Thursday, July 14, 2005

Snippets from Off the Beaten Path

If you rely on your local newspaper or the 4 major networks or CNN for news, you're missing a great deal. While the rest of the world gobbles up a cornucopia of important information each day, folks who rely on this country's mainstream media are often treated to mere government regurgitations and fluff.

I thought I'd share with you some of the information I publish each week in the Salem CityWatch Digest. Aside from listing progressive programs and events in the Salem, Oregon area, I include sections which detail ways for area activists to get involved plus important articles in the alternative press.

Here are some snippets from the stories and columns of the past week or so that you may have missed:

Who's Watching the Watch List? -- AlterNet
My name is on a list of real and suspected enemies of the state and I can't find out what I'm accused of or why, let alone defend myself. And I'm guilty, says my government, not just until proven innocent or a victim of mistaken identity--but forever. [Note: This column is written not by a progressive activist but by an individual who, until this happened to him, was a staunch supporter of "Homeland Security".]
Class Consciousness Matters -- In These Times
The myth of the self-made man is American culture's own special heart of darkness, helping to explain both its infectious optimism and ruthless greed. The idea holds enough truth and seductiveness to make it easy to forget its delusional dangers. To reprise Marx's famous formulation, individuals, like humankind, do make their own personal history, but not under conditions they choose. But in America, we choose to ignore the caveat about conditions at our peril.
The Original Flag Desecration -- TomPaine
When the House of Representatives passed the proposed constitutional amendment against "flag desecration," the politicians struck a blow not for patriotism but government thought control. Yet, ironically, our poorly educated right-wingers have now set America on course to criminalize the displaying of the Confederate flag, an accident that will leave many of them confused and scrambling to rewind their opportunism.
Yelm Residents Forbidden to Mention Wal-Mart -- New Rules Project
Residents of the small town of Yelm, Washington, have been forbidden to utter the words "Wal-Mart," "big-box," or "moratorium" during City Council meetings. "For a long time citizens have not been coming forward to challenge what the city council has been doing," said Christine Hartman of the Yelm Commerce Group (YCG), which formed to oppose a planned Wal-Mart superstore. Now that citizens are speaking out at council meetings, Hartman said, "They resent this. They don't want to hear what we have to say."
Exporting American Values -- The American Prospect
In this week when we commemorate the first proclamation of American ideals to the wider world, we should pause to contemplate which of our ideals are taking root today. Consider, for instance, the very self-interested testimony of Fu Chengyu, the chief executive of CNOOC Ltd., the oil company owned by the Chinese government, which is currently endeavoring to buy Unocal Corp. "The Chinese people and government are learning from the U.S.," Fu told the Los Angeles Times last Friday. "We are adopting the free-trade system very quickly. . . . We are using U.S. bankers, advisors, exactly meeting the processes of U.S. market requirements" for mergers and acquisitions.
And here's an entire (great!) article:

Pile High, Sell Cheap & Pay Well -- The Financial Times (UK)
Look!" said the first little boy to walk by with his parents. "Awesome!" the next child, a little girl, said to her mother, pointing at a vast inflatable backyard paddling pool suspended from the warehouse ceiling.

At Costco's Kirkland warehouse outside Seattle, the pool dangling from the rafters was apparently delivering what Richard Galanti, the US retailer's chief financial officer, calls the "wow" factor - that extra bit of excitement that it wants to produce in order to draw visitors to its cavernous, no-frills warehouse stores.

"If we have a floating inflatable ring for towing behind a boat, it will be the biggest there is . . . it will be 10ft across . . . and it will only cost $49.99," Mr Galanti says, speaking with rapid enthusiasm in his modest office at Costco's headquarters in the nearby suburb of Issaquah.

But, in the world of US retail, it is not just Costco's "stack 'em high, sell 'em cheap" approach to higher quality items such as organic spinach and balsamic vinegar that merits attention.

In a country where the retail industry has been convulsed over the past decade by the rise of Wal-Mart and rival discounters, Costco's discount warehouse club is part of the revolution. But unlike Wal-Mart, whose low-cost labour model has provoked increasingly vocal criticism, Costco has managed to remain competitive while providing its workers with the highest wages and best healthcare plans available anywhere in the US retail industry.

In the anti-Wal-Mart camp, "Costco is seen as the White Knight to Wal-Mart's Darth Vader," says Nelson Lichtenstein, a University of California professor of labour history, who is editing a new book on Wal-Mart's rise.

Costco was founded by Jim Sinegal, chief executive and president, and Jeff Brotman, company chairman, in 1983 - the year that Sam Walton, founder of Wal-Mart, opened Sam's Club, a rival warehouse club.

Both follow the same broad philosophy, developed for small business operators, rather than for individual shoppers: sell a limited number of items in bulk to reduce handling overheads, use mass orders to win attractive pricing from ­suppliers and sell membership subscriptions to boost returns and guarantee customer loyalty.

