WHAT IF CAPITALISM HAD ETHICS?
How Costco Became the Anti-Wal-Mart

From the New York Times courtesy of the Daily Kos:

But not everyone is happy with Costco's business strategy. Some Wall Street analysts assert that Mr. Sinegal is overly generous not only to Costco's customers but to its workers as well.

Costco's average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam's Club. And Costco's health plan makes those at many other retailers look Scroogish. One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco "it's better to be an employee or a customer than a shareholder."

Mr. Sinegal begs to differ. He rejects Wall Street's assumption that to succeed in discount retailing, companies must pay poorly and skimp on benefits, or must ratchet up prices to meet Wall Street's profit demands.

Good wages and benefits are why Costco has extremely low rates of turnover and theft by employees, he said. And Costco's customers, who are more affluent than other warehouse store shoppers, stay loyal because they like that low prices do not come at the workers' expense. "This is not altruistic," he said. "This is good business."

And

IF shareholders mind Mr. Sinegal's philosophy, it is not obvious: Costco's stock price has risen more than 10 percent in the last 12 months, while Wal-Mart's has slipped 5 percent. Costco shares sell for almost 23 times expected earnings; at Wal-Mart the multiple is about 19. Mr. Dreher said Costco's share price was so high because so many people love the company. "It's a cult stock," he said.

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I'm not picky. If socialism is the only way to create a more just society, then so be it. But I don't really believe that we have to go that far. I think that it's possible to reform capitalism such that workers are treated more fairly, and I think this Costco guy's got a good model for how to do it. The big problem with capitalism, the American version of it anyway, is that it assumes that workers are just like any other kind of capital, like buildings, raw materials, equipment, or money. In other words, capitalism reduces human beings to the level of disposable things, and they are treated thusly. For decades now the business community has insisted that this is the only way to keep the economy functioning; it is a regrettable but necessary "fact" of economics. Of course, they're wrong, and Costco is proving it. The point here is that businesses can still be not only profitable, but dominant, when they treat their employees fairly. I think that, on some levels, this is actually understood by business: the real reason for shafting workers is so that the elites can become all the more wealthy--a great deal of "economic theory" seems to actually be only a web of justification for rampant greed. Whatever the case may be, if American companies continue much longer to operate under the bogus assumption that fair labor practices hurt the bottom line, they may not have the luxury of choosing between fair and unfair employee treatment. An angry and economically strapped electorate may one day impose the Costco standard on business. Either way, American citizens win.

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