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Boehner Says No War Savings For Democrats' Jobs Plan

By Lisa Kellman
Thursday, November 17, 2011 at 2:05PM

A week before the supercommittee is due to present a plan cutting $1.2 trillion from the national deficit, House Speaker John Boehner (R-Ohio.) declared that the money saved from winding down the wars in Iraq and Afghanistan should not be spent on the Democrat’s $300 billion jobs plan proposed last week.

According to Boehner, the savings “should be banked, should not be used to offset other spending.”

The speaker addressed these concerns during a press conference to present the “American Energy and Infrastructure Jobs Plan.” The plan is aimed at spurring job growth by increasing energy production and using the revenue to improve the nation’s infrastructure.

However, the most pressing concern now, Boehner said, is getting a plan to lower the deficit.

“You can lead a horse to water but you can’t make him drink” said Boehner when explaining why, a week before its Thanksgiving deadline, there is still no final plan on how to cut the nation’s deficit by $1.2 trillion.

“Our debt crossed the $15 trillion number yesterday. That’d be a giant wakeup call to the congress that its time to rip the band-aid off and do what needs to be done,” declared Boehner.

Unless the Democrats and the Republicans in the congressional supercommittee charged with lowering the deficit by November 23 can agree on a plan, $1.2 trillion across the board will be automatically cut.

The House Speaker would not comment on whether or not he and Senate Majority Leader Harry Reid (D-Nev.) would work together before next week to manufacture an agreement. Although, he stated he would continue to work on solving the problem.

© Talk Radio News Service

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Where city factories, and now babies, die


Recycling scrap metal has become one of the few viable business models in the economically depressed 53210 ZIP code in Milwaukee. The city was once an industrial giant powered by machine shops and metalworking manufacturers such as Compo Corp. on Fond du Lac Ave.
Rick Wood



The economic decline and elevated infant mortality rate in the 53210 ZIP code area exemplify the challenges facing city leaders

By John Schmid of the Journal Sentinel
Nov. 12, 2011

The southern Chinese city of Guangzhou has mastered many of the trades Milwaukee championed in the last century: machinery, motors, metalworking. Guangzhou's boom has coincided with the sunset of manufacturing in Milwaukee, which in mere decades lost one of the nation's densest concentrations of mass production.

The two cities crisscross in another way:

Babies in China's industrial heartland now have a far better chance of reaching their first birthday.

In Milwaukee, one baby under the age of 12 months dies for every 95 who live, making it one of America's most fatal cities for infants. A generation ago, Milwaukee was one of the safest.

Among registered residents of Guangzhou, one baby dies for every 210 who live. The Chinese data, vetted by the World Bank and United Nations, often miss migrant workers in factories, but their infant survival rates are improving markedly as well.

Infant survival and economic competitiveness tend to move on the same sliding scale. Study after study reveals survival chances increase in communities and nations with rising wealth and stability - just as young life is threatened by economic crisis and upheaval.

The issue is especially acute in Milwaukee, a once-muscular manufacturing city where the infant mortality rate in some neighborhoods now rivals that of Third World nations. As civic leaders embark on just-announced efforts [ http://www.jsonline.com/features/health/milwaukee-sets-goal-to-reduce-infant-mortality-st2vff2-133504268.html ] to eliminate racial disparities and cut deaths to historic lows, the central city fallout from 30 years of industrial downsizing underscores the biggest challenge in turning the tide.

"Wealth leaves the city and infant mortality rates rise," said Thomas LaVeist, a professor of public health at the Johns Hopkins School of Public Health. "Not just in the United States, but worldwide."

From developing nations such as India, Vietnam and Brazil to mature economies such as Germany and Japan and post-communist states such as Poland and Estonia, countries around the world are making consistent and measurable advances in infant survival.

With one notable exception.

The United States has fallen behind.

The U.S. slid from 12th best in the world in 1960 to 30th in 2005, according to rankings [ http://www.cdc.gov/nchs/data/databriefs/db23.htm ] from the U.S. Centers for Disease Control and Prevention. In a broader set of 196 nations tracked by UNICEF [ http://www.childinfo.org/mortality_imrcountrydata.php?q=printme ], the U.S. has fallen to 45, where it ties with Montenegro and Slovakia. It lags all of western and eastern Europe, all of developed Asia, as well as Belarus and Serbia. It's only narrowly better than Bosnia and Bulgaria.

The leading cause of infant death in the United States - complications from preterm birth - has spiked 36% since 1984, according to the CDC [ http://www.nap.edu/catalog.php?record_id=11622 ]. More than one in 10 white babies are born prematurely, twice the Greek national rate. For black babies, the rates are much worse.

This is even more true in Milwaukee, which helps set the national extremes for infant mortality and a broad range of other social distress indicators, from poverty to high school dropouts. More than half the city's babies who die were born prematurely.

Within the city, the most fatal of all districts is an eerily quiet ZIP code called 53210.

About four miles from downtown and the lakefront, 53210 idles on the city's north side. In its heart is an economic vacuum. Rows of factory buildings stretch for miles - an industrial graveyard that creates a canyon of concrete and barbed wire. The sheer size and number of empty factories testify to the high-decibel, high-employment economy that flourished when shifts ran around the clock, between World War II and the 1980s, before global competition increased dramatically.

The strip was home to global manufacturing leaders such as A.O. Smith Corp., which welded the undercarriages for nearly every American-made passenger car, and Briggs & Stratton Corp., which built the small engines powering virtually every lawn mower. These days, the signs on the buildings are different.

"Guard Dogs on Duty," is all that's posted on one.

"This building is illegally occupied or unfit for human habitation," is stapled to the door of another.

"We buy junk cars" is hand-lettered on the fence of a sleepy gravel lot.

Trees grow through cracks in the pavement.

The surviving companies no longer offer entry-level factory jobs, the kind that once offered a first step into the middle class. Master Lock Co., the last remaining big company in 53210, has gone from 1,300 to 380 employees at its flagship plant.

But the maker of padlocks requires education and technical skills to operate its automated production lines. Manually intensive unskilled work is carried out at plants in Mexico and China [ http://www.jsonline.com/business/112759524.html ].

In 53210, one baby dies for every 59 who make it.

Even that is misleading.

The western half of the ZIP code includes stable middle-class homes that blend into the affluent suburb of Wauwatosa. It includes Sherman Park with its tidy lawns and wide porches and Wheaton Franciscan Healthcare-St. Joseph hospital, known for decades as the "the baby hospital," a resource for the area's uninsured and poor mothers.

It's the eastern half of the ZIP code, where industry rose and fell, where babies perish.

"Few want to live there," said Laurene Laehn, president of SET Ministry Inc., a family-focused social agency in the area. "Many young families rent there and move as soon as they can afford to."

Sometimes mothers move in when they are pregnant and move out after their children die, often without leaving a forwarding address for the nurses and social agencies meant to help them. A community that was once a bastion of Milwaukee's emerging black middle class is now an enclave of isolation and unrootedness.

"It's a revolving door," said Judy Fitzpatrick, a veteran social worker at Rosalie Manor, which provides services to pregnant teens and their families.

The urge to leave

Tiffany Weddle wants to get out.

She moved into 53210 two years ago, renting the top floor of a duplex two blocks from the factory zone. Almost immediately, she wanted to leave. Drug traffickers congregated on the front porch "like they owned the place." On three occasions, she heard gunshots outside her windows. She keeps her four daughters inside. She found cockroaches inside the refrigerator. She lost sleep.

The 36-year-old is pregnant, this time expecting a boy. And once again, the household finds itself in turmoil. No sooner had she saved money for new beds and mattresses than an infestation of bedbugs left the girls with sores and welts. She threw out the new mattresses and bedding. Thousands of dollars, gone.