At the Kirkland Costco on a Monday afternoon, shoppers pass the threshold every couple of seconds, flashing their $45 annual Costco membership cards at an employee at the door.

Inside, there are plasma screen TVs for $3,999.99, and three pounds of bananas for 99 cents. There are clothes piled on trestle tables, surrounded by warehouse steel stacks of goods.

All this is possible because Costco does not waste money on other things. There are no signs on the aisles and comparatively few staff, no money is spent on advertising, and there is no investor relations or communications department.

"Anything we can do to lower the expenses translates into being able to sell the merchandise for lower cost," says Mr Galanti. "So that we are the extreme value proposition for quality goods."

If membership fees of $960m are excluded, Costco made just $425m in operating profits from its sales of $47bn last year - less than one cent of every dollar it makes at the tills. Wal-Mart has an overall operating profit margin - which includes all its outlets, not just warehouse stores - of
around 5 per cent.

But Costco's frugality does not extend to pay and working conditions. The average hourly wage for a full and part-time US employee is $17.41, according to the company. At Wal-Mart's Sam's Club, the sum for a similar employee is around $12 an hour.

"It's important to pay people a fair living wage," says Mr Galanti, "and if you do, and it's better than everybody else, you're going to get better people - and they're going to stick around longer, and we see that." [emphasis added]

Costco has a staff turnover rate of 17 per cent annually, excluding seasonal hires, compared with 70 per cent seen in the rest of the sector. Only six per cent of new staff leave within the first year, which again reduces costs. "First and foremost, it's the right thing to do," says Mr Galanti. "And long-term, we know it pays dividends."

While Wal-Mart, Target and other US discounters have vigorously resisted union attempts to organise their workers, about 20 per cent of Costco's 84,000 US workers are members of the Teamsters union. Costco acquired the union-organised workers when it purchased Price Club's warehouses in 1993 - but, significantly, it has not sought to shun the unions.

"We prefer not to have them," admits Mr Galanti of the unions. "But we're not going to fight them. It's up to the employees to make that decision, not us."

Only one Costco warehouse has been organised by the Teamsters since 1993. But Roma Aloise, who heads the Teamsters Costco unit, says the company "has played it pretty straight-forward" during organising drives.

"Jim Sinegal believes in treating people right," Mr Aloise says of Costco's chief executive, who was a vocal supporter of John Kerry's 2004 presidential bid.

Wall Street has sometimes been less appreciative of Costco's high-wage model. In August 2003, the company's shares fell about 20 per cent after it reduced its earnings forecast, amid intensifying competition from Sam's Club and growing healthcare costs. Costco increased employee contributions to its healthcare scheme last year, easing some of the pressure on costs.

The company is also not immune to all the criticisms now being directed at Wal-Mart and Sam's Club. It rejects calls for independent monitoring of standards at its suppliers' factories. It is also fighting a would-be class action civil rights law suit alleging a pattern of discrimination against its women employees.

But, for all this, the price fight with Sam's Club continues. Like Wal-Mart, Costco pursues the goal of low prices with an almost religious zeal. It also maintains a strict limit on how much above cost price it will charge the customer - 14 per cent for branded goods and 15 per cent for its
own Kirkland brand products.

"We're extremely fanatical and disciplined about prices," says Mr Galanti, using the shirt he is wearing as an example.

Costco started selling the shirt, which Mr Galanti reckons would cost about $40 in a department store, in three colours under its Kirkland brand for $17.99. It was so popular that they went back with a new, even bigger order, and got a lower price.

"Overnight, we lowered the price from $17.99 to $12.99. Now, as CFO, I'm going: 'How about $14.99?' But that's not how it works."

"Our view is that that is how companies get in trouble in the retail business," he says. "They turn around one day and they are not as special as they used to be."

Costco and Sam's Club opened their first stores in 1983. But the concept of membership-based warehouse club shopping had been launched in the US by Sol Price, one of the great figures of 20th century American retail.

Mr. Price, now 89, was a pioneer of the US discount shopping retail revolution, opening a chain called Fed-Mart in California in the 1950s. After selling Fed-Mart, he and his son Robert opened the first Price Club discount store in a converted aircraft hangar in San Diego in 1976.

Jim Sinegal, Costco's joint founder, was one of Mr Price's protégés, and Wal-Mart's Sam Walton started Sam's Club after a visit to Mr Price in California. Mr Walton, who died in 1992 aged 74, acknowledged in his autobiography that he had borrowed "as many ideas from Sol Price as from anybody else in the business".

But unlike Mr Walton, Mr Price was always sympathetic to unions and believed in paying above-market wages, reflecting what Nelson Lichtenstein, professor of labour history at the University of California at Santa Barbara, says were his roots in the postwar order established by President Franklin D. Roosevelt's New Deal.

Robert Price is now chief executive of the family's latest warehouse venture, Price Smart, which operates stores in Central America, the Caribbean and the Philippines.

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