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Tax Increment Financing: A Bad Bargain for Taxpayers

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By Daniel McGraw 
First published by Reason Magazine, January, 2006

The decision was made easier by the financing plan that Fort Worth will use to accommodate Cabela’s. The site of the Fort Worth Cabela’s has been designated a tax increment financing (TIF) district, which means taxes on the property will be frozen for 20 to 30 years.If you’re imagining an attraction that will draw 4.5 million out-of-town visitors a year, the first thing that jumps to mind probably isn’t a store that sells guns and fishing rods and those brown jackets President Bush wears to clear brush at his ranch in Crawford, Texas. Yet last year Cabela’s, a Nebraska-based hunting and fishing mega-store chain with annual sales of $1.7 billion, persuaded the politicians of Fort Worth that bringing the chain to an affluent and growing area north of the city was worth $30 million to $40 million in tax breaks. They were told that the store, the centerpiece of a new retail area, would draw more tourists than the Alamo in San Antonio or the annual State Fair of Texas in Dallas, both of which attract 2.5 million visitors a year.

Largely because it promises something for nothing—an economic stimulus in exchange for tax revenue that otherwise would not materialize—this tool is becoming increasingly popular across the country. Originally used to help revive blighted or depressed areas, TIFs now appear in affluent neighborhoods, subsidizing high-end housing developments, big-box retailers, and shopping malls. And since most cities are using TIFs, businesses such as Cabela’s can play them off against each other to boost the handouts they receive simply to operate profit-making enterprises.

A Crummy Way to Treat Taxpaying Citizens
TIFs have been around for more than 50 years, but only recently have they assumed such importance. At a time when local governments’ efforts to foster development, from direct subsidies to the use of eminent domain to seize property for private development, are already out of control, TIFs only add to the problem: Although politicians portray TIFs as a great way to boost the local economy, there are hidden costs they don’t want taxpayers to know about. Cities generally assume they are not really giving anything up because the forgone tax revenue would not have been available in the absence of the development generated by the TIF. That assumption is often wrong.

“There is always this expectation with TIFs that the economic growth is a way to create jobs and grow the economy, but then push the costs across the public spectrum,” says Greg LeRoy, author of The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation. “But what is missing here is that the cost of developing private business has some public costs. Road and sewers and schools are public costs that come from growth.” Unless spending is cut—and if a TIF really does generate economic growth, spending is likely to rise, as the local population grows—the burden of paying for these services will be shifted to other taxpayers. Adding insult to injury, those taxpayers may include small businesses facing competition from well-connected chains that enjoy TIF-related tax breaks. In effect, a TIF subsidizes big businesses at the expense of less politically influential competitors and ordinary citizens.

“The original concept of TIFs was to help blighted areas come out of the doldrums and get some economic development they wouldn’t [otherwise] have a chance of getting,” says former Fort Worth City Councilman Clyde Picht, who voted against the Cabela’s TIF. “Everyone probably gets a big laugh out of their claim that they will draw more tourists than the Alamo. But what is worse, and not talked about too much, is the shift of taxes being paid from wealthy corporations to small businesses and regular people.

“If you own a mom-and-pop store that sells fishing rods and hunting gear in Fort Worth, you’re still paying all your taxes, and the city is giving tax breaks to Cabela’s that could put you out of business,” Picht explains. “The rest of us pay taxes for normal services like public safety, building inspections, and street maintenance, and those services come out of the general fund. And as the cost of services goes up, and the money from the general fund is given to these businesses through a TIF, the tax burden gets shifted to the regular slobs who don’t have the same political clout. It’s a crummy way to treat your taxpaying, law-abiding citizens.”

Almost every state has a TIF law, and the details vary from jurisdiction to jurisdiction. But most TIFs share the same general characteristics. After a local government has designated a TIF district, property taxes (and sometimes sales taxes) from the area are divided into two streams. The first tax stream is based on the original assessed value of the property before any redevelopment; the city, county, school district, or other taxing body still gets that money. The second stream is the additional tax money generated after development takes place and the property values are higher. Typically that revenue is used to pay off municipal bonds that raise money for infrastructure improvements in the TIF district, for land acquisition through eminent domain, or for direct payments to a private developer for site preparation and construction. The length of time the taxes are diverted to pay for the bonds can be anywhere from seven to 30 years.

Local governments sell the TIF concept to the public by claiming they are using funds that would not have been generated without the TIF district. If the land was valued at $10 million before TIF-associated development and is worth $50 million afterward, the argument goes, the $40 million increase in tax value can be used to retire the bonds. Local governments also like to point out that the TIF district may increase nearby economic activity, which will be taxed at full value.

So, in the case of Cabela’s in Fort Worth, the TIF district was created to build roads and sewers and water systems, to move streams and a lake to make the property habitable, and to help defray construction costs for the company. Cabela’s likes this deal because the money comes upfront, without any interest. Their taxes are frozen, and the bonds are paid off by what would have gone into city coffers. In effect, the city is trading future tax income for a present benefit.

But even if the dedicated tax money from a TIF district suffices to pay off the bonds, that doesn’t mean the arrangement is cost-free. “TIFs are being pushed out there right now based upon the ‘but for’ test,” says Greg LeRoy. “What cities are saying is that no development would take place but for the TIF.…The average public official says this is free money, because it wouldn’t happen otherwise. But when you see how it plays out, the whole premise of TIFs begins to crumble.” Rather than spurring development, LeRoy argues, TIFs “move some economic development from one part of a city to another.”

Development Would Have Occurred Anyway
Local officials usually do not consider how much growth might occur without a TIF. In 2002 the Neighborhood Capital Budget Group (NCBG), a coalition of 200 Chicago organizations that studies local public investment, looked at 36 of the city’s TIF districts and found that property values were rising in all of them during the five years before they were designated as TIFs. The NCBG projected that the city of Chicago would capture $1.6 billion in second-stream property tax revenue—used to pay off the bonds that subsidized private businesses—over the 23-year life spans of these TIF districts. But it also found that $1.3 billion of that revenue would have been raised anyway, assuming the areas continued growing at their pre-TIF rates.

The experience in Chicago is important. The city invested $1.6 billion in TIFs, even though $1.3 billion in economic development would have occurred anyway. So the bottom line is that the city invested $1.6 billion for $300 million in revenue growth.

The upshot is that TIFs are diverting tax money that otherwise would have been used for government services. The NCBG study found, for instance, that the 36 TIF districts would cost Chicago public schools $632 million (based on development that would have occurred anyway) in property tax revenue, because the property tax rates are frozen for schools as well. This doesn’t merely mean that the schools get more money. If the economic growth occurs with TIFs, that attracts people to the area and thereby raises enrollments. In that case, the cost of teaching the new students will be borne by property owners outside the TIF districts.

