Walmart’s Death Grip in USA


Walmart’s Death Grip on Groceries Is Making Life Worse for Millions of People (Hard Times USA)

Stacy Mitchell , ALTERNET

Walmart’s growing control of our food system has been to intensify the rural and urban poverty that drives unhealthy food choices.

Photo Credit: Shutterstock.com

March 26, 2013  |

This article was published in partnership with the Institute for Local Self-Reliance.

When Michelle Obama visited a Walmart in Springfield, Missouri, a few weeks ago to praise the company’s efforts to sell healthier food, she did not say why she chose a store in Springfield of all cities. But, in ways that Obama surely did not intend, it was a fitting choice. This Midwestern city provides a chilling look at where Walmart wants to take our food system.

Springfield is one of nearly 40 metro areas where Walmart now captures about half or more of consumer spending on groceries, according to Metro Market Studies.  Springfield area residents spend just over $1 billion on groceries each year, and one of every two of those dollars flows into a Walmart cash register.  The chain has 20 stores in the area and shows no signs of slowing its growth. Its latest proposal, a store just south of the city’s downtown, has provoked widespread protest.  Opponents say Walmart already has an overbearing presence in the region and argue that this new store would undermine nearby grocery stores, including a 63-year-old family-owned business which still provides delivery for its elderly customers. A few days before the First Lady’s visit, the City Council voted 5-4 to approve what will be Walmart’s 21st store in the community.

As Springfield goes, so goes the rest of the country, if Walmart has its way. Nationally, the retailer’s share of the grocery market now stands at 25 percent. That’s up from 4 percent just 16 years ago.  Walmart’s tightening grip on the food system is unprecedented in U.S. history.  Even A&P — often referred to as the Walmart of its day — accounted for only about 12 percent of grocery sales at its height in the 1940s.  Its market share was kept in check in part by the federal government, which won an antitrust case against A&P in 1946.  The contrast to today’s casual acceptance of Walmart’s market power could not be more stark.

Having gained more say over our food supply than Monsanto, Kraft, or Tyson, Walmart has been working overtime to present itself as a benevolent king. It has upped its donations to food pantries, reduced sodium and sugars in some of its store-brand products, and recast its relentless expansion as a solution to “food deserts.” In 2011, it pledged to build 275-300 stores “in or near” low-income communities lacking grocery stores. The Springfield store Obama visited is one of 86 such stores Walmart has since opened.  Situated half a mile from the southwestern corner of a census tract identified as underserved by the USDA, the store qualifies as “near” a food desert. Other grocery stores are likewise perched on the edge of this tract.  Although Walmart has made food deserts the vanguard of its PR strategy in urban areas, most of the stores the chain has built or proposed in cities like Chicago and Washington D.C. are in fact just blocks from established supermarkets, many unionized or locally owned.  As it pushes into cities, Walmart’s primary aim is not to fill gaps but to grab market share.

***

The real effect of Walmart’s takeover of our food system has been to intensify the rural and urban poverty that drives unhealthy food choices.  Poverty has a strong negative effect on diet, regardless of whether there is a grocery store in the neighborhood or not, a major 15-year study published in 2011 in the Archives of Internal Medicine found. Access to fresh food cannot change the bottom-line reality that cheap, calorie-dense processed foods and fast food are financially logical choices for far too many American households.  And their numbers are growing right alongside Walmart.  Like Midas in reverse, Walmart extracts wealth and pushes down incomes in every community it touches, from the rural areas that produce food for its shelves to the neighborhoods that host its stores.

Walmart has made it harder for farmers and food workers to earn a living. Its rapid rise as a grocer triggered a wave of mergers among food companies, which, by combining forces, hoped to become big enough to supply Walmart without getting crushed in the process. Today, food processing is more concentrated than ever.  Four meatpackers slaughter 85 percent of the nation’s beef.  One dairy company handles 40 percent of our milk, including 70 percent of the milk produced in New England.  With fewer buyers, farmers are struggling to get a fair price. Between 1995 and 2009, farmers saw their share of each consumer dollar spent on beef fall from 59 to 42 cents. Their cut of the consumer milk dollar likewise fell from 44 to 36 cents.  For pork, it fell from 45 to 25 cents and, for apples, from 29 to 19 cents.

Onto this grim reality, Walmart has grafted a much-publicized initiative to sell more locally grown fruits and vegetables.  Clambering aboard the “buy local” trend undoubtedly helps Walmart’s marketing, but, as Missouri-based National Public Radio journalist Abbie Fentress Swanson reported in February, “there’s little evidence of small farmers benefiting, at least in the Midwest.”  Walmart, which defines “local” as grown in the same state, has increased its sales of local produce mainly by relying on large industrial growers. Small farmers, meanwhile, have fewer opportunities to reach consumers, as independent grocers and smaller chains shrink and disappear.

Food production workers are being squeezed too. The average slaughterhouse wage has fallen 9 percent since 1999.  Forced unpaid labor at food processing plants is on the rise.  Last year, a Louisiana seafood plant that supplies Walmart was convicted of forcing employees to work in unsafe conditions for less than minimum wage. Some workers reported peeling and boiling crawfish in shifts that spanned 24 hours.

The tragic irony is that many food-producing regions, with their local economies dismantled and poverty on the rise, are now themselves lacking grocery stores. The USDA has designated large swaths of the farm belt, including many agricultural areas near Springfield, as food deserts.

***

One might imagine that squeezing farmers and food workers would yield lower prices for consumers.  But that hasn’t been the case.  Grocery prices have been rising.  There are multiple reasons for this, but corporate concentration is at least partly to blame.  For most foods, the spread between what consumers pay and how much farmers receive has been widening.  Food processors and big retailers are pocketing the difference.  Even as Walmart touts lower prices than its competitors, the company’s reorganization of our food system has had the effect of raising grocery prices overall.

As Walmart stores multiply, fewer families can afford to eat well.  The company claims it stores bring economic development and employment, but the empirical evidence indicates otherwise.  A study published in 2008 in the Journal of Urban Economics examined about 3,000 Walmart store openings nationally and found that each store caused a net decline of about 150 jobs (as competing retailers downsized and closed) and lowered total wages paid to retail workers.  Otherresearch by the economic consulting firm Civic Economics has found that, when locally owned businesses are replaced by big-box stores, dollars that once circulated in the community, supporting other businesses and jobs, instead leak out.  These shifts may explain the findings of another study, published in Social Science Quarterly in 2006, which cut straight to the bottom line: neighborhoods where Walmart opens end up with higher poverty rates and more food-stamp usage than places where the retailer does not expand.

This year, Walmart plans to open between 220 and 240 stores in the U.S., as it marches steadily on in its quest to further control the grocery market.  Policymakers at every level, from city councilors to federal antitrust regulators, should be standing in its way.  Very few are.  Growing numbers of people, though, are drawing the line, from the Walmart employees who have led a string of remarkable strikes against the company, to the coalition of small business, labor, and community groups that recently forced Walmart to step back from its plans to unroll stores across New York City.

