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The March of the MegaStores
The plots, plans and antics of multinational jumbostore companies are in the news at the moment, and reports show that many of them are, to be kind, not altogether to be trusted. Adverse publicity has been met by energetic damage control on which no expense has been spared. The superbosses are scared out of their gold-grabbing brains that profits might suffer because some of their tricks have been disclosed, so have ordered their PR machines to get into top gear to disparage or, preferably, wipe out accurate accounts of their machinations.
There have been some interesting revelations about megastores in the past few weeks.
For example, it has been disclosed that some British supermarket chains have been selling beefburgers with a dash of horse. In the case of a particularly horrible UK-based multinational called Tesco a selection of its burgers was found to contain 29 per cent horse flesh, and some even had a tasty touch of pork. That might add to life’s rich flavor, of course, but you have to wonder what else is being served up in supermarkets around the world.
In India, for example, where eating beef is anathema to its mainly Hindu population, might it be possible that an international company could inject — by accident, of course — the odd slice of cow into a burger or two? Tesco already operates quietly in India, in concert with Tata Bazaar Stores, but India’s laws on controlling market access by foreign multinationals have been relaxed to the point of destruction and Tesco is now “focused on the west and south of the country, which has 150m potential customers.”
On the other hand there is upbeat news about Walmart, the superstore empire whose employees are subject to a degree of dictatorial discipline that would have attracted the admiration of Henry Ford, Adolf Hitler and Chairman Mao. Its latest initiative is designed to be emotionally attractive to the US public. A clever media manipulation release wants us to believe that Walmart will hire 100,000 military veterans over the next five years, which decision was taken after last month’s public relations disaster involving the death of 112 workers in a fire at a Walmart supply factory in Bangladesh, a country in which labor conditions are appalling. It was reported that “Though the factory was not meant to feed items into the Walmart supply chain due to being unsafe, documents unearthed after the blaze showed that it had been doing so. It also emerged that Walmart, along with other foreign companies, had blocked a bid to improve conditions in Bangladeshi factories in 2011, including fire safety measures.”
No wonder Walmart’s wizards stretched their inventive brains to come up with a public-friendly maneuver to try to create an image of cozy Wal-care. It didn’t take them long to grasp that although the war in Afghanistan is unpopular, the result of Washington’s crazy conflicts there and in Iraq has been enormous sympathy for military veterans. So what better to do than capitalize on national compassion by mouthing garbage about giving them priority in employment? (Well done, Walmart PR people : enjoy your bonuses.) After all, nobody can question Walmart’s claim that it will employ 100,000 vets over the next five years, and it was a considerable triumph of psychological operations. We are being manipulated to ignore the unpalatable facts that Walmart pays lousy wages, won’t allow labor unions, has a quiet policy of hiring people for too few hours for them to qualify for decent health benefits, and is generally employee-hostile. But it supports the vets! Brilliant checkout!
The picture of superstore corporations as friendly, warm, caring and cuddly has taken a lot of hits recently, but they are fighting back very hard indeed. And they will probably win, because our memories are short and we can’t say nay to cheap burgers. Even those with a dose of horse. But we should bear in mind the reality that superstores kill tiny stores.
Sometimes my wife and I stay with friends in an inner London suburb where there used to be some family-run stores. They weren’t modern models of calculated commercial skills, as measured by megastore profit margins, but they were havens of courtesy, quite well-stocked, and, of course, convenient. They provided a decent living for many people and were very much part of the community. Late last year a supermarket appeared and all the mom and pops vanished overnight. In a matter of days after the big store opened it was obvious they hadn’t a hope of survival, so now they’re dead and boarded up and will never reopen. And it’s difficult to see who benefits. There is a much wider range of foodstuffs available in the big store (such as 43 different types of biscuits), but the prices, after an attractively low beginning, now seem to be creeping up, there being no competition anywhere.
Superstores may be good for some people, but it is open to debate that they should be totally embraced by such countries as India. Last time my wife and I were in Delhi we went to one with friends and I was amazed and shocked at the massive energy use. Nothing was too small to be illuminated, and the strip lighting must have measured miles. Heaven knows the amount of electricity consumed in India’s supermarkets and malls. And given the dismal state of affairs in its rural areas, where over 300 million people — the entire population of the United States — have no electricity at all, it seems that energy provision priorities might be improved a bit. The little people want electricity, too, but will they get it? Or will the megastores win?
According to the International Energy Agency, access to electricity by all India’s citizens will require investment of at least $135 billion. That’s less than a third of what America has wasted on its war in Afghanistan, but in India it’s an awful lot of money. And you might wonder what proportion will be invested in urban areas where it is intended there be vast numbers of megastores, almost all of them foreign. Last December India’s parliament voted to open the country’s retail sector to overseas competition. They welcomed admission of firms like Walmart, which already has 17 stores in association with Bharti Enterprises, based in Gurgaon, a satellite of the capital, Delhi. Like other such places in India, Gurgaon has 43 enormous shopping malls and electricity to match.
