Is Wal-Mart a Raw Deal for Chicago? Or Is Chicago a Raw Deal for Wal-Mart?

The latest drama in the slow, tense Walmartization of Chicago is the bankruptcy of Broadway Consolidated, the minority-owned contractor that built the Austin big box. Here’s why the city’s economic and racial history makes Chicago fertile ground for Wal-Mart, and tough for its opponents.

Walmart Store

Crain’s has a fascinating investigative piece on the bankruptcy of Broadway Consolidated, the construction firm that built Chicago’s first Wal-Mart, in Austin. It’s a lengthy and depressing piece, about not just the difficulties of working within minority-contracting rules, but also the difficulties of working with Wal-Mart, which takes the same approach to the building of its stores as it does to the products within them:

Generally, subcontractors provide their own materials and add a 3% to 4% markup that’s passed on to the owner. But Mr. Williams says subcontractors lose one opportunity for profit when working for Wal-Mart because the company, like other large retail chains, provides its own materials and supplies as a cost-cutting measure.

“You’re taking these jobs to break even at best,” says Herb Lande, owner of Joliet-based Imperial Construction Associates Inc., whose steel-erection firm has done work for several large retail chains, including Wal-Mart.

The collapse of Broadway is just the latest turn in the saga of Wal-Mart’s push into Chicago, though the city’s not alone in having a protracted, politically tense relationship to the company; a similar fight is brewing in New York City.

On one hand, the lack of retail options in black communities is a serious issue, and it’s not just a matter of food deserts, the primary reason mayor-elect Rahm Emanuel gives for supporting the development of Wal-Marts and other big-box stores. In 2005, the Chicago Reporter’s Kimbriell Kelly looked at “retail leakage,” the phenomenon in which residents of poor communities are forced to shop in other neighborhoods:

According to the Reporter analysis, residents of the city’s white neighborhoods outside of the O’Hare community area log $8.2 billion in consumer spending with businesses in those neighborhoods raking in $8.6 billion in retail sales. The picture is much different in the city’s 27 black communities. In all, residents there spend $8.3 billion a year, but retail sales for businesses there stands at just $2.9 billion.

[snip]

The sum of leakage costs for apparel and grocery items in black neighborhoods totaled more than $792 million for 2004. But, in white neighborhoods, businesses sold a combined $263 million more than neighborhood residents spent on apparel and grocery items. That’s because Saphir, White, Sydnor-Davis and others from other parts of the city frequently shop there.

2005, coincidentally, was when the Austin Wal-Mart began to take shape. Ta-Nehisi Coates, now of the Atlantic, toured the neighborhood with Margaret Garner, the head of now-bankrupt Broadway Consolidated and the main figure in the Crain’s piece. One of the things Coates noted was that, thanks to the history of race, economics, and labor in Chicago, employing minorities and employing union members are not two goals that go hand in hand:

In a city whose building trades are dogged by allegations of racism and in which the unemployment rate for black men is 11.8% (double that of white men), those job promises are huge, and not just for the community.

[snip]

Chicago is a union town. But in [Emma] Mitts’ ward–and among many poor blacks–some unions rank only a couple of notches above the Ku Klux Klan. Black leaders in Chicago have repeatedly charged that the building-trades unions, traditionally controlled by whites, are keeping a grip on jobs. While 37% of Chicago is black, only 10% of all new apprentices in the construction trades between 2000 and 2003 were black, according to the Chicago Tribune. The unions that most vociferously oppose Wal-Mart are not in the building trades but represent retail workers, such as the United Food and Commercial Workers (UFCW), which has long welcomed blacks. Still, Mitts and many in the 37th Ward conflated the two and had no problem allying themselves with Wal-Mart.

Strictures about minority-owned contracting are a double bind. They’re meant to encourage the participation of minorities in construction. But the history of race in construction-oriented unions means that the construction trade has a low minority participation rate, and it’s a industry that’s slow to change due to its political nature, as pointed out in a sidebar to the Crain’s investigation:

“This industry is basically a network of individuals that have had control of it since the beginning of construction,” says Eddie Forte, chairman of the group Black Contractors United and president of Precise Construction in Chicago, a general contractor that also does concrete, excavation and infrastructure work.

It’s hard to separate the many tensions about Wal-Mart, from wages to unionization to jobs, from the tragic history of race in the country’s most segregated city. The collapse of neighborhoods like Austin makes them likely candidates for low-wage big-box retailers like Wal-Mart, because they’re badly in need of jobs, not to mention, as Kelly pointed out, retail options for residents. And the destabilization of those neighborhoods is related, in part, to resistance to integration in housing and unions.

As Coates describes, the things that made Wal-Mart spring from and grow like kudzu in the rural South–cultural and economic resistance to unionization, deindustrialization, high unemployment, low retail density, low wages among consumers–make neighborhoods like Austin appealing.

Wal-Mart sometimes gets treated like a disease. But even if you buy that, it’s just as much a symptom. Stagnant wages and low employment make the retailer doubly appealing: the jobs are appealing to the unemployed, and the promise of low prices is appealing to the underemployed. The “Walmartization” of America, and Chicago, is part of larger trends about class–and inevitably, in Chicago, of race.

 

Photograph: Walmart Stores (CC by 2.0)

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3 years ago
Posted by RogerClegg

Why do race, ethnicity, and sex need to be considered at all in deciding who gets awarded a contract? It's good to make sure contracting programs are open to all, that bidding opportunities are widely publicized beforehand, and that no one gets discriminated against because of skin color, national origin, or sex. But that means no preferences because of skin color, etc. either--whether it's labeled a "set-aside," a "quota," or a "goal," since they all end up amounting to the same thing. Such discrimination is unfair and divisive; it breeds corruption and otherwise costs the taxpayers money to award a contract to someone other than the lowest bidder; and it's almost always illegal—indeed, unconstitutional—to boot (see 42 U.S.C. section 1981 and this model brief: http://www.pacificlegal.org/page.aspx?pid=1342 ). Those who insist on engaging in such discrimination deserve to be sued, and they will lose.

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