Back in Springfield, as Michelle Obama was delivering her remarks, framed by a seductive backdrop of oranges and lemons, a citizens group called Stand Up to Walmart was also at work, launching a referendum drive to overturn the City Council’s vote and block Walmart from gaining any more ground in the city.

 

Stacy Mitchell is a senior researcher at the Institute for Local Self-Reliance, where she directs an initiative on independent business. She is the author of Big-Box Swindle and also produces a popular monthly newsletter, the Hometown Advantage Bulletin.Catch her recent TEDx Talk: Why We Can’t Shop Our Way to a Better Economy.

Deadly savings US corporations risk foreign workers’ lives — then evade blame


 

By Priyanka Borpujari

|  GLOBE CORRESPONDENT  JANUARY 02, 2013

A Bangladeshi Army soldier walked through rows of burnt sewing machines after a November factory fire killed 112 workers.

AFP/GETTY IMAGES

A Bangladeshi Army soldier walked through rows of burnt sewing machines after a November factory fire killed 112 workers.

AT 4:45 p.m. on March 25, 2011, hundreds of bells rang across cities and towns in the United States to commemorate the 100th anniversary of the Triangle Shirtwaist factory fire. The fire, which killed 146 garment workers — 129 of them women — managed to get the New York State Legislature to create the Factory Investigative Commission, which eventually made way for better labor laws.

It has been a century since that fire that woke up the United States to labor and worker safety reforms. But nothing has changed in another part of the world — where many US companies are currently manufacturing their products. On Nov. 24, 2012, 112 garment workers were killed in a blaze at the Tazreen Fashions factory in Dhaka, Bangladesh. Just two months earlier, on Sept. 5, 25 workers at a fireworks factory in Sivakasi, India, were killed under similar circumstances; a week later, a total of 283 workers died in two separate fires in Pakistan — 258 in a garment factory in Karachi, and 25 in a shoe factory in Lahore. Two years ago, 29 people were killed in a similar fire in Dhaka, Bangladesh, while manufacturing Gap products. In each of the cases, the fires were followed by a blame game over responsibility and liability. Interestingly, only the fire in Bangladesh has made international headlines because the factory was used by one of the suppliers of Walmart.

But will this well-deserved media attention bring about justice for the families of the victims? An incident like this surely does not go down well in the annual report of companies. For the American companies that worked through numerous intermediaries to get their products made cheaply, the immediate response has repeatedly been to disassociate from the incident, and thereby avoid taking any responsibility for any safety lapse or liability. Walmart has said that it has already fired its supplier, Success Apparel, which had outsourced work to a company called Tuba Group, which owns the Tazreen Fashions factory. Success Apparel has said that it did not know its clothes were being made at the Tazreen Fashions factory. In this maze of subcontracting, which is a norm in the race to minimize costs, the lives of the workers are in limbo, with nobody ready to take responsibility for their working conditions.

Only $470 million has been doled out by Union Carbide Corporation as compensation to the victims of the Bhopal gas tragedy, one of the world’s worst industrial disasters. On Dec. 2, 1984, 27 tons of methyl isocyanate leaked into the city of Bhopal in central India, killing 25,000 people to date, with 120,000 still suffering from air and water pollution. Dow Chemical Company, which merged with Union Carbide in 2001, denies any liability for the incident. It continues to evade Indian courts and the demand for compensation. Almost three decade since the accident, Bhopalis await justice. A horrible disaster, a worse injustice thereafter.

Time and again, corporations have tried to save face by sponsoring sporting events and launching humanitarian foundations. Dow Chemical was the worldwide partner for the London Olympics in 2012. But wouldn’t taking up responsibility for accidents and cleaning up the mess be a better and more credible PR exercise to impress their audience?

But that audience surely does not include workers. At a 2011 meeting to find ways to improve safety at Bangladesh garment factories, according to Bloomberg News, Walmart and Gap officials told attendees that they were not willing to participate in paying for the electrical and fire safety of the 4,500 garment factories in the country. This, they said, was financially nonviable. But the Washington-based Worker Rights Consortium has found that such essential safety upgrades would cost just 10 cents per garment. Yet, for Walmart, which has been reported to outsource the making of garments worth more than $1 billion a year in Bangladesh, saving 10 cents per item appears to be more important than the safety of the workers.

Walmart rides high on its popularity in the United States. With economics and numbers fueling a company’s growth, might it be possible for Walmart’s customer base to demand their favorite store act more responsibly, even as they continue to enjoy its competitively low prices? Perhaps it is up to its customers to decide if 10 cents for a garment is more expensive than the safety of the person who makes it under pathetic conditions. A new wave of safety reforms is also needed, along with a corporate social responsibility that goes beyond events sponsorships and colorful brochures with photographs of smiling children.

Walmart spent spent $25 million ’as its lobbying fee to enter #India


India’s blind fists of fury

The rage in Parliament is off target. Walmart’s disclosure of its lobbying fee in the US Senate should trigger a different debate in India, says Shaili Chopra
Shaili Chopra

December 13, 2012, Issue 51 Volume 9

Illustration: Anand Naorem

WALMART’S DISCLOSURE on the fees it paid to lobby for opening up the Indian market created an uninformed and noisy debate in Parliament. The notion that allowing Foreign Direct Investment (FDI) in multi-brand retail would be the only stumbling block for Walmart’s entry into India quickly evaporated as proceeding in both Houses were disrupted for two straight days because of this disclosure report. As the time of its entry into India gathers pace, any piece of news to do with the company is being greeted with protests.

Earlier this week, the multinational retail giant disclosed in a report to the US Senate that it spent $25 million over the past three years on lobbying, including on issues related to “enhanced market access for investment in India”. Opposition members picked on this number and stalled Parliament, claiming lobbying was illegal and accused the government of taking “bribes” for pushing Walmart’s entry into India. BJP members demanded a probe into the matter. To the surprise of many, the government agreed to an inquiry into Walmart’s lobbying practices.

“This disclosure has nothing to do with political or governmental contacts with Indian officials,” says a Bharti-Walmart spokesperson. “It shows that our business interest in India was discussed with US government officials along with 50 or more other topics during a three-month period. Naturally, our Washington office had discussions with the US government officials about a range of trade and investment issues that impact our businesses in that country and worldwide, and disclosed this in accordance with the law.”

A look at the facts will help us understand better the legality of lobbying. For a start, though it is true that Walmart did pay lobbying firms to push for retail reforms in India, it is also true that it voluntarily disclosed this information. In America, lobbying is a valid practice, a right protected under the US constitution. Therefore, to say that lobbying equals bribery is an outlandish assumption. Just because there are no laws in India regulating lobbying to influence policymakers does not make it illegal. You have laws to make an act illegal, not having a law doesn’t make it otherwise. It is wrong to say Walmart bribed its way into India when there are no facts to prove so, although it may be the right time to address long pending issues around disclosures and lobbying in the country.

