Adventures in Ideas: Conversation With Al Norman, Author of Occupy Walmart

Perhaps some of you have been following the debates in various cities (e.g., New York, Chicago) over big retail stores that land in their backyard. I enjoy reading about attempts to regulate economic activity because I believe it raises a central contradiction of American society: phrased as a question, how much regulation is necessary to maintain the free market? Maybe this is not a contradiction, but a perennial challenge. Two areas seem ripe for inquiry: The need to monitor big financial institutions and the limitations that some want to impose on mega-retailers who crowd out the little mom & pop establishments.

Regarding the second issue, I came across a book I thought might interest you. Al Norman has been writing critically about the retail chain Walmart for some time. He brings his insights and passion together in a book called Occupy Walmart. Below is a brief Q&A.

Q. I want to begin with a basic economic question: Why do you feel that so many consumers support companies like Walmart if they are supposedly so detrimental to our economy and our social contract? I know hundreds of families that benefit from the prices and the commodities that Walmart brings to their town. How do we explain this apparent contradiction?

A. For many Walmart shoppers, their grasp of the economic ramifications of a decision to shop at big box stores is no bigger than the dimensions of their own shopping cart. There used to be a Walmart bumper sticker which read: “Outta my way, I’m shopping at Walmart.” But if you look behind the sticker price, there is a hidden price to our economy of shopping at the giant chain stores.

The story of blue jeans will illustrate the economic forces at work. Levi-Strauss was once the iconic symbol of American clothing. Because of pressure from big box stores to lower their prices, two things happened: 1) the manufacturer shut down all its U.S. stitching plants about a decade ago, throwing more than 3,300 Americans out of work, and 2) the company began making a special “big box” brand of jeans only for stores like Walmart, K-Mart and Meijers. Today, you can buy Levi-Strauss slim straight jeans for men anywhere from $22 to $26 at these box stores.

But Walmart also sells its own “Faded Glory” brand jeans for $10 a pair. None of these jeans are made in America, and the cheaper the price, the cheaper the quality. The fabric and the thread count in a Faded Glory jean are inferior to a Levi-Strauss Signature jean, which is inferior to the Levi 511 jeans. If I go to Walmart and buy a pair of Faded Glory or Signature Levi’s, I am supporting the outsourcing of jobs to Asian sweatshops, getting an inferior product that ends up in my town’s landfill in half the time of a superior product, and weakening the value of labor in the U.S. — often described as the shrinking of the American middle class.

When Levi-Strauss closed its U.S. plants, a company spokesman said, “There is no question that we must move away from owned-and-operated plants in the U.S. to remain competitive in our industry…Outsourcing production…helps us maintain strong margin.” Since 2004, a company called Li & Fung USA has been designing, manufacturing, and marketing certain Levi trademarks. In essence, a foreign company has become the “brand manager” for what was once the classic American clothing company.

Companies like Walmart have had a major impact on our trade deficit with China, our loss of millions of production jobs, and our switch from a manufacturing economy to a consumer economy. All this flows from the decisions we make as shoppers to buy Chinese-made jeans at an import store like Walmart.

Q. You have an intriguing chapter, entitled “Wayward Capitalism,” that looks at the Occupy Wall Street movement. You address the ways in which individual residents can affect the behavior of large corporations like Walmart for the greater good of their communities. Can you cite some examples where business and communities have worked hand-in-hand to satisfy the interests of both?

A. The only times I have seen local officials and developers work “hand in hand” is when they are colluding to approve a project by discouraging citizen involvement.

For the past twenty years, I have watched developers try to maximize profits by constructing the largest store possible on the smallest parcel of land. Properties with historic values, with wetlands, with surrounding residential properties — all have been fair game for big box developers

The land use model in this country is not based on town/corporate collaboration. There are situations where cities and towns have extracted commitments from large corporations regarding local hiring, even wages. Such “community benefit agreements” are rare. By and large, the developer’s job is to push for as many concessions from local officials as possible. Big box stores like Walmart, Target, Home Depot and Lowe’s will deliberately attempt to end-run local regulations, or even sue city councils if they dare to deny a project. Mayors and City Councils are reluctant to use public dollars to fight a wealthy corporation in court. Instead of sitting down with neighbors, developers will intentionally marginalize them. Walmart has often challenged town decisions at the ballot box, spending as much as half a million dollars to win a special permit in a public referendum.

