A New World of Retail Supremacy: Supply Chains

and Workers Chains in the Age of Wal-Mart

Richard Appelbaum
University of California, Santa Barbara

Nelson Lichtenstein
University of California, Santa Barbara

Abstract
In contrast to the mid-twentieth century era of transnational commerce, in which the US
or European manufacturing multinationals played the leading role, twenty-rst century
globalization is increasingly structured by a set of retail-dominated supply chains, that
of Wal-Mart rst among them. This strategic shift in the locus of corporate power has
arisen out of two conjoined phenomena: rst, the logistical integration made possible
and necessary by the revolution in information/transportation technology (bar codes,
data storage, containerization, global communications), and second, the neoliberal
transformation of the worldwide political economy, which in the US has facilitated the
massive expansion of a low-wage, import dependent retail sector, while in coastal
China it has generated a huge export-manufacturing boom. But the global supply chain
linking Guangdong Province to Bentonville, Arkansas may well be an increasingly
fragile one, because the proletarianization of tens of millions of Chinese peasants is
unlikely to go smoothly, especially under conditions of authoritarian governance.

A globalized world of commerce and labor has existed for centuries. The
Vanderbilts and the Victorians knew all about the China trade. But todays glo-
balization differs radically from that of even a few decades past because of the
contemporary role played by the corporate king-makers of our day, the big-box
retail chains that now occupy the strategic heights once so well garrisoned by the
great manufacturing rms of the Fordist era. At the crux of the global supply
chains stand the Wal-Marts, the Home Depots, and the Carrefours of our
time. They make the markets, set the prices, and determine the worldwide dis-
tribution of labor for that gigantic stream of commodities that now ows across
their counters. The evisceration of so many US goods-producing rms has
entailed not just cheap-labor competition from abroad, but an historic shift
in power within the structures of world capitalism, from manufacturing to a
retail sector that today commands the supply chains which girdle the earth
and directs the labor power of a working class whose condition replicates
much that we once thought characteristic of only the most desperate, early
stages of capitalist growth.
The global networks through which international production is coordi-
nated are largely composed of buyer-driven commodity chains in which large
retailers and marketers, along with brand-dened companies like Nike,
International Labor and Working-Class History
No. 70, Fall 2006, pp. 106125
# 2006 International Labor and Working-Class History, Inc.
A New World of Retail Supremacy 107

Mattel, and Eileen Fisher, play pivotal roles in setting up the decentralized
production networks that today stand at the heart of transnational capitalism.
Producer-driven commodity chains, characteristic of capital intensive industries
such as automobiles, aircraft, computers, semiconductors, and heavy machinery,
still exist, but their relative importance has declined since the mid-twentieth
century, when multinational manufacturers played the dominant role in coordi-
nating worldwide production networks. In contrast, the retailers and marketers
who stand at the apex of the buyer-driven global commodity chains of our day
are best understood as branded marketers who do not actually make their own
products, but rather design and advertise them, thus creating a market based on
product image and recognition. Actual manufacturing takes place in a worldwide
set of independently-owned contract factories that purchase the raw materials,
recruit and pay the workers, and oversee all aspects of the actual production
process. This system is most advanced within the world of light manufacturing,
especially apparel, shoes, and consumer electronics, but the output of more
complex, capital intensive products, including high value aviation and computer
parts, as well as call center services contracted to phone companies and airlines,
are rapidly becoming a link in these global supply chains.1
Global competition between contractors competing for the orders of these
big buyers has been a key factor in keeping labor costs down, since any factory
that could not meet the price requirements of its clients risked losing business to
another factory down the street or around the globe. This dynamic has also dis-
couraged efforts by workers to form independent trade unions, since unionized
shops are vulnerable to losing their contracts.2 While some of these factories
have historically been large, as in the footwear industry, most contractors,
especially those in apparel and toys, have been relatively small. This has
reinforced their vulnerability to the big buyers. Thousands of factories have
become part of a set of retail dominated captive networks, limited to
simple, low value-added assembly operations that follow detailed instructions
from their clients.3
We are now entering an era in which a qualitatively higher degree of inte-
gration between production and distribution has begun to reshape the entire
buyer-driven global commodity chain. Two trends have emerged in the past
decade, particularly in the Pacic Rim region, that are erasing the boundary
between manufacturer on the one hand and retail buyer on the other:
the emergence of giant retailers, and the enormous growth of the correspond-
ingly large factory contractors who serve them. As we shall see, these trends
have given birth to a vast new proletariat, with important implications for
labor struggles within the world of industry and transport that sustains it.4
The worlds forty largest retailers (all but ve based in the US or the
European Union) had nearly $1.3 trillion in total revenues in 2001.5 Wal-Mart
was responsible for more than a tenth of the total, and in 2006 it had sales of
$312 billion. But size alone is not responsible for the new power held by the
big-box retailers of our era. Before the 1980s, manufacturing rms and retailers
were relatively independent entities. But in that decade the long-awaited
108 ILWCH, 70, Fall 2006

revolution in information technology and telecommunications nally began to

pay off. The lowly bar code, which became widely adopted in the 1980s, was
the portal through which a ood of data now poured into the increasingly soph-
isticated computer networks and data storage banks put together by all the big
chains, above all Wal-Mart. This enabled the retailers to accurately forecast sales,
reduce inventory to a minimum, adopt uniform product labelling standards,
and exchange sales and production information, routinely and automatically,
with their many vendors. Such innovations brought contractors increasingly
under the supervision and control of the major retailers, even as the new telecom-
munications infrastructure made possible the shift of so much consumer product
manufacture to East Asia and Central America.6
All this is graphically apparent upon a visit to the two most dynamic nodes
of transnational capitalism today. It is easy to get to Bentonville, Arkansas,
where Wal-Mart has its world headquarters in an unimpressive, low slung building
hard by the companys original warehouse. There are many direct ights from
Denver, Chicago, New York, and Los Angeles to this once remote Arkansas
town. It is still not very big. Between Fayetteville and the Missouri line there
are hardly more than 300,000 people. But it is now one of the fastest growing
metropolitan regions in the country. The parking lots are full, the streets
crowded, and there is new construction everywhere. Most important,
Bentonville is now home to at least 500 branch ofces of the largest Wal-Mart
vendors who have planted their corporate ag in northwest Arkansas in the
hopes that they can maintain or increase their sales to the worlds largest buyer
of consumer products. Proctor & Gamble, which in 1987 may well have been
the rst company to put an ofce in Arkansas to service Wal-Mart, now has a
staff of more than 200 in nearby Fayetteville; likewise Sanyo, Levi Strauss,
Nestle, Johnson and Johnson, Eastman Kodak, Mattel, and Kraft Foods maintain
large ofces in what the locals sometimes call Vendorville. Walt Disneys large
retail business has its headquarters not in Los Angeles, but in Rogers, Arkansas.
These Wal-Mart suppliers are a whos who of American and international
business, staffed by ambitious young executives who have come to see a posting
to Bentonville as the crucial step that can make or break a corporate career.7 If
they can meet Wal-Marts exacting price and performance standards, their pro-
ducts will be sucked into the stream of commodities that ow through the
worlds largest and most efcient supply chain. For any manufacturer, this is the
brass ring of American salesmanship, which explains why all those sophisticates
from New York, Hong Kong, and Los Angeles are dining at the surprisingly
large number of good restaurants that have sprung up in Northwest Arkansas.
If Bentonville represents one nerve center of capitalisms global supply
network, Guangdong Province is the other. Located in coastal South China, it
constitutes the raw entrepreneurial engine that links a vast new proletariat to
the American retailers who are putting billions of Chinese-made products on
a million US discount store shelves every day. With more than 40 million
migrant workers, 130,000 factories, and new cities like Shenzhen, which has
mushroomed to more than seven million people in just a quarter century,
A New World of Retail Supremacy 109

