The Bully of Bentonville

by Anthony Bianco

  In the end, Stone, too, charted a zero-sum outcome. The impressive growth of Wal-Mart and the handful of other mass discounters that had moved into Iowa was counterbalanced by the utter collapse of Mom and Pop retailing throughout the state. “Wal-Mart has taken the place of Main Street,” lamented a newspaper publisher in Independence, Iowa, a county seat of 6,100 where Wal-Mart opened in 1983.10 Independence lost its quaint old downtown shopping district, and most of the smaller communities around it were reduced to commercial ghost towns. During the ten-year period that Stone studied, Iowa towns of 5,000 or less lost half their retail sales—$2.46 billion in total. 11

  Although Professor Stone’s work won him no friends in Bentonville, he did not style himself as a Wal-Mart opponent. 12 He was no anti-business rabble-rouser, but rather a conservative sort of business economist who believed in a survival-of-the-fittest brand of capitalism epitomized by Wal-Mart. “In no way is this an attempt to berate the Wal-Mart company,” he wrote in the preface to his first study in 1988. “Its stellar national reputation speaks for itself.” 13 Even as Stone’s work served to stiffen the spine of many a Wal-Mart opponent around the country, the professor carefully steered clear of site fights, considering them both misguided and futile.

  Stone shed no tears over the fate of small-town merchants run out of business by Wal-Mart, figuring that most of them had it coming. “Before the mass discounters came along, many small-town merchants had forgotten that their first obligation was to customers,” Stone recalled. “They closed at 5 o’clock, had bad return policies, and kept their prices too high.” 14 As Iowa State’s extension economist, he did make a concerted effort to try to help Main Street shopkeepers adapt to the new retail order, appending a detailed and surprisingly upbeat primer on how to take on Wal-Mart to most of his research studies. “In general, it is best to take a positive attitude toward the opening of a new mass merchandise store in your area…” he advised. “Try to figure out ways to capitalize on the increased volume of traffic in town.” 15

  Stone, who recently retired from Iowa State, concluded that Wal-Mart’s overall impact on America is “slightly positive. The main factor in its favor is its impact on prices, its suppressing of price inflation.” However, he added, too many cities and towns have tilted the balance to the negative by subsidizing its construction of stores and distribution centers. “That’s always been a pet peeve of mine,” he said. 16

  Walton skillfully played a sly sort of game, feigning interest in potential store sites in towns adjacent to the one where he actually wanted to build. “Whenever he thought he could get away with it—which was often—he would politely but firmly demand concessions: a break on property taxes, use of tax-exempt bonds to finance construction, infrastructure subsidies, a rezoning, even a change of town boundaries so he could get city services at his site,” wrote biographer Bob Ortega. 17 Although Walton might already have decided on a site, Wal-Mart was financed on a shoestring well into the 1970s, and every little bit helped. However, Bentonville’s persistence, long after it needed the money, in hitting up small-town America for contributions most towns could ill afford amounted to an unseemly racket for a company that so loudly professes to have the best interest of everyday people at heart.

  According to a study published in 2004 by Good Jobs First, an advocacy group based in Washington, the construction of eighty-four of Wal-Mart’s ninety-one distribution centers in the United States was subsidized by state and local governments to the tune of $624 million. 18 Public officials across the negotiating table from Wal-Mart claim the company has come to regard DC subsidies not as a concession but as its due. “They expect it,” says Gary Smith of the Delaware Economic Development office. 19 In only one location—Apple Valley, California—did Wal-Mart turn down a subsidy, for fear that accepting it would trigger a legal requirement obligating the company to pay the prevailing market wage to construction workers. Distribution center projects rarely prompt site fights. However, one deal that would have lavished $45 million in tax credits on Wal-Mart to build a $60 million DC in Killingly, Connecticut, created such a public outcry in 2003 that Bentonville had to back away.

  Although cities and states subsidize Wal-Mart stores, it is much easier for these governments to rationalize underwriting the cost of a DC because it brings a lot more higher-paying jobs than a Wal-Mart store and does not compete with local businesses. Good Jobs First’s researchers uncovered 160 store subsidy deals totaling $383 million (an average of $2.4 million per deal). They concluded that about 1,000 of Wal-Mart’s stores had gotten some kind of financial break. Apply that $2.4 million average to all of these outlets and a rough estimate of the total store subsidies paid to Bentonville soars to $2.4 billion.