Weddle has been working since high school. She's traveled to Atlanta and San Antonio as executive assistant to the director of a social service agency and most recently worked at a day care center.

Her fiancé, Eddie Caldwell, the father of her two youngest girls, has full-time income and benefits at Alro Steel, a manufacturing firm in Wauwatosa. They are looking for a new apartment. To cover the cost of the move, Weddle figures she'll need to let at least one of her bills lapse for a month.

"We'll probably be sleeping on the floor," she said. "We'll be eating a lot of bologna sandwiches and noodles."

Three weeks before her due date, she sat at home and - keeping a hand on her expansive belly - recounted a scare in her 35th week, when she had what appeared to be early contractions. A doctor said it was a false alarm. The incident coincided with a mad-dash search to find a new apartment before the baby arrived.

"I didn't want to bring my baby into this house," Weddle said.

Fallout from economics

In an age when developing nations are building more and more things for the world economy, Milwaukee's north side has been building less and less; and that's having a dramatic impact on the babies born there.

The World Health Organization studied metropolitan areas [ http://www.who.int/gho/urban_health/outcomes/infant_mortality_text/en/index.html ] in the Americas, Asia and Africa: "We can see that children in the poorest 20% population are twice as likely to die before their first birthday compared to children in the richest 20% population."

China shows how quickly a nation can shift.

As recently as 1950, it was among the world's poorest nations with high levels of malnutrition, illiteracy and an infant mortality rate of one in 10. Conditions were worst in the rural villages that supply migrant workers for the industrial cities. Today, United Nations data shows infant mortality rates in even some rural interior Chinese provinces are better than Milwaukee's rates.

Research underlines how economic change affects infant mortality.

"It's not just a black thing," said Franklin Goza, a sociology professor who specializes in population demographics at Bowling Green State University in Ohio. "If you are a poor white person, your baby is more than twice as likely to die during its first year of life than it would be if it was a wealthy baby."

Goza studied all the urban census tracts in Ohio [ http://www.ncbi.nlm.nih.gov/pubmed/16959061 ], another Midwestern manufacturing state. Using four decades of data, Goza was struck by an increase over time in the number of white babies who die in poor census tracts, calling it a "strong and consistent inverse association."

A Duke University study [ http://www.ncbi.nlm.nih.gov/pubmed/18640759 ] in 2008 found increased odds of preterm birth for non-Hispanic white women in tracts "with high unemployment, low education, poor housing, low proportion of managerial or professional occupation, and high poverty."

In Milwaukee and the U.S., infant mortality is most acute in African-American communities. Even black mothers in professional occupations have higher infant mortality rates than poor whites.

Researchers who have looked at the internal biological triggers [ http://www.jsonline.com/features/health/119987024.html ] of premature birth, such as genes and chemistry, argue stress is often a key factor in prematurity. So what happens outside the womb - an eviction notice; the anxiety of an unsafe environment; struggling without a job - can affect what happens inside it.

Harvard University sociologist William Julius Wilson was one of the first to link economic upheaval to a chain reaction of collapsing social structures that end with perpetual insecurity.

Using the economy of the American inner city, he described a domino effect.

It starts as one household after another loses income and cannot patronize neighborhood merchants, who go out of business. Storefronts become vacant and unlighted, inviting crime. Housing prices plunge, or stay depressed, leaving owners without equity for loans. Chronic financial uncertainty creates tension in the household. Families go into survival mode. Physical fitness and schoolwork fall by the wayside.

In Milwaukee, such a chain reaction transformed the central city.

In 1970, the city's black poverty rate was 22% lower than the U.S. black average; today, Milwaukee's black poverty rate is 49% higher than the national rate. In 1970, the city's median family income for African-Americans was 19% higher than the U.S. median income for black families. Today, it's 30% lower.

During that time frame, the overall rates of poverty and unemployment in 53210 tripled. When the housing sector collapsed under the weight of subprime debt, the area felt the impact with particular force. "Nearly every block in the ZIP code has problem properties reaching the sheriff sale stage," according to a study of 53210 by researchers at the University of Wisconsin-Milwaukee.

Infant mortality is the ultimate misery index.

Frequent infant deaths nearly always coincide with lower life spans, hypertension, high blood pressure, respiratory issues and diabetes.

"The infants are like the canary," said Geoffrey Swain, medical director of the Milwaukee Health Department and associate professor at the University of Wisconsin-Madison School of Medicine and Public Health. "They are the most vulnerable. They are the first to drop off when conditions are bad."

The U.S. infant mortality rate is 7 deaths per 1,000 live births - far outpacing 3 in post-unification Germany and 2 in Japan.

Milwaukee's overall rate was 11.9 in 2006 and has since improved to 10.4, but it remains the nation's seventh worst big city. The black rate stands at 14.1.

In 53210, the overall rate is 17.

Force, pace of change

All northern cities lost heavy industry in the transition to the era of raw global competition.

What sets Milwaukee apart is the force and pace of economic change.

Black Milwaukeeans were downsized with unprecedented force because they relied more on low-skill labor than African-Americans in any other American city, north or south. According to U.S. Census Bureau data, Milwaukee at its industrial zenith ranked as the nation's best city for African-American industrial laborers.

In 1970, as the city approached its peak output and employment, 43% of black Milwaukeeans drew paychecks as industrial laborers - punch press operators, riveters, assembly-line workers, forklift drivers. The work was unglamorous but paid the mortgage and sometimes the college tuition bill. Only Detroit, with 39%, came close to Milwaukee for black factory labor.

In its halcyon days, the city was known as the "machine shop of the world." The city absorbed continuous waves of industrial migrants from the south. They powered the machine shops, factories, breweries and tanneries.

From 1950 to 1960, a decade that saw Milwaukee's black population triple, the newcomers included Alice and Robert Weddle of Tennessee - Tiffany Weddle's grandparents.

Robert Weddle found employment at A.O. Smith, a 148-acre campus of cathedral-sized factories.

The Weddles bought a home and raised 14 children, including two sons who worked at A.O. Smith. At its peak in the 1970s, a third of the company's 9,000 employees were black. It was the biggest industrial site in the city.

Even the smallest machine shops in the area employed 25 to 50. The bounty of work created an enclave of stable neighborhoods nearby and supported black-owned jazz clubs, tailors, law firms and restaurants in what was known as Bronzeville.

"Everybody could walk to work," said Willie Carter, 65.

Carter moved to Milwaukee from Mississippi with his parents when he was 5. He also ended up at A.O. Smith.

"Milwaukee drew a lot of people from the South to work here," he said. "You could get off the bus, knock on a door, and go to work."

In those years, Milwaukee was making major strides in black infant survival.

By 1981 in Wisconsin - when four of every five African-Americans lived in Milwaukee - the state had the third best black rate of infant survival in the nation. White mortality rates in Milwaukee were falling as well and better than the national average.

The city sent a Department of Health nurse to visit every mother for every birth. Today, Swain said, city nurses visit less than a tenth of all at-risk mothers in just the city's worst ZIP codes.

Follow the rails

The city owes its unique industrial geography to the Milwaukee Road railroad, the longtime anchor of the city's economic foundation. The railroad once hauled so much made-in-Milwaukee freight it became the nation's fifth-biggest rail carrier. Industry sprang up along its tracks and spurs.

Tracing the Milwaukee Road's path through 53210 provides a lesson in the 21st century economy.

A.O. Smith exited the auto business in the 1990s and reinvented itself as a water-technology company. It sold the plant in 1997 to Tower Automotive Inc., which filed for bankruptcy in 2005 and closed the Milwaukee factories. The city is tearing down the old factories and hopes to create an industrial park. Next door was the sprawling Koehring Machine Co., which employed over 1,000; today Koehring is a scrap metal yard.

