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.
http://triplecrisis.com/multinational-retail-firms-in-india/