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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Apple Scamming Consumers on Sourcing and Worker Conditions

Tim Cook CEO of Apple and Workers at Foxconn Plants in China

New Orleans   Steven Greenhouse reported in the Times that Apple was claiming it was finally going to “come clean” on the real conditions of the work and workplaces of its largely Chinese subcontractors.  The reaction from those who understand the real issues and the nature of reviewing compliance with any kind of decent global standards for workers was immediate and critical, largely because once again Apple was trying to scam its consumers and the general public by covering up its naked disregard on these issues with a fig leaf.  The name of the fig leaf in question was the Fair Labor Association.

Within days of Apple’s announcement the CEO of FLA is already whitewashing Apple suppliers, when any real review or update would have been impossible.

Greenhouse quoted Jeff Ballinger head of Press for Change and a long time organizer, activist, and critic of some of these inspections.  Jeff is also a former staffer of the AFL-CIO’s Solidarity Center in Indonesia where he was expelled for assisting in organizing unions and raising these same issues in the mid-1990s.   Jeff and I are often in touch, and he forwarded me some comments he made as part of a Q&A on this Apple scam, and I thought I would share.  Among many other things, note that in making the “claim” of union involvement, FLA “forgot” to mention that all of the union had withdrawn because of the weaknesses of their inspections and standards.  http://video.cnbc.com/gallery/?video=3000073151

Question    Assessments by the fair labor association began yesterday and will last for more than two weeks.  Let’s bring in the director of labor rights organization, Press for Change.  Jeff great to speak with you. The fair labor association you think it’s sort of the fox guarding the hen house. This is all “for show” here?

Well, they have a poor, 12-year track record.  Nike – that i follow most assiduously – not a lot has changed after the FLA started to inspect these factories.   In fact we have numerous instances where workers have fought for restitution from factory owners things that the FLA didn’t uncover or wasn’t concerned about.

Question    What i thought was curious was that Apple was the first tech company to join the FLA, Fair Labor Association.  Does, in your view, does that make the Fair Labor Association biased in any way because some of its members are the companies who are contracting these companies that are being audited?

I think it’s been biased from the get-go and the “spin” has already started. The head of the FLA gave an interview where he said unions had been at the founding of the FLA, which is kind of “technically” true.  When unions left that was one thing he didn’t mention. Unions got out of the FLA when they saw what the inspection regime was like and there wasn’t any enforcement power and from Apple’s side, Apple says that they were admitted to the FLA, as if it was some kind of an honor but, you know, you pay your money and you’re a member.

Question    So, in terms of who should then do the auditing of Foxconn, who would issue the most fair and objective report?

Well, you know, all this auditing can’t take the place of worker self-organization and you can’t do that in china.

Question    They should be unionized? Given that can you not form a union in China —

I understand, but there are ways – workers find ways. In Indonesia, between ’90 and ’95 through a combination of international solidarity and worker protest, workers raised their minimum wage 300%.  There are things workers can do.  But it takes the global attention.  It takes solidarity with some international labor rights organizations to keep the focus on and that’s what I’m hopeful for in this Foxconn case that unlike the suicide flap — that I thought would result in a real lasting kind of pressure campaign — it disappeared, and you know,  I think in this case because the FLA has this track record (of failure?), we can get some Chinese groups based in Hong Kong to look over their shoulder as they are doing these audits and really hold their feet to the fire.

Question    Don’t you inevitably  – on these supply chains – once a union is unionized – wouldn’t the supply chain be switched somewhere else.  It would go to Latin America?

Something interesting in Indonesia, as the wage was rising 300%, foreign direct investment increased over that period. I can show you a study by Berkeley economist that was published in the American Economic Review that documents that.  So, I don’t think that this “race to the bottom” is an iron-clad kind of deal.  China works very well for the tech industry and I don’t think they are going to pick up stakes if you double or triple the wage.

Question    Actually, Jeff, I just wonder.  We were talking about this issue that for any other company would be, I think, a little jarring, they are under a lot of public pressure.  Bad publicity you could argue. [But] the stock is up today at $503 a share.  Is that dispiriting to those of you trying to change things?

Not at all.  There is a disconnect.  It’s a very successful company.  I might point out that when Nike was in the cross-hairs, their sales in the U.S. fell ’96, ’97, ’98 and ’99 because of the controversy.  I wouldn’t expect, in this case, consumers would turn away from Apple but –  with the addition of social media – we’ll find different strategies to put pressure on this company.

Question    Do you see in any way the work you do returning jobs in America longer term?

No.  Not in any great sense.  But I am encouraged that some employers like New Balance in the shoe industry, for example, found a way to get the China labor cost differential between Massachusetts and China down to $2.50 a pair by using team assembly.  So I think there are things that smart companies can do to have some manufacturing base here and i think it would, it would apply to the tech industry as well.

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