  A city’s willingness to subsidize Wal-Mart correlates mainly to the degree of leverage that the company applies. Independence, Iowa, is a classic case in point. When Wal-Mart came to town in 1983, Iowa’s farm economy was reeling. Independence is the seat of Buchanan County, which was devastated during the 1980s by the failure of 200 farms and the loss of 10 percent of its population. Nevertheless, Independence floated a $1.3 million tax-exempt bond issue that covered most of Wal-Mart’s construction costs and extended its water and sewer lines to Wal-Mart’s building site, which lay outside the city limits. “Wal-Mart threatened us,” explained Frank Brimmer, the mayor of Independence. “They told us if they didn’t build here, they’d build in a nearby town, and that would have been equally hard on Main Street. You simply cannot beat Wal-Mart, so we joined them.” 20

  “Infrastructure assistance” of the sort that Independence supplied is the most common form of subsidy given Wal-Mart. Its prevalence goes a long way toward explaining why the company is synonymous with urban sprawl in much of America—and why it was satirized as “Sprawl*Mart” on The Simpsons. (For example, in an episode called “On a Clear Day I Can’t See My Sister,” Homer replaces Grampa as the people greeter. The store manager likes Homer’s work but demands that he work overtime without pay. Homer agrees after the manager threatens to deport him to Mexico on the suspicion that he is an illegal immigrant. Homer eventually removes the obedience chip Sprawl*Mart had implanted in his brain and tries to rally his co-workers to help him shut down the store in protest of its mistreatment of workers. Homer’s associates refuse to follow him because they have learned to accept the things they can’t change—and to steal what isn’t nailed down. Homer recognizes a superior form of protest when he hears it and rides triumphantly off into the night on a stolen forklift bearing a load of big-screen plasma TVs.)

  Wal-Mart undoubtedly has despoiled more prime country acreage than any other retailer, not only because of its size but also because of the development strategy that Walton established. Many of Walton’s first stores were located on town squares or main streets. But as Wal-Mart began to expand into larger markets in the mid-1970s, it typically located as far outside the city limits as practicable to minimize land costs. “We never planned on actually going into the cities,” Walton recalled in the early 1990s. “What we did instead was build our stores in a ring around a city—pretty far out—and wait for the growth to come to us…. We’re still more or less following this same strategy, although today we’ve moved into some cities outright. But I think our main real estate effort should be directed at getting out in front of expansion and letting the population build out to us.” 21

  Wal-Mart was not nearly as passive as Walton makes it sound, of course. In inducing public officials to extend city limits and make costly new investments in roads, water systems, and the like, Bentonville went beyond merely anticipating a city’s growth to shaping and stimulating that growth to its own, purely commercial ends. A heavily patronized new Wal-Mart sitting by itself in an erstwhile cow pasture exerted an almost gravitational force, pulling a town toward it and accelerating development of the acreage in between. It is impossible to quantify the cost to taxpayers of the sprawl Wal-Mart induces; neither Basker nor Stone even raise the issue. It’s fair to
say, though, that the development tab that Wal-Mart sticks government with offsets a sizable portion of the cost savings that shoppers pocket at the cash register.

  When Wal-Mart abandons a town, its departure can be just as contentious and traumatic as its entry. Almost always, the company shuts a store because it has built a larger outlet within what it considers the same market area. In Wal-Mart lingo, these are “consolidations” or “conversions,” not closures. It is not uncommon for a new store to be located within walking distance of the store it is replacing. However, in the rural areas where Wal-Mart concentrated its first stores, the new and old locations easily could be separated by fifteen to twenty miles or more. In these instances, the town abandoned by Wal-Mart in favor of the new Supercenter often takes a punishing hit to its economy.