Guangdong lays an arguable claim to being the contemporary workshop of the

world, following in the footsteps of nineteenth-century Manchester and early
twentieth-century Detroit. This was our thought when we taxied across
Dongguan, a gritty, smoggy, sprawling landscape located on the east side of
the Pearl River between Guangzhou (the old Canton) and skyscraper-etched
Shenzhen. We drove for more than an hour late one Sunday afternoon, along
broad but heavily trafcked streets, continuously bordered by bustling stores,
welding shops, warehouses, small manufacturers, and the occasional large
factory complex. This is how the cities of the old American rust belt must
have once looked, smelled, even vibrated.
Because of its proximity to Hong Kong and Macao, as well as its remote-
ness from the capital, the Chinese government in Beijing chose Shenzhen as a
special economic zone in 1979. A few years later the entire Pearl River Delta
became a virtual free market, with low corporate taxes, few environmental or
urban planning regulations, and most importantly, the free movement of
capital and prots in and out of the region. The results were spectacular.
Gross Domestic Product in the Pearl River region leaped from eight billion in
1980 to $113 billion in 2002. Shenzhens population rose twenty-fold.
Guangdong Province itself, which covers most of the Pearl River Delta,
produces a third of Chinas total exports. And ten percent of all that nds its
way to Wal-Marts US shelves.8
Although Wal-Mart owns no factories outright, its presence is unmistak-
able. Its world buying headquarters is now in Shenzhen, it has already put
eleven big stores in the province, with more to come, and Wal-Mart is feared
and respected by everyone involved with any aspect of the export trade,
which is why the executives at the Yantian International Container Terminal
in Shenzhen, now the fourth largest port in the world, give Wal-Mart bound
cargoes top priority. Wal-Mart is king a port ofcial told us. But the Pearl
River Delta is not merely an export platform like the border region of northern
Mexico or the free trade zones of the Caribbean. In Guangzhou, Shenzhen, and
their environs, well-paved roads pass through a staggeringly crowded landscape
of factories, ofces, dormitories, apartments, and streams of migrant labor.
Governments at both the provincial and national level are making huge infra-
structure investments; likewise tens of thousands of foreign investors from
Taiwan, Hong Kong, South Korea, Japan, and the United States are building
production facilities of increasingly complexity and capacity. This makes it
possible to transform raw materials into containerized consumer goods in
just a few weeks. Nike managers at the huge Yue Yuen factory complex in
Dongguan bragged that they could ll an order from the US in just two months.
Container ships are loaded in half the time it takes in Los Angeles.
Wal-Mart in China is therefore a virtual joint venture between the
company and the Chinese government. This is not only because so many of
its suppliers have governmental investment, but because for Wal-Mart and
other multinational companies doing business there, a stable currency, political
peace, and a compliant workforce are nearly as important as low costs. There
110 ILWCH, 70, Fall 2006

might be places in other parts of the world where you can buy cheaper, but can
you get [the product] on the ship? asked Andrew Tsuei, managing director of
Wal-Marts global procurement center in Shenzhen. If we have to look at a
country thats not politically stable, you might not get your order on time. If
you deal in a country where the currency uctuates, everyday, there is a lot of
risk. China happens to have the right mix.9
The workforce in Guangdong, like that of the other coastal provinces, is
overwhelmingly composed of migrants from inland villages. The men work in
construction and the women in export manufacture and commerce. Factory
wages are lowabout $100 a monthbut far higher than in agriculture, and
they are rising fairly quickly because of the labor shortage generated by the
export boom in toys, garments, shoes, and electronic devices. But as in apartheid
South Africa or along the employment pathways carved by so many Mexican
workers in the US, these millions of migrants are essentially stateless. Because
their ofcial residence remains the home village, migrant workers in coastal
China do not have access to social services or adequate housing so long as
they are without residence permits. Under Chinese law the hukou, or popu-
lation registration system, links citizenship to birthplace, so local governments
in the crowded coastal districts have turned their backs on the needs of most
migrant workers. Instead, they work and reside on the sufferance of their
employer, which often holds their identity papers until they complete their
labor contract. This is why so many factories throw up huge dormitories,
some housing eight or twelve workers to a room, where residence is dependent
upon employment at the enterprise next door. Moreover, because workers lack
classication as gongren, or proletariat, both state and factory ignore the
labor laws. Women workers who are red or get pregnant are practically
compelled to return to their home villages. Marriage is difcult because
there is so little affordable housing for couples who work in the contract manu-
facturing sector.10

Power and Place in the Retail Supply Chain

Neither Bentonville nor Guangdong just happened; these anchors of the
trans-Pacic supply chain are not the product of some abstract process of globa-
lization, but rather both were constructed by a set of political and policy choices,
in the US and throughout the globe, that have shifted power from manufactur-
ing to retail distribution, and from an economy in which the interests of
relatively high-wage men played a central role to one in which the exible,
low-wage labor of women is increasingly crucial.
For more than a century, from roughly 1880 to 1980 the manufacturing
enterprise stood at the center of the US economys production/distribution
nexus. The government sometimes challenged the more egregious oligopolies
and a few big merchants like Sears and A&P exerted sufcient leverage to actu-
ally bargain on prices, but for the most part the mass production rms adminis-
tered their price schedule so as to insure continuous production and a healthy
A New World of Retail Supremacy 111

return on investment. General Motors wanted a twenty percent pretax prot,

and for more than half of the twentieth century it got it, through the New Era
of the 1920s, depression, war, and on into the early postwar decades. US
Steel, which Andrew Carnegie and J.P. Morgan had created as the de facto
price umbrella for the nations most basic industry, used an elaborate system
of freight surchargesPittsburgh Plusto sustain the valuation of its
capital-intensive mills and mines in Pennsylvania and Ohio. Ford and General
Motors proved shameless in their exploitation of the dealer network that they
had built, which is why US car dealers felt themselves in chronic battle with
Detroit for most of the twentieth century.11 Even the manufactures of food
items and light consumer goods, like Hartz Mountain, Gillette, P&G, 3M,
Hershey, Kraft, and Coca Cola conducted themselves in an imperious manner
when they stocked the shelves of the regional grocery and drug chains that
sold their wares. And these manufacturers had a vocal, politically powerful
ally among the small-town merchants who in the 1920s and 1930s demanded
retail price maintenance laws to curb the power of the retail chains and elim-
inate the nefarious discount chiselers who had begun to pop up in the less desir-
able sections of some big cities.12
Today, however the retailers stand at the apex of the worlds supply chains.
Indeed, the very phrase supply chain did not exist twenty years ago.
Manufacturers had distribution channels, wholesalers operated throughout
a dened sales territory, retailers had a network of jobbers and suppliers.
Academic theorists such as Emmanuel Wallerstein developed the idea of a
commodity chain as part of a world systems schema. They were not new,
not even a product of the industrial era, and as a consequence, such systems
of world trade had something close to an organic, naturalistic provenance.
Frederick Abernathy and John Dunlop used the phrase commodity channels
as recently as 1999 to describe the way apparel moved from Asian and Central
American suppliers to North American retailers. But in the twenty-rst century
supply chain, with its hard linkages and sense of domination and subordina-
tion, has become the artful phrase. Theorists such as Gary Geref and Gary
Hamilton have emphasized the market-making potential of the contemporary
buyer-driven supply networks in order to more clearly evaluate the hierarchy
of power and protability that characterizes contemporary global trade.13 As
Gary Hamiltion explains, in an article written with his graduate student,
Misha Petrovic: Market-making:

Refers to all activities oriented toward creating and reproducing opportunities for
trade, from pricing and contracting to nding and retaining trading partners, to
getting the products into and through the market. Wal-Marts ability to make
marketsto dene the shopping environment, the assortment of merchandise,
and the everyday low price for its customers; to specify the rules of conduct
and standards of performance for thousands of its global suppliers is the most pro-
found of all Wal-Mart effects, revealing how the corporation has reshaped the
global market for consumer goods during the last twenty years.14
112 ILWCH, 70, Fall 2006

Thus much of the global economy is driven by the supply chains that have
their nerve centers in Bentonville, Atlanta (Home Depot), Minneapolis
(Target), Troy, Michigan (K-Mart), Paris (Carrefour), Stockholm (Ikea), and
Issaquah, Washington (Costco). The goal of these mega retailers is to procure
only those goods that consumers will actually buy, not what the supplier nds
it convenient and protable to ship. Like Fords rst assembly line, which soon
made obsolete so many traditional skills and processes in the metal-bending
core of the US economy, so too have these supply-chain innovations superseded
virtually all other congurations in the manufacturer-distributor-retailer nexus.
Using a wide variety of new information technologies, the big-box retailers of
our day collect point-of-sale (POS) data and relay it electronically through
their supply chain to initiate replenishment orders almost instantaneously.
Thus when Wal-Mart sells a tube of toothpaste in Memphis, that information
ashes straight through to Bentonville, then on to the P&G headquarters
ofce in Cincinnati, which immediately sends the electronic impulse directly
to an offshore toothpaste factory which adjusts its production schedule
accordingly.
The venerable Ohio home product manufacturer long used its market
power and sophisticated research on consumer buying habits to secure an out-
sized share of shelf space from traditional retailers. Although many drug and
grocery chains considered P&G a self-aggrandizing bully, Wal-Mart turned
this power relationship on its head. The retailers superior point-of-sale data
collection system enabled Wal-Mart to know more about the consumers of
P&G products than did the manufacturer, which is one reason that P&G
moved a 200-person sales ofce to Bentonville in the late 1980s. By the mid
1990s, Wal-Mart was P&Gs largest customer, generating more than three
billion dollars in sales, or about twenty percent of P&Gs total revenue. But
executives at the Cincinnati soap maker were well aware that their good
fortune turned on Wal-Marts sufferance, which explains why they bought
Gillette in 2005. The $57 billion deal was designed to transform P&G into an
even larger supply rm that could challenge Wal-Marts pricing power and its
private label brands. But even this mega merger may not be enough. If you
want to service Wal-Mart you have got to be more efcient, asserted the
retail consultant Howard Davidowitz, The power will stay with Wal-Mart.15
Wal-Mart is therefore not simply a huge retailer, but increasingly a manu-
facturing giant in all but name. The retailer tracks consumer behavior with meti-
culous care and then transmits consumer preferences down the supply chain.
Replenishment is put in motion almost immediately, with the suppler required
to make more frequent deliveries of smaller lots. This is just-in-time for retailers,
or lean retailing. To make it all work, the supply rms and the discount retai-
lers have to be functionally linked, even if they retain a separate legal and
administrative existence. The giant retailers of our day, Wal-Mart rst among
them, pull production out of their far-ung network of vendors. The manufac-
turers no longer push it onto the retailer or the consumer. Or to extend
the metaphor, the nearly continuous stream of container ships which move
A New World of Retail Supremacy 113

between Shenzhen and the Long Beach/Los Angeles port complex are pulled
across the Pacic, not pushed by the Chinese manufacturers who stuff their
product into nearly half-a-million forty-foot containers each year. Moreover
pull production requires speed, predictability, and accuracy in the delivery
of goods, since available inventory has been cut back. Constant and unpredict-
able changes in sales patterns must be met by just-in-time delivery systems.
Supply Chain Managementthat is the new Business-School buzz phrase
is the science of getting this to happen in the most efcient and cost-effective
way.16
Elements of this system have existed for decades. Before the 1980s logis-
tics, the task of scheduling production, storage, transportation, and delivery,
was a purely military term, familiar to all those who studied why the Russians
took so long to mobilize in 1914 and how Pattons Army was resupplied
during its dash across France in the summer of 1944. Amateurs worry about
tactics, but professionals worry about logistics, asserted old hands at the
Army Quartermaster Corps.17 The Vietnam War ended in a humiliating US
military defeat, but it turned into a triumph of supply chain logistics when
civilian-run container ships proved enormously efcient on the trans-Pacic
run between Oakland and Cam Ranh Bay. A decade later, Japanese
just-in-time production methods, rst in automobile and electronic pro-
duction, demonstrated that inventory and labor costs could be slashed if subcon-
tractors were kept on a tight leash by the rm that stood at the apex of the
manufacturing supply chain.18
These Pacic Rim logistical innovations were then assimilated into the
retail supply chains when, in the 1970s and 1980s, Sears, K-Mart, and numerous
US apparel makers began to take advantage of the cheap labor and growing
sophistication of the export manufacturers who fueled the rapid growth of the
Asian tiger economies, especially Hong Kong, Taiwan, and South Korea. At
rst this was largely through contract manufacturing, whereby US retailers
directly sourced batches of differentiated goods specially ordered for sale in
niche American markets. Wal-Mart opened a buying ofce in Hong Kong in
1981 and then quickly added a second Far Eastern purchasing ofce in Taipei.
Of course, direct imports by Wal-Mart and other discounters only made up a
small share of all the goods sold in the United States; in the mid 1980s Sam
Walton estimated that his companys direct imports accounted for but 6% of
its total sales. The bulk of the importing was done by the manufacturers
that sold goods to Wal-Mart. Of key import, as Naomi Klein and Steve Ross
remind us, was the rise, both cultural and economic, of the branded rms
who have taken the fashion idea and extended it from upscale womens clothing
to shoes, blue jeans, swimwear, toys, athletic equipment, and electronics. Once a
brand becomes well established, or the store that sells those brands achieves
cache, it is no longer necessary for The Gap or Reebok or The Limited to man-
ufacture anything. They design and advertise their product, contract for its man-
ufacture and transshipment, and promote its sales either through other retailers
or their own outlets. Production becomes but one stop, one service element, in
114 ILWCH, 70, Fall 2006

their tightly coordinated supply chain.19 The distinction between making and
marketing, which once structured so much business thought and praxis, trans-
forms itself into a dialectical unity.
Until about 1985 the supply chains that led from East Asia to the United
States were loosely linked and relatively unstable. But in that year, or shortly
thereafter, two developments took place that decisively shifted production to
mainland China, and in the process tightened up the retail supply chains and
gave the big box stores even more leverage against their vendors, both
foreign and domestic. The rst was the forty-percent revaluation of most East
Asian currencies negotiated in September 1985 at the Plaza Hotel. Combined
with rapidly rising real wages, in South Korea and Hong Kong, the Plaza
Accords set off a scramble for a new set of export platforms, chiey in
Guangdong and other sites in coastal China. This production shift was rapid
but not difcult. A set of Taiwanese and Hong Kong contractors had
already begun to supply the American retailers. When they set up new
factories in South China, they naturally maintained their existing links with
the US.20