Q. What is an example of a large corporation that you believe operates in a more sustainable way vis-a-vis its workers?

A. I believe that the phrase “sustainable large corporation” is an oxymoron.

Employee-owned companies tend to treat their worker/owners better than a company like Walmart, which basically operates like a retail plantation. In the retail sector, the number of employee-owned companies like Publix Supermarkets, Hy-Vee, or Price Chopper can be counted on two hands. Publix, with 152,000 employees, is one of the largest employee-owned operations in America — yet its workforce is only one tenth the size of Walmart’s. Founded in 1930, Publix Super Markets describes itself as “ the largest and fastest-growing employee-owned supermarket chain in the United States.” The company boasts of a employee stock ownership plan that gives stock to workers each year at no cost; has a group health, dental and vision plan; and company paid life insurance.

Unlike Walmart, Publix has been listed for the past 15 years in Fortune magazine’s 100 Best Companies to work for. You won’t find Walmart, Target, Home Depot or Lowe’s on that list—because employees have to put you there. Walmart has more employee-based lawsuits than men’s suits.

Walmart is a chain store. At every link of that chain—from the sweatshops in Shenzhen, China, to the sales floor in Sheboygan, Wisconsin—someone is being exploited. This business model is simply not sustainable.

Q. People defend Walmart as a big-box retailer by saying that they just play the game better than others — meaning, they play the “free market” game better than others. Are you suggesting that the game is rigged, or that they are rigging the game? I’m trying to figure out if Walmart gets help from the government or otherwise operat
es in way that is not true to free market principles.

A. I am not sure what people mean by the “free market,” unless it refers to companies that are trying to get something for free in the marketplace. The capitalist enterprise in America is not “free” of restraints and rules. It is part private capital, part government intervention. There is no question that large corporations have many advantages in this environment — and companies like Walmart will milk everything from tax increment financing to elaborate tax dodges to reduce its operating costs.

For example, in 2007, the Wall Street Journal ran a story revealing that Walmart paid billions of dollars a year in rent for its stores, but in 25 states — most of them east of the Mississippi — it had been paying most of that rent to itself, and deducting that amount from its state taxes. By so doing, Walmart avoided paying several hundred million dollars in state taxes.

Based on a scheme developed by its accounting firm, Ernst & Young, for a “local tax reduction strategy,” Walmart’s financial self-dealing allowed it to pay rent to itself through a maze of eight corporate subsidiaries, including Real Estate Investment Trusts (REITs). The rent appeared as an expense on state tax forms, and was deducted from its taxable revenues. Under an agreement with itself, Walmart paid 2.5 percent of gross sales monthly as rent to its own REIT, which then wired the money quarterly to Walmart Property Company in the form of a dividend, which was then paid to Walmart Stores as a tax-exempt “dividends received.”

All of these transactions were handled through a “cash management agreement” between all the parties. Neither the REIT nor the Property Company ever had any employees. The REITs didn’t pay taxes, as long as they paid 90 percent of their income out in dividends to shareholders. In Walmart’s case, the REITs were owned by Walmart subsidiaries registered in Delaware, a state that has no corporate income tax. Walmart got the benefit of the rent expense, but also the benefit of the non-taxed dividend, on the same monies. The dividends escaped taxation, and the original rent that created the dividends was deducted from taxable income in the states where the “expense” was incurred. The rent, in essence, went from one Walmart pocket, into another.

It took some states years to figure out how Walmart was cheating them of taxes due. Add to this the millions of dollars in “corporate welfare” that cities and towns give Walmart in tax write offs for infrastructure like roads, sewer, and traffic improvements. There is no reason why a company with Walmart’s bottom line should get any public financing, but taxpayers have been subsidizing their destruction of smaller firms by underwriting many of their costs of doing business.

