The Poor Will be Among Us, and Corporations Will be Selling Them Crap!

Unilever products in Indonesia

New Orleans    When I wrote Citizen Wealth: Winning the Campaign to Save Working Families, with my editor’s encouragement I labored pretty hard to make the case that major corporations understood the importance of citizen wealth or income security for lower income families and some had in fact fine tuned their business models to live and die on that recognition.  The examples are easy to find in Wal-Mart, H&R Block, and many other consumer products, but the heart of my argument was that companies needed to play a better role in helping maintain and advance citizen wealth for working families and on the other hand predatory corporate players needed to be singled out and punished.

Given that background, it was with mixed feelings that I read with interest an article recently in the Wall Street Journal entitled, Multinationals Market to the Poor:  In Nations Such as Indonesia, Companies Find People at Poverty Line Are Steady Customers for Inexpensive Basics by Eric Bellman.   Reading the article was in some ways a depressing experience though.

Essentially, companies like Unilever, the consumer goods company known for its soap, shampoo, and food products in Indonesia, the worlds 4th most populous country and one of the poorest, has averaged annual sales growth of “more than 22% over each of the last five years.”  Sancoyo Antarikso at PT Unilever Indonesia argues that even in the recession, “we continued coming up with innovations that increase relevance, made our products more affordable, and even money-saving.”  I can’t even describe how much I hope that is true.

But reading about Nestle’s strategy gives me pause, especially given long and troubled history and contemporary stories of Nestle’s role in pushing baby formula on poor mothers around the world and more recently its involvement with other chocolate makers in aiding and abetting child slavery in its contract plantations in the Ivory Coast.  Bellman’s description of their activity in Indonesia is chilling:

Nestle is rolling out a new chocolate snack in Indonesia that was developed by its global network of food engineers [this already sounds frightening!] with the less-affluent customer in mind.  The Crunch wafers are bite-size crispy chocolate-filled triangles that sell for 10 cents per palm-sized package.  Crunch wafers are inexpensive in part because they tap into the same process used to make breakfast cereals.  They also are easy to transport and don’t melt or crumble in their inflated plastic packaging.  It was a complicated engineering process to deliver something so rugged at a low price, but Nestle hopes if the snacks sell well in Indonesia, it can launch them in other developing markets.

Reading that paragraph, does anything sound good? Nutritious?  Even worth a dime?  OMG!!!

That’s not all.  Look at this:

Analysts have long argued that companies selling products and services to people earning less than $4 a day can outperform in tough times.  This is because consumers still must buy food, soap, and other basic goods when the economy is bad….Companies selling everything from cheese to diapers to frozen fish have discovered in Indonesia that they can turbocharge growth…by offering small package sizes that are more affordable to the poor who have limited spending money on any given day.

For the life of me a lot of that sounds like “regressive pricing.”  By that I mean like regressive taxation, charging the poor way more money by volume and weight for the same basic commodity that would be offered someone not strapped to the highs and lows of their daily income.

Too much of this sounds like it doesn’t build citizen wealth, but is plain predatory no matter what the claims.

Nestle products around the world

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Breadlines: The Impact of Budget Cuts on Citizen Wealth

Growing Poverty in London, picture from Breadlines Series in the Guardian

Toronto   If anyone really wants to know what the impact of Congressman Paul Ryan’s budget proposals, Tea Party harangues, and Republic policy propositions would be for working people, it might be worth taking a look at the impact of the current austerity program in Britain under the conservative government there.  A friend in Toronto sent me a note about the “Breadlines” series currently running in the Guardian, which is a sad and tragic eye opener about what happens when politics of cutbacks is implemented.

Make no mistake, these measures are frontal attacks on the efforts of working families, albeit making lower wages, to build any citizen wealth or income security.  Statistics released last week in the USA indicate that family wealth has now fallen to a bit over $100,000 per white household, around $7500 for Hispanic households, and hardly $5000 for African-American households:  a 20-1 gap racially!  No small part of this has been the unaddressed loss of home value which is the key factor in citizen wealth for the majority of working families.  Given the ongoing housing crisis this should not be a surprise, but it still is a shock for those living there, and more pain is being proposed.

In the attack on working families, Britain has already “been there and done that.”  An article in The Guardian series lays out the problem:

The last year has been one of the most difficult in living memory for Britain’s households. The economy continues to falter, and few have enjoyed a pay rise – which, with the spike in the cost of living means millions of wages have fallen in real terms. Employers try to avoid sacking employees by cutting their hours instead – sometimes pushing workers below the requisite number of hours at which they can claim tax credits – and the government has introduced an £18bn programme of welfare cuts.

Living standards have plummeted for many but, say charities, the group that has been particularly hit are those in low-paid or insecure employment. Those on benefits see their income rise in line with inflation but last week, the Institute for Fiscal Studies revealed the sharpest one-year fall in middle incomes since 1981, reversing five years of growth in a single year.

Outnumbering the 5.5 million working-age adults already living in poverty in the UK – officially defined as households with incomes of less than 60% of the median average – those suffering in-work poverty include couples without children who have a gross annual household income of between £12,000 and £29,000, and couples with two children on £17,000 to £41,000.

18 billion pounds in welfare benefit cuts is a huge blow as well.  Amazingly, it is based on something called a “work capability assessment” to see who qualifies and who doesn’t.  For some reason the British contracted that task out to a French outfit, and the process is caught in constant appeals over denial of benefits in what is now a draconian system:

At the centre of the controversy is the work capability assessment (WSA), the test carried out in the UK by the French healthcare firm Atos that is designed to identify people on incapacity benefit who are “fit for work”. Critics say it fails to pick up complex and fluctuating conditions such as mental health. It is widely feared by vulnerable claimants – and for those who are found fit for work, it can trigger a long, stressful cycle of appeals.

What a nightmare!  Coming to a home near yours soon.

Job Centre in London

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