Farther south was a campus of six factories that belonged to Briggs & Stratton, which called itself the world's largest maker of small air-cooled engines. Briggs employed more than 700 factory workers in the factories - not including the on-site headquarters of its electrical products division. Today the buildings are vacant.

Willie Carter, the A.O. Smith veteran, operates a scrap metal lot on 30th St. It used to be a Milwaukee Road shipping office and freight rail depot. The site was in constant use, clogging N. 30th St. as trucks and trains shuttled in and out.

The Journal Sentinel canvassed 60 of the old industrial properties [ http://www.jsonline.com/features/health/133659818.html ] in the stretch that slices through 53210. Some made shoes, brewing equipment, potato chips, embroidered vestments for priests. But the biggest among them stamped, forged, welded, plated and fabricated metal.

Nine of the 60 have been torn down and exist as empty lots. Another 18, including A.O. Smith and Briggs, are empty or partially used as storage space.

Some found nonindustrial uses: the headquarters for the T.L. Smith Co. machinery company has become a Genesis Behavioral Services facility, where intoxicated people are given a cot and fed the next morning. Walter H. Knapp Co., which made electrical controls for railroads, is the location of a state corrections center. Several old machine shops are churches or ministries.

Fewer than one in four retains an industrial use - and most of these are a shell of their former size: Logemann Brothers Co. is a machinery maker than ran three shifts with 225 workers. Today it has 12.

Twelve of the sites became scrap metal yards.

Art Arnstein grew up in the area and watched it change. He is co-owner of United Milwaukee Scrap LLC, the largest of the area's scrap metal collectors, and has been buying up empty factories on the N. 30th St. corridor, including the Koehring site.

Another of his properties on W. Fond du Lac Ave. has an electric sign that announces daily rates for aluminum and copper. Hundreds of people arrive each day with plastic bags of aluminum cans, which the company buys for about 70 cents a pound.

"People today are destitute and need to feed their families," he said.

Every day, Arnstein says, he is forced to turn away job applicants. His company has 145 workers in eight former industrial sites that once employed more than 2,000.

"This is the economy of the inner city," he says. "It helps keep the city clean."

He used to resell scrap to foundries in the Midwest. That, too, is changing.

As factory demand in the developing world has raised the price of metal commodities, the firm increasingly ships containers full of scrap metal to foreign factory cities, where it gets a second life, being hammered back into new products.

Arnstein's fastest growing export market:

China.

Ben Poston of the Journal Sentinel staff contributed to this report.

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Photo Gallery

People, places of ZIP code 53210
http://www.jsonline.com/multimedia/photos/133762218.html

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Interactive Map

In the 1970s, when Milwaukee ranked among the nation’s best cities in terms of infant mortality, the city had a strong manufacturing backbone. This was most in the north side ZIP code of 53210 (shown in red on this map), which today has the city’s worst infant mortality rate.This interactive map shows jobs then and now in 53210. You can also view the map as a PDF.
http://www.jsonline.com/features/health/133659818.html
http://media.jsonline.com/documents/infantzip_big_111311.pdf

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Related Coverage

India city sets standard for improving survival rates
http://www.jsonline.com/features/health/india-city-sets-standard-for-improving-survival-rates-rj2p1qb-133760228.html

Resources in reporting of this story
http://www.jsonline.com/features/health/zipcoderesource-6e30ia7-133760223.html

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About this series

The Journal Sentinel this year is taking on an issue we have too long ignored - the death of children before their first birthday. Infant mortality is a crisis not just of public health, but of ethics and morality. The rate at which infants die in our city is unacceptable. In today's newspaper and online, we focus on the economic underpinnings of the problem. - Martin Kaiser, editor

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Empty Cradles

The Journal Sentinel this year is taking on an issue we have too long ignored - the death of children before their first birthday. Infant mortality is a crisis not just of public health, but of ethics and morality. The rate at which infants die in our city is unacceptable. In this installment, we look at the financial costs to everyone of prematurity. - Martin Kaiser, editor

Go to:
Section http://www.jsonline.com/emptycradles
Blog http://www.jsonline.com/blogs/news/emptycradles.html

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© 2011, Journal Sentinel Inc.

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How Walmart Is Changing China


Susan Meiselas/Magnum Photos


From sea cucumbers in Dalian to upscale Sam's Clubs in Shanghai, Walmart stores vary from province to province.


Susan Meiselas/Magnum Photos


Susan Meiselas/Magnum Photos

The world’s biggest corporation and the world’s most populous nation have launched a bold experiment in consumer behavior and environmental stewardship: to set green standards for 20,000 suppliers making several hundred thousand items sold to billions of shoppers worldwide. Will that effort take hold, or will it unravel in a recriminatory tangle of misguided expectations and broken promises?

By Orville Schell
December 2011 ATLANTIC MAGAZINE

Beside the Fifth Ring Road, one of the superhighways encircling Beijing like concentric shock waves radiating outward from the epicenter of an earthquake, sits an enormous big-box installation, one of thousands now proliferating throughout China. The parking lots flanking it are gridlocked with late-model cars and ruddy-faced peasants-turned-workers pushing long, snake-like trains of shopping carts toward the entrance.

Stepping into the building’s vast, windowless interior, I have the sense of entering an oversize Fabergé egg. But instead of refined scenes of aristocratic czarist life, I encounter thousands of middle-class Chinese engaging in the newest, and already the most inalienable, right in this erstwhile “People’s Republic”: shopping. This is the Shijingshan Shanmuhui, a Sam’s Club, one of the 352 stores that Walmart now operates in 130 Chinese cities.

Just inside the doorway, a scrum of salespeople hawk everything from roasted sweet potatoes to fitness-club memberships and massage chairs. Throngs of energetic customers push overflowing carts (fitted with data screens touting the latest bargains) making that familiar sound of wobbling rubber wheels on concrete. Indeed, its familiarity makes me feel I’ve been astrally projected back to Walmart’s natal place—Bentonville, Arkansas, which the current president and CEO, Michael Duke, recently referred to as the “Lighthouse of the Ozarks.”

But the young Chinese women workers in green aprons and sanitary masks make it undeniable that we’re a long way from the Ozarks. They call out their wares in Mandarin, proffering samples of soya-bean milk, date juice, and lychee jelly. Around them are mountainous piles of fresh pig intestines; pillow-size bags of dried fungus, seaweed, and mushrooms; packages of desiccated deer tendons (still attached to hooves!); inky-black dehydrated sea slugs; glistening octopuses on nests of chopped ice; and tanks of gulping fish, dazed frogs and turtles, and hyperactive shrimp.

Although Walmart’s $7.5 billion in Chinese sales receipts account for only 2 percent of the company’s annual revenues, its sales in China have risen substantially over the past decade. Sales in the United States, by contrast, have been shrinking. And as China’s retail market—the world’s fastest-growing—expands by 18 percent a year, Walmart’s executives smell the intoxicating scent of more growth to come. Equally important, if not more so, some 20,000 Chinese suppliers, or “partners,” reportedly provide Walmart with about 70 percent of the nearly $420 billion worth of goods that it sells globally each year. (Because of the complexity of the global supply chain, the percentage from China is hard to calculate.) China has become so crucial to Walmart’s supply chain that in 2002, the retail giant moved its global sourcing headquarters across the border from Hong Kong to Shenzhen, in southern China.