How should industry or individuals in a democracy try and convince policymakers of a particular position if not by lobbying? Unlike in the US, where the constitution allows it, we, in India, are running away from lobbying. We cannot expect transparency unless we have a right to approach our elected officials on any issue, in a manner similar to groups such as the CII and FICCI, who work with the government on behalf of corporate India, and with the rest of the world on behalf of India. In the US, such groups would have to register as lobbyists.

“Lobbying is often viewed with suspicion since it is confused with fixing,” says Sunil Kant Munjal, Joint MD, Hero Corp. “If it is in the form of advocacy to wean others to your point of view, it is absolutely fine and is an accepted practice worldwide and in India.”

Walmart has been the mascot of the battle between the UPA and its political opponents, who have been anti-reform in retail, their argument being it will hurt small traders and farmers. There is no doubt that the rollout of FDI will be complex and tedious and this latest controversy is a part of it. But what is also clear is that Walmart will need to rethink how it plans to make the most of India’s push for reforms amidst growing hatred for its brand. For the BJP to translate lobbying into bribery is misleading. What they should highlight is Walmart’s investigation of its Indian officials under the US Foreign Corrupt Practices Act (FCPA). They are more likely to find some ammunition there. Instead, they are confusing the two issues.

The company has undertaken a detailed investigation of its own arm in India with regard to internal bribery charges under the FCPA. It has sacked five employees in India, including CFO Pankaj Madan, following the inquiry, and Walmart India CEO & MD Raj Jain — who has just returned from the United States — is under severe pressure to sort out the mess.

The lobbying fee disclosure is not connected to this case at all but with all the wounds suddenly open, anti big box retail segments are making use of every opportunity to show how the entry of Walmart will be detrimental to India’s economy. It, of course, helps to remember that retail is not just Walmart or vice-versa.

Says Ronen Sen, former Indian Ambassador to the United States: “Anywhere you have democratic institutions, this is a registered way of doing things.” Sen further says that Indians have for long engaged in lobbying to push their case.

Unfortunately, in India, lobbying as a term is still associated with Niira Radia and the 2G spectrum scam, acts to be scoffed at, proofs of the unsavoury business- politics nexus. But the truth is, lobbying is undefined, vague and controversial because we have never considered a framework for it or its scope, albeit it has existed in every sphere — corporate, government, NGOs and more. And not one party can be exempted from indulging in it.

Often lauded for his business-friendly ways, Gujarat Chief Minister Narendra Modi reportedly hired Apco Worldwide, a public affairs firm, to boost his image internationally. Apco today boasts of a client list that includes names such as former Indian ambassador to the US Lalit Mansingh, US ambassador to India Tim Roemer and many more.

The UPA had also paid a US firm to lobby for the Indo-US civilian nuclear deal. As reported by the Daily Mail in November 2012, Washington-based Barbour Griffith & Rogers (BGR) was hired by the Indian embassy to seek media interviews for Prime Minister Manmohan Singh and get Congressional resolutions passed in his support ahead of a US visit.

“What is being said reveals ignorance,” says Sen who was instrumental in the Indo-US nuclear deal. “As India’s ambassador, I have actively engaged in lobbying, wherever it was. For example, when the erstwhile Soviet Union broke up, we had to lobby for a certain point of view to influence opinion. Even during legislations, as foreign envoy, I would get into the language of the legislation and lobby to get it changed with our trade, economic and security agenda in mind.”

INDIAN TECH companies routinely hire lobbying firms to get improved visa rules passed. Reliance, Tata and Nasscom have all used the services of global firms to get a foot in the door in other markets or appointments with governments.

Does an Indian citizen have any basis for seeking answers from those who receive funds? As a nation, we do not believe in disclosure of campaign finance, lobbying funds or even any gifts received by those in office. As a result, our political class gets uncomfortable whenever there is talk of disclosing information voluntarily. Why would any politician or entity disclose that they accepted any money when no such rule makes it incumbent on them to do so?

What this debate has once again exposed is our discomfort with transparency where all institutions — government, corporations or the bureaucracy — will have to deal with an open system of discussion, debate and decision. The government should take this opportunity to seek a basic framework to recognise lobbying as a legitimate industry, which should be given due importance when policies are drafted. At the same time, we need to recognise that excessive influence of money like in the US is not desirable and hence, the need for a set of rules.

People who work in the building that hosts the Walmart Federal Government Relations offices watch as hundreds of people from several different labor rights groups demonstrate in the street below August 5, 2011 in Washington, DC. Organized by the Jobs With Justice 2001 Conference, the demonstrators called on Walmart to secure decent, living wage jobs during their attempt to build four new stores in the District of Columbia, and not to retaliate against associates who join labor organizations.

We would also do well to acknowledge that lobbyists are professionals, who possess special skills of persuasion and tact to make a point of view acceptable to those who did not approve it. So that we understand that when Walmart spends $25 million on lobbying, it is because it used the best professional help it could to achieve its objectives. Calling it a bribe is not only irresponsible, but also defamatory.

Shaili Chopra is Business Editor, Tehelka.
shaili@tehelka.com

 

#India- How FDI in retail affects the “Mango Man”


 

MATHEW THOMAS | 07/12/2012 02:29 PM , MOneylife.com

FDI in retail is an example of deregulation, devoid of any safety net for its after-effects. Would the government consider the Parliament Committee report or treat Parliament with disdain? 