Like Tesco, which has 6,000 stores in 14 countries and half a million employees, Walmart welcomed the Indian government’s decision to allow it majority ownership of “multi-brand retails”, but there was much critical comment. Mr Ravi Shankar Prasad of the opposition Bharatiya Janata Party said Walmart spent $3 million in 2012 “for entering the Indian market,” and noted that “Lobbying is illegal in India . . . If Walmart has said that hundreds of crores of rupees were spent in India, then it is a kind of bribe.”
This was not a biased political rant: it was a statement of unpalatable fact. And when the past machinations of Walmart are examined, Mr Prasad’s concern is understandable, given that some most unpleasant details have been exposed. The New York Times conducted an analysis of Walmart that should make us all sit up and think about the enormous power of these giant companies. “The Bribery Aisle: How Wal-Mart Got Its Way in Mexico” is a well-researched, excellently-written and deeply depressing description of the deceitful and shameful way these people conduct business.
It was discovered that “Wal-Mart de Mexico was an aggressive and creative corrupter, offering large payoffs to get what the law otherwise prohibited. It used bribes to subvert democratic governance . . . It used bribes to circumvent regulatory safeguards that protect citizens from unsafe construction. It used bribes to outflank rivals.” Walmart is the largest commercial employer in Mexico, with 200,000 employees in its amazingly profitable 2,000 outlets. Is this really the way India and other prospective victims want to go?
Walmart had to admit to a US Senate committee that it had spent $25 million on obtaining “enhanced market access for investment in India.” And following independent revelations about Walmart’s intriguing activities, India’s Bharti-Walmart company suspended what they called “a few associates” — which is an odd description of such a figure as their Chief Finance Officer, Mr Pankaj Madan, who was one of the six people fingered, so far.
In addition to imaginative commercial maneuvers in India, there is the matter of the influence of global mega-stores on their unfortunate suppliers in many countries. In Britain, as one bankrupt dairy farmer put it about milk payments: “In 1997, we got 25p a liter at the farm gate. We’re getting 26p now. But the price in the shops then was 42p a liter and now it’s anything from 70p to £1.” The Asda supermarket chain in Britain is a subsidiary of Walmart, much like Bharti-Walmart but enormously larger (542 stores; over 200,000 employees), and last year was fined 9 million pounds for “coordination” with other enormous chains in price-fixing of dairy products. In 2010 it was fined 14 million for a similar scam involving tobacco sales, and although these amounts are the smallest of pocket-change to Asda-Walmart, given its colossal profits, you have to wonder what might be in store (pun intended) for Indian producers who supply supermarket chains.
In Britain the shelf prices of some 65 per cent of all food consumed in the entire country are controlled, brutally and sometimes spitefully, by four gigantic and astronomically profitable supermarket companies. They set prices and destroy farmers who try to complain about their tyrannical — but entirely legal — commercial capers. Every new supermarket that opens destroys whole networks of independent shops and their suppliers. And tax avoidance by these companies, especially Walmart’s Asda in Britain, is practiced on a cosmic scale. This raises the question as to how much tax these companies will pay on the vast profits they intend to make in India.
There are some notable beneficiaries of the expansion of superstore chains — like the legions of highly-paid lawyers and tax-avoidance experts who design amazing schemes to shrink or annul tax payments. And given India’s understandable concern over the high level of corruption in the country it would also be advisable to consider the straight bribery angle, as distinct from the generous lobbying pointed out by Mr Prasad of the nationalist Bharatiya Janata Party.
As the New York Times recorded “Wal-Mart de Mexico officials did not themselves pay bribes. Records and interviews show that payoffs were made by outside lawyers, trusted fixers . . . to deliver envelopes of cash without leaving any trace of their existence. Wal-Mart de Mexico’s written policies said these fixers could be entrusted with up to $280,000 to “expedite” a single permit. The bribe payments covered the payoffs themselves, a commission for the fixer and taxes.”
Two members of the US Congress stated in August 2012 that “we have obtained internal company documents, including internal audit reports, from other sources suggesting that Wal-Mart may have had compliance issues relating not only to bribery, but also to ‘questionable financial behavior’ including tax evasion and money laundering in Mexico.”
There is raging corruption in India at all levels of government, business and bureaucracy. The Economist noted a year ago that “Graft is hardly new in India . . . But there seems to be more of it about than ever, if only because India is getting richer fast, and the faster the economy grows, the more chances arise for mind-boggling theft.”
It might be time for India’s government to think more deeply about the dangers and penalties of throwing the country open to the imaginative tactics and “questionable financial behavior” of foreign commercial enterprises.
Brian Cloughley’s website is www.beecluff.com
A shorter version of this essay appeared on Asia Times Online.