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Why Wal-Mart Deserves the Nobel Peace Prize

|Includes: Walmart Inc. (WMT)

After a dismal record of awarding the Nobel Prize to the undeserving and worse, the Norwegian Nobel Committee this year has finally gotten it right, selecting the richly deserving Chinese dissident Liu Xiabo. But instead of allowing the trend next year to revert to the depressing mean, why not select the giant retailer Wal-Mart? It would be a refreshing change from previous years when the likes of Kofi Annan, Mohammed El-Baradei, and Barack Obama were tapped for the honor.

Wal-Mart is the company people love to hate. It plows up farmland and sets up enormous and featureless stores surrounded by acres of parking lots. It contributes to urban blight by charging prices so low established downtown merchants can’t compete and ultimately go out of business. It viciously fights any attempt to unionize its employees. It pays low wages and offers few, if any, benefits. It is accused, if unjustly, of sending U.S. jobs overseas. And there are the Wal-Mart greeters.

But these negative aspects of the company’s culture have to be balanced against the benefits it has produced for humanity.

Wal-Mart is the largest single U.S. importer of Chinese goods, accounting for 15 percent of our total imports of Chinese consumer products. The numbers are huge: over $30 billion in annual imports from China, representing about 80% of the company’s total imports. It would almost be accurate to say that China doesn’t have a trade surplus with the United States; it has one with Wal-Mart.

We tend to think of big trade deficits as a Bad Thing, and in an aggregate sense they can be. If China didn’t own nearly a trillion dollars worth of U.S. Treasury securities (effectively lending us the money), we wouldn’t be able to afford all the Chinese goodies we import. The trade deficit and our corresponding indebtedness at least partly explain the cool reception President Obama received at the recent G-20 summit in Seoul. Fed Chairman Ben Bernanke’s QE2 (quantitative easing round two), which involves injecting $600 billion into the U.S. economy by buying Treasury securities is seen by the Chinese, the Germans, and the Japanese as currency manipulation, the same thing we accuse the Chinese of doing when they buy dollars to depress the value of the renminbi.

Wal-Mart’s responsibility for the trade deficit and the loss of American manufacturing jobs, however, is tenuous, at best. U.S. fiscal and monetary policies explain our deficits far more than the actions of any company, however large. Wal-Mart, whatever its critics say, is not conspiring to shift good American jobs overseas. It is acting rationally, and doing its utmost to help the family budgets of poor and middle class consumers go further than they otherwise would. There is, admittedly, something strange and almost surreal – think of the serpent swallowing its tail or two scorpions in a jar – in the large swathes of America where Wal-Mart is the biggest employer and its employees spend a big chunk of their paychecks at…Wal-Mart.

But Wal-Mart has, arguably, done more good for more people than any NGO, charitable foundation, international organization, or government aid program in history.  Since 1978, when market-oriented economic reforms began, China has experienced the most rapid and sustained increase in human prosperity in world history. According to the World Bank, more than 600 million people have been lifted out of poverty during this period. The number of Chinese living in poverty has fallen from 65% of the population to around 10%. In both absolute numbers and percentage of population this is unprecedented. To be sure, the World Bank and United Nations definition of poverty is different from yours and mine: you have to have a per capita income at purchasing power parity of less than $1 a day (since revised to $1.25) to qualify. By any measure, an income of $1.25 a day still counts as a fairly wretched standard of living, but it is enough to afford minimal standards of food, clothing, health care and shelter.

China’s progress in reducing poverty dwarfs the combined effects of all other poverty reduction programs undertaken by anyone, anywhere in the world, over the past 30 years. In spite of all China’s remaining poverty, not to mention the ugliness and brutality of its political landscape, this is an astonishing achievement.

Although this achievement is the result of concerted government policies rather than the independent actions of any company or group of companies, Wal-Mart, as the largest single importer of Chinese products, is one of the most visible symbols of the success of those policies. Wal-Mart’s retail operations in China, launched in 1996, now employ over 80,000 people – “associates” in company parlance – but this number is inconsequential next to the number of people who work in factories that supply Wal-Mart products. The company has more than 20,000 Chinese suppliers, which employ several million people. Using standard employment and income multipliers, Wal-Mart can be credited with the creation of as many as 10 million Chinese jobs and contributing as much as $15 billion annually to China’s GDP. That’s enough to keep 32 million Chinese above the poverty line.

In addition to creating well-paying jobs, Wal-Mart is also a leader in energy efficiency and climate protection, having enlisted BSR, a leading corporate social responsibility consultancy, to reduce greenhouse gas emissions from its Chinese suppliers 20% by 2012, and to cut 20 million tons of greenhouse gas emissions annually from its global supply chain. Wal-Mart, sensitive to criticism of its labor practices, conducts rigorous audits of its suppliers. Abuses do occur – it is hard to monitor tens of thousands of suppliers – but the company is notorious for suspending suppliers for violating company standards. Yes, factory workers in China earn far less than their American counterparts, and factory health and safety standards may not be 100% compliant with U.S. Occupational Safety and Health Administration (OSHA) standards, but using a more realistic yardstick, suppliers to Wal-Mart and other big U.S. companies tend to pay higher wages and offer better working conditions than most other factory operators in China.

The 2010 Nobel Peace Prize awards ceremony will take place in Oslo in a few weeks, sadly marked by the absence of the honoree and his wife. Shortly thereafter, the committee is likely to take up deliberations concerning the 2011 prize. Here is a modest proposal: instead of selecting a faceless bureaucrat and the organization he or she represents, or a charismatic but ineffectual activist, or a political hack who has just negotiated a peace agreement or political settlement likely to fall apart before the ink is even dry on the signatures, they should choose Wal-Mart. It might help us all save money and live better, as their slogan puts it.

Disclosure: no positions