The Politics of Wal-Marts Rise

But the global integration of capitalism is not just a product of better technology
or trans-Pacic currency readjustments. Sam Walton and the generation of top
executives that he groomed were innovative and energetic entrepreneurs, who
quickly deployed each new generation of telecommunications hardware and
computer software to build a system that can track, order, and price a tube of
toothpaste from one end of the planet to the other. But neither hard work,
clever ideas, nor even the rise of cheap Asian imports would have been
enough to have sustained Wal-Marts tremendous growth, and that of the
entire big box retail industry, in the years since 1980. Wal-Marts extraordinary
success is also the consequence of conservative political victories that generated
the terrain upon which big box retailing would ourish. These included the col-
lapse in the real value of the US minimum wage, a simultaneous disintegration
of the Wagner-era labor law, and the growth of a free trade regime that
has proved exceptionally benecial to the conquests made by Americas new
retail oligarchy.
The minimum wage is crucial because discount retailing is a labor intensive
enterprise. And because margins are so low, wages are decisive to a retailers
competitive prole. As Sam Walton wrote in his memoir, no matter how you
slice it in the retail business, payroll is one of the most important parts of
overhead, and overhead is one of the most crucial things you have to ght to
maintain your prot margin.21 Walton paid rock bottom wages in the 1950s
and 1960s, rst because all retail workers were exempt from the minimum
wage until 1961, and after that because he systematically broke the law. As
Walton expanded into the discount sector in the 1960s, he created a series of
family-centered corporate shells, single stores which had retail sales that came
A New World of Retail Supremacy 115

in below the thresholda million dollars a year throughout most of the 1960s
at which the government required payment of the federal minimum wage. This
was rather helpful because in 1968 the minimum wage reached its twentieth-
century apogee, so Walton could employ, at pin money wages, thousands of
women who were pouring off Arkansas and Missouri farms during the years
when the revolution in American agriculture belatedly reached the Ozark
plateau.22
In the late 1960s, when the courts nally ruled that his decentralized own-
ership structure was but a device to avoid the wage and hour law, Walton got
lucky. The stagation that swept through the American heartland stripped the
minimum wage of much of its real value. It uctuated in the early 1970s and
then plunged after 1978 just as Walton was expanding his retail barony into
metropolitan Missouri, Texas, and Tennessee. Because Walton placed his
stores in small communities, where rural, underemployed women were available
at the minimized minimum wage, he held a striking competitive advantage over
urban/suburban department stores like Sears and Macys, whose wage scales
had long been structured by their effort to avoid unionization and retain a
core workforce of male workers. Thus today, when Wal-Mart asserts that its
average pay is almost twice the minimum wage it exaggerates only modestly.
But as of early 2007 the buying power of the real minimum wage is a third
less than it was thirty years ago.23
The second policy vacuum that Wal-Mart exploited was the evisceration
of the American labor law. The key to Wal-Marts success was not just a
low-wage retail operation, but keeping its logistics system nonunion. Among
truck drivers and warehousemen, unionization has been an historically
vigorous presence, especially in Missouri which was Wal-Marts growth
frontier all through the 1970s. But Walton did not establish his rst distribution
center in that state until the mid 1980s. Indeed all three of Wal-Marts rst
distribution centers were put in Bentonville and the fourth in Searcy. The
workers in those centers knew that wages were a couple of dollars higher
across the Missouri line and they also knew that Wal-Marts frenetic growth
was pushing them right up to their physical and psychic limit. Organizing
efforts and wildcat strikes therefore took place in almost every Wal-Mart
distribution center in the 1970s, and in Clinton and Mexico, Missouri unioni-
zation attempts were mounted at two of the companys early discount stores
as well. Walton crushed all these efforts by hiring John Tate, an antiunion
lawyer who had fought the emergence of interracial unionism in the upper
South in the 1940s, and a quarter century later, had been employed by the
new cohort of antiunion meatpacking rms in Nebraska and Colorado,
who were determined to keep Chicago-style unionism out of their
territories. In later years Wal-Mart would develop an infamous Union
Prevention Index for each store, designed to measure and track employee
discontent, and if necessary, trigger the rapid deployment from Bentonville of
a squad of antiunion executives skilled in the latest union avoidance
techniques.24
116 ILWCH, 70, Fall 2006

The Buy American Road to China

Wal-Mart also led the way in squeezing labor costs out of its vendors both at
home and abroad. Ironically, the companys famed Buy American campaign
of the late 1980s proved most useful in this endeavor. The origins of the program
lay in a conuence of factors. Sam Walton may well have been personally
offended by the poor working conditions he witnessed when visiting Central
American garment factories in 1984. More important, many Wal-Mart custo-
mers blamed the recession of the early 1980s, which destroyed so many blue-
collar jobs, on the rst ush of global competition. In the mid 1980s the
closure of several Arkansas rms led to an outcry against the import practices
of big retailers like Wal-Mart. Governor Bill Clinton was among those who
appealed to Sam Walton to save Arkansas jobs by shifting or keeping
production at home.
Wal-Marts Buy American program proved a public relations coup his-
toric in its dimensions, rued Discount Store News, which reected the chagrin
of the Bentonville retailers competitors.25 By 1986 Wal-Mart stores were
festooned with red-white-and blue Buy American banners and signs on the
counters that proclaimed, THIS ITEM, FORMERLY IMPORTED, IS NOW
BEING PURCHASED BY WAL-MART IN THE U.S.A. AND IS
CREATING OR RETAINING JOBS FOR AMERICANS!26 Even today,
long after its formal abandonment, Wal-Mart is thought of as a more
American rm than some of its competitors who actually import fewer
goods. Wal-Mart never released any rm gures on the proportion of its
product costs that came from overseas. But Asian procurement rose steadily
all during the heyday of the Buy American program as the corporate buying
staff resident in East Asia more than doubled in size.
The real import of the Buy American campaign lies elsewhere, however.
Wal-Mart would increase domestic purchasing, but the company used the pro-
spect of such procurement as a hammer to drive down supplier costs, including
their wages and prots, and transform these vendors into Bentonville pawns.
One of our big objectives in the Buy American program, a Wal-Mart
board member told Walton biographer Bob Ortega, was to put the heat on
American manufacturers to lower their prices.27 Wal-Mart recognized that
US labor costs were much higher than in Central America or East Asia, but it
sought to make up the difference by freezing wages and forcing logistic and
production efciencies on its suppliers. Our American suppliers, said Sam
Walton must commit to improving their facilities and machinery, remain nan-
cially conservative and work to ll our requirements, and most importantly,
strive to improve employee productivity.28
Thus an embittered spokesman for the National Knitwear and Sportswear
Association complained that Wal-Mart used its ag-waving Buy American
campaign as a negotiating club that forces domestic manufactures to compete,
often unrealistically, with foreign suppliers who pay their help pennies an hour.
As a result vendors see their gross sales skyrocket and their net prots plunge.
A New World of Retail Supremacy 117

