wal-Mart, who are enjoying record-breaking profit margins year after year, start paying a livable wage to their workers,or we must pay Wal-Mart's workforce for them. As the stock market continues to rise to unprecedented levels - a reflection of the immense success being enjoyed at the very top of the socio-economic ladder - and considering that Wal-Mart's CEO, executive team and shareholders are major benefactors of this "success," the latter choice really shouldn't be an option. Like the majority of us who must participate in a system that compels us to sell ourselves for wages in order to sustain, Wal-Mart's workforce deserves, at the very least, the dignity of earning a living. And we, as taxpayers, owe it to ourselves to demand that Wal-Mart starts paying livable wages and stops forcing their operational costs onto us. If you accept the status quo, you've already been taken. And after your next trip to Wal-Mart, as you walk out staring at your receipt in admiration, keep in mind that you've already paid for those "savings."


* It's important to tackle the misconception that labor costs have a direct effect on the prices of goods - in other words, higher wages will automatically equal higher prices on goods - a notion that is simply not true, especially considering the retail scale and profit margin of a company like Wal-Mart, where there is a substantial pool of top-tier profits that come into play long before consumer prices should.

[1] [Arindrajit Dube, Phd, and Ken Jacobs. Hidden Cost of Wal-mart Jobs: Use of Safety Net Programs by Wal-Mart workers in California. UC Berkeley Labor Center, August 2, 2004.

[2] Ibid

[3] Reagan's "Welfare Queen" FOUND! Monday, 03 December 2012. By Thom Hartmann and Sam Sacks , The Daily Take

[4] Myers, Vol 1, pp. 104-105

[5] Ibid

[6] Shopping for Subsidies: How Wal-Mart uses Taxpayers money to fund its never-ending growth. Philip Mattera and Anna Purinton, Good Jobs First, May 2004.

[7] Ibid

[8] Why Wal-Mart Loves Welfare, California Progress Report. Bobbi Murray, 3/14/12

[9] Wal-Mart Welfare: How taxpayers subsidize the world's largest retailer. Jenna Wright, Dollars and Sense magazine, January/February 2005.

[10] Walmart's CEO Paid 1,034 Times More Than The Median Walmart Worker: PayScale The Huffington Post | By Bonnie Kavoussi Posted: 03/29/2013 1:18 pm EDT

[11] Arindrajit Dube, Phd, and Ken Jacobs, 2004.

[12] Everyday Low Wages: The Hidden Price we all Pay for Wal-Mart
A Report by the democratic staff of the Committee on Education and the workforce -
US House of Representatives, February 16, 2004.

[13] How Does That Make Any Sense? Jill Klausen. The Winning Words Project, 2012.