Such concerns have had little impact so far, in part because almost no one has examined how TIFs succeed or fail over the long term. Local politicians are touting TIFs as a way to promote development, promising no new taxes, and then setting them up without looking at potential side effects. It’s hard to discern exactly how many TIFs operate in this country, since not every state requires their registration. But the number has expanded exponentially, especially over the past decade. Illinois, which had one TIF district in 1970, now has 874 (including one in the town of Wilmington, population 129). A moderate-sized city like Janesville, Wisconsin—a town of 60,000 about an hour from Madison—has accumulated 26 TIFs. Delaware and Arizona are the only states without TIF laws, and most observers expect they will get on board soon.

First used in California in the 1950s, TIFs were supposed to be another tool, like tax abatement and enterprise zones, that could be used to promote urban renewal. But cities found they were not very effective at drawing development into depressed areas. “They had this tool, but didn’t know what the tool was good for,” says Art Lyons, an analyst for the Chicago-based Center for Economic Policy Analysis, an economic think tank that works with community groups. The cities realized, Lyons theorizes, that if they wanted to use TIFs more, they had to get out of depressed neighborhoods and into areas with higher property values, which generate more tax revenue to pay off development bonds.

The Entire Western World Could Be Blighted
Until the 1990s, most states reserved TIFs for areas that could be described as “blighted,” based on criteria set forth by statute. But as with eminent domain, the definition of blight for TIF purposes has been dramatically expanded. In 1999, for example, Baraboo, Wisconsin, created a TIF for an industrial park and a Wal-Mart supercenter that were built on farmland; the blight label was based on a single house in the district that was uninhabited. In recent years 16 states have relaxed their TIF criteria to cover affluent areas, “conservation areas” where blight might occur someday, or “economic development areas,” loosely defined as commercial or industrial properties.

The result is that a TIF can be put almost anywhere these days. Based on current criteria, says Jake Haulk, director of the Pittsburgh-based Allegheny Institute for Public Policy, you could “declare the entire Western world blighted.”

In the late 1990s, Pittsburgh decided to declare a commercial section of its downtown blighted so it could create a TIF district for the Lazarus Department Store. The construction of the new store and a nearby parking garage cost the city more than $70 million. But the property taxes on the new store were lower than expected, as the downtown area surrounding Lazarus never took off the way the city thought it would. Sales tax receipts were also unexpectedly low. Lazarus decided to close the store last year, and the property is still on the block. Because other businesses were included in the TIF, it is impossible to predict whether the city will be on the hook for the entire $70 million. But given that the Lazarus store was the centerpiece of the development, it is safe to say this TIF is not working very well, and Pittsburgh’s taxpayers may have to pick up the tab.

If businesses like Lazarus cannot reliably predict their own success, urban planners can hardly be expected to do a better job. Typically, big corporations come to small cities towing consultants who trot out rosy numbers, and the politicians see a future that may not materialize in five or 10 years. “The big buzzwords are economic development,” says Chris Slowik, organizational director for the South Cooperative Organization for Public Education (SCOPE), which represents about 45 school districts in the southern suburbs of Chicago, each of which includes at least one TIF. “The local governments see a vacant space and see something they like that some company might bring in. But no one thinks about what the costs might be.…They are giving away the store to get a store.” Big-box retail chains such as Target and Wal-Mart seem to be the most frequent beneficiaries of TIFs. (Neither company would comment for this story, and local politicians generally shied away as well.)

Given the competition between cities eager to attract new businesses, TIFs are not likely to disappear anytime soon. “Has it gone overboard?” asks University of North Texas economist Terry Clower. “Sure.…But the problem is that if a city doesn’t offer some tax incentives, the company will just move down the road.” According to Clower, “In a utopian world, there would be no government handouts, and every business would pay the same tax rate. But if a city stands up and says they aren’t doing [TIFs] anymore, they will lose out.”

Instead, it’s the competitors of TIF-favored businesses that lose out. Academy Sports & Outdoors, which employs 6,500 people, has about 80 sporting goods stores in eight Southern states, including a store in Fort Worth. When the Fort Worth City Council was considering the TIF for Cabela’s, Academy Sports Chairman David Gochman spoke out against the tax incentives, realizing that his company is a big business, but not big enough. “This is not a nonprofit, not a library, not a school,” he said. “They are a for-profit business, a competitor of ours, along with Oshman’s and Wal-Mart and others.”

TIFs Have Become the Standard Handout
Al Dalton, owner of Texas Outdoors, a 10,000-square-foot hunting and fishing shop in Fort Worth, echoed the sentiment that the city was favoring one business over another. “We don’t have the buying power, and we don’t have the advertising dollars,” Dalton said. “It doesn’t make any difference even if we’ve got the best price in town if nobody knows about it. The deep pockets, in every way, [make] a lot of difference.”

And that may be the key to understanding how TIFs are now applied: The companies with the deep pockets are able to fill them with subsidies.

The Cabela’s location in Fort Worth does not fit any of the blight criteria people had in mind when TIFs were first created. The 225,000-square-foot store, with its waterfalls, multitude of stuffed animals, and wild game café, sits on prime property just off Interstate 35. It is a few miles down the road from the Texas Motor Speedway (which has its own TIF), and the 200,000 NASCAR and IRL fans who attend races there three times a year—not to mention the fans who come to the speedway’s concerts and other special events—might want to shop at Cabela’s.

The area around Cabela’s is affluent and has been growing for years. A half-dozen shopping centers nearby were on the drawing board well before the TIF was considered. Within a five-mile radius of the hunting/fishing megastore, 10,000 new homes have been built since 2000. That same area is expected to grow by 20,000 people in the next two years.

But the argument against the “but for” assumption is not being heard. In 2004 a state judge threw out a lawsuit against the Cabela’s TIF by a Fort Worth citizens’ group that claimed blight was never proven, and that the city was misusing TIFs in a prosperous area that needed no tax breaks for future development. The blight designation came from a pond and stream on the property. It was an odd designation, given that the property is in a prime development area and ponds and streams are not what one would classify as blighted.

The press releases and newspaper articles about the new Cabela’s emphasize that the store is going to draw more people to Texas than visit the Alamo (the studies were done by Cabela’s). The press release never mentions that a Bass Pro Shop store, part of a chain almost identical to Cabela’s, is just 10 miles down the road. While Cabela’s was negotiating its TIF with Fort Worth, it was also negotiating a TIF with the city of Buda, 120 miles away, outside of Austin. Cabela’s got about $20 million from Buda, and the same tourist claims are being made there. If each Texas store is going to draw 4.5 million tourists, as the chain claims, that means 9 million people will be coming to Texas every year just to visit the two Cabela’s stores.

“The notion that a hunting store would draw all these tourists is ridiculous,” says Greg LeRoy. “But what is even more ridiculous is cities thinking that tax breaks are the primary reason businesses relocate or expand in certain areas. There are so many other factors at play—transportation costs, good employment available, housing costs and quality of life for executives—that the tax breaks like TIFs aren’t very high up on their priority list. But these corporations are asking for them—and getting them—because everyone is giving them out. TIFs have become the standard handout, and the businesses have learned how to play one city off the other. Businesses would be stupid for not asking for them every time.”

