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Wal-Mart's Well-Timed Good Citizen Campaign

Rick Newman

The world's biggest retailer has some good news for America, just as the nation--and the company itself--could use some.

Wal-Mart plans to spend an extra $50 billion over the next decade buying American-made merchandise, to help reestablish U.S. manufacturing after two decades of steep job losses to China and other low-cost producers. It has also offered to hire any honorably discharged military veteran who wants a job, estimating it could hire at least 100,000 vets over the next five years. "America needs an economic renewal," Bill Simon, CEO of Wal-Mart's U.S. division, said in announcing the new initiatives. "Through our buying power? we can play a role in revitalizing the communities we serve."

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This pro-America push comes as Wal-Mart faces a range of running controversies. The retailer is an unwitting participant in the explosive gun control debate underway in Washington, since it is thought to be the biggest seller of guns in the country. Nobody has accused Wal-Mart of doing anything wrong, but some activists have called on the company to stop selling firearms. There have also been protests at a handful of Wal-Mart stores, including one less than 10 miles from Newtown, Conn., where Adam Lanza murdered 27 people in December (even though that store, it turns out, doesn't carry guns).

Wal-Mart fanned the flames by initially refusing to meet with Vice President Joe Biden's gun control task force, saying the appropriate executives had commitments elsewhere. When that provoked criticism, the company sent somebody to the talks. Meanwhile, there are unconfirmed reports that Wal-Mart has stopped selling ammunition until the controversy blows over or there's clearer guidance from Washington.

Wal-Mart also remains a regular target of worker rights advocates who claim that the company deliberately keeps pay low and full-time benefits scarce. Critics have accused the company of turning a blind eye to abuses by suppliers that led to the horrific deaths of more than 100 workers last September at factory in Bangladesh that manufactured clothing sold by retailers including Wal-Mart. The company is also facing legal action over an alleged bribery scheme in Mexico, with some investors threatening to sell their Wal-Mart holdings if the company doesn't institute widespread reforms.

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Wal-Mart generally defends its practices, and like any corporation, it wants nothing to do with touchy political battles. But it has a harder time avoiding them than most. On one hand, Wal-Mart certainly doesn't want to provoke regulators or legislators who could make it jump through additional hoops and bring bad publicity to the company. Nor does it want to be seen as favoring either side in the gun control debate.

By taking guns off the shelves and acknowledging the move, the company would look like they were sucking up to nanny-state prohibitionists, which could turn off rural shoppers who constitute Wal-Mart's original customer base. But Wal-Mart's growth plans involve new stores in a lot of urban locations, where support for gun control is stronger and many customers wouldn't mind seeing corporate titans take a stronger stand against guns.

Profitability, ironically, may be the least of Wal-Mart's concerns. While gun sales have risen over the last few years, they represent a tiny portion of the retail giant's overall sales. Wal-Mart doesn't break out gun sales, but they belong to a category known as "hardlines," which accounts for just 10 percent of sales, according to Wal-Mart's latest annual report. Since that category includes sporting goods, hardware, paint, automotive accessories, crafts and many other things, gun sales may account for just one percent (or less) of Wal-Mart's overall revenue.

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So a bit of flag-waving may help Wal-Mart tread a middle course--though it's not clear the company's latest proposals will do much for the overall economy. Wal-Mart staunchly denies that it's rolling out feel-good proposals as a way to counteract bad publicity. It has published testimonials from veterans' advocates--including first lady Michelle Obama and Republican Arizona Senator John McCain--praising its focus on hiring former soldiers, who face a higher unemployment rate than the overall population. And Wal-Mart suppliers, including textile manufacturer 1888 Mills and camping-gear producer Coleman, have said the giant purchaser's commitment to providing longer contracts and other incentives will help them support or revive domestic manufacturing.

Still, Wal-Mart tends to offer mostly low-paying jobs that may not be a natural career choice for vets who joined the military to get technical training, leadership experience or other skills meant to give them an edge in the civilian job market. And Wal-Mart's pledge to spend an extra $5 billion per year on domestic goods won't do much if it encourages the kind of labor-intensive, low-cost manufacturing that China has excelled in."Wal-Mart's business model is to squeeze suppliers to the max," says Alan Tonelson, a research fellow at the U.S. Business and Industry Council, which supports policies aimed at more domestic hiring. "If Wal-Mart follows the same model and squeezes U.S. suppliers so tightly that they're not able to pay workers decent wages, then the new 'Buy America' policy would be a pyrrhic victory."

It's worth keeping in mind, of course, that Wal-Mart is a public company obligated to produce optimal returns for shareholders rather than jobs for deserving Americans. But sometimes one coincides with the other.

Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.

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