By S Gurumurthy
Indeed ironical. On the same Friday (September 14)
Prime Minister Manmohan Singh rolled out the red carpet for Walmart, New York
City, America’s largest, shut Walmart out. Again ironically the very Friday the
UPA government handed the FDI bouquet to Walmart and lobbyists assured that
small retailers are safe, Atlanticcities, a web-newspaper from the stable of
the famous Foreign Affairs magazine, carried a devastating headline news: ‘Radiating
Death: How Walmart Displaces Nearby Small Businesses’. Weeks ago, on June
30, over 10,000 people, shouting “Walmart = Poverty”, marched through Los
Angeles, America’s richest city, against Walmart stores. On June 1, hundreds
protested in Washington DC against Walmart. “Say-No-To-Walmart” is an
ongoing movement all over the United States.
Why focus on Walmart? It is world’s most powerful
retailer; it has ‘spent’ a lot to get the UPA nod for FDI in retail. Even
as lobbyists here celebrate Walmart, it has become untouchable where it was
born, in the US. Why is Walmart so hated in the US? “Walmart will
devastate local businesses,” say New York trade unions and local
communities. The mass protesters at Los Angeles too cited the same reason: “small
business will close down”; and screamed “Walmart has no heart and no
morals. We don’t want you in Los Angeles.” Politicians in the US, however,
seem to be like the UPA’s cousins. In March last, the Los Angeles City Council
had put a moratorium on big retailers, but, Walmart got building permits just a
day before! Recall the 2G permit cut off date?
Yet,
the UPA certifies Walmart and its competitor cousins as compassionate to small
retailers and farmers. It
promises they will employ millions here. The evidence in the US is to the
contrary. According to the Atlanticcities article, Walmart entered in Austin
neighbourhood of Chicago in 2006. And by 2008, some 82 of the 306 small shops
had closed down. The Economic Development Quarterly study found the closure
rate around Walmart location at 35-60 per cent. Walmart radiated closure of 20
per cent of drug stores every mile from its stores; and 15 per cent home
furnishing, 18 per cent hardware and 25 per cent toy stores. Studies in the
US nail the UPA lie that FDI in retail will not hurt small shops. On job
creation, a latest report (January 2010) titled ‘Walmart’s Economic Footprint’
prepared for the New York City Public Advocate says that Walmart kills three
local jobs for every two it creates. So the job creation argument too is a lie.
The third justification that the ‘farmers will get better prices’ is a
clever lie, and so needs a closer look. It suppresses the vital fact that
Walmart does not buy, or pay, over the counter. It buys the nation’s next
harvest in futures market and fixes farm prices. It also imports cheap
goods — from China — and destroy local production like it has done in the US.
Take the first case, with the recent experience of the US and the world.
Rice prices in the US and world markets shot up by
three times in April 2008 as compared to January 2007. It was then that the US
President George W Bush made the funny remark that prices had gone up because
the newly prosperous Indians had begun eating more! What was the truth? The USA
Today (April 23, 2008) and CNN (April 24, 2008) quoted the California Rice
Commission and USA Rice Federation as denying shortage of rice and saying there
was enough stock. Why then were prices rising? It was because, said the CNN,
Sams Club (Walmart’s wholesale division), holding huge stocks, was pushing up
the prices. US farmers accused speculators and futures market for the high
prices. It was not farmers who traded in farm futures. Investment funds
accounted for 40 per cent of wheat futures trade in the US in January 2008,
which rose to 60 per cent by April. Wheat futures that was $4 a bushel in early
2007, rose to $14 per bushel in April 2008. The US farmer, who had sold his
harvest in futures market, lost and Walmart, which had bought the futures,
gained. Even if some farmers had some stocks, Walmart, which had stocked at
cheaper prices, refused to buy at higher prices, pointed out the media.
Look at it this way. If the US farmers get
remunerative prices from Walmart why does the US, with two per cent farming
population, grant annual farming subsidies of $20 billion and the European
Union, for its five per cent farming population, gift a subsidy of $74.5
billion annually. The experience of the US and West nail all three
justifications for the FDI in retail as lies. Foreign direct investment in
retail will incrementally hit the 12 million family retailers in India; it will
not help farmers; it will cut jobs. Even more dangerous, it will destroy the
rural food security.
Two of UPA government’s reports — of the Planning
Commission Working Group on Agriculture for the XI Plan (2007-2012), and the
19th report of the Standing Committee of Parliament on Food (2006-2007) to
Parliament — themselves nail the lie that Walmart will link farm-gate to its
gate and make Indian farmers rich. The reports describe the farm-gate thus:
a total of 59 million of farming families (32 crore rural people) live on
subsistence farms of five acres or less (while US farms are 250 times and the
Australian, 4000 times, larger); about 60 per cent of food products is
barter-exchanged and consumed by farmers and farm labour, and as seed and
animal feeds within villages; only 40 per cent move out of villages for
commercial marketing. Even if a small part of the large local needs is drawn by
an efficient Walmart from the farm gate to its gate, that will mean urban
pricing in rural areas that will destroy the food security of two-thirds of
Indians in villages.
The Montek Ahluwalia-led Planning Commission report
laments that ‘the marginal farmers are certainly going to stay for a long time’
and ‘what happens to them has implications for the entire economy.” However,
the small farmer is no waste. He is more efficient. His productivity a third
higher, than in large farms. Small farmers use one-third of the total
cultivated area and produce 41 per cent of nation’s food and 110 million tonnes
of milk. If large ones replace them, the nation’s food production will fall by
7 per cent. The reformers do not know that recent global researches have
confirmed that economy of scale that applies to industries does not apply to
agriculture, where small ones are more efficient than large ones.
QED:
The ‘reformers’ betray illiteracy; clamour for fame as reformers; secure it at
nation’s cost. Reformers or deformers?
S Gurumurthy is a
well-known commentator on political and economic issues.
The views expressed and Information provided
by the author are his own and left to public to judge and rationalise for
themselves.
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