If TIFs continue to multiply at the present rate, we may see the day when every new 7-Eleven and McDonald’s has its own TIF. That prospect may seem farfetched, but it wasn’t too long ago that cities wouldn’t even have considered giving up tens of millions of dollars in exchange for yet another store selling guns and fishing rods.

Daniel McGraw, freelance writer in Fort Worth, is the author of First and Last Seasons: A Father, A Son and Sunday Afternoon Football (Random House).

© 2006 Reason Foundation 

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Big Box Balderdash

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Wal-Mart’s claim of “creating jobs” has no credibility

By Paul Krugman 
First published by the New York Times, December 12, 2005

© 2005 NY Times Company

I think I’ve just seen the worst economic argument of 2005. Given what the Bush administration tried to put over on us during its unsuccessful sales pitch for Social Security privatization, that’s saying a lot.

The argument came in the course of the latest exchange between Wal-Mart and its critics. A union-supported group, Wake Up Wal-Mart, has released a TV ad accusing Wal-Mart of violating religious values, backed by a letter from religious leaders attacking the retail giant for paying low wages and offering poor benefits. The letter declares that ”Jesus would not embrace Wal-Mart’s values of greed and profits at any cost.”

You may think that this particular campaign — which has, inevitably, been dubbed ”Where would Jesus shop?” — is a bit over the top. But it’s clear why those concerned about the state of American workers focus their criticism on Wal-Mart. The company isn’t just America’s largest private employer. It’s also a symbol of the state of our economy, which delivers rising G.D.P. but stagnant or falling living standards for working Americans. For Wal-Mart is a huge and hugely profitable company that pays badly and offers minimal benefits.

Attacks on Wal-Mart have hurt its image, and perhaps even its business. The company has set up a campaign-style war room to devise responses. So how did Wal-Mart respond to this latest critique?

Wal-Mart can claim, with considerable justice, that its business practices make America as a whole richer. The fact is that Wal-Mart sells many products more cheaply than traditional stores, and that its low prices aren’t solely or even mainly the result of the low wages it pays. Wal-Mart has been able to reduce prices largely because it has brought genuine technological and organizational innovation to the retail business.

It’s harder for Wal-Mart to defend its pay and benefits policies. Still, the company could try to argue that despite its awesome size and market dominance it cannot defy the iron laws of supply and demand, which force it to pay low wages. (I disagree, but that’s a subject for another column.)

But instead of resting its case on these honest or at least defensible answers to criticism, Wal-Mart has decided to insult our intelligence by claiming to be, of all things, an engine of job creation. Judging from its press release in response to the religious values campaign, the assertion that Wal-Mart ”creates 100,000 jobs a year” is now the core of the company’s public relations strategy.

It’s true, of course, that the company is getting bigger every year. But adding 100,000 people to Wal-Mart’s work force doesn’t mean adding 100,000 jobs to the economy. On the contrary, there’s every reason to believe that as Wal-Mart expands, it destroys at least as many jobs as it creates, and drives down workers’ wages in the process.

Think about what happens when Wal-Mart opens a store in a previously untouched city or county. The new store takes sales away from stores that are already in the area; these stores lay off workers or even go out of business. Because Wal-Mart’s big-box stores employ fewer workers per dollar of sales than the smaller stores they replace, overall retail employment surely goes down, not up, when Wal-Mart comes to town. And if the jobs lost come from employers who pay more generously than Wal-Mart does, overall wages will fall when Wal-Mart moves in.

This isn’t just speculation on my part. A recent study by David Neumark of the University of California at Irvine and two associates at the Public Policy Institute of California, ”The Effects of Wal-Mart on Local Labor Markets,” uses sophisticated statistical analysis to estimate the effects on jobs and wages as Wal-Mart spread out from its original center in Arkansas.

The authors find that retail employment did, indeed, fall when Wal-Mart arrived in a new county. It’s not clear in their data whether overall employment in a county rose or fell when a Wal-Mart store opened. But it’s clear that average wages fell: ”residents of local labor markets,” the study reports, ”earn less following the opening of Wal-Mart stores.”

So Wal-Mart has chosen to defend itself with a really poor argument. If that’s the best the company can come up with, it’s going to keep losing the public relations war with its critics. Maybe it should consider an alternative strategy, such as paying higher wages.

Editors’ note: Krugman somewhat disingenuously selects just one of many studies about net employment / disemployment by big box stores. Other studies suggest a slight net gain in local employment when a big box store opens. His general point is valid, however: a primary advantage of chains (we won’t tackle market-distorting subsidies here) is they employ fewer people per dollar of sales than smaller businesses. When people cite Wal-Mart’s efficiencies, this is the greatest one.

Independent community-based businesses typically employ many other businesses. They hire or use the services of designers, cabinet shops, sign makers, accountants, insurance reps, computer consultants, attorneys, advertising agencies and others. Local retailers and distributors also carry a higher percentage of locally-made goods than the chains, creating more jobs for local producers.

In contrast, a new chain store typically puts in place a clone of other units, eliminates the need for local planning, and uses a minimum of local goods and services, centralizing those jobs at corporate headquarters. Some jobs are likely to be eliminated (or future jobs not created) in the community hosting a big box store as a result.

In addition to our own library of studies, the New Rules Project and the American Independent Business Alliance each collect many studies on the economic impacts of big box stores.

Letter to Wal-Mart from Religious Leaders

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Published December 10, 2005

The following letter, addressed to the CEO of Wal-Mart Stores, Inc. was coordinated by Wakeupwalmart and several dozen religious leaders around the country (list of signatories follows the letter).

Dear Mr. Scott,

The holiday season is a time to honor and remember the virtues of hope, love, joy, sharing, sacrifice, and faith. For people of all faiths, the celebration of the holiday season is a time to remember and embrace the best of our values. It is a time to reflect upon our lives, the impact we have on others, and the responsibility we all have to improve the lives of those less fortunate than us.

The prophet Moses in Deuteronomy 25:13-15 teaches “Thou shalt not oppress an hired servant that is poor and needy … lest he cry against thee unto the LORD, and it be sin unto thee.” During this holy season, we must ask ourselves – at what moral price do we accept the sins of exploitation and greed? Sins, it is sad to say, which are exemplified by one of America’s largest and richest corporations, Wal-Mart.

Every day, Wal-Mart’s so-called low prices come at a high cost to the moral virtues and greatness of your workers, our families, and our nation. Everyday, America pays too high a cost for Wal-Mart’s immoral business practices.

As all faiths teach us, the current exploitation of those who work to provide us with goods and services, whether at Wal-Mart or its suppliers, can never be morally justified. Under all conditions, it is simply immoral and wrong. It goes against the teachings of our spiritual leaders and our commitment to justice, fairness, and community.