Here is a simplified explanation, sans economic jargon, to help understand FDI (foreign direct investment) in retail and what it has in store for the aam aadmi—“The Mango Man”. Let us start with an analogy.When a falling stone hits the ground its energy is converted and dissipated as heat. However, if the same stone lying on the ground is heated, it does not take off. What is the relevance of the falling stone to FDI in retail?
What is FDI in retail? It means “Foreign Direct Investment” of 51%, a controlling stake is permitted to any foreign company to set up retail trade in India. Simply put, a number of foreign-owned supermarkets would sprout all over the country. At a political party rally in Delhi, the leaders extolled the virtues of FDI in retail as symbolic of the party’s reforms agenda. The phrase, “economic reform” has many different meanings depending on ideological and political leanings.
One view is that between 1875 and 1975 it meant more government and since then it means less government intervention or free run for market forces. A Wall Street view says that it means, “Change for the better as a result of correcting (economic) abuses”. “Better for whom?” and “whose abuses would the reforms correct?” Did the post 1975-reforms in USA correct the abuses by financial wizards that led to the 2007–08 meltdown? A third view holds that economic reform refers to policies directed to achieve improvements in economic efficiency. Which of these did the rally leaders have in mind when they toasted the FDI reform push?
Those in favour of FDI in retail painted rosy pictures of benefits such as better prices for farmers, more jobs, better shopping experience and so forth. Those against it predicted the opposite. Few had hard facts to back their arguments. It is strange that neither the government nor the opposition referred to the report of the Parliament Committee which examined FDI in retail. The Committee seems to have done a comprehensive study, examining a number of witnesses, individuals, NGOs and trade bodies, travelling around the country, studying reports and experiences of other nations and asking questions of government departments. The Committee concluded that more people would lose jobs that the number that would find work. They said that FDI in retail would destroy large numbers of small and marginal farmers. They cautioned against the probable monopolistic behaviour, predatory pricing and attendant consequences. The Committee found that unorganized retail provides livelihoods for 40 million people, that is, for about 8% of the country’s workforce. Referring to the projection of FDI in retail creating 2 million jobs, the Committee said that this was exaggerated and that this ignores 200 million people who depended on retail trade for a living. The Committee was not only critical of FDI in retail, but also of any large corporate in retail business. The Committee drew a dismal picture of the effect of FDI in retail on the “Mango Man”.
With FDI in retail, shops like this will disappear. How sad.
ICRIER (Indian Council for Research on International Economic Relations) carried out two studies, one in 2008 and the other in 2011. The 2011 study predicts a great shopping experience for consumers. ICRIER surveyed 300 consumers, in high and middle income groups. Evidently, the government relied on the ICRIER recommendations, rather than on the Parliament Committee report. Does the reliance on a private organisation’s recommendations in opposition to Parliament, have anything to do with the chairperson of ICRIER bearing the same surname as the Deputy Chairperson of the Planning Commission?
ICRIER’s sample of 300, from high and middle income brackets, for a population of 1.2 billion with over 40% poor, for recommending foreign investment, is questionable. In reply to a RTI (Right to Information) query on whether the government had done any study on FDI in retail, the commerce ministry replied that it had not done any such study. The reply referred to the ICRIER report and not the Parliament Committee report. The Committee’s report was not discussed in Parliament. Rejecting the Parliamentary panel study and accepting a private study report, does not augur well for Parliamentary democracy. ICRIER says consumerism promotes economic growth. The earlier study (2008) surveyed 2020 unorganized small retailers out of 6 million shops. None of the studies addressed the issue “why India requires FDI in retail?” Would it lead to a net increase in foreign currency earnings, improve India’s balance of trade? Stiglitz’s views on FDI in retail are significant. He asks, “Why India needs foreign entrepreneurs in any sector, particularly the retail?” He then talks of the power of Wal-Mart to drive down prices and suggests that they will use that power to have Chinese goods displace Indian goods. Next, he draws attention to Wal-Mart’s abusive labour practices. He asks, “Why would you want to import such practices into India?” Why indeed? The foreign retail lobby reportedly spent over Rs52 crore in India. Could that be the reason why? He also talked about increasing inequality that Indian reforms are ushering in, accompanied by corruption.
It is appropriate to now look at the falling stone analogy. To see the relevance of it look at two economic philosophies prevalent today. One is the “Trickle-down” variety. Subscribers to this believe in less and less of government. The market would correct itself. De-regulation is the key. Concessions to the rich would lead to investments and economic growth. This would trickle down to the poor. The second view holds that left to itself, unregulated market economies, would become so disorderly that the human costs would be enormous. FDI in retail is integral to “Trickle-down” economics. It is part of the reforms’ cry for deregulation.
No lessons have been learned from the deregulation induced meltdown. That is why the government and proponents of FDI in retail do not bother about its effect on 6 million small shop-owners or the 50% of the farming-dependent population who would lose their livelihoods. Some of these dispossessed may find jobs in the retail supermarkets, as shop assistants or labourers. Does deregulation help them? The stone does not take off when heated because heating causes disorder. The heat energy is random, disorderly; the stone’s molecules jostle each other randomly. Hence, they cannot lead to orderly motion of the stone. The natural propensity of things is to move towards chaos. Markets are no exception. Without regulation the result is disorder. FDI in retail is an example ofderegulation—thinking devoid of any safety net for its after-effects. Would the government consider the Parliament Committee report or treat Parliament with disdain?

EXCLUSIVE – How Wal-Mart got a foot in the door of India’s retail market


Wed, Dec 05

By Nandita Bose

MUMBAI (Reuters) – Wal-Mart Stores Inc (WMT.N) prepared its entry into India‘s supermarket sector in 2010 with a $100 million investment into a consultancy with no employees, no profits and a scant $14,000 in revenue.

The company, called Cedar Support Services, might have been a more obvious selection four months earlier: it began its corporate life as Bharti Retail Holdings Ltd, according to documents filed with India’s Registrar of Companies.

The Cedar investment is now the focus of an investigation by India’s financial crimes watchdog into whether Wal-Mart broke foreign direct investment rules by putting money into a retailer before the government threw open the sector to global players.

Wal-Mart said it was in compliance with India’s FDI guidelines, and had followed all procedures. It said the central government had sought “information and clarification”, which Wal-Mart has provided.

However, several lawyers said the transaction appeared to violate at least the spirit of India’s long-standing ban on foreign investment in supermarkets, which it only lifted in September 2012. When Wal-Mart made the investment in 2010, it was legal for foreigners to own consultants but not retailers, so the shift in Cedar’s business description raised eyebrows.

“This is a complete camouflage,” said Hitesh Jain, a senior partner at ALMT Legal in Mumbai who advises retailers but is not involved with Wal-Mart. “It can be looked at as a violation of FDI rules because Cedar also operates supermarkets, which was a restricted sector back then.”

Graphic on Wal-Mart’s investment http://link.reuters.com/myp44t

Graphic on India’s retail market http://r.reuters.com/cuh79s

The law, however, is murky.

Others stressed that the way Wal-Mart structured the transaction might make it legal. According to the documents filed with India’s registrar, the investment was in the form of debt that was convertible into equity. That clouds the issue of whether Wal-Mart took a stake in Cedar or provided financing.

Bharti and Wal-Mart both declined to provide additional details on how the transaction was structured.

Senior government officials told Reuters that the RBI had asked the Enforcement Directorate, which investigates financial crimes, to look into whether Wal-Mart violated the law by investing in a supermarket retailer before foreign investment rules were relaxed.

If Wal-Mart did break the law, it could face a penalty of up to three times its initial $100 million investment, they said.

That would not only be a setback for Wal-Mart, it would also weaken consensus-building efforts by India’s minority government, led by the Congress party. The party is desperate for more support from across the political spectrum after its decision to let foreign players into India’s retail market came under fire from the opposition and even some of its own allies.

Wal-Mart and other retailers lobbied for years to gain access to India’s market, lured by the promise of a middle class that will one day rival China’s. But local opposition has been fierce because of concern that Wal-Mart and its peers will knock millions of mom-and-pop stores out of business.

COMPLEX WEB

Reuters pieced together details of Wal-Mart’s investment in Cedar by examining records from India’s Registrar of Companies and through interviews with government officials involved with the matter, as well as several lawyers who work with retailers.