Indeed, a packaged goods vendor told Discount Store News that Wal-Marts
highly proactive approach to product development may, unintentionally, be
making American business less competitive. Because Wal-Mart now sets the
parameters of product development, companies like his are no longer manu-
factures. Instead they are becoming sources who produce only the products
that Wal-Mart has decided it wants to sell, which in turn make R&D and intro-
duction of new products redundant and unprotable.29
Such was the case with Ferris Fashions, an Arkansas producer of plaid work
shirts, that became a poster boy for the Buy American campaign. Three
hundred jobs would have been lost in Brinkley, Arkansas, after Van Heusen
shifted production offshore, had not Sam Walton personally stepped in with a
contract for 50,000 dozen red check shirts a year (later made famous when
Lamar Alexander ran for the presidency in 1996). But Ferris Fashions was now
Wal-Marts creature. The big retailer designed the shirts, found the Taiwanese
supplier from which it bought the plaid fabric in huge bulk, and remained virtually
the sole customer. When workers at Ferris Fashions signed up with the
Amalgamated Clothing and Textile Workers Union, company president Ferris
Burroughs told them to stop messing around with the union because Sam
Walton wouldnt buy union goods; otherwise he would turn the plant into a
chicken coop. Ferris Fashions kept making Wal-Mart shirts until 2005, but
neither unionism nor higher wages ever made their appearance in Brinkley.30
Indeed, the Buy American campaign actually helped prepare the way
for the big-box rush to China that took place in the 1990s. By then Wal-Mart
had become a de facto manufacturing enterprise, with skilled buyers who
helped vendors develop and design products according to the tastes and pro-
clivities of its customers, as analyzed by the data mining made possible by
Wal-Marts enormously clever IT department in Bentonville, not to mention a
computer data facility said to be second in size only to that of the National
Security Agency. Because Wal-Mart has an intimate understanding of the
manufacturing process and because its purchasing power is so immense, the
Bentonville company, which now employs almost 500 people in its
Shenzhen world purchasing headquarters, has transformed its 3,000 Chinese
suppliers into powerless price-takers, rather than partners, deal-makers, or oli-
gopolistic price administrators. While many of these suppliers are small and
undercapitalized, a growing number of East Asian contractors manage fac-
tories that are of stupendous size, rst among them Yue Yuen Industrial,
which makes shoes for Nike, Adidas, Reebok, New Balance, and other
well-known brands.31
The dialectical relationship between a brandwhich is really just a disem-
bodied reputationand the tangible factory that turns out such branded
commodities became graphically apparent to us when we visited the Nike
headquarters, located right inside the Yue Yuen factory in Dongguan.32 Yue
Yuen/Pou Chen Industrial Holdings Ltd.,33 based in Hong Kong, is
the worlds largest maker of branded athletic and casual footwear, with $3.2
billion in revenues during 2005.34 Its workers turn out some forty foot wear
118 ILWCH, 70, Fall 2006

brands on 342 production lines, producing nearly 160 million pairs of branded
athletic shoes for export in 2005, one-sixth of the world total. The company is
Nikes biggest supplier, providing about fteen percent of its shoes; other
major footwear clients include Reebok, Adidas, Asics, New Balance, Puma,
Timberland, Rockport (owned by Reebok), and Starter, which is featured at
Wal-Mart. While most of its shoes are made in factories throughout southern
China (four out of six are in Guangdong Province), the company also has fac-
tories in Vietnam and Indonesia.
Yue Yuens global workforce of 365,000 has grown by more than half in
only four years, as the company has moved from contract production into retail-
ing. It currently has a network of more than 800 wholesale distributors and 250
outlets in China to distribute the major brands made in its factories.35 Yue Yuen
is also engaged in the upstream production of raw materials, shoe components,
and even production toolsaffording a high degree of vertical integration over
its supply chain. At the sprawling Dongguan facility we visited in September
2005 more than 110,000 workers, eighty percent women, produce just under a
million pairs of shoes a month, including 21,000 for Nike and 13,000 for
Adidas.36
Yue Yuen was not our host when we visited that companys Dongguan
factory. Rather it was Nike, whose ofces were in the same place, who gave us
the royal welcome. They were happy to do so because Nike saw any group of
visiting US academics as but another chance to advertise what they considered
the exemplary working conditions under which their shoes were manufactured.
We were told the Chinese labor codes were strictly enforced; the dining rooms
did look clean, and the dormitories were safe, if crowded. Nike had even built
a disco and a reading room, full of the Chinese equivalent of People and
Cosmopolitan magazines. Their social responsibility staff numbered about
twenty-ve. All this cost moneywe were told at another Yue Yuen factory
that such social amenities and adherence to legal wage and safety standards
had pushed the wholesale cost of Reebok shoes from seven to eleven dollars a
pair. This seems excessive, but whatever the cost, Nike, Reebok, and other
branded distributors felt it essential to sustain the reputation of their brand
and the goodwill of the non-governmental organizations who have begun to
monitor South China production facilities. They dont want to turn CNN on one
afternoon and watch an expose of the poor labor or environmental conditions
fostered by a footwear brand whose goodwill is measured in the billions.37

The Dirty King of South China

Wal-Mart has not neglected this public relations front. Like Nike, Reebok and
other branded distributors, Wal-Mart has an elaborate factory certication
program which was set up right after a devastating 1992 NBC expose that docu-
mented abusive child-labor practices in Bangladesh. Since then Wal-Mart has
replicated many of the features found in the factory inspection and certication
programs that have been supported by branded companies like Nike and Liz
A New World of Retail Supremacy 119