If there is one shared hope all faiths have in common, it is the central belief that we must work together to improve the lives of others. This central tenet, ‘do unto others as you would have them do unto you,’ is the bedrock of our values, our faith, our families and our communities.

Unfortunately, Wal-Mart needlessly ignores the Golden Rule putting our children and their workers needlessly at-risk.

Despite $10 billion in profit last year, more than 600,000 Wal-Mart workers and their families struggle with no company-provided health care. Even more troubling, nearly 1 out of every 2 children of Wal-Mart workers lives without health care or relies on a public program. Wal-Mart has repeatedly broken child labor laws. Wal-Mart is being sued by 1.5 million female employees for discrimination. And, Wal-Mart continues to pay poverty-level wages, forcing many of its workers to make the impossible choice between rent and health care.

It is hard to imagine why Wal-Mart would consciously choose to make 1.3 million workers suffer in the name of “low prices,” a suffering we can no longer let stand.

For those of us who are Christians, we celebrate the life, the birth and the teachings of Jesus, and we call on Wal-Mart to change. As we prepare to celebrate Christmas, we ask ourselves: Would Jesus support the exploitation of so many for the profit of so few? Would Jesus tolerate systematic discrimination against women? Would Jesus stand by idly while thousands of children go without health care? Would Jesus accept violations of child labor laws?

The answer is simple. Jesus would not embrace Wal-Mart’s values of greed and profits at any cost, particularly when children suffer as a result of those misguided values.

Those of us who are Jewish, Muslim or Buddhist also have scriptures that remind us that God is just and God’s servants must practice justice in all of our words and deeds. As we prepare to celebrate our own holiday traditions, we also ask ourselves, is it right to shop at Wal-Mart? Would our God want us to support Wal-Mart’s values and actions with our dollars?

We know Wal-Mart has the power to improve the lives of millions of workers, their families, and our communities. Wal-Mart can become, if you and the Walton Family so choose, a leading example of moral greatness in corporate America. You have the power to change and set an example that would truly honor and reflect the call of all faith traditions to righteousness and justice.

So beginning today, in the shared spirit of the holiday season, we call on Wal-Mart to change, to become better, and to embrace the best of American values. It is within your power to become a truly responsible, ethical, and righteous company.

In the end, there is no better present Wal-Mart could give to its workers, their families, and America than to change for the better this holiday season.

Sincerely,

Reverend Jesse Jackson, Rainbow PUSH Coalition
Reverend John H. Thomas, President, United Church of Christ
Reverend James Lawson, Holman United Methodist Church in Los Angeles, CA
Kim Bobo, Executive Director, Interfaith Worker Justice
Bishop Gabino Zavala, Regional Bishop in the San Gabriel Pastoral Region (Archdiocese of Los Angeles, CA)
Reverend Doctor William Jarvis Johnson, Calvary CME Church of Pasadena, CA
Reverend Alexia Salvatierra, Clergy and Laity United for Economic Justice (CLUE)
Father Michael Pfleger, Faith Community of St. Sabina Parish, Chicago, Illinois.
Reverend Bennie E. Whiten, Jr., United Church of Christ
Retired Bishop Jesse DeWitt of the United Methodist Church
Reverend Mark Wendorf, McCormick Theological Seminary and Board Member of Interfaith Worker Justice
Professor William P. Quigley, Loyola University New Orleans School of Law and Board member of Interfaith Worker Justice
Dr. Edie Rasell of the Justice and Witness Ministries, United Church of Christ.
Reverend Ron Stief, Director of Washington, D.C. office, United Church of Christ
Pastor Sylvia Tucker, Union Baptist Church of Hopewell, VA
Mr. Ralph Ramirez, President of Richmond, VA Southern Council Leadership Conference Chapter
Reverend Rebekah Jordan, Mid-South Interfaith Network for Economic Justice
Reverend Sinclair Oubre, J.C.L. of St. John the Evangelist Catholic Church of Port Arthur, TX
Reverend Doctor John J. O’Brien, C.P.
Reverend Bridgeforth, Shiloh Baptist Church, VA
Reverend King, Southern Council Leadership Conference of Danville, VA
Reverend Rufus Fuller II Pastor of New Hope Baptist Church, VA
Reverend William Avon Keen of Traynham Grove Church,VA
Reverend John Snider, Saint Stephen’s Lutheran Church, West St. Paul, MN
Reverend Bill Bulson, Holy Apostles, MN
Reverend Timothy M Johnson, Cherokee Park United Church of St. Paul, MN
Reverend Johnathan C. Tetherly, Chaplain of Hampden County House of Corrections, MA
Father Thomas Mueller, S.S. Cyril & Methodist Orthodox Church, WI
Father Jerry Schroeder, St. Benedict the Moor Parish of Milwaukee, WI
Reverend Viviane Thomas-Breitfeld, Good Sheperd Lutheran Church in Waukesha, WI
Reverend Kelly Fowler, First United Methodist Church of Waukesha, WI
Reverend Doctor Ronald Faust, Kansas City Interfaith Worker Justice, MO
Reverend Tom Blakley, Barry Christian Church, MO
Reverend Spencer Barrett, Co-chair, Kansas City Interfaith Worker Justice, MO
Pastor Robin Hood Senior Pastor, Redeemed Outreach Ministries, IL
Reverend Fr. Alfredo Gundrum , Pastor of St. Kevin, Chicago, IL
Reverend Jose Landaverde, Amor de Dios, United Methodist Church, IL
Reverend William F. Marx, Pax Christi of Western New York
Reverend Dan Schifeling, Church of Nativity, United Church of Christ
Sister Jean Sliwikski, Western New York Workers’ Rights Board
Reverend Suzelle Lynch, Unitarian Universalist Church, Brookfield WI
Reverend Doctor. Roland Womack, Board Member, African-American Ministers Leadership Council, and Pastor, Progressive Baptist Church, Milwaukee, WI
Pastor Susan Burchfield, Immanuel Lutheran Church of Seattle, WA
Reverend Richard Vogel, Executive Pastor, St. James United Methodist Church, Kansas City, MO
Reverend Emanuel Cleaver II, St. James United Methodist Church of Kansas City, MO
Reverend Norman D. Copeland, AME Church, Los Angeles, CA
Reverend Calvin S. Morris, Ph.D. Executive Director Community Renewal Society of Chicago, IL
Reverend Jennifer Kottler, Protestants for the Common Good of Chicago, IL
Reverend Jon M. Luopa, Univeralist Unitarian Church of Seattle WA
Sisters of St Joseph of Springfield, MA Justice and Peace Committee
Reverend William F. Brisotti, Our Lady of the Miraculous Medal Church, NY
Reverend Catherine Schulyer, Protestant Campus Ministry of Stony Brook, NY
Reverend Richard E. Edwards, Stony Brook Community Church, NY
Reverend Thomas W. Goodhue, Executive Director, The Long Island Council of Churches, NY
Reverend Paul Ratzlaff, The Unitarian Universalist of Fellowship of Huntington, NY
Sister Rosemary Everett, SNJM, Sisters of the Holy Names, CA
Father Bill Leininger, Human Concerns Commission, Diocese of San Jose, CA
Monsieur Gene Boyle, St. Thomas Aquinas of Palo Alto, CA
Reverend John Freesemann, Holy Redeemer Lutheran Church of San Jose, CA
Rabbi Melanie Aron, Congregation Shir Hadash of Los Gatos, CA
Reverend Carol Been, The Interfaith Council of San Jose, CA
Ms. Mary Quinn Kambic, Catholic Labor Committee of Baltimore, MD
Ms. Evely Laser Shlensky, Board member, Executive Committee, Interfaith Worker Justice
Mr. Monroe B. Sullivan, National Board Member, Interfaith Worker Justice
Ms. Karen Herrling, Attorney, Catholic Legal Immigration Network
Mr. Stephen Hand, Editor, Traditional Catholic Reflections

