The story isn't part of the official Wal-Mart creation epic, but it tells us almost all we need to know about the company's approach to the interests of its employees and the laws of the nation. Around the time that the young Sam Walton opened his first stores, John Kennedy redeemed a presidential campaign promise by persuading Congress to extend the minimum wage to retail workers, who had until then not been covered by the law. Congress granted an exclusion, however, to small businesses with annual sales beneath $1 million -- a figure that in 1965 it lowered to $250,000.
Walton was furious. The mechanization of agriculture had finally reached the backwaters of the Ozark Plateau, where he was opening one store after another. The men and women who had formerly worked on small farms suddenly found themselves redundant, and he could scoop them up for a song, as little as 50 cents an hour. Now the goddamn federal government was telling him he had to pay his workers the $1.15 hourly minimum. Walton's response was to divide up his stores into individual companies whose revenues didn't exceed the $250,000 threshold. Eventually, though, a federal court ruled that this was simply a scheme to avoid paying the minimum wage, and he was ordered to pay his workers the accumulated sums he owed them, plus a double-time penalty thrown in for good measure.
Wal-Mart cut the checks, but Walton also summoned the employees at a major cluster of his stores to a meeting. "I'll fire anyone who cashes the check," he told them.
Besides its Dickensian shock value, this story -- told by Nelson Lichtenstein in his new book about Wal-Mart -- points to a phenomenon of wider significance. The company that was willing to break the law to avoid paying the minimum wage is now the largest private-sector employer in the nation and the world, with 1.4 million employees in the United States and 2 million overall, more than 6,000 stores, and revenues that exceed those of Target, Home Depot, Sears, Kmart, Safeway, and Kroger -- combined. By virtue of its size and its mastery of logistics, Wal-Mart is able to demand low prices from its thousands of suppliers and thus inflict low wages on their employees. Its low prices have also forced reductions in wages and benefits at the unionized supermarkets with which it threatens to compete.
As the unionized General Motors was big enough to set the pattern for the employment of nonprofessional Americans in the three decades following World War II, Wal-Mart is now so big it is setting the pattern today. Each created a distinct national buying public for its goods that was far larger than its immediate work force: in GM's case, workers who could afford to buy new cars; in Wal-Mart's, workers who could afford to shop nowhere except Wal-Mart. With Wal-Mart's rise, the same traditional values that underpinned Sam Walton's cheating and threatening of his workers -- contempt for Yankee laws and regulations, and a preference for the authoritarian, low-wage labor system of the South -- have become more the norm than the exception in America's economic life.
For the past year, Americans have focused, and understandably so, on the ways in which Wall Street has misshaped the American economy, how finance has grown large over the past 20 years as manufacturing has shrunk. But the rise of finance is just half the story; it takes the rise of retail to complete the tale. Both Wall Street and Wal-Mart played a central role in the deindustrialization of the United States: 40,000 U.S factories were closed between 2001, when China was admitted to the World Trade Organization, and 2007, during which years Wal-Mart's Chinese imports tripled in value from $9 billion to $27 billion.
The rise of Wal-Mart, and the national economy it has shaped in its image, is a story that Lichtenstein, a professor of history at the University of California, Santa Barbara, is eminently suited to tell. He's also the author of The Most Dangerous Man in Detroit , a biography of United Auto Workers President Walter Reuther that is one of the definitive accounts of the rise of the unionized, high-wage, mid-20th-century economy that Wal-Mart has done so much to destroy. The Retail Revolution now tells the story of how Walton, strongly abetted by Ronald Reagan, pulled down the world that Reuther, strongly abetted by Franklin Roosevelt, created. It is not the definitive scholarly history that Lichtenstein's Reuther biography is, but it is surely the best account we have of Wal-Mart's metamorphosis from a backwater chain to the nation's dominant corporation, and it contains more direct reporting than is normally found in the works of historians. The story of Walton's minimum-wage evasion came from Lichtenstein's interviews with former Wal-Mart executives.
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With its stock price stagnant for nearly a decade due in part to its failure to expand to blue-state America, and with Democrats now in control in Washington, Wal-Mart is currently undergoing a great cosmetic makeover. It has announced it will develop a green profile for all the products it sells and has even proclaimed its support for an employer mandate in any emerging health-reform package. What it is not willing to relinquish is its die-hard opposition to unions and labor-law reform, its existential commitment to the Southern model of labor relations. Wal-Mart cannot thrive in a nation where prosperity is broadly shared, and it will do all it can to keep that from happening.
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