Election: Wal-Mart's Attempt to Influence Politics

Last Friday, the Wall Street Journal reported that retailing giant Wal-Mart, concerned about a potential Democratic sweep this fall, has been not-so-subtly indoctrinating managers and department heads about the perils of an Obama presidency. The operating assumption in Bentonville seems to be that a Democratic president and a Democratic Congress would pass laws such the Employee Free Choice Act, which would make it easier for unions to organize at Wal-Mart, thus hurting the company, its workers, and its shareholders. And while the executives running the meetings were careful not to instruct workers which lever to pull, the upshot was clear. "I am not a stupid person," a Wal-Mart customer-service supervisor told the Journal. "They were telling me how to vote."

Wal-Mart denied that it was engaging in partisan politics. But, even so, these meetings are the latest in a series of clumsy political moves. Wal-Mart may be a master of many domains: global supply chains and logistics, local politics and zoning, anti-union warfare and branding. But on the stage of national politics, it has proved to be strikingly inept. Its executives seem to have a cartoonish understanding of the way Washington works, ascribing mythic powers to the nation's continually weakening private sector unions and misunderstanding the linkages between party control in Washington and its impact on the performance of the economy and individual companies.

For starters, Wal-Mart has pursued what would appear to be a self-contradictory political strategy. Clearly, Wal-Mart fears the prospect of unionization more than any other factor. Low wages, low benefits, and a generally supine workforce have been fundamental to its business model for decades. Wal-Mart clearly believes Democrats are more sympathetic to unions than Republicans. So one might think that the company would be doing everything in its power to help Republicans and hurt Democrats. That's certainly what it used to do. In the 2000 campaign cycle, its political action committee devoted 85 percent of its donations to candidates for federal office to Republicans; in 2004, the split was 78 percent to 22 percent. But with Democrats having resumed control of Congress, Wal-Mart has increasingly deployed corporate resources to help Democrats stay in power. So far in this cycle, according to the Center for Responsive Politics, Wal-Mart has basically split its $884,700 in donations equally between the two parties (52 percent to 48 percent in favor of the Republicans). The list of recipients includes long-standing friends of organized labor such as Rep. Charles Rangel of New York and Sen. Debbie Stabenow of Michigan.

Wal-Mart seems to be trying to help Democrats in retail politics, too. In the fall of 2006, Wal-Mart, seeking to bolster its public image, kicked off a campaign to help its 1.3 million employees—whoops, I mean "associates"—register to vote. The company hasn't published results of this campaign. But given the demographic makeup of Wal-Mart's workforce, any such efforts would seem to help Democrats. As Wal-Mart's 2006 EEOC data shows, 61 percent of employees are women, including 75 percent of sales workers, while 17.5 percent of workers are African-Americans and 11.4 percent are Hispanic. So it has spent money and effort helping to register voters who are quite likely to vote for Democrats.

As it tries to scare managers and workers about the inevitable triumph of unions should the Democrats sweep this fall, Wal-Mart also seriously misreads recent political history. The company behaves as if private-sector unions are juggernauts gaining strength, enjoying enormous support in Washington, and bending the Democratic Party to their will. In reality, private sector unions are very weak and getting weaker. Data from the statistical abstract of the United States show that in 2006, just 8.1 percent of private-sector workers (7.4 million) were covered by unions, down from 9.8 percent in 2000 and 15.9 percent in 1985. Given the massive job reductions in the auto industry, the figures are almost certainly lower now. Yes, big unions such as SEIU and AFL-CIO spend money on (mostly Democratic) campaigns and help get out the (mostly Democratic) vote. But the long-term trend is against unions and has been so under all partisan combinations in Washington. While Washington Republicans are almost uniformly hostile to organized labor, Washington Democrats aren't exactly the second coming of Samuel Gompers. Remember that NAFTA, a piece of legislation that organized labor vociferously opposed, was passed in 1993, when a Democrat was in the White House and Democrats controlled both houses of Congress. In today's enlarged Democratic tent—with its upscale constituencies on the coasts and newly flipped districts in places like Mississippi, North Carolina, and Texas—unions just don't matter as much. (While this shift could explain Wal-Mart's increased willingness to fund Democratic candidates, it strikes me as too subtle a change to register with Wal-Mart's Manichean strategists.)

Finally, consider this. Wal-Mart's brass plainly believes—no, know—that a Republican president would be good for Wal-Mart, while a Democrat would be bad. Despite Clinton's Arkansas roots, most Wal-Mart executives probably opposed Clinton in both his successful campaigns. But during his presidency, Wal-Mart's stock more than tripled. By contrast, Wal-Mart executives polled in 2000 would have been exultant at the prospect of two George W. Bush terms, especially if they were to be coupled with mostly Republican control of the House and Senate. And yet this decade has been a lost one for Wal-Mart shareholders: In the Bush years, the stock hasn't budged at all.

Yes, politics matters. But in the end, the macroeconomic climate matters a lot more. Wal-Mart's success ultimately depends on whether the lower-income and middle-income customers on whom it depends are doing well or getting eaten up by stagnant incomes and rising costs for health care and gas. Here, again, the last two decades offer a pretty good contrast. In the 1990s, when a Democrat was in the White House, the rising economic tide lifted all boats (though not all boats equally), and Wal-Mart benefited. In this decade, the rising tide lifted only the yachts. The Bush years have been something of an economic disaster for people on the lower rungs of the income ladders. Census data show that household income in 2006 was below its 1999 peak and that the uninsured rate has steadily risen throughout the decade. Layer on soaring energy prices in the past couple of years, and you've got trouble. It's not all the fault of Bush or congressional Republicans, of course. But it's pretty clear that the dominant fiscal and economic policies of the past eight years—massive tax cuts for the wealthy, economic royalism, hostility to labor, and neglect on health care—haven't made things better for Wal-Mart customers.

Instead of asking whether a particular candidate or political party will be favorable to Wal-Mart's labor-relations policies, the executives in Bentonville, Ark., should be asking whether the candidate or party will be good for Wal-Mart's customers.