Kasky v. Nike: Just the Facts

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The following is a summary of the facts of the case of MARC KASKY, Plaintiff and Appellant, v. NIKE, INC., et al., Defendants and Respondents as presented in the record of the Court of Appeal of the State of California. First Appellate District, Division One

Nike, Inc., a marketer of athletic shoes and sports apparel, has grown into a large multinational enterprise through a marketing strategy centering on a favorable brand image, which is associated with a distinctive logo and the advertising slogan, “Just do it.” To maintain this image, the company invests heavily in advertising and brand promotion, spending no less than $978,251,000 for the year ending May 31, 1997. The promotional activities include product sponsorship agreements with celebrity athletes, professional athletic teams, and numerous college athletic teams. Reviewing the company’ s successful marketing strategy, the 1997 annual report asserts, “[W]e are a company . . . that is based on a brand, one with a genuine and distinct personality, and tangible, emotional connections to consumers the world over …”

Like other major marketers of athletic shoes and sports apparel, Nike contracts for the manufacture of its products in countries with low labor costs. In Nike’ s case, the actual production facilities are owned by South Korean and Taiwanese companies that manufacture the products under contract with Nike. The bulk of Nike products are manufactured in China, Thailand, and Indonesia, though some components or products involving more complex technology are manufactured in South Korea or Taiwan. In 1995, a Korean company opened up a major new facility in Vietnam, giving that country also a significant share of Nike’ s production. The record indicates that between 300,000 and 500,000 workers are employed in Asian factories producing Nike products. The complaint alleges that the vast majority of these workers are women under the age of 24.

The company has sought to foster the appearance and reality of good working conditions in the Asian factories producing its products. All contractors are required to sign a Memorandum of Understanding that, in general, commits them to comply with local laws regarding minimum wage, overtime, child labor, holidays and vacations, insurance benefits, working conditions, and other similar matters and to maintain records documenting their compliance. To assure compliance, the company conducts spot audits of labor and environmental conditions by accounting firms. Early in 1997, Nike retained a consulting firm, co-chaired by Andrew Young, the former ambassador to the United Nations, to carry out an independent evaluation of the labor practices in Nike factories. After visits to 12 factories, Young issued a report that commented favorably on working conditions in the factories and found no evidence of widespread abuse or mistreatment of workers.

Nevertheless, Nike was beset in 1996 and 1997 with a series of reports on working conditions in its factories that contrasted sharply with the favorable view in the Young report. An accounting firm’ s spot audit of the large Vietnamese factory, which was leaked to the press by a disgruntled employee, reported widespread violations of local regulations and atmospheric pollution causing respiratory problems in 77 percent of the workers. An investigator for Vietnam Labor Watch found evidence of widespread abuses and a pervasive “sense of desperation” from 35 interviews with Vietnamese workers. An Australian organization published a highly critical case study on Nike’ s Indonesian factories. And the Hong Kong Christian Industrial Committee released an extensively documented study of several Chinese factories, including three used by Nike, which reported 11- to 12-hour work days, compulsory overtime, violation of minimum wage laws, exposure to dangerous levels of dust and toxic fumes, and employment of workers under the age of 16.

These reports put Nike under an unusual degree of public scrutiny as a company exemplifying a perceived social evil associated with economic globalization-the exploitation of young female workers in poor countries. An article in The Oregonian of Portland, Oregon, asserted: “The company’ s worldwide production system has turned the Beaverton giant into an international human rights incident.” The News & Record of Greensboro, North Carolina, asked, “But who wants to enjoy products made on the backs of human misery?” The New York Times carried a series of eight articles in 1996 and 1997, reporting “grim conditions” and widespread human rights abuses in Nike factories. And a CBS television report juxtaposed the complaints of a Vietnamese worker with disclaimers by company officials.

Nike countered with a public relations campaign that defended the benefits of its Asian factories to host countries and sought to portray the company as being in the vanguard of responsible corporations seeking to maintain adequate labor standards in overseas facilities. Press releases responded to sweatshop allegations, addressed women’ s issues, stressed the company’ s code of conduct, and broadly denied exploitation of underage workers. A more lengthy press release, entitled “Nike Production Primer” answered a series of allegations with detailed information and footnoted sources. Another release drew attention to the favorable Young report and invited readers to consult it on-line. A letter to the presidents and athletic directors of those colleges sponsoring Nike products defended the company’ s labor practices. And company officials sought to rebut specific charges in letters to the editor and to nonprofit organizations.

The complaint alleges that, in the course of this public relations campaign, Nike made a series of six misrepresentations regarding its labor practices: (1) “that workers who make NIKE products are . . . not subjected to corporal punishment and/or sexual abuse;” (2) “that NIKE products are made in accordance with applicable governmental laws and regulations governing wages and hours;” (3) “that NIKE products are made in accordance with applicable laws and regulations governing health and safety conditions;” (4) “that NIKE pays average line-workers double-the-minimum wage in Southeast Asia;” (5) “that workers who produce NIKE products receive free meals and health care;” and (6) “that NIKE guarantees a ‘ living wage’ for all workers who make NIKE products.” In addition, the complaint alleges that NIKE made the false claim that the Young report proves that it “is doing a good job and ‘ operating morally.’ ”

The first and second causes of action, based on negligent misrepresentation and intentional or reckless misrepresentation, alleged that Nike engaged in an unlawful business practice in violation of Business and Professions Code section 17200 by making the above misrepresentations “In order to maintain and/or increase its sales and profits . . . through its advertising, promotional campaigns, public statements and marketing . . . .” The third cause of action alleged unfair business practices within the meaning of section 17200, and the fourth cause of action alleged false advertising in violation of Business and Professions Code section 17500. The prayer sought an injunction ordering Nike “to disgorge all monies” that it acquired by the alleged unlawful and unfair practices, “to undertake a Court-approved public information campaign” to remedy the misinformation disseminated by its false advertising and unlawful and unfair practices, and to cease “[m]isrepresenting the working conditions under which NIKE products are made . .”

