The Indian government's sudden decision to allow hitherto
prohibited foreign direct investment in multi-brand
retail as well as full ownership in single-brand retail
generated huge public outcry, to the extent that the
government was forced to pause. One important ally
of the government, fearing for her own popularity
in the state of West Bengal where she is currently
Chief Minister, declared that the policy is temporarily
''on hold'', to be greeted with only awkward silence
from the government. Finally the government was forced
to announce that the policy is to be kept on hold
until ''consensus'' is achieved, which certainly seems
unlikely at present.
What this episode does show clearly is that this is
a highly contentious and potentially very unpopular
policy, and that politicians are now getting more
aware of this. So despite the raucous support from
corporatised media and more subtle but possibly more
influential lobbying by big multinational business,
this policy could not be easily forced down in the
face of massive public outcry.
The Indian debate provides an opportunity to consider
the actual impact of large corporate retail, and especially
multinational retail chains, in developing countries
in general. Proponents of such corporate retailing
make several claims: that they ''modernize'' distribution
by bringing in more efficient techniques that also
reduce wastage and costs of storage and distribution;
that they provide more choice to consumers; that they
lower distribution margins and provide goods more
cheaply; that they are better for direct producers,
such as farmers, because they reduce the number of
intermediaries in the distribution chain; that they
provide more employment opportunities.
In fact, all of these claims are suspect, and several
are completely false. This is particularly so in the
case of employment generation: experience across the
world makes it incontrovertible that large retail
companies displace many more jobs of petty traders,
than they create in the form of employees. This has
been true of all countries that have opened up to
such companies, from Turkey in the 1990s to South
Africa. Large retail chains typically use much more
capital intensive techniques, and have much more floor
space, goods and sales turnover per worker.
One estimate suggests that for every job Walmart (the
largest global retail chain) creates in India, it
would displace 17 to 18 local small traders and their
employees. In a country like India, this is of major
significance, since around 44 million people are now
involved in retail trade (26 million in urban areas)
and they are overwhelmingly in small shops or self-employed.
Since other organized activities in India create hardly
any additional net employment, and overall there has
been a severe slowdown in job growth in the past five
years, this is obviously a matter that simply cannot
be ignored.
The argument that such large retail benefits direct
producers like farmers is also very problematic. Greater
market power of these large intermediaries has been
associated in many other countries with higher marketing
margins and exploitation of small producers. This
is even true of the developed world, with more organized
and vocal farmers protesting against giant retailers
squeezing the prices paid to the farmers for their
products, in some instances forcing them to sell at
below cost prices. The European Parliament in 2008
actually adopted a declaration in February 2008 stating:
''throughout the EU, retailing is increasingly dominated
by a small number of supermarket chains…evidence from
across the EU suggests large supermarkets are abusing
their buying power to force down prices paid to suppliers
(based both within and outside the EU) to unsustainable
levels and impose unfair conditions upon them''. In
the United States, marketing margins for major food
items increased rapidly in the 1990s, a period when
there was significant concentration of food retail.
The idea that cold storage and other facilities can
only be developed by large private corporates involved
in retail food distribution is foolish: proactive
public intervention can (and has, in several countries)
ensured better cold storage and other facilities through
various incentives and promotion of more farmers'
co-operatives. The argument is also made that corporate
retail will encourage more corporate production, which
in turn supposedly involves more efficient and less
'wasteful'' use of the production. But calculations
of efficiency based only on marketed output really
miss the mark, because they do not include the varied
uses of by-products by farmers. Biomass is used extensively
and very scrupulously by most small cultivators, but
industrial style farming tends to negate it and does
not even measure it. Biodiversity, use of biomass
and interdependence that create resilient and adaptive
farming systems are all threatened by the shift to
more corporate control of agriculture.
There is another crucial implication that is all too
often ignored in discussions of corporate retail.
Corporate involvement in the process of food distribution
causes changes in eating habits and farming patterns,
which create not just unsustainable forms of production
that are ecologically devastating, but also unhealthy
consumption choices. In the developed world, this
has been effectively documented by books like Eric
Schlosser's "Fast Food Nation"
and Michael Pollan's "The
Omnivore's Dilemma".
In the Baltic countries, this has led to a striking
breakdown of any real link between local production
and the supply of food. The global supply chain has
become the source of most food and the European market
has become the destination of food production: all
mediated by large chains that deal in buying from
farmers (often in contract farming arrangements that
specify inputs and crops beforehand) and in food distribution
down to retail outlets. Anecdotal evidence suggests
that farmers have not gained from this even in a period
of rising food prices, as they are powerless relative
to the large traders who now control the market. And
consumers complain about the rising prices of food,
which the supposedly more ''efficient'' supermarkets
have not prevented at all.
As affluent western markets reach saturation point,
global
food and drink firms have been seeking entry into
developing country markets,
often targeting poor families ad changing food consumption
habits. Such highly processed food and drink is also
a major cause of increased incidence of lifestyle
diseases like such as obesity, diabetes, heart disease
and alcoholism, all of which have been rising rapidly
in the developing world. The recent experience of
South Africa is especially telling: around one-fourth
of schoolchildren are now obese or overweight, as
are 60% of women and 31% of men. Diabetes rates are
soaring. Yet, nearly 20% of
children aged one to nine have stunted growth,
having suffered the kind of long-term malnutrition
that leaves irreversible damage. And it has been found
that obesity and malnutrition often occur in the same
household.
These considerations - which are at least being noticed
in the fierce debate now raging in India around this
issue - surely deserve greater public attention across
the world.
*
Note: This article
was originally published in the TripleCrisis blog
and is available at:
http://triplecrisis.com/multinational-retail-firms-in-india/