As I tramped across the country, from Shenzhen to Manchuria and from the North China Plain to Sichuan province, visiting Walmart retail outlets, factories, farm cooperatives, and executive offices, the Walmart/China axis loomed as something unprecedented. Beyond the sheer scale of the relationship, what struck me was how interactive Walmart and China have become. These two colossal entities, with such utterly different provenances—the world’s largest corporation and the world’s most populous country—have somehow managed to meet and maintain a state of relatively steady symbiosis, each fulfilling vital needs for the other. Just as China is providing Walmart with the lifeblood of its commercial growth, Walmart is helping the Chinese state not just to satisfy the escalating demands of its consumers but to extend Beijing’s regulatory writ. Together, they are engaging in a bold experiment in consumer behavior modification, market economics, and environmental stewardship. Just how this unlikely partnership will affect the evolution of these two larger-than-life entities is as yet uncertain. But one thing is already clear: how Walmart and China interact with each other over the next decade will be critical to the fate of the planet’s environment.

The Wager

Since the 1980s, many U.S. corporate leaders, policy pundits, China watchers, and politicians have suggested that the best way to curb China’s dedication to Leninism is to bathe the Chinese people in the solvent of the open marketplace. But although China has proved remarkably susceptible to the lure of “marketization,” its one-party system has shown little receptivity to political reform, especially to democratization. The Chinese Communist Party has always fiercely resisted any notion that it can be “changed,” especially by outside pressure.

Of course, over the past century and a half, most of the foreign missionaries, merchants, military emissaries, and educators who have sallied forth in hopes of “changing China” have returned home with little to show for their efforts. Like nitinol, a unique nickel-titanium alloy that possesses “shape memory,” bending at low temperatures only to regain its original form when heated, China has long rebuked foreign efforts to change it. So one might plausibly wonder why Walmart, a company that is so indelibly American, might now have an experience that is any different.

Indeed, Walmart has deep roots in conservative, southern, small-town, fundamentalist-Christian, anti-union, middle-American values. The founder, Sam Walton, was an ardent capitalist, devoted Christian, and militant anti-Communist who rolled all these values up into a quasi-religious/political credo, a founding faith for a business praised by then–Vice President Dick Cheney as “one of our nation’s great companies,” exemplifying “some of the very best qualities in our country—hard work, the spirit of enterprise, fair dealing, and integrity.”

Walton opened his first store in rural Rogers, Arkansas, in 1962. His policy of low markup and high volume—under the banner of “Always Low Prices. Always”—found immediate favor with ordinary Americans, as did the folksy bonhomie of the company’s business practices and corporate culture. By 1985, Walton had become the richest man in America—“a billionaire everyone can love,” as USA Today once dubbed him—and by 1989, Walmart was operating in 29 states. Then, in 1991, the company opened its first international store, in Mexico. Since then, with only a few notable failures (in Germany, Russia, and South Korea), it has continued to expand abroad. By 1999, Walmart had become the largest private employer in the world, and in 2003 Fortune magazine pronounced it the nation’s most admired company.

At first blush, such a pedigree would seem to make Walmart an unlikely candidate for an alliance with the People’s Republic of China. And when the company arrived there in 1996, the country was terra incognita for Walmart executives. But the Bentonville behemoth actually shared more commonalities with its new partner than were first apparent—a curious alignment of goals and policies, even of organizational structures and “ideologies.”

Consider the following:

Both are animated by a mythologized grand progenitor. Sam Walton’s smiling visage (beneath a shovel-billed company cap) today hangs prominently in Walmart stores, much as Mao Zedong’s iconic image still hangs in Tiananmen Square and adorns China’s increasingly powerful currency. Even today, these founders’ successors rule supreme—as Walmart’s CEO and as the Chinese Communist Party’s secretary general.

Each is not only unelected, but also anointed with quasi-cultish Big Leader status to reign over a fundamentally authoritarian organization held together by an elaborate belief system or ideology bordering on the religious. And each presides over an enormous and complex apparat staffed by a professionalized core of operatives—namely, Party leaders and cadres in China, and senior executives and mid-level managers at Walmart.

Each of these leviathan organizations seeks to influence the outside world through the media, advertising, and PR while at the same time maintaining the kultur among its own minions, through written propaganda, motivational campaigns, and sometimes coercive measures aimed at bringing refractory “comrades” or “associates” back into line. In fact, each system employs a significant amount of monitoring, even outright electronic surveillance, to make sure that employees and citizens and customers alike stay within the boundaries of “correct” behavior.

And finally, each professes a proud populism, always proclaiming a responsibility to better service. China’s leadership, with its socialist roots, has long stressed “serving the people,” while Walmart, with its capitalist roots, emphasizes “service to the customer.” In fact, Walmart stores in China prominently display personnel charts that are inverted pyramids, with the customers and lowest workers situated on the top tier and the managers on the bottom.

Just as Mao’s revolution elaborated an all-encompassing code of conduct and ideology, “Walmart culture,” known in Chinese as Woerma wenhua, became a set of principles that, in the words of one employee quoted in Derek J. Davies’s insightful article on “corporate cadres” in the forthcoming book Walmart in China, “are not simply rules for a style of work, but are kind of ‘a way of life.’” This notion of an all-embracing culture has created a shared contradiction: while neither organizational structure is comfortable with dissent, they both value, and depend on, innovation. Leaders are left to confront the same question: How, in such a tightly controlled and closely monitored organizational structure, can they encourage the kind of independent, creative spirit that is essential to surviving and maintaining a competitive advantage?

In that respect, if China wants to keep developing its hybrid form of authoritarian capitalism, its leaders could do worse than to learn from Walmart, a corporate entity larger in scope and logistical complexity than any other in human history: Its 9,700 stores in 28 countries, supplied by a network of more than 100,000 sources in 60 countries, are staffed by some 2.1 million employees serving 200 million customers a week. Compare Walmart’s annual revenue with the GDP of sovereign nations, and it ranks in the top quartile. In many ways, the company is like a country. Its CEO, when abroad, is treated almost like a visiting head of state. Senior executives in charge of overseas operations function like diplomats, signing agreements with governments and businesses and managing the company’s interests. The various national arms of the Walmart Foundation operate almost like a government foreign-aid program. Even Walmart’s stores, arrayed around the world, seem almost as representative of America as our consulates and embassies.

Breaking the “Bentonville Bubble”

Certainly there are lessons for China in Walmart’s evolution over the past decade. By 2005, the company’s steady expansion had made it a magnet for criticism and earned it a reputation as a rapacious, anti-labor-union, un-environmental “big box” destroyer of small towns and independent businesses. Things had gotten so bad on the image front that in November 2004, Comedy Central’s South Park did a devastating episode on the opening of an outlet in the show’s imaginary Colorado town. The townspeople try to boycott the store, but are unable to resist its seductive bargains. Finally, the new store’s manager, burdened by guilt for all the atrocities Walmart has been perpetrating around the country, commits suicide, and the townspeople snap. Cartman and the rest of the South Park gang set off for Bentonville to stop the company’s insidious spread.

“Yeah. We’ve come to complain,” Kyle announces to a receptionist upon arriving at corporate headquarters. “We don’t want a Walmart in our town.”

“Who does?” the receptionist cynically retorts. “Nobody likes what the Walmart does, but it keeps … right on doing it!”

In classic, rapid-cut South Park fashion, the boys are ushered into the office of Walmart’s president and one of the store’s original creators, who has been drinking heavily and chain-smoking.

“We … invented the Walmart Supercenter in 1987,” he says laconically. “The idea was simple: build a store for one-stop shopping where bulk purchases could keep prices incredibly low. We didn’t know what we were doing. In just four years, it was out of control.”

“So how do we stop it?,” Kyle asks.

“You don’t stop it!” the president responds gravely.

“There has to be a way!,” Kyle pleads.

“There’s nothing! Don’t you understand?!” cries the anguished president. “Nothing can stop the Walmart in your town! … Unless … of course, you can find and destroy its heart … Destroy the heart, and you could reverse the entire process!” he continues, sounding like a remorseful evil genius in a low-budget sci-fi film.

So, of course, the South Park posse must save the world by finding and destroying the heart of their Walmart, which turns out to be located near the TV-sales department. You get the picture.