Nike and the individual defendants filed demurrers to the complaint challenging the application of Business and Professions Code sections 17200 and 17500 and contending that the complaint is barred by the First Amendment to the United States Constitution and article I, section 2(a), of the California Constitution. The trial court regarded the constitutional distinction between commercial and noncommercial speech to be dispositive. Following a hearing, the court sustained the demurrers without leave to amend and entered a judgment of dismissal from which the plaintiff appeals.

Return to Nike v. Kasky index page

Condemnation Nation

by

Retail chains and the big business of eminent domain

By Joshua Kurlantzick
First published by Harper’s Magazine, October, 2005

This June the Supreme Court handed down one of its most important property-rights decisions in decades. In Kelo v. New London, the Court ruled that the city of New London, Connecticut, could use eminent domain to seize homes–properties, the Court agreed, that were not “blighted or otherwise in poor condition”–from a handful of owners who refused to make way for a massive private redevelopment plan. The 5-4 decision confirmed the right of local governments to forcibly take property from one private owner and give it to another if the handover would presumably result in economic development–an affirmation of cities’ redefinition of the “public use” clause of the Fifth Amendment, which traditionally limited the taking of property to instances that benefited the larger public good. Indeed, throughout the nineteenth century and much of the twentieth, states invoked eminent domain primarily for these public uses, seizing smallholder land to build roads, parks, railroads, hospitals, and military bases.

In New London, however, the homes will not be replaced by a waterfront park or a school; they’ll make way for a conference center and hotel, an upscale office complex, and other structures designed to lure pharmaceutical giant Pfizer to the area–developments, it was successfully argued, that would bring increased tax revenue to economically distressed New London .

It was the Supreme Court’s more liberal jurists who voted in favor of New London , with Justice John Paul Stevens writing in the majority opinion that there “is no basis for exempting economic development from our traditionally broad understanding of public purpose.” Left-leaning editorial pages came out strongly in favor of the decision. The New York Times wrote that the ruling was “a welcome vindication of cities’ ability to act in the public interest.” “The court’s decision was correct,” agreed the Washington Post. Democratic leaders either touted the ruling or remained silent. Conservatives, on the other hand, quickly condemned the decision, with Florida Governor Jeb Bush calling it “horrible” and the Wall Street Journal opinion page, normally known for championing corporate interests, caustically noting that the Court’s liberals had given local governments “more or less unlimited authority to seize homes and businesses.” In her dissent, Justice Sandra Day O’Connor warned, “Nothing is to prevent the state from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”

This political divide, perhaps, shouldn’t be surprising. Liberals have historically supported government’s right to use broad powers to promote the greater social good–from protecting minorities and the poor to revitalizing faltering communities–and have had to defend this position against increasingly vituperative attacks from conservatives, who decry government programs as “not the solution to our problems” but “the problem.” Are liberals right, however, in claiming that eminent domain remains more solution than problem? Between 1998 and 2002, according to a study by the Institute of Justice, a public-interest law firm specializing in property rights, more than 10,000 properties in forty-one states were taken or threatened by eminent domain so that the land could be given to another private interest. And these numbers may actually be understated. In Maryland alone there were 1,237 of these private-interest threats or seizures. Of the more than 5,500 condemnations filed or threatened in California between 1998 and 2002, 858 are known to be on behalf of other private parties; it is impossible to know how many of the remaining thousands were as well.

What these numbers reflect is not some noble effort to revitalize America ‘s cities but a concerted campaign by city governments, on the one hand, and large real-estate developers and “big-box” retailers, on the other, to exploit eminent domain for their own gain. The developers and retailers–stores such as Wal-Mart and Target, which build numerous warehouse-style outlets on vast swaths of land to keep costs down–already enjoy immense advantages, including huge tax breaks, over smaller competitors; and yet increasingly they are urging cities to condemn property to serve their own interests, and employing lobbyists and donating large sums to local officials to help this effort. Cities, hoping to generate greater tax revenue, have been eager to comply, mostly to the detriment of homeowners and small businesses. To defend eminent domain as it is now practiced, therefore, is not a defense of our social compact with government, of the need for individuals to make sacrifices in the face of progress; it is an endorsement of a municipal-corporate collusion that now operates like a machine.

“The idea that you can invoke eminent domain is absolutely essential,” the mayor of Long Branch, New Jersey, Adam Schneider, explained to me. “Without that tool developers are not going to get on board.” And because companies now expect land seizure as part of their deal with cities, they will leverage the power of their tax revenues if city officials, their sizable economic redevelopment departments, or their hired private-public development corporations do not readily bend to their whims. In Long Beach , California, which has undergone extensive redevelopment of its waterfront and many commercial areas, the “developers are very well-versed in the legalities” of eminent domain, Councilman Frank Colonna told me. “The developers that get in are fully aware the city is committed to delivering the property, and would use eminent domain if we have to.” In the New London case, the president of Pfizer’s research department openly informed the city that if the company was to consider locating in New London, condemnation and redevelopment of adjacent areas would be vital. When megapharmacy chain CVS wanted to build a new drugstore in Ambridge, Pennsylvania, its local developer simply asked the government to seize the land and give it a lease; the town complied. In a more obscene flouting of public use, the city of Cypress, California, prevented a local church from building on property it had legally acquired in order to give the land to Costco.

Although cities and their development professionals at times select the land that they hope retailers will fill, in many cases retailers themselves find the choicest parcels of land, which they then ask cities to hand over. When Best Buy identified desirable land in Richfield, Minnesota, for the relocation and expansion of its corporate headquarters, Richfield guaranteed the company that it would use eminent domain to take property from the area’s existing businesses. In New Rochelle, New York, Ikea said it wanted to build a 300,000-square-foot store on fifteen acres of an existing neighborhood; the city agreed to clear the land, although public outcry later led Ikea to pull out of the deal. In fact, seeking sites with the idea of condemning them has become so routine that developers and retailers aren’t shy about their aims. A Costco vice president, in a frank letter to a shareholder in 2002, acknowledged that this was now normal operating procedure–that the company had initiated “dozens” of projects utilizing or threatening eminent domain to take away enough land from former tenants for its 148,000-square-foot stores. If Costco “refrained from participating in these deals,” the VP wrote, “our competitors for those sites, like Target, Home Depot, Kmart, Wal-Mart, BJ’s, Sam’s Club, and many others, would take advantage of our reticence.”

Even when a municipality’s economic-redevelopment agency is on board, developers and retailers must convince city councils and other elected officials that the condemnations are warranted. Consequently, developers and retailers have begun deploying, in unprecedented numbers, local lobbyists to win land concessions. According to the Center for Responsive Politics, the retail sales industry more than tripled its political contributions between 1990 and 2004; the real-estate industry’s contributions grew more than sevenfold during that same period.

In New York State alone, spending on municipal lobbying has grown from some $6 million per year in 1978 to $144 million in 2004, and the number of registered lobbyists has risen to over 3,800. In some cases the lobbying is blatantly venal. In Newark, New Jersey, for example, the city council was initially opposed to a redevelopment plan that involved seizing nine city blocks and 166 properties and building high-end condominiums in their place; when a coalition of developers contributed funds directly to two municipal councilmen, they suddenly changed their stance and allowed the proposal to go forward. In Lancaster, California, Costco repeatedly threatened to leave the city unless the municipality condemned a neighboring business, 99 Cents Only. Under pressure, the local government tried to entice the smaller store into leaving, then began proceedings to condemn its land. “99 Cents produces less than $40,000 [a year] in sales taxes,” the Lancaster city’s attorney reasoned. “And Costco was producing more than $400,000. You tell me which was more important.”

Cities and their officials have used eminent domain in other ways to line their pockets. The Southwestern Illinois Development Agency charged a commission fee for condemnations allotted for private use, in essence raising money directly from eminent domain. In Mesa, Arizona, and in Cincinnati, city council members or redevelopment-corporation board members either owned property that likely would have increased in value due to redevelopment or were themselves the contractors bidding on the lucrative construction projects.

Once the local government makes a decision to condemn, it still has to demonstrate to the public that the seizures are warranted. But this has turned out not to be difficult. It has become an accepted part of the process that a private developer can pay for a study showing the property is worthy of condemnation, and can pay the attorneys’ fees involved in seizing the land. (By comparison, the idea that pharmaceutical companies should pay a part of the Food and Drug Administration’s reviews of new medicines, a similar conflict of interest, has proven extremely controversial.) In St. Louis, Target and the city commissioned a blight study that showed a site’s electrical system was deteriorating. Yet the study failed to mention that Target was responsible for upkeep of the electricity at the site, where it already had one store, so the company itself had created the “blight” it then decried.

When such studies designate land as “blighted,” they make it easier for condemnation to proceed. But “blighted” is a subjective term, and definitions of blight vary widely from state to state. The city of Pittsburgh seized a neighborhood in which some 95 percent of the buildings were reportedly occupied. According to state redevelopment law, property can be declared blighted in New York if it lacks off-street parking. San Jose has marked a tenth of the entire city as blighted. After land is designated as blighted, the public is supposed to have a chance to respond. Yet cities and developers can essentially cut the public out of this process as well. In the St. Louis Target case, the city sent notice of the public hearing on condemnation to Target but not to the property holder. In other cases the municipality published these notices in the legal classifieds of local newspapers rather than sending information directly to property owners who stood to lose their land. When the government of Port Chester, New York, wanted to obtain parcels of land for a private developer, it published its notice of condemnation in the paper, without mentioning that landowners had only thirty days to challenge the order.

With a blight designation in hand, the city and the developer have considerable leverage. Most small landholders sell, since they rarely have the resources to fight the decision. Although states require the developer to pay “just compensation” for the land, this may not take into account the difference between what the city determines is fair market value and the property’s true open market value. Redevelopment officials in Port Chester offered one landowner less than half what local tax authorities said his property was worth. In Garden Grove, California, where the city wanted to redevelop large expanses of land, the municipal government offered only $16,000 for a successful auto business; a court later forced it to pay $950,000.

As this procedure has become increasingly routine, governments and developers have formed permanent partnerships, dangerously blurring the line between the public and private sectors. Almost all cities now have economic-development professionals, and these in turn have engendered their own trade associations. The National Congress for Community Economic Development, for one, has grown from a membership of forty development corporations in the early 1970s to over seven hundred today. And these development pros now have their own meeting and junket circuits, where they can rub shoulders with and woo retailers and developers. At one of the largest of these events, the International Council of Shopping Centers, held in Las Vegas, armies of retail executives, economic-development specialists, and officials from cities across the country mingle at booths designed to advertise a city’s appeal to big retail. A contingent from Fontana, California, at the 2005 International Council exposition included the mayor, his entire economic-development team, and several city councilors. “We want the private developer to show good faith in acquiring land,” Ray Bragg, Fontana ‘s redevelopment and special-projects director, told me. “And if you run up against a stumbling block, if you find a landowner unwilling to sell, come to us and then we’ll talk about eminent domain.”

In his majority opinion, Justice Stevens wrote, The City [of New London] has carefully formulated an economic-development plan that it believes will provide appreciable benefits to the community, including–but by no means limited to–new jobs and increased tax revenue.” It was the development plan, and its promise that the seizure of homes would result in positive change–in progress–that clinched the decision for the five consenting judges. Yet these plans, according to the Court’s ruling, need not provide “reasonable certainty” that the “expected public benefits will actually accrue.” Indeed, evidence suggests that cities’ efforts at redevelopment rarely bear fruit. A comprehensive study conducted in California in 1998 shows that cities spend roughly two dollars–on condemnations, the luring of companies, and other aspects of redevelopment–for every dollar gained in growth. In three out of every four of the areas it examined, the study found that redevelopment projects had brought no net increase in tax revenue.

This study is perhaps less surprising than it seems: in neighborhoods filled with small businesses, a few can close and the area will retain its economic center. But if a municipality condemns land and gives it to a big-box retailer and that chain doesn’t move in, or moves in and closes, a wide swath of land is left vacant. This history of condemnation or potential condemnation, moreover, discourages businesses from improving their stores, or new owners from moving in, since they never know when the city might take their land. In one case in Hampton, Virginia, the city condemned homes to build a project anchored by Kmart; then, in 2002, Kmart declared bankruptcy, itself a victim of even more pervasive big-box competitors. At the time, Kmart’s demise left the Hampton space an unused shell. In another case, in Phoenix , the city condemned a small tobacco shop for new development but ultimately found no takers, leaving the land vacant.

Kelo v. New London does include a proviso that may protect homeowners and small businesses from unproven redevelopment plans, with their alluring promises of greater revenue and profit: it sends the issue back to the states, which have the power to set their own standards on seizures. And eleven states already have put forward legislation that would significantly limit the Supreme Court ruling. Republicans in both the Texas House and Senate have proposed amendments to the state constitution prohibiting almost all instances in which eminent domain can be used for economic development or private gain. Tom McClintock, a conservative senator from California, has introduced a similar bill in his state. “No one should have to worry about losing your home to some politically connected developer,” he recently said. “There are 6,000 public agencies in California that now have the power to seize your home, pay you pennies on the dollar for it, and then give it to somebody else for their own personal gain and profit.” Libertarian groups have even proposed using eminent domain to seize the homes of Justices David Souter and Stephen Breyer, both of whom voted with the majority in the New London case.