  Consider Hearne, Texas, “the town that Wal-Mart killed twice.” Before Wal-Mart opened a 46,000-square-foot store on its outskirts in 1982, Hearne, a central Texas community of 5,200, had a small but bustling downtown dominated by long-standing locally owned businesses. Over the next five years, the downtown was hollowed out by the failure of ten retailers in the typical pattern documented by Ken Stone. In 1989, Wal-Mart announced that it was pulling out of Hearne because its store was unprofitable. After it closed, there was no place left in town to buy a pair of dress socks or a spool of thread. Residents had to drive twenty-two miles to Bryan to do most of their shopping. “No matter what else Wal-Mart may say for itself in marketing, it cannot say that it really cares about the communities it goes to, especially the small ones,” declared Steve Bishop, a local minister who had grown up in Hearne. “Its service came at a very high price.” 22

  A few years later, Wal-Mart abruptly pulled out of two small Oklahoma towns—Nowata and Pawhuska—closing discount stores of the same vintage as the one in Hearne. “They came in and ravaged all the small businesses. And when it came to the point where they were not satisfied, they left,” complained the president of the First National Bank of Nowata, who had enthusiastically supported Wal-Mart’s entry. The loss of income from the city’s 3 percent tax on Wal-Mart’s sales left a gaping hole in the municipal budget, pushing the town into a budget deficit. Nowata had to boost its water and sewer taxes by 32 percent and impose a new $5-a-month tax on homeowners to pay for fire protection. What particularly galled locals was that Wal-Mart left shortly after it had erected signs in front of both the Nowata and Pawhuska stores vowing eternal loyalty. “The rumors are false: Wal-Mart will be here always,” proclaimed the one in Nowata, where resentment of Wal-Mart inspired a derisive new schoolyard chant: “Wal-Mart Fall-Apart.” 23

  Wal-Mart did not abandon Nowata and Pawhuska (which is just an hour’s drive from Claremore, Helen Walton’s hometown) and scores of other communities of similar size because it soured on small towns per se. Rather, the mid-1990s emergence of the Supercenter as the company’s preferred growth vehicle effectively doomed the classic discount store that Walton had pioneered. Three to four times bigger than early discount stores, Supercenters were designed to draw customers from a larger market area. The Nowata and Pawhuska stores were among the first of at least 900 stores that Wal-Mart has shut down to make room for new Supercenters. The number of closings has steadily risen in tandem with Supercenter openings, reaching 160 in 2004.

  In Bardstown, Kentucky, a city of 10,000 with no less than 300 buildings in the National Register of Historic Places, Wal-Mart built progressively larger stores in three different locations over a fifteen-year span, shifting the town’s economic center each time. The first store was abandoned in 1991; the larger Wal-Mart across town that replaced it closed in 2004 when a giant Supercenter opened just outside the city. “How did this happen? How are we on our third Wal-Mart, in a town riddled with preservationists?” asks Julia Christensen, a Bardstown native who was inspired by Wal-Mart’s molting to make reusing the abandoned stores an artistic and academic specialty. 24

  Wal-Mart Realty, a 500-employee division based in Bentonville, tries to extract as much value as it can from the hundreds of discarded stores scattered across America’s rural and suburban landscape like unburied corpses. As of September 2005, it listed 370 properties for sale or lease across thirty-five states. Texas topped the list with thirty-seven stores, followed by Georgia, Illinois, North Carolina, Tennessee, and Ohio. The 44,752-square-foot store that Wal-Mart strong-armed the town of Independence, Iowa, into subsidizing long ago will come available in April 2006, about the time a new Supercenter is scheduled to open a mile across town.

  California outdoes all other states both in expansion potential for Wal-Mart and in the intensity of resistance to Wal-Mart. The company’s slow rate of progress to date toward the modest goal it announced in 2002 of opening forty Supercenters in California by 2008 is a serious, nagging problem for Lee Scott, who simply cannot afford to fail in the Golden State and keep his job. Against this backdrop of mounting pressure and frustration, Wal-Mart waged a site fight in the South-Central Los Angeles community of Inglewood that damaged its image worldwide by revealing the sneer beneath the smiley face it presents to the public. Inglewood looms large in the recent history of Wal-Mart as the place where Bentonville plumbed the depths of its disrespect for local government—and lost for a change.