When the episode first aired, Walmart was, in fact, navigating through very difficult times. In 2001 it was hit by the largest class-action lawsuit in U.S. history, accused by more than 1 million women of employment discrimination. In 2003 it was raided for employing illegal immigrants, and in 2004 it was fined for environmental infractions. By then, a McKinsey & Company study was reporting that, because of all the “negative press,” Walmart had lost as much as 8 percent of its customers. In 2005, Robert Greenwald’s documentary Wal-Mart: The High Cost of Low Price charged the company with being “short on scruples and long on shabby treatment of the people who work for them.” Walmart’s reputation was at a low. “Bad years do happen to good companies,” noted Fortune a year later. “But for Walmart, 2006 was just another downer in a period of decline that’s lasted seven years and overlaps the tenure of the company’s current CEO, Lee Scott.” Indeed, Walmart’s damaged state was curiously similar to that of China itself, whose “brand” had taken an almost fatal hit following the bloody events of June 4, 1989. Both were badly in need of reputational rehabilitation.

Originally hired by Sam Walton to work in Walmart’s transport division, Lee Scott, who became president and CEO in 2000, is pretty much the stereotype of what many might imagine a Walmart executive to be. Tall, with sandy hair and a pale, almost forgettable face, he radiates a reassuring, no-nonsense air and Great Plains earnestness—a middle American who grew up in a small southeastern-Kansas town pumping gas at his father’s filling station and earned his degree at a state university while living in a trailer and working in a tire-mold factory.

Fed up with being viewed as an environmental despoiler and everyone’s punching bag, Scott had already begun questioning how he might turn around Walmart’s image, if not the corporation itself. In 2004, he connected with Jib Ellison, a former river guide who had recently set up a small consulting firm, Blu Skye Sustainability, in Sonoma County, California. “When I first met Lee, the guy was just getting pummeled,” Ellison told me. “I mean, the world was really turning upside down for him!”

After a discreet courtship, Ellison managed to break through the “Bentonville bubble,” as he calls it, and convince Scott that it was not enough to “limit Walmart’s exposure” to environmental criticism. He also had “an opportunity to use sustainability to ‘do well by doing good.’” According to Edward Humes, the author of Force of Nature: The Unlikely Story of Walmart’s Green Revolution, Ellison insisted “that inefficiency and waste were omnipresent, even in a notoriously stingy company like Walmart, with the waste not only damaging the environment, but damaging the company’s bottom line as well.” Identify and cut out the waste in areas like packaging, shipping, and energy use, Ellison said, and Scott would solve his company’s image problem and make a better return on investment.

It was a beguiling dream, so much so that Ellison persuaded Scott to make tiny Blu Skye a Walmart consultant, a decision that helped send the massive company off on an environmental odyssey and won Ellison the handle of “CEO whisperer.” Soon, Scott was inviting the longtime banes of Walmart’s existence—nongovernmental organizations like the Rocky Mountain Institute and the Environmental Defense Fund—to Bentonville for discussions with his executives.

In the company’s corporate narrative, October 24, 2005, is spoken of as “a defining day in the history of Walmart.” This was the day Lee Scott gave his “Twenty First Century Leadership” speech, broadcast via video to all Walmart stores and suppliers. In the same way Chinese Communist cadres quote from the revolutionary scripture of their Big Leader’s collected works, Scott began by citing Walmart’s founder. “Sam Walton’s dream to serve the underserved changed the world,” he said. “We didn’t get where we are today by being like everyone else and driving the middle of the road. We became Walmart by being different, radically different.”

Scott acknowledged that the company was “in uncharted territory as a business,” but he said that “after a year of listening, the time has come to speak, to better define who we are in the world, and what leadership means for Walmart in the 21st century.” Then Scott got to the point. “Environmental loss threatens our health and the health of the natural systems we depend on,” he told his audience. “As one of the largest companies in the world, with an expanding global presence, environmental problems are our problems.”

Scott acknowledged that naysayers would “think that if a company addresses the environment, it will lose its shirt.” But, he countered, “I believe they are wrong. I believe, in fact, that being a good steward of the environment and in our communities, and being an efficient and profitable business, are not mutually exclusive. In fact, they are one and the same.”

Walmart was a company with a reputation for having already “gotten religion” through Sam Walton. But now, it seemed on the verge of being reborn in a different way. In the most practical language, Scott tersely laid out three long-term goals, which he described as “both ambitious and aspirational”:

1. To be supplied 100 percent by renewable energy.
2. To create zero waste.
3. To sell products that sustain our resources and environment.

“I’m not sure how to achieve them,” he admitted. “At least not yet.”

Scott left a stunned audience, but soon the company was examining every aspect of itself to find inefficiencies and waste. It condensed products like laundry detergent into small, more easily packed and shipped containers; retrofitted 7,000 big rigs with small auxiliary motors so that drivers would not run their engines just to cool their cabs while they slept; reduced the amount of cardboard and plastic used in packaging; and started buying directly from farmers to ensure cheaper, fresher, and more reliable organic lines of fresh food. The goal was to save money by becoming greener.

A Greening in Shangri-La

With some 30,000 Chinese factories making things for Walmart, the company’s future was tied to China in the most elemental way. So Scott and his team knew that Walmart could never truly “green” its supply chain without taking on its Chinese partners. But, if China was going to be the laboratory of the future, it was difficult to imagine how even Walmart could wrangle such a far-flung and disparate range of suppliers into a responsive group.

On October 22, 2008, the CEOs and factory managers of more than 1,000 Chinese Walmart suppliers sat waiting in the Valley Wing Grand Ballroom of Beijing’s Shangri-La Hotel, for the beginning of Walmart’s China Sustainability Summit. Many of the attendees anticipated a significant new environmental announcement, and not a few of them were concerned. After all, Walmart was famous for pressuring suppliers to cut costs and reduce prices to the point where profit margins vanished. Moreover, the world economy had begun to careen toward breakdown, with countries like the United States cutting back precipitously on orders from abroad.

Heralded by a blast of pop music, Lee Scott strode to the podium. In characteristically flat tones, he started off with a few pleasantries about the Olympic Games, complimenting his Chinese audience for being part of a nation “that really gets things done.” Then he leaned into the topic at hand. “When Walmart first came to China,” he declared, “the government said that it expected us to be a model retailer. We have worked hard to try to meet those expectations … and to save money in the process.” He spoke without any dramatic oratorical pauses or expressive hand gestures. “And with the Chinese government expanding its goals for sustainability … it just makes sense that Walmart would be committed to being a more sustainable company here in China.”

As Scott continued in the cavernous and, by now, completely still room, he conveyed utter conviction. “Look around: we have 1,000 suppliers here. A year from now, each and every one of you who chooses to make a commitment will be a more socially and environmentally responsible company. And that will make a difference. It will make a difference for you, for Walmart, for China, for our customers, and yes, for the planet.”

Acknowledging that Walmart customers “need low prices,” he said he also believed that “more and more, they will be looking at the entire life cycle of a product: How is it made, how is it sold, how is it used, and how is it reused? To meet these customer expectations, we need to ask ourselves: Is a product made in a factory that is a responsible steward of the environment and our natural resources?”

On the crucial role of energy use, Scott declared, “The final factor that I see at work in bringing us here today is an increase in the global demand for energy and what that means for climate change.” Then, as if he were, in fact, a foreign minister, Scott warned: “This will be one of the greatest economic, environmental, and perhaps security challenges that the world will face in the 21st century … Meeting social and environmental standards is not optional. I firmly believe that a company that cheats on overtime and on the age of its labor, that dumps its scraps and its chemicals in our rivers, that does not pay its taxes or honor its contracts, will ultimately cheat on the quality of its products.”