Q. Today progressives are complaining about Walmart, but tomorrow it will be someone else. Isn’t capitalism perfectly engineered as an economy to produce bigger and bigger companies? Isn’t that always going to happen?

A.As I state in my latest book, capitalism is inherently very wasteful and inefficient. Defenders of this “free” marketplace like to quote the Austrian economist Joseph Schumpeter, who popularized the concept of the “creative destruction” of the capitalist enterprise. One of the great economic myths about companies like Walmart is that they are “job creators.” When a new Walmart opens, the company (and local officials) will claim that the new superstore brings with it “250 new jobs.” This is a form of voodoo economics—because studies have shown that as much as 80 percent of these jobs are simply transferred from existing retailers in the same trade area. So the net effect is negligible. In fact, some analyses have shown negative job growth after a Walmart opens.

It is fair to say that there will always be the big bully on the block that attracts the scorn of neighbors. This was true in the 1930s, when farmers and merchants united in an anti-chain store movement against the Atlantic & Pacific Company. Walmart, like any other business, will go through its business cycle, and one day—perhaps in the not too distant future—will become as obsolete as the Sears Catalogue—once the retail center of American merchandising. I have no doubt that the huge superstores of today have already entered their Ice Age, and online shopping will make them as superfluous as horseless carriages made horses.

The point is, capitalism is not “perfectly engineered.” It is perhaps evenly balanced between creation and destruction. In the field or retailing, the nearly 4,000 Walmart stores in American have done little or nothing to lift the economy, and as I have argued for years, have actually precipitated the decline in the value of labor and the sustainability of the middle class. Our economy over the past 50 years would have fared better if Sam Walton had never stumbled onto the concept of discount retailing in small towns.

caleb b

So what if the jeans are made in China? Please read Econ 101.

Should everything I buy be made in my home state? What about my city? What about just the block I live on? IN FACT, I am costing MYSELF jobs by not butchering my own meat or sewing my own clothes.

Occupy Walmart is a preachy, economically illiterate book that panders to people of the same. I'm disappointed that it was given a forum here.

Mike B

Correct, it doesn't matter where the jeans are made, but WalMart has been tricking Americans into purchasing goods with low up front costs, but high lifetime costs (via bad quality). After all, if your cheap WalMart product breaks after 6 months or a year, you have to come back to WalMart and buy a new one.

WalMart first got big though honest innovations in efficiency, but then started using its market power to co-opt producers into making high churn, low quality items and preventing competition from high quality items. That's the problem, but the people who write books like this are still wedded to the idea that our society should be paying middle class wages to unskilled labourers.

Phillip Ng

I would argue that a dollar today is worth more than a dollar tomorrow. Accordingly, people who shop at Walmart probably realize they are buying bad quality products, but would rather have sequential reoccuring expenses than buy a quality product upfront.


there is no contradiction, because there is no tooth fairy, imean free market- there is only regulation for privatization (bailouts, regressive tax policy) vs. regulation for socialization (taxes, unions)


Wal-Mart, and for that matter all its brethren (Target, Kohls, Kmart, Meijer), are far from perfect, but I would rather live in a country with them than it one where they are banned. And what's his solution for limiting the creative destructive efect of Amazon and other online only retailers? You can't live in, or for, the past.


" I have no doubt that the huge superstores of today have already entered their Ice Age, and online shopping will make them as superfluous as horseless carriages made horses."

While on-line shopping will certainly increase I suspect we will still have plenty of even bigger superstores as most consumers will always want immediate gratification when making purchases instead of getting the items a day or two later and will demand product selection & pricing that is competitive with the online retailers.

What seems much more realistic is that improved RFID or similar technology will make 90% of retail workers superfluous in another decade or two. Once every little product has a tiny chip in it then machines can automatically restock the shelves and there is no need for cashiers to ring up products as a shopper could just push their whole cart through a scanner and swipe a card or use a cell phone to pay. Wal-Marts of the future will be able to man their 200k+ sq foot stores with just 5-6 employees. At least those few remaining employees are likely to be higher skilled and higher paid so perhaps that thought can slightly comfort critics such as Mr. Norman.