The documents reveal a web of companies set up under the Bharti umbrella, which runs India’s largest telecom operator, Bharti Airtel (BRTI.NS). The group, which also has retail interests, signed a joint venture with Wal-Mart to run wholesale stores in 2007, shortly after India allowed full foreign ownership of wholesale retail operations.

That same year, the Bharti group formed Bharti Retail Holdings Ltd, which in turn owned a subsidiary called Bharti Retail Ltd which operated supermarkets and hypermarkets.

In December 2009, Bharti Retail Holdings changed its business description to consulting services from retail, the documents filed with India’s Registrar show. A month later, the company changed its name to Cedar.

The timing of the change in name and business is significant because when Wal-Mart invested in Cedar in March 2010, foreign companies could legally own 100 percent of an Indian consulting firm but not a supermarket retailer.

Cedar issued “compulsorily convertible debentures” to Wal-Mart Mauritius Holdings Co Ltd, which would be exchanged for 49 percent equity 18 months after the issue date. The conversion date has since been pushed back twice, to September 2013, which would be after India’s relaxation of rules on retail investment.

Cedar’s cash flow statement for 2010 shows that the funds raised from the debentures were used to finance activities and an attached schedule to the balance sheet shows a transfer of 1.75 billion rupees to its retail unit, raising questions over whether Wal-Mart’s money went into the retail business.

M.P. Achuthan, a communist member of India’s parliament, has accused Wal-Mart of breaking the foreign direct investment law and said he wanted the company to be penalised. Achuthan also wants India to scrap its foreign retail investment policy.

“I am surprised and shocked that the government didn’t see this. This kind of an investment could not have happened without the government’s knowledge,” Achuthan said. “It is impossible.”

Wal-Mart’s Indian partner, Bharti Enterprises, said it had followed the rules but did not address specific questions emailed by Reuters.

“We are in complete compliance of all regulations. All details have been shared with the relevant authorities,” a Bharti Enterprises spokesman said.

Two senior government officials said there had been an initial round of communication between the Reserve Bank of India and the Enforcement Directorate. The RBI asked the law enforcement agency to conduct the investigation.

“RBI believes there is a need to investigate,” said a senior government official, who spoke on condition of anonymity because of the sensitivity of the matter. He said both Wal-Mart and Bharti were being investigated because “Wal-Mart allegedly made the investment and Bharti allegedly received it”.

Separately, Wal-Mart said last month it was looking into bribery allegations in several countries including India, Brazil and China. It conducted an earlier probe in Mexico.

DEBT OR EQUITY?

Prime Minister Manmohan Singh is under intense pressure to roll back the decision to permit foreign retailers. Parliament ground to a halt on November 22 over opposition to the reforms until the government agreed to a vote, set for Wednesday.

A year ago, political pressure forced the government to make a U-turn after it first approved foreign investment into supermarkets, an abrupt shift that brought into question India’s ability to build consensus behind long-awaited reforms.

When Wal-Mart made the investment in Cedar in 2010, Indian law permitted foreigners to own “cash-and-carry” wholesale stores, but they were barred from owning what India calls multi-brand retailers, or stores like Wal-Mart’s namesake supermarkets that sell a wide array of products and brands.

Whether the investment in Cedar violated India’s law depends on two issues, according to the lawyers: if Cedar was in fact a retailer rather than a consultancy, and how the investment was structured.

Cedar’s articles of association filed with the Registrar show it called itself a consultancy, but a few pages later it describes a “competing business” as one involved in retail and operates supermarkets, hypermarkets and discount stores.

Even if investigators determine Cedar was a retailer, lawyers said Wal-Mart’s investment may still be legal if the transaction is deemed to be debt. Wal-Mart could then argue that it did not acquire a stake but instead extended a loan.

But according to RBI guidelines set in 2007, compulsorily convertible debentures are considered equity. That would mean Wal-Mart jumped the gun, said Alok Dhir, managing partner Dhir & Dhir Associates.

Dhir said there may be one way around that problem. If Wal-Mart and Bharti included a “put” option on the debentures, it could be considered debt because Wal-Mart would no longer be required to convert the debt to equity.

It is not clear whether this transaction included such a clause, and Wal-Mart and Bharti declined to comment.

LOOPHOLES

Under Indian law, Wal-Mart can be found in violation even if each step it took was within bounds. If the combination of those actions led to a result that circumvented the law, a court can consider the bigger picture, four lawyers said, citing a 1985 Supreme Court of India decision.

However, there are numerous grey areas.

For example, the RBI does not require Indian companies to declare what they do with money they receive from foreign investment.

“Even if the investigation is able to prove that funds were invested into the retail business, the companies can say they are not legally bound to declare it and present an argument,” said Ravi Singhania, managing partner at law firm Singhania & Partners.

The fact that Wal-Mart’s investment was capped at 49 percent and would not give it majority control of Cedar after the debt is converted could also help the companies build a case that the investment was legal.

The rules allow Indian-owned and controlled companies to use foreign capital to fund businesses which their subsidiaries operate. However, lawyers said there is no clarity on whether it is a breach if the unit of the Indian entity operates in a restricted sector, which supermarkets were until September. (Additional reporting by Satarupa Bhattacharjya in New Delhi and Jessica Wohl in Chicago; Editing by Emily Kaiser and Mark Bendeich)


“To those who believe in resistance, who live between hope and impatience and have learned the perils of being unreasonable. To those who understand enough
to be afraid and yet retain their fury.”

 

India–Caste control & FDI


The opening of the retail market for foreign entrepreneurs has invited sharp reactions from several quarters.

The main argument against it is that the livelihood of millions of small shop owners would be seriously affected as they would be handled by global marketing giants like Walmart and Tesco.

According to the opponents of foreign direct investment (FDI) in multi-brand retail, the small marketing sector will be devastated and this would lead to massive unemployment and hunger.

And the supporters of FDI argue that the inflow of foreign funds would create a lot more jobs and the small shops would suffer only marginally.

I, for one, welcome FDI in retail even if it would disrupt the chain of small shops as that is appreciable from the point of view of the likely social change it will bring about.

Certain systems are so well-entrenched in this country that a serious shake-up is long overdue.

For one, if we look at the caste-wise presen­ce of people in the groce­ry (kirana) shop system that is spread over villages and urban areas, the locally entrenched baniyas and marwadis control the major chunk of the grocery business. In these shops, as a rule, they do not employ those from the lower strata of society.

Even in urban areas, when they need someone to supplement the role of their family members, caste comes into play.

They make sure dalits are kept out. The OBCs do have some space in the baniyas’ scheme of things, though this business is mostly run by family and clan members. They are, I noticed, casteists to the core.

One major character of the Indian retail market was or still is that it historically practised untou­chability vis-a-vis da­l­its.

The shudras, though not untouchables, were not supposed to engage in the retail business of essential food items in ancient and medieval times.