As his listeners were digesting all this, Scott assured them that Walmart was willing to “work with” them. But then he dropped the trap door: “If a factory does not meet these requirements, they will be expected to put forth a plan to fix any problems. If they still do not improve, they will be banned from making products for Walmart.” Like a priest admonishing parishioners to accept Communion or be excommunicated, Scott explained that each supplier would have to make a commitment to comply with these environmental standards. (Ultimately, they would also be required to open themselves to third-party auditors.)

“Some may wonder, even inside Walmart: With all that is going on in the global economy, should being a socially and environmentally responsible company still be a priority?” Scott did not yield an inch. “You’re darn right sustainability should be a priority!”

He was all but preaching now. With his hint of a southern accent and his almost religious sense of the righteousness—not to say the profitability!—of his cause, he seemed to be crescendoing toward some sort of evangelical climax. But, ever the model of middle-American restraint, Scott resisted the urge to overstep the bounds of oratorical modesty.

“I believe that as a businessman. I believe it as a person who has a responsibility to shareholders. And I believe it as a father and a grandfather. We will have better companies, better communities, and an even stronger commitment to a cause that is greater than each of us and unites us all. And we will leave a better world for future generations.”

Amen!

I turned to a Sichuan factory manager standing beside me and asked what he thought of Scott’s speech. He gave a worried frown.

At the press conference that followed, a Wall Street Journal reporter asked Scott, almost accusatorily, if these new demands on suppliers would simply presage a further squeeze of their already meager profit margins. In a tone as close to testy as he could come, Scott asked the reporter if she wouldn’t rather pay a few cents more for something that was made well and would not harm the environment.

No Benzyladenine in Your Bean Sprouts

What made Scott’s sermon so timely was the buildup in China of political and economic forces that augured well for the idea of a large and trustworthy foreign-owned company “going green.” Whereas up until about 2005, Party leaders had been dedicated to unfettered development, whatever its environmental cost, the five-year plan that went into effect in 2006 introduced the concept of kexue fazhan, or “scientific development,” which was a way of injecting the idea of a more environmentally sound kind of development into the equation without directly impugning all the previous efforts to promote economic progress. Then, over the next few years, the Party began heralding the notion of kechixude fazhan, or “sustainable development.”

As it happened, just at this time, growing numbers of Chinese were also becoming worried, even frightened and angry, about pollution, adulterated foods, and the corruption that kept local government agencies from taking remedial actions. And because more and more Chinese were not only erupting into spontaneous protests as a way to get action, but also looking to NGOs rather than to the government for relief, and because even the press had become more activist, the government became concerned about the impact of environmental damage on the stability of the country.

The number of scares involving illegal chemical additives in food was creating particular alarm. In 2008, milk products were found to contain melamine, a coal-based industrial chemical that, when ingested, can cause kidney stones and renal failure. (Melamine had been regularly used to give milk powder and baby formula a seemingly higher protein content.) As a result, some 300,000 Chinese consumers were sickened and at least six infants died. The Chinese government reorganized its food-inspection system in response, and its new Food Safety Law went into effect in 2009. Nonetheless, the dairy industry was hit again with scandals this year.

In the spring, hundreds were sent to the hospital when hogs from 16 provinces were found to have been fed a “lean meat powder” containing the toxic chemical additives ractopamine or clenbuterol, to produce less-fatty pork. In Guangdong province, authorities discovered and destroyed 45 tons of vermicelli noodles adulterated with industrial wax and ink; in Shenyang, police seized 40 tons of bean sprouts that had been illegally bathed in urea, sodium nitrite, antibiotics, and the plant hormone 6-benzyladenine, to make them grow faster and appear fresher. The food-safety situation became so serious that on April 14, Premier Wen Jiabao took the unprecedented step of speaking out, saying the recent scandals indicated that “dishonesty and moral degradation” had become a serious problem.

No wonder, then, that many in China’s burgeoning middle class, especially those with children, are seeking refuge in brand-name restaurants—particularly fast-food chains such as McDonald’s and KFC—and grocery markets such as Walmart. Walmart has several times come under fire in China for selling produce tainted with toxic chemical residues, and for mixing organic and nonorganic foodstuffs: this fall, for example, the Chongqing municipal government fined Walmart, and temporarily closed some of its stores, for mislabeling pork as organic. Still, because Walmart is a well-known multi-national corporation with so much at stake in terms of its global brand, Chinese shoppers have assumed that it will be a more trustworthy outlet. (Of course, Americans and Europeans have exactly the opposite reaction, seeking safety in small organic producers rather than big corporations.) And since the Chinese government, too, is concerned about people’s health and social stability, and its own legitimacy, it tends to see these larger, well-branded outlets as both models and responsible allies. “The government is still the most powerful force in China, and they have just adopted their 12th five-year plan, emphasizing food safety and domestic consumption,” David Gao, Walmart’s government-relations director for China, told me in the company’s Shenzhen headquarters. “If we want to push sustainability efforts and grow here, we have to have government support. So we want to align our strategy with government interests. And quite frankly, because the overall business climate for sustainability is favorable, I can’t think of any reason for not doing this.”

At the Shijingshan Sam’s Club on the periphery of Beijing, produce counters are stocked with three kinds of fresh products: youjide (organic), lusede (green), and wugonghaide (hazard free). A deputy manager tells me that sales of organic produce, meat, eggs, and oils have grown by almost 20 percent a year. When I stop a number of shoppers in the organic-produce section to ask them why they are willing to pay substantial premiums for food that looks the same as ordinary food, most show a characteristically wary Chinese attitude toward answering any question from a stranger and wave me away like a bad smell. But some agree to talk. One man says that he buys organic “because there are so many fake products on the market, and I am worried about my health.”

A young woman tells me, “If my salary was high enough, I would only eat organic.”

Another woman, with daughter in tow, says, “Some places will take rotten tomatoes and put them in the middle of good ones and then wrap them up in plastic. In my local supermarket, who knows? But I trust Walmart to buy the best.”

Walmart’s green and organic products are clearly designated with special labels that name the province and region where they were grown. Much of this food is sourced from the Direct Farm Program, which Walmart established in 2007; in 2008 the commerce and agriculture ministries invited Walmart to join their new, similar program. This initiative created a national mosaic of new agricultural hezuo she, or “cooperatives,” which echo the long-dismantled mandatory collectives and communes of the Mao era, but this time around have been formed voluntarily by regional farmers banding together to gain market clout and sell directly to large chains like Walmart.

“By buying directly through these co-ops, Walmart eliminates pieces of the supply chain that are not productive,” Leslie Dach, the company’s executive vice president for corporate affairs, tells me. “And we found that we can raise farmers’ income, supply them with extension-like services, and give them greater market access. On top of that, we can get stuff fresher and thereby cut down on food spoilage, which reduces waste and helps us lower our prices.”

Direct Farm offers one other incomparable benefit: by dealing directly with farmers, a retailer is better able to control the standards of food it advertises as green or organic. This is a huge asset in a country where few people trust an organic label not backed by a recognizable brand-name source. Still, as the Chongqing scandal shows, Walmart’s supply chain—or any other, for that matter—is hardly foolproof.

The Fruits—and Boots—of Capitalism

To traverse the emptiness of the almost treeless steppes of Liaoning province in Manchuria, but at the same time drive on a magnificent, eight-lane freeway that runs parallel to a new high-speed overhead rail line (linking the port of Dalian to the provincial capital of Shenyang), is to experience one more of those seemingly infinite moments of counterintuitive amazement that now regularly jolt visitors to China.