Although condemnations fall most heavily on Democrats’ key constituencies–the poor and minorities-Democrats at the federal level have done little to try to ensure that eminent domain is used judiciously and constructively. By lending implicit if not explicit support to a flawed enterprise, Democrats are defending a principle–the government’s right to act on behalf of the greater good of its citizenry–that has been abused into obsolescence. And this support only confirms many voters’ fears (and the Republicans’ incessantly pushed portrayal) of the minority party as haughtily paternalistic, unresponsive to individual rights, uncaring about the needs of the little guy. In a pending Senate bill that would prevent all seizures for economic development, only two of the twenty-five cosponsors were Democrats; this summer, 157 Democrats in the House voted against a successful amendment to a bill that restricts transportation funds from being used for eminent domain takings. House Minority Leader Nancy Pelosi, one of the country’s most prominent and admittedly liberal Democrats, supported the New London decision, even saying, strangely, that the Court’s ruling was “as if God had spoken.” Apparently, these days, even God shops at Wal-Mart.

© 2005 Harper’s Magazine 

Related feature on corporate exploitation of eminent domain: Wal-Mart, the Abuse of Eminent Domain and Corporate Welfare

 

Guide for Post-film Discussion of “Wal-Mart: The High Cost of Low Price”

by

Ideas to make screenings more informative and productive events

By ReclaimDemocracy.org staff

Posted November 14, 2005

Introduction

Robert Greenwald’s Walmart documentary can be a useful conversation starter and entry point for citizens to learn about some of the destructive impacts of corporate chains on our communities, economy, jobs, environment and more. But without a strongly facilitated discussion to bring out these points, the film’s exclusive focus on a single company may leave some viewers with a misunderstanding of the problems and potential solutions.

The film can be an excellent educational tool, so we created this discussion guide to help local screening organizers facilitate such post-film discussion. A question or two prior to the film may help viewers get the most out of it, too –and they can also watch it at home, by getting a tv wall mount installation today which can help with this a lot.

This document was produced immediately after viewing the film for the first wave of screenings. We welcome your ideas for improving this guide, and we’ll update it on our website as ideas come in. To order “The High Cost of Low Price,” click here (a portion of your ($13) purchase will go to support our work).

Is WalMart Unique?

“Walmart: The High Cost of Low Price” focuses solely on Walmart Corporation while ignoring the existence of other giant retail chains (Sam’s Club, which is mentioned, is a division of Walmart) that create most of those same destructive impacts. Walmart indeed is unique in its size and impact, has a worse record than most in compliance with the law, and certainly deserves most criticism it receives. But while Walmart differs in scale and degree from other corporate chains, is it different in kind?

  • Target Corporation, Walmart’s most direct competitor, is invisible in the film, yet it:
  • Pays workers wages essentially identical to Walmart and is ardently anti-union;
  • Drives down wages at competitors, especially unionized supermarkets;
  • Has an equally devastating impact on many of the communities where it locates “superstores” and on independent business in and near those communities;
  • Wields its amassed power to extract taxpayer subsidies around the country, with all the accompanying harms the film blames on Walmart;
  • Uses corporate funds to help elect candidates favored by its directors, undermining democracy
  • Sells mostly imported goods from the same countries and often the same factories as Walmart (the prices and quality tend to be slightly higher, but an equally low portion of sales go to the people who make them);
  • Drives sprawl, increased costs for roads and services, and consumes enormous amounts of land for single-story buildings and parking lots isolated from any other destination.

Clearly, labor leaders, environmental groups and others who pressure Walmart for concessions have reason to attack it. As the world’s largest corporation, Walmart is a symbol and publicity magnet, and a positive change in Walmart can have broad repercussions. But is Walmart the disease or the symptom? What are the risks of presenting the symptom as if it were the disease?

Costco often is presented as if it were the “anti-Walmart.” The company unquestionably treats workers far better and sells more upscale merchandise, but is much else different? Doesn’t it take wealth out of communities and concentrate that money and power in the hands of shareholders in the same way?

How many of you have heard of the class action suit pending against Walmart for allegedly discriminating against women in granting promotions into management level?

How many of you are aware that a nearly identical lawsuit is pending against Costco?

Are We Making Progress By Targeting Individual Corporations?
The Walmart movie closes with the story of Inglewood, California ‘s victory over Walmart–stopping a proposed supercenter. But did this battle improve people’s lives or merely maintain the status quo?

Thousands of volunteer hours and thousands of dollars were spent to stop a single big box store temporarily, with no guarantee that Walmart will not be back next year (as has happened in many communities). This in no way diminishes the inspiring work of those citizens — they pulled of an incredible campaign to win the initiative battle. But ask yourself if we achieve real progress when our energy is consumed with defensive battles one after another?

Millions of activists have fought harms inflicted by thousands of corporations one at a time for generations. Are the major societal problems caused by runaway corporate power getting better or worse? What does this tell us?

Should we redouble our efforts? Work harder and longer? Or do we need to rethink whether democracy even is possible when corporations are granted the rights of human beings with none of the limitations we the people have.

Blame Walmart or Our Broken System?
What would happen to our tax base if the penalty for evading income taxes was a fine of pennies? How many people would choose to break the law and risk getting caught in this situation? This is directly comparable to the case in which Walmart negotiated a deal with the federal government to pay 18 seconds worth of revenue to settle 24 labor law violations.

So do you blame Walmart executives for continuing to break the laws when the fines imposed on the relatively few occasions where they are caught and penalized are inconsequential? Or is it our fault for failing to assert our authority over Walmart and tolerating politicians who fail to punish criminal corporations in any meaningful way?

Should we keep pleading with one company at a time to stop destructive behaviors or should we focus on eliminating such behavior through asserting the superiority of human rights over (corporate) property rights?

Can a corporation that is legally responsible only to maximize profit for its owners truly be “socially responsible?” (reference “Inherent Rules of Corporate Behavior” –consider adding your own talking points based on that article.

Why do we expect poverty-level wages to be the norm among big box stores? Is there any inherent reason why service jobs should not pay a livable wage? Is operating a machine in a factory really that different than operating a cash register?

What can be done beyond a defensive battle to stop a big box store from opening in our community? Here are a few examples.

  • Ban or limit the number of chains in your community.
  • Ban subsidies to big box stores.
  • Limit the size and/or location of retail development to ensure new stores benefit your community.
  •  Create an Independent Business Alliance to help community-based business thrive.
  •  Explore worker-owned businesses, co-ops, and community-owned department stores (contact us for more on this topic) as an alternative to absentee-owned chains.
  •  Deny claims to “corporate personhood” that allow corporations to challenge citizens’ authority.

This guide was produced by ReclaimDemocracy.org. You are welcome to adapt in any way that suits your needs. Please note ReclaimDemocracy.org/walmart as a resource to your audience and, if you find our resources valuable, make a donation to keep us working. Thank you.