Mike B

The way the WalMart's of the world are good for the local economy is not through jobs, but through the cost reductions of retail items available to local consumers. When people save money at WalMart they can purchase more goods and services elsewhere which creates new jobs to replace the ones WalMark destroyed in the local retail space.

Only problem is that automation and outsourcing have eliminated many of the jobs that people need to be able to shop anywhere besides WalMart and because education and healthcare can't be sold at WalMart an increasing amount of the population is having to go without.

Mike B

I have absolutely no problem with Walmart being large and efficient and driving small mom and pop stored out of business. That's call progress and it is how standards of living are able to increase. Before A&P came along Americans would spend 33% of their incomes on food and filling a basket of groceries would often take trips to 5 different stores and take most of a day. Do you really want to go back to the pre-A&P days where you had to go into a general store and ask the clerk to hand you items that were stocked behind the counter? By your logic such inefficient operation would be great for the economy because it employs more people!!

My primary problem with WalMart is its commitment to lowering the quality of the goods its sells due to its Monopsony power to set prices. If you don't meet a certain price point you don't get put on the shelves, no matter how "important" your brand or product is and as you pointed out this has lead to all sorts of high quality American brands watering down their products and outsourcing labour to meet these low price points. Now is this a shame because thousands of American jobs are being sent to China? No, most of the jobs that are being eliminated are provide little value added and should be eliminated. The real shame is that Walmart is the best example of the old adage that it is the stingy man that pays the most. Walmart's whole business model came to be built around the bait and switch where you were enticed by the low up front prices, but could not see the higher lifecycle costs for a low quality good.

What allowed this to happen is a combination of Walmart's size of a corporation being able to nullify the producer's previous prerogative of producing, marketing and pricing a good and various changing cultural factors that make Americans demand more "things", while at the same time not providing them with the rising incomes to purchase those things as the previous quality and price points. What else would you expect WalMart to do when all of its customers were increasingly poor and selling shoddy merchandise would ensure repeat business.

Ironically the only entity that can possibly change consumer habits as you are advocating is WalMart itself. When WalMart wishes to be a force for good and progress it can be. WalMart has drastically driven down the cost of organic foods and efficient light bulbs. If WalMart were to see out high lifetime value products or products that are made in America and instead of competing only on rock bottom prices, changing it to best value for money they could go a long long long way to solving the problem of Americans wasting their dwindling dollars on bottom bucket goods.



Why do people continue to think that we will become richer if we trade with fewer and fewer people?

Do we want to be the country that still makes blue jeans, while other countries are pioneering internet/software/medical imaging technologies? Do we aspire to be the Guatemala of today in 20 years?

I remember the last time the economy stunk this bad, the late 1970s. Everyone was talking protectionism, and how we should protect this industry and that industry. Had we done that, we would still be making rotary phones, tube televisions, and mimeograph machines.


Couple of points that seem to have been missed here. First on the jeans: yes, the Faded Glory brand is a lighter fabric than Levis, which makes them more comfortable to wear. They're also tailored somewhat differently (don't ask me to explain just how), so they me fit better. So even if I had both brands side by side in a store, at the same price, I'd likely wind up buying the Faded Glory.

Second issue here is that, for me at least, shopping decisions are far more about convenience than price. If I can pick up everything I need by spending 20 minutes in a big box store, why would I want to spend two hours or more going around to a half-dozen mom & pop stores? Sure, I'd like it if there were big boxes which concentrated on quality rather than absolute low prices, but I place a pretty high value on my time.


So what I take from this:

1. People shop at WalMart because, well, they're just not as smart as Al.
2. People buy blue jeans that were made in WalMart's asian sweatshops, instead of Levi Strauss' asian sweatshops.
3. I should ignore the economic disasters of countries with centrally planned economies, because capitalism is so inefficient.
4. Large successful companies should ignore their business plans and run their business the way unemployed protestors with masters degrees in puppetry would run them.
5. Large companies have more success getting around unreasonable environmental regulations than smaller companies.
6. When WalMart moves into town, employees get a crappy job at WalMart after leaving their even crappier job at the mom n' pop place that paid them less, had zero opportunity for advancement, and didn't offer benefits.
7. Mom n' pop places that pay less, offer zero opportunity for advancement, and don't offer any benefits are superior to larger companies that do, because they're small and run by mom n' pop. And they were there first and have dibs.
7. Companies are doing something wrong when they take advantage of tax breaks available to them.
8. WalMart circumvents the will of government officials by actually winning referendums put to the voters, and that's just wrong.