As our van passes through hundreds of square kilometers of rolling cropland whose red earth has been manicured into squares of meticulously pruned vineyards and orchards of apple, pear, peach, and cherry, Liu Mei, who, with her sister, Liu Yan, founded one of the most successful fruit-distribution businesses in China, tells me her family’s story. Her tall, spike-heeled black-leather boots, dark-silk evening wear, and stylish coiffure hardly suggest the surrounding countryside, much less her odyssey from penurious post–Cultural Revolution watermelon vendor to mega-agri-entrepreneur. But of course, in today’s China, such rags-to-riches stories are not unusual. Liu Mei, who has adopted the English name Lucy, tells me how Walmart advisers initially visited the family-owned Dalian Xingyeyuan Group to explain how, by selling directly to large outlets, the business—and the co-ops with which it worked—could be more efficient and profitable.

“We learned a lot about quality, pricing, and management from Walmart,” she says. “At first, we didn’t quite understand, but they patiently explained consumer demand to us. So we came to understand that Walmart not only had vision about these things, but also were the strictest in maintaining standards. Now we have started moving from green to organic.”

We arrive at her company’s local fruit-packing plant, the Dalian Glory Times Logistics Company, a large U-shaped building, once a school, standing alone in the midst of a patchwork of orchards. Here Dalian Xingyeyuan’s fruit is collected, sorted, stored in nitrogen-filled cold rooms, packaged, and shipped to its 1,000-plus warehouses in more than 100 cities all over China.

“Over the last couple of years, the problem of food safety has made people think hard about the origins of what they eat,” Liu earnestly tells me. “There are companies that put profit ahead of quality, so many consumers are coming to trust big names like Walmart, which has been a leader in organic food here and does pay real attention to inspections and standards.” She pauses before adding, “We have learned from Walmart how to become a company with a social conscience.” Then, suddenly sounding a little like a Catholic pilgrim reporting back on a tour of the Vatican, Liu proudly announces that she has actually been to Bentonville.

Dealing with China’s out-of-control industrial pollution has in many ways been far harder for Walmart than greening its agricultural product lines. One thing the company did early on was enlist the help of NGOs to monitor and train workers at its suppliers’ factories. This was a bold move, especially in a country where not only are NGOs still relatively undeveloped, but the government and the Party have a deeply ambivalent relationship with civil society.

One of the people Walmart turned to was Ma Jun, whose Institute of Public and Environmental Affairs maintains a detailed database, the China Water Pollution Map, that uses government statistics on illegal wastewater emissions to keep track of polluting factories. When Walmart representatives sought Ma out, he was as dubious as when he first arrived at the China Sustainability Summit, which he attended, as he put it to me, “without any confidence that they would eventually do anything different.” Several months after that first meeting, however, he got a call saying that a Walmart procurement team wanted to visit his Beijing office. “To our surprise, there were 15 people,” he recounted. “We didn’t even have that many chairs, so some of them had to sit on the tea table.” Now Walmart relies heavily on the institute’s database to identify factories violating China’s environmental-emissions regulations. “By late 2008, every month, they would do a comparison of their list of suppliers with our list of violators,” Ma told me. “This is exactly what we wanted them to start with.”

“Boldly Revolutionize the Towel!”

As dawn breaks over the North China Plain, the industrial smog is so thick that the sun reveals itself only as a blurry, fluorescent glow. The outskirts of Jinan, the capital of Shandong province, present an endless maze of high-rise buildings, freeway overpasses, industrial smokestacks, hourglass-shaped power-plant cooling towers, and factories, creating the kind of charmless tableau that has became a hallmark of “the China boom.”

About two hours from Jinan, Binzhou is just one more of the provincial Chinese cities whose hell-bent economies have helped hundreds of millions rise from poverty. Despite the existence of 160-plus cities in China with populations of more than 1 million (the United States has only nine), most Westerners have never heard their names. These cities have gone about development with every bit as much competitive fervor and totalism as they exhibited when the “correct line” called on them to foment Maoist class revolution. And their success has been even more revolutionary.

I have come to Binzhou to visit Loftex, one of Walmart’s suppliers of high-end bath towels. After the 2008 China Sustainability Summit, Walmart solicited some 200 of its largest provincial suppliers to join an Energy Efficiency Program, dedicated to achieving a 20 percent savings in energy use by 2012. Working with advisers from the Environmental Defense Fund, the National Resources Defense Council, and Business for Social Responsibility, Walmart challenged these companies to examine their supply chains for ways to save energy and cut costs. Loftex is one success story.

Just driving through the gates of Loftex’s sprawling headquarters and plant tells me that this company is striving for something. Giant signs emblazoned with slogans goad its 3,000 workers not to carry out class revolution, but to Boldly Revolutionize the Towel! and to Escape the Ordinary and Produce Top-quality Textiles! But most of the company’s slogans proclaim the need for employees to strive for greater environmental sensitivity. One reads: Enterprises Must Develop, but They Must First Protect the Environment.

The factory has its own coal-fired power plant, a wastewater treatment facility, and acres of floor space filled with machines that annually churn through more than 50,000 tons of cotton, largely from the United States. It runs 24/7, carding, spinning, weaving, dyeing, labeling, and packing towels, most of them destined to return to U.S. shores.

In a Loftex conference room decorated with tabletop bouquets of plastic lilies, a Venus de Milo–like statue (with arms!), a cast-iron sculpture of a bucking bronco (homage to Frederic Remington?), and some abstract oil paintings, I ask the factory’s general manager, Wang Hongxing, a smart, affable middle-aged man in a dark suit and tie, if he was present when Lee Scott gave his 2008 Beijing speech.

“I was, and our first thought was that it was a good thing,” he tells me cheerfully. “But our second thought was that the new policy was going to put a lot of pressure on us, and we didn’t know if we could accomplish Walmart’s goals. We had no idea what sort of investment it would involve. But we also didn’t realize that Walmart would have so many programs to help advise us on how to reduce energy and water use and reduce emissions.” Since then, Loftex has invested more than 4 million RMB (about $650,000) and cut electricity use by 25 percent and water use by 35 percent, achieving its 2012 energy-reduction goals a year ahead of schedule.

“Now, whenever we create a new towel, we always think about the environment!” pipes up Li Yongzhi, the assistant manager, reminding me of how the heads of Revolutionary Committees used to boast during the Great Proletarian Cultural Revolution about how many jin of corn they could harvest from so many mu of land, under the guidance of Chairman Mao. “We have begun experimenting with such things as new fibers derived from bamboo, and even from milk, which we mix with our cotton stock so that it will be faster-drying, and thus produce more-energy-saving towels.”

No doubt, Loftex’s exemplary progress in its sustainability crusade was why Walmart urged me to visit this model plant: I leave Loftex thinking of Wang, the general manager, as the bright kid in class who, because he always raises his hand with the right answer, gets called on by the teacher whenever important visitors stop by.

But Chinese industry abounds with bad actors, and some of them can be found in Walmart’s network. Ever since Walmart established its Ethical Standards Program in 1992 to improve labor standards among its suppliers, some critics have challenged the program’s effectiveness. In fact, the forthcoming book Walmart in China calls the whole effort into question, citing the company’s own admissions that serious violations have been a persistent problem. “The Corporate Social Responsibility industry,” observes Xue Hong, one of the book’s contributors, “has become a cat-and-mouse game between suppliers and their buyers.” Instead of engendering better compliance, Xue argues, such efforts have given rise to a massive new, and profitable, “corporate social responsibility” auditing industry that offloads responsibility for compliance from Walmart to outside auditors and suppliers.

While researching this piece, I repeatedly asked Walmart executives how many Chinese factories had actually been given “red” status and been “disapproved” as ongoing suppliers by Walmart’s Global Audit system, as Lee Scott had threatened back in Beijing. A clear answer was hard to come by. When I checked the company’s “2011 Global Responsibility Report,” I found China grouped with Japan and South Korea simply as the “Far East,” a region that was itself strangely incomplete, making one wonder if Scott’s threat was more bark than bite. When the company’s Ethical Standards team finally responded, it said that it does not “provide breakouts below the regional level.” The team did say, however, “The majority of the [failing] factories in that region are in China.”