Even now, this rule applies to dalits. If a dalit opened a retail shop in a village, those from the higher castes would not buy things from the shop.

From village upwards, the baniyas (komatis and marwadis in An­dh­ra Pradesh) have, over generations, established their hegemony.

Rice, pulses, oil, turmeric and even salt were considered Hindu items and only a baniya was ex­pected to sell them in the village settings.

Meat, fish, ropes and other thi­n­gs were considered “un-Hindu” and were ne­ver sold in these sho­ps. Leather goods were completely banned and were sold by those cast­es and communities that manufactured them.

The fact remains that at the production level, even the Hindu goods, as raw materials, were/are produced by shudras and dalits only. Even at the milling and grinding level, they were/are at work.

But, once they reach the baniya shops as finished products, these commodities become untouchable for the communities that produced them.

In a baniya shop, these articles are considered spiritually pure but once sold to shudras and dalits, the same articles become impure.

This vicious cycle continues. In the process, the shop owners become kuberas (rich). As a result, a huge amount of black money gets accumulated and in many cases they bury that we­a­lth underground, whi­ch historically was kno­wn as guptdhan.

This process un­der­cut the growth of in­di­genous industrial de­velopment, in as far as that this buried wealth was not being re-invested.

The wholesale busine­ss of groceries used to take place mostly from urban settings and it us­ed to be completely un­der the control of bani­yas.

Till we attained In­dependence, the right to do business in retail and wholesale market was vested on the basis of the Varnadharma ideology.

The entry of Muslim tra­ders changed the caste-based trade relationshi­ps in some urban centr­es, as the Muslim tra­ders were not concerned about the caste or religious background of buyers and se­llers. But their influence on the Indian retail market was limited.

The baniya businessmen and Bri­tish officials colluded to sustain the Hindu market and tried to checkmate the expansion of Muslim trade in the co­u­ntry during the colonial period. However, it was the Muslim traders who initiated the process of decasteising market relations.

That process, however, was slowed do­­wn during the colonial and nationalist pe­r­i­ods. Indian nationali­sm did not play a very positive role in this respect.

In Independent India, market relations have substantially expanded. But the caste controls of markets survived dramatically.

The emergent capitalist growth also shared its bed very well with the modern mode of Varnadharma.

The emergence of Mahatma Gandhi, with an anti-industrialisation theory, saw to it that varna relations did not face odds in the market.

For, if the baniyas lost their control on the markets, they would have become unemployed and looked for different ways and means of survival.

But the Gandhian nationalism protected them with a shield of Varnadharma in the market. Though his emergence as an unchallenged leader created tension between brahmins and baniyas, that was overcome very soon. Between them, they accommodated and adjusted well.

Till the liberalisation process began in 1991, the Indian retail market was choked by caste controls and a lack of liberal creativity in the business structures themselves.

Hopefully, if the FDI in retail liberalises the caste-controlled ma­r­ket, a new relationship would begin to unfold in the Indian market system.

It is important that foreign investors res­pect the social diversity principle in the retail market and employ SC, ST, OBCs too in their chain of shops at least up to 50 per cent. That will create a business-experienced human resource base among these communities.

If the FDI system has to survive, it is imperative that a lot more money flows into the hands of the toiling masses. So that they too can become buyers in these shops.

The system of money transfer and MGNREGA resources, coupled with the new-found jobs in the market, might hopefully revolutionise their lives. In the process, if a few baniyas see their own exit from the market, that does not matter. Let the FDI come.

The writer is director, Centre for the Study of Social Exclusion and Inclusive Policy, Maulana Azad National Urdu University, Hyderabad

 

India’s clothing workers: ‘They slap us and call us dogs and donkeys’


Human rights tribunal hears allegations of abuse and low pay against clothing companies that supply high street stores

Suma, of the Karnataka Garment Workers Union

Suma, of the Karnataka Garment Workers Union, gave evidence on human rights abuses.
Photograph: Gethin Chamberlain for the Observer

Workers making clothes that end up in the stores of the biggest names on the British high street have testified to a shocking regime of abuse, threats and poverty pay. Many workers in Indian factories earn so little that an entire month’s wages would not buy a single item they produce.

Physical and verbal abuse is rife, while female workers who fail to meet impossible targets say they are berated, called “dogs and donkeys”, and told to “go and die”. Many workers who toil long hours in an attempt to support their families on poverty wages claim they are cheated out of their dues by their employers.

The allegations, which will be of concern to household names including Gap, H&M, Next and Walmart, were made at a human rights tribunal in the southern Indian city of Bengaluru. The “national people’s tribunal for living wages and decent working conditions for garment workers” was convened to investigate widespread human rights abuses in the garment industry.

Sakamma, a 42-year-old mother-of-two working for Gap supplier Texport in Bengaluru, told the tribunal she earned just 22p an hour and that when she finished at the factory she had to work as a domestic help to top up her wages.

“It hurts us to be paid so little. I have to do this and they sell one piece of clothing for more than I get paid in a month,” she said. “We cannot eat nutritious food. We don’t have a good life, we live in pain for the rest of our life and die in pain.

“Low wages is the main reason. How much burden can a woman take? Husband, children, house and factory work – can we manage all these with such a meagre salary? So we are caught up in the debt trap. Is there no solution for our problem?”

Like many of the women giving evidence, she said workers faced abuse if they failed to meet quotas. “The targets are too high. They want 150 pieces an hour. When we can’t meet the targets, the abuse starts. There is too much pressure; it is like torture. We can’t take breaks or drink water or go to the toilet. The supervisors are on our backs all the time,” she said. “They call us donkey, owl [a creature associated with evil], dog and insult us … make us stand in front of everyone, tell us to go and die.”

According to Indian government figures, the national textile industry is worth £35bn a year and employs 35 million people. Garment exports are worth £21bn. But human rights campaigners accuse international brands of subcontracting to firms paying poverty wages to the people who make their clothes.

A spokesperson for Texport denied setting unachievable targets and said abuse of workers was not tolerated. Gap said: “These allegations describe conduct that violates our Code of Vendor Conduct. We are looking into this matter and will take appropriate action with our vendors, depending on our findings.”

The Asia Floor Wage Alliance (AFWA), which organised the tribunal, wants companies to pay a minimum living wage of 12,096 rupees (£138) a month, equivalent to 58p an hour. But the tribunal heard that a factory supplying Gap and Next paid as little as 26p an hour. The supplier – Pearl Global, based in Gurgaon, in Haryana state – admits it has underpaid workers for overtime and has required them to work illegally long hours, but said it had now repaid them. It insists it complies with the legal minimum wage, though evidence submitted to the tribunal by one worker indicated that he was paid below the legal rate.

Pearl Global was first exposed by the Observer for rights abuses in 2010when it traded as House of Pearl, but it has continued to operate and supply the brands under its new name.

