Wednesday, August 1, 2012

From Monopoly to Monopoly

I apologize for the blog being dark for the past couple weeks; spent some time in Vancouver for the summer, but hopefully we should be back on the right track.

I thought about where I should post this, as it might fall better under the philosophical blog, but I think in the long run this is the better forum to air it. As many of you are no doubt aware, today was the death knell of the Canadian Wheat Board, as their monopoly has officially come to an end and farmers are allowed to 'market' their own crops as they see fit.

For the longest time, the Harper Government has defended the move to destroy the CWB as a means of providing farmers choice and allowing them to get better market value for their goods. For the Harper Government, it was all about CHOICE. But there's a small detail that the Harper Government has tended to leave out in this argument, and that is that there is only the illusion of choice.

I recently sat down and watched the documentary Food Inc.; well worth the watch if you haven't seen it, and it talks a bit about how our food has become an industry like any other. The documentary explained that in the 60s - 70s, the five largest food organizations controlled about 25% of the market. Today, they control over 80%.

Furthermore, if you take a company like Monsanto, a few decades ago only about 3% of seed crops in the US were from Monsanto seeds. Today, that number is over 90%. I am highlighting this because it illustrates a point that I think people often tend to forget: We talk about choice and how there are different companies and buyers you can sell to or buy from; but often, those different choices are owned by the same company.

A good illustration of this was a report on eyeglasses that I saw a few weeks ago. It explained that LensCrafters and Pearl Vision, despite apparently being opposing eye-ware companies, are owned by the same multinational company. Furthermore, many of the 'name brand' frames that both of these companies stock are ALSO OWNED by the same multinational corporation.

If you think I've strayed from the point, perhaps I have a little, but I can think of no better way to illustrate my point. When it comes to marketing crops, farmers are going to have the illusion of choice. There may be hundreds of companies to whom they can sell their goods, but in truth those companies exist only as an extension of another larger company. And when you trace it all the way back, you'll find that there's probably only 4 or 5 real companies that farmers will eventually deal with.

In essence, we've swapped one monopoly for another.

The difference here though is that now the monopoly is in the hands of private corporations. I never interacted with the CWB, as I am not a farmer. As such, I cannot say unequivocally that they acted in the best interest of farmers. My understanding, from those who did have interactions with them, was that they did. And since that comes from people I can trust, I can assume that the CWB did have the best interest of farmers in mind during their tenure.

The same cannot be said for private business. The only thing private business cares about, as well all know, is private business and their bottom line.

Think back to the early to mid eighties; during the OPEC Crisis. A small monopoly of oil producers was able to work together to set a price for their product, which in turn caused financial instability for people and countries around the globe. This was done in order to maximize profit for the OPEC members; and this is what happens when a company has a monopoly on buying and selling: They can charge or pay what they want.

With the CWB, there was only one option for farmers. As such, all farmers were treated equally regardless of how many acres they had because there was a set price. But now, with the illusion of choice, there is going to be disparity. One farmer who has 12 acres of land may get two - three dollars more an acre than a farmer with the same amount of land, simply because he or she was able to work out a better deal (or a quicker one) with a purchasing entity.

Now, this is a real problem.

In Canada, we've seen the decline of the family farm for the past few decades. Fewer and fewer people are choosing to make a career in farming; and those who do, often have to work other jobs or find other means of paying bills because farming doesn't supplement their income enough. This was a problem when we only had one purchaser paying a fair price to everyone, imagine how much worse it is going to get now that people are truly in a free-for-all.

Effectively, the loss of the CWB is going to mean a loss in net farms for Canada. Smaller farmers who were barely scraping by with the CWB are going to find themselves now in open competition to market their crops against larger farmers who can afford to buy better connections or means of selling their crops. What this is going to lead to is a lot of farmers having to sell crops below the cost of production, and eventually lead to those farmers losing their livelihood.

And of course, that will have an effect on the average Canadian. Chances are pretty good that sales without the CWB will see more Canadian product shipped outside of Canada; couple this with loss of farmers and farms in our country, and we could see an explosion of prices at our own local supermarkets. With more product leaving the borders, and less being produced within it, it is only a matter of time until we face a shortage that will lead to increased cost on the average consumer.

And then we enter the real problem, the top down control that is about to enter this country. My understanding is that the CWB didn't care how you grew your crops, just as long as you sold them through them. This might not be maintained under the situation we've created in the name of choice.

Again, looking to Food Inc, it was discussed how farmers became nothing more than a cog in the corporate machine. In the case of chicken farmers, how the company could mandate the upgrading of equipment or housing (which could cost as high as $250,000 - $500,000), all of which was paid by the farmer.

Let me repeat that: A company demanded these upgrades, but refused to pay for any of them. Refusal to have the upgrades led to your contract with the company being cancelled, and the market for your product basically disappearing.

We've already seen some level of corporate control, especially from seed companies such as Monsanto; I'm sure we're all aware of Monsanto's rules regarding seed saving. (If you're not, the short end of it is this: In 2008, you plant the seeds produced in 2008. In 2009, you cannot plant 2008 seeds. If you do, you have violated Monsanto's patents and can be sued for infringement.)

Sure, farmers may have choice in marketing, but we may have condemned them to lose choice in how they operate their farm on a daily basis. If a company starts mandating practices, demanding upgrades, and so forth at the risk of cancelling your contract, then a farmer (who was an independent businessperson) has now essentially lost control of their company.

When you think about that, you really have to ask: Is marketing choice really worth all that?

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