ECONOMY OF SCALE OR MONEY POWER, WHAT IS KILLING THE SMALL PLAYERS?

At a time when India is debating about the merits and demerits of "inviting" multinational retail giants to do business in the country the old perception that "small is beautiful" seems to be gaining some traction, that too in a country like the US. After all Americans are the greatest practitioners of big scale operations in all spheres of their activities. Whether it is in the meat sector or the dairy sector Americans appear to be yearning for their past when every thing was in the small scale domain with higher quality products available unlike the present day commercial food dominance. With tremendous advance in food engineering and equipment design areas, mechanization and automation have reached great heights in recent years. Added to this, scarce and costly man power have facilitated such a transition in no small measures.  Whether this development has been good for the country is another matter. As most motive power which drives automation and large plants are heavily dependent on fossil fuels, it may be difficult to justify the trend. Added to this, centralized processing and distribution create a large carbon foot print considered the most causative factor in global warming. Here is an interesting critique on the effect of large scale displacement of small dairy players in the economic scenario in a state like New York which is worth studying for getting an insight into the consequences of mindless capitalism.    

"The report also found that the number of milk-processing plants in New York fell almost in half, from 61 in 1992 to 37 in 2007, and that other large dairy product manufacturing plants closed over the past decade. The declining number of plants made dairy farmers more dependent on fewer milk-processing companies and fewer, larger milk handlers, the study says. However, the report only focused on New York state, one of five separate case studies that show how the concentration of economic power can harm both farmers and consumers in different agricultural sectors. Other studies dealt with poultry production on Maryland's Eastern Shore; organic soy milk production and organic soybean farming; and the California processed fruit and vegetable industry. "The consolidation of the food and farm sector is sucking the economic vitality out of rural America and shipping it off to Wall Street,"Food & Water Watch Executive Director Wenonah Hauter said. "These findings shine a much-needed light on the negative economic impact that farm and agribusiness monopolies have on farmers, consumers and rural communities."

In India there was a time when succeeding governments since independence singing a familiar tune of encouraging and protecting small investors and for a number of years government had reserved over 700 manufactured  items exclusively for the small scale sector, barring big players from producing the same. Mahatma Gandhi's vision of using small scale players to achieve prosperity has been thrown to winds and India has the dubious distinction of courting crony capitalism from abroad in preference to the domestic players in almost all fields including food processing. