Saturday, June 28, 2008

Another Case of Market Failure

From the generally depressingly racist Hamilton Spectator comes a decent bit of local journalism:

"Trouble in the Fruit Belt"

Essentially, CANGRO a local canner of locally-grown fruit products is closing, primarily due to foreign competition:

It was a pragmatic decision on the part of CanGro, owned by American private equity firms Sun Capital and EG Capital Group.

Quite simply, the products can be made cheaper elsewhere.

Many union reps, growers, economists and even consumers reluctantly acknowledge the canned products put out by the plant, Del Monte fruit cocktails and the like, were approaching their best-before date. Consumption of canned goods is near stagnant (about 2 per cent growth a year), fruit production costs (particularly labour) are escalating, and the plant, while it made money, was not considered efficient in global terms.

The part about stagnant canned-fruit sales is unproblematic. I remember liking canned peaches, but the syrup was needlessly sweet, so I don't buy them anymore. If people are simply deciding not to buy canned fruit, well, there's nothing that can be done to force us to do so.

On the other hand, it says that sales are stagnant, not declining. Sounds like the average hourly wage since the early 1970s if you'd ask me. If it's good enough for working people then it oughta be good enough for a Canadian business, no? Regardless, the same amount of people seem to be buying this product. So who is going to provide it for them?

That's where it gets a little sticky for me. Labour costs are escalating? Agricultural wages in Canada are relatively modest compared to the average Canadian wage. Furthermore, the work is often difficult and tiring. What are we comparing these wages to? Enslaved alien labour in the fields of Florida? Indentured peasants in South America, India or Africa? Super-exploited Chinese workers? Given the hellish nature of much of the rest of the world economy, being "considered efficient in global terms" has a bit of a chilling edge to it.

Well, okay, big deal, a canning operation in Ontario shut down, the skeptic might say. But there's more troubling implications for this. The article states that local fruit growers are going to switch to growing fresh market fruit varieties of peaches and etc., now that the canner isn't buying their production. But there are stresses involved in this transition:

But changing direction in fruit production is a long, expensive process.

Trees can take years to come into production, and the return on investment can be even longer. Many tender fruit growers were already grappling with plum pox -- a virus that has plagued the peninsula for about eight years --when the plant announced it would close.

"We were just crawling out of that and then this came," said John Thwaites, a Niagara-on-the-Lake grower. "We've gone through the expense of replanting and we have to live with the loss of that lost market. It won't be until four years from now when these trees start bearing fruit that we'll start recovering."

As well, there's the impact on the workers and the community. In all, about 280 full-time jobs in the area have been lost. Coupled with the de-industrialization in the rest of Ontario, this represents a considerable loss to the area. Again, this move appears to have been predicated on the fact that a profit-driven corporation has discovered that (for whatever reason) wages are lower in other parts of the world.

This is what I mean by "market failure." One of Canada's best (and one of its few) areas of agricultural lands is under stress, local communities are devastated, all so that "investors" can take advantage of lower wages, taxes, and regulatory regimes in other parts of the world. Based on a very narrow calculus of value, the sustainability of the Niagara fruit-belt is put under needless strain.

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