May 31, 2012
The more a corporation can drive down the cost of their products and/or services, the larger the profit. This is a fundamental rule which is especially apparent in the banana industry. Walking down the produce aisle in your local supermarket, you might have noticed that banana prices have hit historical lows during a time of rising food prices. The reality of these cheap prices is that bananas, like milk, are often sold at a loss to customers in order for supermarkets to attract customers who will purchase other items during their trip. Any trip to a major grocery store will reveal that a pound of bananas costs anywhere from 65 to 89 cents. This is because bananas are what retailers call a “Known Value Item” which refers to a basic everyday product to which the consumer is very price-sensitive.
Price wars between supermarkets in an effort to gain the lowest possible cost of bananas has led to a race to the bottom which has no winners other than the large retailers and multinational corporations. The fundamental need for competitiveness overrides any moral incentive on the parts of the corporations. In the words of BananaLink, an NGO based in England, “there is no such thing as cheap fruit—someone always has to pay the cost.” In the case of Caribbean farmers it is estimated that they are currently paid one third of the price they received in the year 2000, well below what is considered a living wage.
This wage deacrease is a matter of externalities. Economists define the environmental and social costs of production that are not reflected in the price of a product as an externality—“an expense that is not recorded in cost-accounting but is instead borne by the public at large or future generations." Ignoring these harmful externalities is what enables competitors to sell bananas for less than those from the Caribbean. In comparison to Latin American bananas, Caribbean bananas are regarded as inefficient, as they cost anywhere from three to five times as much to produce.
The reason for this is that Caribbean bananas are grown on small plots, without irrigation, mechanization, use much less chemical inputs and are located on mountainous terrain. The small plots average roughly two to five acres, and are farmed by families, not corporations. While not perfect, this arrangement promoted collective bargaining and allowed for the growth of a middle class and the formation of a banana workers union, which fought for labour and environmental regulations.
In Latin America however, bananas are produced on huge plantations, which can be more than 5,000 hectares in size. Chiquita’s massive plantations are often broken into divisions of typically 20,000 acres, each covering about twenty plantations, served by the company’s own, self-contained communities of 30,000 to 40,000 people.
A direct example of the economy of scale in Latin America compared to St. Lucia was provided by Mark Moberg in his book Slipping Away. In his comparison of the banana industry in the Caribbean and Latin America he pointed out the fact that: “A single farm owned by Chiquita (formerly United Fruit) along the Costa Rica-Panama border comprises as much land as the entire acreage under bananas among all 11,000 St. Lucian farmers in 1992, the industry’s peak year of production.”
These massive farms do not just provide economies of scale for the corporations, but they also resemble slave like conditions in a setting of industrialized, toxic environments of mass production. Labour unions in Latin American banana farming are nearly nonexistent, as union organizers are routinely killed due to their demands for higher wages and safer workplaces, which run at odds with the large multinationals.
As evidence of this, Chiquita is currently facing a US$1 billion lawsuit from Colombian workers who claim that they were victims of right-wing paramilitaries who were on the company’s payroll. This isn’t anything new, as in 2007 Chiquita admitted to paying paramilitaries such as Colombia’s AUC (United Self Defence Forces of Colombia) to protect their workers from falling victim to other paramilitaries operating in the region. As a result, Chiquita was forced to pay a $25 million fine for funding the paramilitaries between 1997 and 2004.
Further north in Guatemala, Del Monte has also been linked to the murders of banana workers involved in union organizing. Guatemala ranks only second to Columbia as the most dangerous place to be a unionized worker. Since the Central American Free Trade Agreement (CAFTA) was ratified in 2006, six unions in Guatemala are currently involved in a legal battle with the government, who they claim are purposefully overlooking instances of murder, continued illegal chemical exposure and other human rights abuses of banana workers.
Despite the U.S. Trade Representative condemning the ongoing violence against banana workers and trade unionists, one needs only to look to their continued support of the Colombian government's murderous security forces to see how hollow the statements of action are. If that is not enough downward pressure against workers in Latin America, Eric Holder, President Obama’s Attorney General, represented Chiquita in their civil suits related to their support of the AUC paramilitaries.
The economic determination of what constitutes inefficiency in the global economy is truly frightening. An industry which abused and even murdered its own workers, engaged in factory farming, poisoned the workers and the environment, and employs child labour is seen as efficient, while another that produces a relative middle class existence of small farmers is not. This is the twisted logic of our current economic system. The fact that the current capitalist system only values prices and otherwise disregards the cost of externalities associated with such destructive practices is leading the banana industry and the entire economic system into an acute state of crisis.
If any of the externalities related to the Latin American banana trade were calculated into the price, Caribbean bananas would no longer seem expensive or inefficient. But this would mean that the capitalist system also valued competition. The reality is that it does not. This is the reason why the United States steadfastly opposed a protected banana market in Europe while protecting its own agricultural system through massive subsidies.
In the United States, much of the agricultural sector is supported by subsidies. In 2009, American farm subsidies topped $15.4 billion—more than 15 times the entire GDP of St. Lucia. Yet, in the WTO the United States aggressively fights against any “distortions” to global free trade made by other countries. The rationale behind the subsidies is that the United States needs to protect its farmers. When the powerful require state intervention and protection, it is always acceptable. The reason for the economic attack and dismantling of the Caribbean banana trade was simple. In comparison to the United States, St. Lucia was small and powerless, and stood in the way of Chiquita making more money in Europe.
In conclusion, the one size fits all trade agenda of the WTO worked to destroy diverse trading arrangements that were unfavourable to U.S. hegemony. The United States defended their corporate interests and was utterly indifferent to the socio-economic fallout that would occur. The tiny island democracies of the Caribbean were sacrificed as the result of a trade dispute between the United States and the E.U., undertaken on behalf of a commodity the United States has never exported. The case of the Caribbean banana trade bluntly demonstrated that free trade is set up to work in the interests of the powerful states to erode the sovereignty and entrench the dependency of the small. In spite of all of the negative social and environmental externalities related to Latin American bananas the WTO has deemed St. Lucian bananas to be too expensive, and the trade arrangement with England as too restrictive. The reason was simply economics.