Claiborne. Wal-Mart audits at least once each year the 5,300 factories from
which it purchases directly. And the company requires audits of supplier
factories from which it indirectly sources apparel, shoes, sporting goods, and
toys. The companys Ethical Standards Department employs more than 200,
half in China; and Wal-Mart has established an elaborate green-yellow-red
trafc light system that categorizes factories according to their adherence to
Wal-Marts labor and environmental code. One percent of all factories fail
inspection outright and are dropped from the Wal-Mart supply network.38
But none of this has enabled Wal-Mart to escape a barrage of criticism. The
AFL-CIO has proved an early and persistent critic, focusing on the use of prison
labor by Wal-Mart suppliers in China. Then in 1995 when Kathie Lee Gifford
was confronted with evidence that the factories producing her clothing line, mar-
keted at Wal-Mart, employed children in Honduran sweatshops, she broke into
tears on national television, thereby adding a bit of glitz, and a satisfying victory,
to the anti-sweatshop campaign. In more recent years the drumbeat of criticism
has been almost constant. In 2001 KLD & Co. the largest mutual fund aimed at
socially responsible investments, said it sold its shares of Wal-Mart and removed
it from the Domini 400 Social Index because Wal-Mart wasnt doing enough
to prevent sweatshop abuses. Wal-Mart has refused to join the Fair Labor
Association, a monitoring group endorsed by many companies in the apparel
and shoe industry, and it contracts with commercial rms like
PriceWaterhouseCoopers, rather than local NGOs, to do its factory safety and
labor audits. And in 2005 the International Labor Rights Fund inaugurated a
lawsuit against Wal-Mart on the grounds that it systematically fails to enforce
labor standards in its corporate code of conduct, and then lies about it to the
American public.39
So Wal-Mart is the dirty king of South China, as one of our NGO infor-
mants told us, the the lowest of the low observed a Reebok executive.40
Managers at three Wal-Mart supply factories told the Shenzhen-based
Institute for Contemporary Observation, whose scruffy, bustling ofces we
visited, that Wal-Mart staff from the companys Shenzhen purchasing depart-
ment both sought and accepted bribes. Moreover, workers are often coached
by their foremen to lie about conditions to inspectors, otherwise, they are
told, the factory might lose its orders and they will be on the street. And the
ICO found that many of Wal-Marts social responsibility inspection teams
only spent about three hours at the factories, during which they veried
wages, working hours, and personnel records, made a brief inspection tour of
the factory and met three or four workers in the factory ofces reception
room. Wal-Mart inspections were quite easy to bluff . . . .41 Indeed, even
Wal-Mart CEO H. Lee Scott has admitted that the company needs to become
more committed and transparent in order to provide additional credibility
to our factory certication program.42
So why Wal-Marts poor record? There are two reasons. First, there is an
absolute conict between Wal-Marts drive for low prices and its effort to
enforce a code of conduct. When Wal-Marts Shenzhen buying headquarters
120 ILWCH, 70, Fall 2006

advertises a contract for a big production run, Chinese entrepreneurs jump at the
chance to ll it. Even without Wal-Marts infamous price squeeze, the Chinese are
willing to take a loss on a rst Wal-Mart contract in hopes that they will recoup
their xed costs in the long run. But given Wal-Marts enormous appetite, and
its bias toward large suppliers, the Chinese vendors must themselves subcontract,
and the subcontractors also nd their own sources of labor.43 As with the turn of
the twentieth century garment manufacture on New Yorks Lower East Side, no
one can effectively police the complex network of contractors, subcontractors, and
family workshops, especially when it is a private company, not the state, which is
trying to do the police work. The factory owners dont think they violate the law
because they do not know the law, said Liu Kaiming of the Institute for
Contemporary Observation. Ninety percent of Wal-Mart subcontractors and
suppliers cannot meet Wal-Marts own code of conduct.44
Contributing to this price and production pressure is the telecommunica-
tions infrastructure that has so integrated the supply chain. These instantaneous
links between Bentonville and Shenzhen are a mechanism that puts relentless
pressure on the Chinese vendors to meet production and shipping deadlines.
Because Wal-Mart can so accurately forecast its inventory needs, and change
those forecasts as conditions shift in the United States, it now expects the
same kind of exibility from its manufacturers. Thus, the stop-and-start nature
of work in so many Chinese factories, and the heavy overtime punctuated by
short work weeks and unpaid vacations. As a manager at a Dongguan
company asserted, We are forced to apply the labor codes. . . but we can
judge from our intuition that when production and codes clash, which side we
can cling to. Once I phoned their production department and asked, Do you
still want your products on time? The monitor then left our company alone.45
Second, although Wal-Mart itself is a brand, few of the products it sells
depend on the kind of brand reputation so carefully nurtured by Nike,
Reebok, or some of the fashion apparel makers. This makes the company far
less vulnerable to consumer pressures targeted at a well-known product. The
commodities Wal-Mart sells are interchangeable. The advantages of all this
were driven home to us when Tiger Wu, a production manager at Nike, drove
us over to the local Wal-Mart to inspect the shoe department. Nike does not
sell its shoes to Wal-Mart, in either China or the United States. They would
not be able to command $100 a pair if they were found near the same shelf
with the plastic ip-ops. But Nike has recently purchased the non-brand
Starter line, which Yue Yuen now produces in increasingly large quantities.46
At the Dongguan Wal-Mart the shelves were full of cheap Starter athletic shoes,
so too at many stateside Wal-Marts. Mr. Wu was contemptuous of their work-
manship, but even more so of their invisibility as an attractive brand.47 But
from Wal-Marts perspective, this is highly advantageous because it has no
investment in the brand reputation, so it can easily and rapidly shift production
from one Chinese source to another. As a consequence, the ICO found that the
level of enthusiasm in implementing codes of social responsibility among
brand-name companies far exceeded that of retailers.48 One detailed study
A New World of Retail Supremacy 121

of codes and labor conditions in two large Chinese apparel factories concluded
that:

Rather than leading to labour rights in the workplace, labour power and collective
bargaining will be co-opted by the side of capital. The result is at best managerial
paternalism with labour rights, if granted, originating from above. . . . the compa-
nies had devoted huge resources to setting up systems and procedures, but they
demonstrated no genuine concern for labour rights, less still workers represen-
tation or participation.49

The real value of these corporate codes of conduct, even at the best companies,
lies in the realm of ideology. They legitimize the idea of a worldwide social stan-
dard, even as their chronic failures demonstrate that any real transformation of
the global supply chains must come from other sources. In Guangdong, as in so
many other parts of China, resentment, anger and social conict lie just beneath
the surface. Chinas Ministry of Public Security reports that the number of mass
incidents rose eightfold in the decade after 1993. Labor Ministry statistics on
industrial disputes have recorded an even more rapid increase, and hardly a
week goes by without a journalistic report of a demonstration or police crack-
down in the coastal industrial districts. Most such conicts still occur in the
northeast rustbelt provinces where layoffs and pension corruption have gener-
ated enormous unrest. But the full employment and rising wages of coastal
China have done little to ameliorate social discontent. Guangzhou City reported
nearly 900 protests involving more than 50,000 workers in 2004. One protest in
seven involved more than 100 people.50 And in that same year, after the annual
week-long Spring Festival holiday, more than two million migrant workers,
almost ten percent of Guangdongs workforce, failed to return to the Pearl
River Deltas export-processing factories. Turnover has always been high after
this holiday, when many young workers visit their home villages, but this aban-
donment of the factory was unprecedented, one of the most massive unorga-
nized withdrawals of Chinese labor in recent times.51
A study by the Hong Kong Confederation of Trade Unions documents
numerous other instances of working-class discontent, including:52

A work stoppage involving 10,000 workers from the Xiangyang

Automobile Bearing Company Limited in 2003 demanded that workers
rights be protected during the privatization of the state-owned enterprise.
Workers also blocked the railway lines and major roads in the city of Xianfan.
1,000 workers from the Tieshu textile factory in Suizhou (Hubei Province)
held a protest in 2003, demanding payment of back wages, severance pay,
and worker shares they claimed were owed by management. Workers also
blocked a major railway. Frustrated by the courts, protests continued throughout
the year. In 2004 workers were told they would be paid roughly a quarter of
what they claimed were owed them, triggering larger demonstrations that
122 ILWCH, 70, Fall 2006

shut down transportation in the cities, resulting in forcible dispersal by armed

police and detention of the organizers.
Workers from the Anshan Iron and Steel Group Corporation in 2003
staged a protest over unfair treatment, compensation, and severance pay, even-
tually taking their case to authorities in Beijing.
1,000 taxidrivers in Chengdu (the capital of Sichuan Province) staged a
week-long protest over government plans to resell taxi certicates at a higher
price. When they were unsuccessful in appealing this decision, the protests
continued into 2004, until broken by the police.

