One of the oft-used tricks of our modern system of socialism for the rich is to have the government pick up costs that should properly be borne by private concerns. A common ruse is to have the operator of a new plant or large facility set up a bidding war between prospective locations, pitting them against each other to win the jobs that it will supposedly generate. The fallacy of this approach, from the perspective of the community, is that the tax gimmies often wind up being so large as to fully offset the gains from the expected increase in jobs. And that’s before you get to the fact that many of these newbies to the local economy aren’t additive, but partly or in the case of WalMart, almost fully displace established local businesses. Those existing players not only often offered high wages than the new entrants, but they also had reason to keep the interest of the community in mind (for instance, they might donate equipment to a local charity).
And the most aggressive national players shift other costs onto taxpayers. WalMart and fast food chains pay below a living wage, forcing workers to rely on government assistance like food stamps and Medicaid.
Bloomberg, in an in-depth report, describes yet another way that WalMart makes local communities pay for the privilege of having it drive local retailers out of business: by refusing to police its stores properly. The result is a safety risk to its shoppers, since the incidence of petty crimes like shoplifting and violent crimes (which do take place in WalMart stores) are highly correlated. And even though the Bentonville giant is well aware of its crime problem, and says it is in the process of tackling it, experts say the company is moving at an unduly slow pace so as to lessen the impact on profits.
The article is very much worth reading in full. Some highlights:
There’s nothing inevitable about the level of crime at Walmart. It’s the direct, if unintended, result of corporate policy. Beginning as far back as 2000, when former CEO Lee Scott took over, an aggressive cost-cutting crusade led many stores to deteriorate. The famed greeters were removed, taking away a deterrent to theft at the porous entrances and exits. Self-checkout scanners replaced many cashiers. Walmart added stores faster than it hired employees. The company has one worker for every 524 square feet of retail space, a 19 percent increase in space per employee from a decade ago.
In terms of profit, all this has worked: Sales per employee in the U.S. have grown 23 percent in the past decade, to $236,804. For criminals, however, the cutbacks were like sending out a message that no one at Walmart cared, no one was watching, and no one was likely to catch you.
Fixing the problem comes down to money. When McMillon became CEO, he established an ambitious program to fix up long-neglected stores, starting with making them cleaner and stocking them better. Then, in early 2015, came a push to crack down on shoplifting. Experts say that should have additional public safety benefits: Less petty crime typically means less violent crime.
Police departments inevitably compare their local Walmarts with Target stores. Target, Walmart’s largest competitor, is a different kind of retail business, with mostly smaller stores that tend to be located in somewhat more affluent neighborhoods. But there are other reasons Targets have less crime. Unlike most Walmarts, they’re not open 24 hours a day. Nor do they allow people to camp overnight in their parking lots, as Walmarts do. Like Walmart, Target relies heavily on video surveillance, but it employs sophisticated software that can alert the store security office when shoppers spend too much time in front of merchandise or linger for long periods outside after closing time. The biggest difference, police say, is simply that Targets have more staff visible in stores.
And here is why WalMart can adopt such a cavalier attitude: it can out-lawyer most parties that try to make it responsible for the consequences of its lax attitude towards security:
According to laws in every state in the U.S., Walmart has a duty to protect its customers from violent crime while they’re on store property. Under an area of the law known as premise liability, victims and their lawyers have argued in hundreds of lawsuits that Walmart failed to provide enough security. To prevail, plaintiffs must prove that a violent crime was reasonably foreseeable based on a history of violent crimes at a particular Walmart. “They’re not easy cases,” says Memphis attorney Bruce Kramer, who has sued Walmart multiple times on behalf of clients who were the victims of violent crimes occurring on company property. “Proving what the duty is and the foreseeability issue is always difficult. You have a certain mindset of jurors who say, ‘Why are you holding the business responsible for the acts of this criminal?’ ”
Walmart’s lawyers typically argue that the company couldn’t have foreseen the crime in question and that it took reasonable steps to keep customers safe. It tries at every opportunity to keep its crime database secret. Even in litigation, when it must produce company records under court seal, its lawyers have wrangled for months or even years to limit access to its records, arguing the information is proprietary. “Nothing compares to the way Walmart litigates cases,” says attorney Christopher Marlowe. He fought Walmart for several years over a lawsuit he filed in 2010 on behalf of a woman who was abducted outside a store in DeFuniak Springs, Fla., and repeatedly raped. Marlowe said in a court filing that he learned only in 2013 of the database, which documented “precisely the sort of incidents” he sought for more than two years. Walmart’s lawyer, he said, “led everyone to believe that crime data retrieval was a great mystery—a query of inconceivable proportions.” Walmart denied liability in the case. The company eventually settled for an undisclosed sum.
And what would it cost to lower crime rates? One way would be to hire more people. Burt Flickinger from retailing consultant Strategic Resource Group estimates that hiring 250,000 more part-time workers, which would bring the employee to square foot to 2006 levels, would make the stores feel sufficiently better supervised so as to reduce crime by 50%. The tab would be roughly $3.25 billion, which amounts to one-fourth of WalMart’s 2015 net income. Another option, likely to be even more effective, would be to copy the tried and true formula of hiring private uniformed security guards. 12 hours a day of coverage in the biggest stores, where most crimes occur, would cost a cool half billion. Flickinger argues that these investments would pay for themselves, that cleaner, safer stores would be higher productivity in sales terms.
But what would seem to be normal self interest isn’t how WalMart operates. The company has long been so fixated on lowering costs that loosening its purse strings is anathema. But while litigation hasn’t proven to be effective, bad press is a different matter. The story describes how Beach Grove, Indiana, already had its police force overburdened by WalMart demands. In short sequence, a woman was killed and her grandson badly hurt by a fleeing shoplifter, and a video on YouTube from the same story showed “a furious fistfight that turned into a profane wrestling match in the shampoo aisle.” (In another sign of WalMart’s legal clout, the Bloomberg story linked to the clip, which has been removed). The mayor went public with his complaints on local and social media. WalMart execs sought a meeting and made earnest noises about doing better. But those noises were not met with action:
But in the weeks following the meeting, Walmart dragged its heels. [Mayor Dennis] Buckley went public again, this time appearing on national cable news. “Walmart Beech Grove is draining our police resources,” he told Fox Business Network. “It’s the string of terrible events that have been occurring down there over the past two months that have led me to instruct our police chief to declare the Walmart a public nuisance.”
That meant the threat of a $2,500 fine for every call to the police. Walmart now pays for off-duty police to man the store, and the pressure on the local police has eased. A year later, Buckley is pleased, but it still irks him that he had to go to such measures to get Walmart to act. “Cities really need to put their thumb down and get them to the table,” he says. “It’s taken a long time, but they can really be good partners if they want to be.”
Obviously, Buckley is putting a charitable spin on WalMart finally behaving only as a result of ratcheting up the pressure. But his example is a microcosm of the relationship between government and Corporate America these days. It wan’t all that long ago that companies backed down if they were called into what my Jewish attorney called a “Come to Jesus” meeting by government officials. Big businesses now are so used to ignoring or only minimally complying with rules that they need to see steel, and maybe even feel the bite of the sword, before they shape up. But the flip side is that the rise of populist candidates like Sanders and Trump shows that many citizens have lost respect for what passes for the leaders of this country. That means officials who stand up to negligent and abusive companies are more likely to get public support than in the past. Hopefully, that over time will embolden more of them to follow Mayor Buckley’s playbook and go the extra distance to force corporate miscreants to shape up.