WalMart will probably sell Al's book if it's popular.


David Leppik

There's a big difference between taking advantage of a tax break and creating a series of shell corporations to hide one's tax liabilities. The biggest difference is that the former is legal. (And just because a municipality doesn't have the investigative firepower to enforce a law doesn't mean they aren't breaking it.)


The fundamental problem is NOT that a company like Walmart imports cheap goods and undercuts local stores. Its that Walmart, and other large corporations, receive favorable treatment from the government, both federal and, often, local. This would not be a problem if the stores were competing on a level playing field, you know, if we actually had a free market economy.

I really can't understand why teapartiers don't get upset by this. Our tax laws and regulations enormously favor big business. Every time the tax law gets more complicated, fewer small businesses can compete. Every time regulations get more complicated, it costs big businesses a little more but it costs small businesses A LOT more, so big business often favors increased regulation. It's state sponsored comparative advantage, plain and simple.


No, regulations favor SMALL businesses. Do you know how many regulations you escape by having a FEW employees? There are hundreds, if not thousands, of regulations that you must comply with when you get to the threshold of 25 or 50 or more employees, depending on the whim of the "regulators" of the moment.

Plus, there are SMALL Business administration loans and help, as well as preference points in government contracts for small or minority owned businesses.

The bigger the business the bigger the target! (for government taxes, for regulation, for lawsuits, etc.)


False. They only favor small businesses if they're DESIGNED to favor small businesses, and even then they don't always work as intended. Regulations in general favor large corporations, because its inherently easier for a company with more resources to meet said regulations, and that's not even considering that large corporations can often avoid regulations with inventive accounting or legal wrangling. And of course the largest corporations routinely buy politicians to directly change regulations to their liking.

You're so caught up in the existence of a handful of ways in which small businesses are favored, you're not even considering that the ENTIRE MECHANISM of regulation, taxes, etc. favors large corporations. Think like an economist for a second. If small businesses really had a comparative advantage due to government, why is the market dominated by huge conglomerate companies, and why is this becoming more so every year? Why would huge companies merge if doing so would make it even harder to compete in the marketplace?

While you may be right that there are some cutoffs where having a few more employees is actually better (in terms of dealing with the government) than having a few more, these are the exception, not the norm. Larger companies are favored and clearly get preferential treatment.


Chris Woodrow

The best takeaway I see from this article is that Publix is an employee-run business. I think I could get behind them, for better ethical/economic reasons than the ones given above.

Otherwise, his arguments seem heavily biased without much support, though I'm sure that's a limitation of the interview format.

Also, very interested in the quality argument. Do we have studies on the quality/length-of-use for clothing made at Walmart vs. other companies?


This is one of the worst pieces of anti-capitalist propaganda I’ve ever heard!

“Capitalism is inherently “very” wasteful and inefficient.” Seriously? You think a PLANNED economy is better? Name ONE! Where does the government get EVERY penny of taxes? Does it get it from businesses that are losing money? From government agencies? From non-profits? NO! Government only gets its money from businesses that make a profit and from the salaries paid to their workers.

No profits = No taxes!

Capitalism is not “perfectly engineered” because it doesn’t have to be engineered at all. It “grows” of its own accord. Government only needs to protect property rights and safety, and let competition bring us what people CHOOSE and can afford. When I was young and poor I chose the cheapest (all I could afford), as I get older and make more income, I choose quality when I want to.

I don’t want you “engineering” MY choice! I usually don’t have the time, nor WANT to drive to 5 different stores! I thought progressives are pro-choice and anti-driving!

Some “planned” economies I can think of are Cuba, China, North Korea . . . lots of Mom & Pop businesses there – because people don’t have a choice to work for a big business. Subsistence farming is a Mom & Pop business. No thank you.