There are also indications that China faces a labor shortage, particularly in
the booming south. The combination of demographics (Chinas family planning
programs have signicantly lowered birth rates and hence slowed the increase in
the number of new workers) and exploding demand have for the rst time given
workers considerable bargaining power. Some workers are leaving the factories
in Guangdong Province for better-paid work in factories on the Yangtze River
Delta near Shanghai, or elsewhere in large interior cities.53 In the Uniden
factory strike mentioned above, women workers were able to coordinate their
actions via cell phone and instant messaging.54 Workers are able to communi-
cate easily with friends and relatives who are working elsewhere in China,
comparing wages and working conditions, and moving elsewhere if they are dis-
satised with their current job.
These protests are directed less toward the national government than toward
local authorities, specic employers, and corrupt ofcials. They have not, and
seem unlikely, to achieve the national character of the Solidarity movement
that challenged the Communist regime in Poland a quarter century ago. They
have a far more local, although hardly a parochial, thrust, seeking to pressure
factory managers and provincial ofcials to live up to Chinese labor and environ-
mental laws, as well as to the specic employment contracts and working con-
dition promises which brought so many to Guangdongs factory districts in the
rst place. The protesters are ghting for the kind of democratic citizenship
that will liberate them from a workplace regime that has left them in a purgatory
half-stateless and half-free. As they push back against this system, they begin to
crack the chains, supply chain as well as others, that have given Wal-Mart and
its retail competitors such overweening power in the global economy.55

NOTES
1. Gary Geref, The Organization of Buyer-driven Global Commodity Chains:
How U.S. Retailers Shape Overseas Production Networks, in Gary Geref and Miguel
Korzeniewicz, eds., Commodity Chains and Global Capitalism. (Westport, CT, 1994), 95 122;
Richard P. Appelbaum and Gary Geref, Power and Prots in the Apparel Commodity
Chain, in Edna Bonacich, Lucie Cheng, Norma Chinchilla, Norma Hamilton, and Paul Ong,
eds., Global Production: The Apparel Industry in the Pacic Rim (Philadelphia, 1994); Gary
Geref, Beyond the Producer-driven/Buyer-driven Dichotomy: The Evolution of Global
Value Chains in the Internet Era, IDS Bulletin 32.3 (2001), 3040; Andrew Ross, Fast Boat
to China: Corporate Flight and the Consequences of Free Trade (New York, 2006), 24 31.
A New World of Retail Supremacy 123

2. Edna Bonacich, Pulling the Plug: Labor and the Global Supply Chain, New Labor
Forum (Summer 2003): 4148.
3. Gary Geref, John Humphrey, and Timothy Sturgeon, The Governance of Global
Value Chains, forthcoming in Review of International Political Economy.
4. Edna Bonacich with Khaleelah Hardie, Wal-Mart and the Logistics Revolution, in
Nelson Lichtenstein, ed., Wal-Mart: The Face of Twenty-First Century Capitalism (New York,
2006), 16387; Frederick H. Abernathy, John T. Dunlop, Janice H. Hammond, and David
Weil, A Stitch in Time: Lean Retailing and the Transformation of Manufacturing Lessons
from the Apparel and Textile Industries (Oxford, 1999).
5. Among the top forty, twelve were based in the United States and accounted for 43% of
total revenues. Almost all of the remaining ones are from the EU (accounting for 46%). The
only Asian rms in the top forty are ve in Japan (accounting for the remaining 11%).
Richard P. Appelbaum, Fighting Sweatshops: The Changing Terrain of Global Apparel
Production, in Richard P. Appelbaum and William I. Robinson, eds., Critical Globalization
Studies (New York, 2005)
6. Abernathy et al, op. cit, 3; Misha Petrovic and Gary G. Hamilton, Making Global
Markets: Wal-Mart and Its Suppliers, in Lichtenstein, ed., Wal-Mart: the Face of Twenty-First
Century Capitalism, 107 41.
7. Lichtenstein interview with anonymous Bentonville resident, April 29, 2005,
Bentonville; Jeff Glasser, Boomtown, U.S.A., U.S. News and World Report, June 25, 2001,
1720; Anne DInnocenzio, Wal-Mart Suppliers Flocking to Arkansas, The State,
September 21, 2003, 1.
8. Joseph Y.S. Cheng, Guangdong: Preparing for the WTO Challenge (Hong Kong,
2003); Michael Enright, Edith Scott, Ka-mun Chang, Regional Powerhouse: The Greater
Pearl River Delta and the Rise of China (Singapore, 2005), Joe Studwell, The China Dream
(London, 2005).
9. Philip Goodman and Philip Pan, Chinese Workers Pay for Wal-Marts Low Prices,
The Washington Post, February 8, 2004, 1.
10. Pun Ngai, Made in China: Women Factory Workers in a Global Workplace (Durham,
NC, 2005), 46 48; Authors interview with Pun Ngai, Hong Kong, September 15, 2005. The
hukou system is currently being reformed and Guangdong Province reportedly no longer
stamps workers hukou as urban or rural, making it easier for immigrants to gain access to ser-
vices. For a business perspective on this see Zhan Ye, New Hope for Chinas Women
Workers, Chinese Business Review, April 26, 2006.
11. Alfred Chandler, Jr. Strategy and Structure: Chapters in the History of American
Industrial Enterprise (Garden City, 1962), 158-99 passim; Louis Galambos and Josepth Pratt,
The Rise of the Corporate Commonwealth (New York, 1988), 167 69.
12. Richard S. Tedlow, New and Improved: The Story of Mass Marketing in America
(New York, 1990), for studies of Coca Cola, Sears, A & P, and the automobile companies.
13. For an overview see Jennifer Bair, Global Capitalism and Commodity Chains:
Looking Back, Going Forward, Competition and Change 9: 2 (June) 129156; and
Abernathy, Dunlop, et al., A Stitch in Time: Lean Retailing and the Transformation of
Manufacturing.
14. Petrovic and Hamilton, Making Global Markets: Wal-Mart and Its Suppliers, in
Lichtenstein, ed., Wal-Mart, 108.
15. Wal-Mart, P&G Link up for Efciency, St. Louis Post-Dispatch, February 14, 1989,
12B; Constance Hays, Whats Behind the Procter Deal? Wal-Mart, New York Times,
January 29, 2005, C1; Davidowitz quoted in Jeremy Grant and Dan Roberts, P&G Looks to
Gain Strength Through Unity, Financial Times, January 31, 2005, 25.
16. Bonacich with Hardie, Wal-Mart and the Logistics Revolution, in Lichtenstein ed.,
Wal-Mart, 163 188.
17. Major Van Hart, (Retired), Logistics: The Art of Doing War, at http://www.
chuckshawks.com/logistics.htm.
18. Marc Levinson, The Box: How The Shipping Container Made the World Smaller and
the World Economy Bigger (Princeton, 2006), 171 88; Bahar Barami, Productivity Gains
from Pull Logistics: Tradeoffs of Internal and External Costs, paper presented at the
Transportation Research Board Conference on Transportation and Economic Development,
Portland, Oregon, September 22 25, 2001.
124 ILWCH, 70, Fall 2006