  Inglewood is about as far removed culturally from Wal-Mart’s Ozarks comfort zone as it is possible to be without leaving the United States altogether. People of color predominate in every sense in this city enfolded within America’s second-largest metropolis. But what Wal-Mart seemed to find most daunting about Los Angeles as a whole is that it is a union stronghold where, as one veteran observer of the city put it, “politicians rarely go far without big labor’s endorsement.” 25 As is often the case with the worst of Wal-Mart’s behavior, its blunders in Inglewood were rooted in part in a visceral hatred of labor unions, a hatred that caused it to overreact to the provocations of its archenemy, the United Food and Commercial Workers.

  In 1999, less than a year after Wal-Mart had slipped quietly into California by opening a few relatively small stores, the UFCW pushed legislation through the state assembly that effectively would have banned the sale of groceries at all big-box stores statewide had not Governor Gray Davis vetoed the measure. The union then redirected its anti–Wal-Mart lobbying to the local level, succeeding in getting big-box ordinances on the agendas of city councils in a number of cities, including Los Angeles, the great cloverleafed jewel of California’s vast retail market.

  Wal-Mart countered with lobbying of its own, but made no immediate attempt to enter L.A. The company had scattered ten stores throughout the Gateway Cities and other exurbs of eastern Los Angeles County before venturing into L.A. proper in 2003 to open what it described as “one of its first truly urban stores.” It was located on Crenshaw Boulevard in Baldwin Hills, a mostly middle-class black district notorious in the 1980s for cocaine-related gang violence. Breaching the L.A. city limits by moving first into Baldwin Hills was so politically astute a maneuver that not even the UFCW dared protest too loudly. Although Wal-Mart much prefers to construct its own stores, on Crenshaw it took over a historic department store building left vacant for five years. Much to the annoyance of local political leaders, all sorts of supermarkets and major retailers had passed on this site, which had been a commercial hub of black Los Angeles for two decades. Bernard Parks, the councilman for the district, supported Wal-Mart’s entry so avidly that his photo was pinned to the store bulletin board next to a head shot of Rob Walton. 26

  Inglewood is four miles down Crenshaw Boulevard and a world apart from Baldwin Hills. Inglewood is considerably more affluent than more notorious sections of South-Central L.A., with a median household income of about $35,000. To the out-of-towner flashing by on Interstate 405, the town looks like just another undifferentiated stretch of south L.A. However, Inglewood long was a city unto itself until it was swallowed by the metro area’s gargantuan sprawl, and many of its residents retain a pronounced, even prickly identity as Inglewooders fi
rst and Angelenos second. Actually, L.A. might rank third in the loyalties of the many residents who originally hailed from rural Texas, Louisiana, and other Deep South states. “Inglewood is a country town in the city,” said Daniel Tabor, a longtime city council member who himself moved to “the Wood” from Texas in 1967 as a boy of fourteen. 27

  Sports fans around the country know Inglewood as the home of the Hollywood Park Racetrack, founded in 1938 by a consortium of movie stars and studio bigwigs, including Jack Warner, Walt Disney, Bing Crosby, and Irene Dunne, and also as the site of the Forum, where the Los Angeles Lakers held court from 1967 until 1999, when they broke Inglewood’s heart by decamping for the neon dazzle of the Staples Center in downtown L.A. The racetrack and the Forum sit on either side of a great expanse of asphalt parking lot just a dozen blocks from Market Street, Inglewood’s well-tended but sleepy downtown shopping district. In its heyday, Market Street resembled a thousand other small-town downtowns across America, except for its two ornate movie palaces, each of which was owned by a Hollywood studio that continued to stage swanky movie premieres in Inglewood well into the 1960s. 28

  Like many communities within greater L.A., Inglewood has a history as a racial kaleidoscope of sorts. In 1960, the federal census counted only twenty-nine “Negroes” among its 63,000 residents. Not a single black child was enrolled at any of its schools and Realtors routinely refused to show homes to black families. The Watts Riots of 1965 triggered a white exodus that put blacks in the majority by the time the 1980 census was taken. Thanks to a massive influx of Mexicans and other Latin Americans over the last two decades, Inglewood now is about 47 percent black and 46 percent Hispanic. However, the Latinos tend to be poorer and less active in civic affairs than black residents, who completely dominate government. Koreans and other Asians also figure importantly in the mix, not as residents but as owners of a great many of Inglewood’s small businesses.