Still, none of the environmentalists I spoke with viewed Walmart’s progress toward greater sustainability as simply a PR stratagem. Indeed, just as China’s tenacity and ability to deliver economic growth have recently begun to win new respect for its development model, Walmart’s perseverance in attaining its environmental goals has also won over a host of surprising new admirers. “Of course, journalists are always skeptical at first,” Jib Ellison tells me. “Everyone is always looking for the soft underbelly of Walmart. But in my experience, when they actually look under the hood, they are almost always blown away.”

By 2009, even The New York Times was effectively proclaiming a reincarnation of Walmart’s corporate soul. “The company that democratized consumption … has begun to democratize environmental sustainability,” it enthused. And when interviewed by Bloomberg Businessweek, Andrew Hutson, a supply-chain specialist at the Environmental Defense Fund, found himself not only explaining, but defending, the company’s often-reviled practice of exerting extreme pressure on suppliers to lower prices. “Lowest cost doesn’t have to come from past methods—the squeeze-’em-till-they-bleed approach,” he said. Acknowledging that such tactics had led to environmental degradation in the past, he insisted that Walmart was now doing something different by helping suppliers save money.

“Walmart is one of the most environmentally active and vocal companies,” Ma Jun, of the Institute of Public and Environmental Affairs, tells me admiringly. “I respect them for being willing to stick out their head. The globalized economy has created a big transfer of pollution to China. We export all these cheap products, but the waste gets dumped in our backyard, contaminating China’s water, air, soil, and coastal seas. I don’t think Walmart wants to see the day come when all this is blamed on its sourcing practices and they are held responsible for much of the damage. They want to do something now to change it.”

Measuring the Walmart Effect

Even if Loftex and the Dalian Xingyeyuan Group (to which Walmart had also sent The Washington Post) are Potemkin villages of a sort, what is telling about them is not simply how they have greened their supply chains, and saved a bundle in the process, but how they serve as important models for transforming Lee Scott’s vision from theory into practice. The use of such models is, of course, a time-tested Communist Party way not only to experiment with a new reform, but then to propagandize for it “among the broad masses,” and Walmart seems to have learned that technique well, at the hand of the master.

Through the so-called Walmart Effect—according to the scholars who study the enormous global footprint of the company’s management decisions—whatever Walmart does will profoundly influence all its competitors. So Walmart’s reincarnation as a company devoted to sustainability is, in fact, a catalyst for a positive global shift. When Michael Duke took over as CEO from Lee Scott in 2009, he not only reaffirmed Scott’s goals of ultimately having Walmart rely completely on sustainable energy, produce zero waste, and sell only sustainable products, but he began referring to these goals as the company’s “new normal.” “The great thing about Walmart’s green effort,” says Edward Humes, “is that, however they do it, it pushes other manufacturers to match them. And they are now exerting very positive influence at many levels.”

Perhaps Walmart executives such as Lee Scott, Michael Duke, and Leslie Dach will, with the help of environmental free-booters like Jib Ellison, prove to be clairvoyants in their ability to divine ineluctable environmental trends and green-market demands. They certainly seem to have arrived at a profitable and mutually advantageous partnership with the Chinese government. As China’s economy has decentralized, and many provincial and municipal governments have become rich fiefdoms riddled with corruption, Beijing has struggled to deal with tens of thousands of local polluting factories and hundreds of thousands of small-scale food producers, many of whom have been wantonly violating environmental regulations. But in large, well-organized companies like Walmart that operate nationally in China, the government has found auxiliary sources of public education, control, and regulation—all at no extra public cost.

Indeed, the commercial proselytizing by Walmart managers about the need to respond to consumer demands may end up changing China far more than previous generations of Western Christian missionaries, educators, or advocates of democracy and human rights ever did. For in such giant global corporations, which must please China’s increasingly demanding middle-class consumers in the marketplace, Chinese are becoming accustomed to wielding an influence that they have not hitherto had in the political arena. How Communist Party leaders will deal with such rising expectations is hard to predict. And, as Walmart surely understands, China can be a fickle mistress. Such liaisons of convenience can easily fall apart, especially if interests begin to diverge.

Even if the company has found accommodation and something of a global sweet spot in its efforts to go green and make more money, several other challenges elsewhere continue to bedevil it. Particularly in the United States, Walmart’s reputation continues to suffer from the company’s low hourly wages, fractious relationship with labor unions, allegations of failure to extend women staffers the same pay and promotion opportunities as men, and the damage done to communities and small businesses by the opening of new Supercenters nearby.

What’s more, the company may, by drifting from its old working-class values and customers, risk turning “the people’s store” into a big-box boutique. By appealing more to the kind of upscale clientele that goes from yoga lessons to Whole Foods, Walmart might just kill, or at least unsettle, the Sam Walton goose that has been laying golden eggs for several decades. In fact, with Walmart’s U.S. sales declining during the past nine quarters, critics are already asking how the company’s new green identity will sit with its traditional base, especially in the American South, now awash with rampaging Tea Partiers seeking to defeat climate-change legislation and defund the Environmental Protection Agency. A hint of blowback appeared this April, when The Wall Street Journal reported that the company had decided to launch an “It’s Back” promotional campaign to let its “core customers” in America know that the company would be restoring fishing tackle, bolts of fabric, and other “heritage” merchandise that it had removed from store shelves in what the paper called “a flubbed renovation effort.”

As I roamed through Walmart stores, visited factories, traipsed around co-op farms, and listened to corporate executives in China, I found myself pondering a question that I couldn’t get out of my mind, but that had little to do with Walmart’s immediate success in China or the world: However smart, prescient, and successful Walmart’s sustainability efforts actually turn out to be, just how “sustainable” is the whole bloody global-retail proposition that lies at the heart of the company’s amazing progress? Maybe Walmart’s new initiatives will pencil out in a business sense for the company and, within the terms of the current retail game, even serve as a model of good environmental stewardship. But will the hyperactive retail-consumption model that it has pioneered for global consumers pencil out for the world?

“Yeah, I worry that people will read my book and think that I have drunk the Kool-Aid,” says Edward Humes, reflecting on his admiring study of Walmart’s green progress. “When I started, I didn’t imagine I would be convinced that Walmart was green. And actually, they are not green, but they are a lot better than they were. And the efforts they are making are influencing not only their suppliers, but other businesses as well. Now Walmart is acting something like a private regulator. Nonetheless, the nature of their outsourced business model is not, ultimately, sustainable. But,” he says, laughing at the irony of what he is about to say, “we have created a situation where crazy-sounding things make sense.”

In fact, one could say the same thing about China, which—after so many decades of defiant proletarian opposition to capitalism, consumerism, and American imperialism—has embraced the American-style market and is ardently following the Walmart path to prosperity. Indeed, allowing, even encouraging, people to consume as much as they want, or can, has become one of the Chinese Communist Party’s key strategies for political legitimacy and social stability. Party leaders may label their version of development “scientific” or “sustainable,” but it’s still development. The bitter reality is that even if unrestrained consumerism becomes less environmentally destructive per unit of production than it was in the past, it is still unsustainable in the long run. So even as this most innovative of corporate and statist green strategies may represent an environmental breakthrough and good business for Walmart, and good politics for the Chinese government, it may nonetheless end up being very bad business for humankind.

Copyright © 2011 by The Atlantic Monthly Group

http://www.theatlantic.com/magazine/archive/2011/12/how-walmart-is-changing-china/8709/ [ http://www.theatlantic.com/magazine/archive/2011/12/how-walmart-is-changing-china/8709/?single_page=true ] [with comments]


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