19. Petvoic and Hamilton, Making Global Markets: Wal-Mart and Its Suppliers, in
Lichtenstein, ed. Wal-Mart, 107142; and also Gary Hamilton, Remaking the Global
Economy: U.S. Retailers and Asian Manufacturers, Hearing on China and the Future of
Globalization, before the U.S. China Economic and Security Review Commission, May 20,
2005; Naomi Klein, No Logo: Taking Aim at the Brand Bullies (New York, 1999).
20. Hamilton, Remaking the Global Economy.
21. Sam Walton and John Huey, Sam Walton, Made in American: My Story (New York,
1992), 162.
22. Jerold Waltman, The Politics of the Minimum Wage (Urbana, IL, 2000), 3841; The
exemption of retail workers proved the most contentious issue in every legislative conict
over the minimum wage during the 1950s and 1960s. See Tom Wicker, Minimum Wage:
Congress Shows Power, The New York Times, March 26, 1961, E6.
23. Jared Bernstein and Isaac Shapiro, Unhappy Anniversary: Federal Minimum Wage
Remains Unchanged for Eight-Straight Year, Falls to 56-Year Low Relative to Average
Wage, Economic Policy Institute, September 1, 2005; W.W. West vs. Wal-Mart, Inc., 264
F. Supp. 158; 1967 US District Court, February 16, 1967.
24. Bob Ortega, In Sam We Trust (New York, 1998), 8790, 105 109; Lichtenstein
telephone interview with Al Zack (formerly UFCW), August 24, 2005.
25. Wal-Mart Boasts Made in USA, Discount Store News, June 15, 1992, 127.
26. Ortega, In Same We Trust, 208.
27. Ibid, 206.
28. Michael Barrier, Waltons Mountain, Nations Business, April 1988, 64.
29. Wal-Mart Boasts Made in the USA, 127.
30. Caroline Mayer, Wal-Mart Flies the Flag in Import Battle; Prods U.S. Producers
With Favorable Terms, The Washington Post, April 21, 1985, E1; Farris Fashions, Inc. and
Amalgamated Clothing and Textile Workers Union, Southwest Regional Joint Board, Cases
26-CA-14258 and 26-RC-7323, September 30, 1993, 550. The factory was derelict in June
2006 when Nelson Lichtenstein visited Brinkley.
31. Sam Hornblower, Wal-Mart & China: A Joint Venture, on Frontline: Is Wal-Mart
Good for America? website; Bill Bowden, PREL CEO Says Wal-Marts Policy is No Sweat,
Northwest Arkansas Business Journal, June 25, 2001.
32. Richard Appelbaum organized this trip as part of his exploration of global
supply chains. Eileen Boris and Karen Shapiro were also participants in the trip and almost
all the interviews.
33. Yue Yuen Industrial Holdings is the principal source of Pou Chens shoe production; as
of June 2004, Pou Chen held 50.1% of the stock in Yue Yuen: http://www.yueyuen.com.
34. Sales data from Hoovers website. And see Yue Yuens website at http://www.
yueyuen.com for a more complete business prole.
35. Jeroen Merk, Nikes Mirror Image: Yue Yuen and the Implementation of Labour
Codes, paper presented at the 47th ISA Convention, March 2225, 2006, San Diego. Other
clients include Polo Ralph Lauren, Kenneth Cole, Calvin Klein, and NBA Properties. About
60% of Yue Yuens footwear production is for Nike, Reebok, and Adidas-Salomon.
36. Richard Dobson, Pou Chen Corp.: Shoe-in for Success, Taiwan Business Topics, vol.
33, no. 8 (2003); Marcus W. Brauchli and Dan Biers, Green Lanterns: Asias Family Empires
Change their Tactics for a Shrinking World, Wall Street Journal, April 19, 1995, 1.
37. Authors interview with Tiger Wu, Nike Manufacturing Manager, Dongguan,
September 12, 2005; authors interview with Reebok executive, Guangdong Province,
September 13, 2005.
38. Wal-Mart: 2004 Report on Standards for Suppliers, at Wal-Mart Stores website:
www.walmartfacts.com.
39. Kyle Johnson and Peter Kinder, Wal-Mart Stores, Inc. Domini 400 Social Index
Decision Series, No. 3, May 16, 2001; Molly Selvin, Wal-Mart Faces Suit by Labor Group,
Los Angeles Times, September 14, 2005.
40. Authors interview with Billy Han, SACOM, September 14, 2005, Hong Kong;
Authors interview with Reebok executive.
41. Liu Kaiming, Global Purchasing Practices & Chinese Women Workers, (Shenzhen,
2003), 18, 19.
42. H. Lee Scott, Twenty First Century Leadership, October 24, 2005, Wal-Mart Sores
Web Site.
A New World of Retail Supremacy 125

43. Lichtenstein interview with Tom Mitchell, South China Morning Post, September 17,
2005, Hong Kong.
44. Authors interview with Liu Kaiming, September 14, 2005, Shenzhen.
45. As quoted in Pun Ngai, Global Production, Company Codes of Conduct.
46. AP, Nike Ventures into Discount Shoe Business, The Clarion-Ledger, April 23, 2005.
47. Authors interview with Tiger Wu, September 12, 2005, Dongguan.
48. Liu Kai-ming, Global Purchasing Practices & Chinese Women Workers.
49. Pun Ngai, Global Production and Corporate Business Ethics: Company Codes of
Conduct Implementation and its Implication on Labour Rights in China, China Journal
(July 2005): 1718. While there are a number of case studies of the effectiveness (or lack
thereof) of governmental and activist pressures to improve working conditions, there is only
one, to our knowledge, that attempts a statistical estimation of their impact across a range of
production facilities. Harrison and Scorses study of Indonesian factories concludes that
direct US government pressure, along with anti-sweatshop campaigns, contributed to a fty
percent increase in the minimum wage, a doubling of wages for unskilled workers at targeted
plants, and some closing of targeted plants (which were offset by gains in employment
at other plants). See Ann Harrison and Jason Scorse, Moving Up or Moving Out?
Anti-Sweatshop Activists and Labor Market Outcomes, U.C. Berkeley and National Bureau
of Economic Research draft manuscript, October 2004.
50. Murray Scot Tanner, Chinese Government Responses to Rising Social Unrest,
Testimony Presented to the US-China Economic and Security Review Commission, April 14,
2005; John Pomfret, Labor Unrest in China Reects Increasing Disenchantment, The
Guardian Weeky, May 4, 2000, 37.
51. Andrew Ross, Fast Boat to China: Corporate Flight and the Consequences of Free Trade
(New York, 2006), 16.
52. Chinese Labor and the WTO, Hong Kong Confederation of Trade Unions (June
2004).
53. Jim Yardley, Jim and David Barboza, Help Wanted: China Finds Itself With a Labor
Shortage, New York Times, April 3, 2005, 1.
54. Howard A. French, Workers Demand Union at Wal-Mart Supplier in China,
New York Times, December 16, 2004, A4.
55. As this article goes to press, reports indicate that the Chinese government favors
workplace reforms that would facilitate unionization and end some labor abuses in the
coastal districts. Intense opposition from US and other foreign companies in China suggests
that these labor law proposals may contain a few teeth. David Barboza, China Drafts Law
to Empower Unions and End Labor Abuse, New York Times, October 13, 2006.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.