Terms of engagement for Wal-Mart India

ND Batra says the global retailer could bring more than just hardship to local businesses -- it could bring positive change

By ND Batra
AsiaMedia Contributing Writer

Friday, November 25, 2005

West Bengal Chief Minister Buddhadeb Bhattacharjee asked at a meeting of business leaders in October, "Why do we need Wal-Mart to come?" It's a good question, one that Wal-Mart has yet to answer.

There is genuine apprehension that small shopkeepers and intermediaries would be adversely affected by the arrival of the global retailer in India. In the United States, many mom-and-pop corner stores have shut down and others struggle to survive where Wal-Marts open.

Small entrepreneurs and the burgeoning middle class are the backbone of the Indian economy; they must not be savaged. Nonetheless, they need to be exposed to the challenges of globalization, to Wal-Mart's organizational innovations.

Fortunately, the retail space in India, unlike in the United States, is expanding rapidly and large retailers like Wal-Mart are going to take hold with or without the actual Wal-Mart company. Talking with analysts in June, John Menzer, the president and CEO of Wal-Mart's international operations said, "India represents a $250 billion retail market, growing 7.2 percent a year, but modern retailing is just starting to emerge." India is not only "a huge organic growth market for Wal-Mart," he said, but also a fast growing outsourcing market, with an expected $1.5 billion of merchandise export to Wal-Mart stores this year.

That projection is nothing compared to what Wal-Mart exports from China. $70 billion in merchandise exported annually have created a myriad of entrepreneurial opportunities in China by establishing a modern supply chain system.

Chief Minister Bhattacharjee should focus his attention not only how Wal-Mart treats its employees, keeping in mind that in the United States the retailer does not encourage unionization, but also on whether Kolkata could be another outsourcing hub for the hungry giant.

When small things aggregate, they bring about great changes. Wal-Mart has 2000 stores worldwide, including 40 in China, and sells almost every thing at the low prices, giving low and middle-class people access to goods which would have been otherwise beyond their monthly budgets. The retailer is able to do so by buying massive quantities from inshore and offshore sources and hiring people, mostly women, at blood and sweat wages. The High Cost of Low Price, a recent documentary by Robert Greenwald, shows the seamy side of the retail giant, including its denial of health coverage to employees, unequal wages for women and the elderly, ethnic and gender discrimination and many other not-so-legal practices.

These allegations should be of great concern to political leaders like Chief Minister Bhattacharjee. In the long run, such business practices may have greater impact upon the world than Al Qaeda, tsunami and earthquakes. As Nelson Liechtenstein, professor of U.S. labor history at the University of California, Santa Barbara, wrote in the Globalist, "Wal-Mart rezones our cities, determines the real minimum wage, channels capital throughout the world -- and conducts a kind of international diplomacy with a score of nations."

As the retail giant scrounges and sponges the third world for cheap goods, in the process it also creates employment for hundreds of thousands of people in developing countries, especially China. In the United States it keeps overheads low by hiring mostly female workers at wages much less generous than it pays to its male employees. In 2001, six women accused Wal-Mart of discrimination. Six women snowballed into more than a million current and former women employees who, in a class-action suit, charged that Wal-Mart, one of the nation's largest employers, paid less and gave fewer promotions to women than to male employees.

In the land of presumed equality, this is a serious accusation and has become a public relations disaster. U.S. District Court Judge Martin J. Jenkins found that the plaintiffs did "present largely uncontested descriptive statistics which show that women working in Wal-Mart stores are paid less than men in every region, that pay disparities exist in most job categories, that the salary gap widens over time for men and women hired into the same jobs at the same time, that women take longer to enter management position, and that the higher one looks in the organization, the lower the percentage of women."

Gender and race-based discrimination is an anathema in American society. India should take the same stance whenever a foreign company is allowed to do business in its borders.

This is however not the first gender-discrimination class-action suit against corporate America. Home Depot, Texaco, Coca-Cola, Public Super Markets and many others were hit with class-action suits for discriminatory employment practices and paid millions of dollars in settlement.

A legal and humanitarian precedent set in the United States should be followed whenever Wal-Mart and other multinationals come to India. A consequence of globalization should be that companies in India should have no choice but to offer competitive opportunities to their female employees on par with what they offer to men. These should be the terms by which political leaders offer global corporations opportunity to do business in India.

The views expressed above are those of the author and are not necessarily those of AsiaMedia or the UCLA Asia Institute.

Date Posted: 11/27/2005