Many workers at the tribunal claimed that long hours and poor health and safety conditions made them ill. One worker said that a colleague was electrocuted by a bare wire last year in a factory supplying Gap. Ashok Kumar Singh, 29, who works for Gap supplier Modelama Exports in Gurgaon, gave evidence that he was paid just 5,097 rupees a month (24.6p an hour), although the legal minimum rate for his job was 5,300 rupees.

He said workers were taught to lie to auditors sent to check up on working conditions. “Before a visit they gather all the workers around and tell them what to say. If we don’t say what we are told, we are fired,” he said, adding that some workers had been dismissed after complaining to auditors about conditions.

Workers who failed to meet targets were verbally and physically abused, he said. “They call us motherfuckers and push us around and some people get slapped by supervisors and managers,” he said. “I feel the companies look at the workers like enemies.”

The tribunal, in front of an international jury, took evidence in person from workers and will consider written evidence compiled at regional hearings.

Gap and Next were accused of using suppliers that paid below the minimum legal wage, paid below the legal rate for overtime, and required workers to work excessive and illegal overtime. They also faced allegations, along with H&M and Walmart, of using suppliers that verbally abused staff, while there were allegations of physical abuse against a supplier for Gap, H&M and Walmart.

H&M sent representatives to the tribunal and insisted it was committed to improving working conditions. “The social and environmental responsibility that we take puts H&M’s sustainability work ahead of the field in the fashion industry worldwide,” said a spokeswoman. “We clearly see these issues as industry problems that need to be addressed at industry level by government, suppliers, trade unions, workers, buyers, etc.”

A spokesman for Next said: “Next identified that Pearl Global was falling well short of the group’s standard codes of practice in 2010. As a result, Next ceased using this supplier in 2011, after making a determined effort to bring about major change at Pearl Global. Next last reviewed the supplier in July, when the decision to remain disengaged from it was maintained. Next has no plans to recommence manufacturing at Pearl Global.”

Anannya Bhattacharjee, international co-ordinator for the AFWA, told the tribunal that despite the recession the garment industry continued to bring in profits. She said workers continued to suffer “shocking, inhuman conditions” and were being paid poverty wages. “Nothing can be more important than a decent living wage for workers working day and night to clothe the world.”

 

 

Walmart Black Friday Strike Being Organized Online For Stores Across U.S


Walmart Black Friday Strike Being Organized Online For Stores Across U.S. (

Black Friday, the day after Thanksgiving regarded as one of the biggest shopping days of the year, may be dramatically different this year.

Organizers are planning a nationwide strike against Walmart, the largest retailer in the world, and are banking on a new strategy: online organizing.

Labor organizers are working with social action nonprofit Engage Network as well as corporate watchdog nonprofit Corporate Action Network to pull off what they are calling a “viral” — meaning national and spreading online — strike.

Walmart workers interested in joining the day of action are directed to this website, either to find a store near them with an organized strike or to “adopt an event” at a store near them.

Brian Young, cofounder of the Corporate Action Network, said on a conference call coordinated by the United Food and Commercial Workers (UFCW) union Thursday, that organizers cannot cover the roughly 4,000 Walmarts across the country, but enabling self-appointed leaders online has widened and decentralized the campaign.

Supporters can also sponsor a striking worker, who may be losing wages in order to strike, by donating grocery gift cards. The campaign has raised more than $13,500 worth of donations toward grocery gift cards since Oct. 15 — a figure that doesn’t include significant funds raised through mailed-in checks, Jamie Way, of the UFCW, told HuffPost.

The campaign is also mobilizing strikers and supporters through a Facebook app, multiple Facebook pages, a Tumblr and Twitter with the hashtag #walmartstrikers.

“This online mobilization, in addition to traditional on-the-ground organizing, has allowed the campaign to reach into the rural corners of the country that might have otherwise been overlooked,” Marianne Manilov, cofounder of the Engage Network, said on the conference call.

She pointed to a group of renegade workers in Oklahoma who mobilized in October. “A completely unorganized set of workers in Oklahoma spontaneously went out on strike and held their own type of action without any organizer or … connection with the broader organization,” she said. “This is what organizing looks like in the age of Occupy.”

The outreach leading up to Black Friday follows a series of unprecedented actions taken by Walmart workers against their employer and working conditions. In October, for the first time in the company’s 50-year history, more than 70 workers at multiple Los Angeles-area Walmart stores walked off the job, even though their jobs are not protected by an official union. The strike had a ripple effect, causing strikes in 12 other cities, in large part through online organizing.

The success of these strikes, as well as one over the summer touted as the largest ever protest against the company, and a six-day pilgrimmage of warehouse workers in September, would not have been possible without Facebook, Twitter and other web sites, Young said.

“Making Change at Walmart,” which organized the demonstrations and is a campaign affiliated with the UFCW union, has over 25,000 supporters on Facebook.

Although it does not officially represent Walmart workers, OUR Walmart, organized by the Making Change campaign, acts like a union to fight for the rights of Walmart workers. OUR Walmart, which was founded last year with 100 members, now has over 14,000 supporters on Facebook.

Corey Parker, a Walmart worker from Mississippi, said on the conference call that he became active with OUR Walmart after finding out about it through a HuffPost article on Facebook. Now, he has mobilized workers at his store to strike on Black Friday because, he said, he realized that “not being able to make a living was not just an issue at my store.”

Adding fuel to movement, Walmart announced Thursday that it will kick off its Black Friday sale at 8 p.m. on Thanksgiving, its earliest start ever.

“Lots and lots of Walmart workers are going to be forced to not have Thanksgiving because they’re going to be preparing all day for the busiest shopping day of the year,” Dan Schlademan, director of Making Change at Walmart, said on the conference call. “This essentially cancels Thanksgiving for hundreds of thousands of workers.”

“It’s not like Walmart is financially hurting. It’s not like they’re not making unbelievable sums of money. The price of this is really decimating an important family day in our country.”

But Walmart spokesman Steven Restivo said of the sale, “Last year, our highest customer traffic was during the 10 p.m. hour and, according to the National Retail Federation, Thanksgiving night shopping has surged over the past three years.”

“Most of our stores are open 24 hours and, historically, much of our Black Friday preparations have been done on Thanksgiving, which is not unusual in the retail industry,” he said, adding that the strikes planned for Black Friday, will not “have any impact on our business.”

Regarding the action over the last few months, Restivo said, “While the opinions expressed by this group don’t represent the views of the vast majority of more than 1.3 million Walmart associates in the U.S., when our associates bring forward concerns, we listen.”

In September, dozens of Walmart-contracted warehouse workers in Southern California’s Inland Empire walked off the job and went on a six-day, 50-mile pilgrimage to protest working conditions and retaliation for speaking up.

More than a month later, the warehouse company NFI responded to some of the strikers’ working condition requests. “Just in the last week, we’ve seen the warehouse operators scrambling to replace broken and unsafe equipment, they’ve rented fans to increase ventilation, and they’ve added more water coolers,” Elizabeth Brennan, communications director for Warehouse Workers United, said on the conference call.

