Mahtab Haider

‘IN THE old days there were doctors, decent housing, the housing was well kept. They paid for the electricity in your housing and they paid for health care,’ says Alberto who worked on a Costa Rica banana plantation which supplies to the global fruit giant Del Monte, when the international charity ActionAid interviewed him in 2006. ‘In harvesting jobs, there used to be teams of four or five; now we have to do the same work with three people. These are all the things that happened in 1999 when they sacked everyone overnight and rehired them under different conditions. We paid the price. They’re always saying that the market is bad. It’s just another way of putting pressure on us. The market’s always bad for Del Monte.’

What had changed in 1999 that so radically lowered the living standards of hundreds of thousands of Costa Rica’s banana harvesters including Alberto? Del Monte fired its plantation workers in Costa Rica and rehired them on wages that were an estimated 40 per cent lower than in the last contract, granting fewer benefits, and an increase in the number of temporary and sub-contracted employment. This cost-cutting enabled Del Monte to offer its produce at what one industry insider described as a ‘ridiculously low prices’. And it paid off. Three years later, Del Monte signed a deal to become the exclusive supplier for the UK supermarket Asda which would change the way bananas are produced and sold for the international market. As a result of the deal, Asda cut the retail price of its bananas from ?1.08 per kilo to 94p per kilo in 2002. In response, other UK supermarkets followed suit, with Morrison cutting down to 85p and Asda retaliating once more by cutting to 65p. Within a span of months, the ‘Del Monte model’ had become the standard for banana plantations across Costa Rica, spreading onto the global industry.

Fast forward to 2005. Asda-Walmart (by now it had become a subsidiary of the US supermarket giant) cut banana prices once again, with their competitors Tesco, Sainsbury, and Morrison slashing prices to match on that very day. Come 2006, Asda initiated yet another price war. For consumers in the UK, it was, of course, ‘consumer sovereignty’ at its sparkling, laissez faire best, but here’s what it did to plantation workers in Costa Rica: the wholesale value of Costa Rican bananas fell from an average of ?374 per tonne in 2005 to ?287 per tonne in 2006. Since agrochemicals constitute the bulk of the production costs at a banana plantation, it was the workers wages and benefits that were considered the only variable cost that could take a cutback. ‘We’re earning the same amount or less than we were ten years ago for doing more work,’ one plantation worker told ActionAid. ‘It’s a hunger wage if you can’t get overtime,’ said another. According to local trade union officials, approximately 80 per cent of the plantation workforces used to have permanent contracts in 2000. That figure had been whittled down to 40 per cent by the end of 2006.

Incidentally, Asda-Walmart is one of Bangladesh’s biggest clients for the export-oriented readymade garments industry, which accounts for over three quarters of the country’s total foreign exchange earnings. In 1999 a pair of basic jeans in the UK used to cost roughly ?15. Today at an Asda outlet, the same pair retails for about ?3. In 2006, Marks and Spencer cut by up to 5.5 per cent, at the same time demanding better terms and reinforcing its social compliance rules. Together, Asda, Tesco, Sainsbury and Marks and Spencer account for about a third of all the clothes in the UK retail market. Even while the spate of violence in the country’s garments sector and the ensuing negotiations had seen the minimum wage in the garment’s sector to almost double, Tesco pushed the price it was paying for clothes sourced from Bangladesh down by about 5-10 per cent lower than what it was in 2003-04. Manufacturers in Bangladesh say the CM (cutting and making) price that Tesco pays to them has been slashed by half in the past decade. Despite the hike in minimum wages, which many factories are yet unable to pay, in real terms (i.e. in terms of the goods and services that can be bought) the new minimum wage is still lower than what it was in 1994. Of course, much has to do with the fact that even while buyers have squeezed production costs harder and harder, consistently high inflation in Bangladesh since 2006 has meant that prices of food and other basic necessities have increased between 50-70 per cent in the span of the past two years.

These economic consequences of global sourcing of agricultural and consumer goods are not unique to the Asda model however. Supermarket sales of non-food goods have risen a staggering 90 per cent in the UK between 2000 and 2004. Clothing sales at supermarkets are growing five times faster than at retailers in the rest of the sector. And this growth is being fuelled and is reinforcing the monopsonist power of such supermarkets in the global marketplace. Data collected by the UK’s Competition Commission in 2000 suggested that larger supermarkets consistently extract prices from suppliers that are on average 9 per cent lower than the industry average. By 2006 that gap had widened to between 15-20 per cent. ‘Two decades of liberalisation, privatisation, and deregulation in developing countries have opened up their economies to global market forces throwing workers and producers in different corners of the world into intense competition with each other,’ writes ActionAid in its 2007 report ‘How British supermarkets are keeping women workers in poverty’.

One of the biggest factors behind the growing power of these monopsonist buyers who source from the third world is the clout they can exercise because of the bulk of their purchases. In many cases, a single supermarket can account for the total capacity of one or several factories that supply to them, and the factories are bound by the unofficial condition that they cannot supply to any of the buyer’s competitors. The result is that manufacturers are under constant pressure to either deliver on sometimes irrational demands of the buyers, or to lose what is potentially a make-or-break contract. What in effect these large buyers are doing in their bid to lower prices is transferring the costs and risks of slashed retail prices and their style of ‘lean retailing’ on to the producers. One of the classic ways that buyers do this is by keeping the volumes that they expect producers to ship variable on consumer responses to the item rather than the traditional pre-arranged contract basis. In the case of Costa Rican bananas it has been seen that buyers will communicate the confirmed quantity they expect a shipment of on the morning of the night-flight that shipment will be loaded into. If the producer fails to meet the quantity, since buyers pay retrospectively, there are charges or levies, and even the possibility that the buyer will place the item on a sale and expect the producer to shoulder the costs.

Despite the fact that a slew of social compliance rules have justifiably been drawn up so that producers in developing countries and LDCs don’t violate the rights of their workers, the truth is that until now, governments in the US and the UK, where supermarkets are gradually gaining in market shares across the spectrum of consumables, have left the action on these exploitative buying practices largely to the discretionary prerogative of the supermarkets. Unless governmental mandatory regulations are developed to govern these buying practices by companies in the West and more stringent legislation to govern manufacturers in countries like Bangladesh, whether it is minimum wage or health or safety regulation, the workers are likely to be doomed.