However, the strikers who returned to work have continued to face retaliation, many times getting their hours cut from 35 down to eight, she said. Some of these warehouse workers will join striking Walmart workers on Black Friday, Brennan said.

Excluding the retaliation, organizers hope to see that type of positive response after Black Friday. And with an online system open to anyone who wants to start a strike in his or her local Walmart, Manilov hopes both the demonstration and response will be broad-reaching.

“This is one of the first labor campaigns to really fully embrace the potential of online-to-offline labor organizing,” she said. “As this captures fire, its potential is limitless.”

Won’t allow Wal-Mart in Bengal: Mamata Banerjee


Mamata Banerjee
 West Bengal Chief Minister Mamata Banerjee on Tuesday said she would not allow foreign direct investment (FDI) in multi-brand retailin the state.”They (union government) allowed FDI in retail, capped subsidised cooking gas and now they will invest pension money in the share market. By doing this, they want to ruin the country. They want to sell the country to foreigners,” Banerjee said at a public meeting in Tamluk in East Midnapore district.”They want to snatch your land and livelihood and set up Wal-mart here. But let me say this: ‘As long as I’m here, we will not allow Walmart to enter’. We cannot and will not allow anything that jeopardises the interest of common people,” Banerjee , the Trinamool Congress chief, said.

She was in district to inaugurate a slew of projects in Haldia.

Banerjee came down heavily on the Congress-led United Progressive Alliance (UPA) government for the steep hikes in diesel and fertiliser prices and said the government would have to roll back the hikes.

Following the UPA government’s decision to allow FDI in multi-brand retail, her party had withdrawn support from the ruling coalition last month.

Earlier in the day, Banerjee inaugurated a PET resin plant of Dhunseri Petrochem & Tea Limited, an edible oil plant of JVL Agro and a logistic park of Apeejay Surrendra Group in Haldia.

Dhunseri plans to increase its PET resin production capacity to 4,10,000 tonnes per annum with the second plant, investing Rs.400 crore.

JVL Agro has set up the 1,200 tonnes per day capacity plant, pumping in Rs.165 crore, while investment for the first phase of logistic park of Apeejay Surrendra would be around Rs.100 crore.

Banerjee expressed unhappiness over the union government delaying environmental clearance for eco-tourism project in Nayachar in the district.

She sought immediate clearance for the project. She said the government was also blocking Haldia’s industrial expansion by imposing a ban on industries citing environmental issues.

“Once there was a proposal that there would be a petrochemical hub. Then the objection was there. Now we will be doing eco-tourism. I do not know why they have blocked it. If they do not clear the area for the tourism project, let us go for another area and not wait for anybody,” she told a gathering here.

“I do not want to wait for anybody. If you want to do a job, you do it immediately. We cannot wait,” she said.

Banerjee had opposed the chemical hub for environmental reasons during the previous left Front government. After coming to power in May 2011, she revived Nayachar’s industrial plan, and proposed an eco-tourism project instead of the petrochemical project.

But the eco-project too hit a roadblock with the Ministry of Environment and Forestsseeking certain clarifications from the state government since a thermal power plant was also proposed along with the project.

Radiating Death: How #Walmart Displaces Nearby Small Businesses


 

 

Radiating Death: How Walmart Displaces Nearby Small BusinessesReuters

In 2006, months before a Walmart store was opened in the Austin neighborhood of Chicago’s West side, researchers counted 306 businesses in the surrounding area. Two years after the Walmart opened, 82 of those businesses had closed.

That some businesses, particularly small businesses, would close after a large retailer moves into the neighborhood is to be expected. But, as the researchers found, the pattern and severity of those closures was far from typical. The closer a business was to the new Walmart store, the more likely it was to close.

“No matter which direction you go from Walmart, there’s a very high rate of business closures in the immediate vicinity, and the further away you get there’s less and less,” says University of Illinois Chicago economics professor Joe Persky, one of the authors of the study, which wasjust published in Economic Development Quarterly.

Farther out from the store, about four miles or so, the rate of closure is about average, or roughly 24 percent of small businesses, according to Persky. “Small businesses often close. They have a high turnover.”

But the closer a store was to the Walmart location, the greater the likelihood it would close. Persky and his colleagues found that for every mile closer to the Walmart, 6 percent more stores closed. Close in around the store’s location, between 35 and 60 percent of stores closed.

And depending on the type of business, the impact of a Walmart moving in can be much worse. Persky says that the per-mile closure rate increase for drugstores is almost 20 percent. For home furnishings, it’s about 15 percent. For hardware stores, it’s about 18 percent per mile. For toys, it’s more than 25 percent per mile.

The research also shows that during the study period, from 2006 to 2008, overall sales tax revenues went down in the two ZIP codes closest to or encompassing the Walmart. Before the store opened, the sales tax revenues for these two ZIP codes were growing at rates of 6.7 percent and 4.3 percent per year. After the Walmart opened, they each saw a boost – up to nearly 18 percent in the ZIP containing the Walmart and slightly up to about 5 percent in the ZIP next door. But by 2008, both of those growth bumps had faded, and the ZIPs were seeing declines – negative 11 percent sales tax revenue growth in the ZIP containing the Walmart and negative 3 percent in the neighboring ZIP. The researchers also argue that by 2008, the amount of jobs lost because of store closures was just about the same as those created by the Walmart store’s opening. It was, Persky says, a wash.

“You may have reasons to want Walmart and you may have reasons not to want Walmart, but economic development is not one of those reasons,” Persky says. “And yet that’s been, in many cases, the primary argument for bringing Walmart to the city.”

Walmart disputes these findings and argues that its stores are magnets for both growth and economic development. In a study commissioned by the company, an independent researcher argued that the assertion of jobs creation being “a wash” was incorrect and only looked at jobs created by Walmart and not other jobs that also developed after the store opened. That study[PDF] found there was actually a net increase of more than 400 jobs in the area.

“Anyone who has actually walked the neighborhoods on the west side, talked with elected officials there or met with surrounding area businesses, knows the positive economic impact our store has had on the surrounding area,” says Walmart spokesperson Steven Restivo. “The businesses that typically surround our stores either offer a product or service we don’t or are strong in areas we’re not. Just drive around the vicinity of a Walmart and you’re likely to see small, medium and large businesses co-existing.”

Persky says he understands some of the criticism of his research. He concedes that the study did not include any data on stores that opened during the 2006 to 2008 period, just those that closed. But he argues that any openings would have been reflected in the sales tax revenue data collected.

Persky argues his study offers proof that Walmart openings can be bad for small business, especially those located close to the new stores. And while he says the results shouldn’t be used as an argument for or against the retailer, he does call into question Walmart’s role in local economic development.

Photo credit: John Gress / Reuters

Nate Berg is staff writer at The Atlantic Cities. He lives in Los Angele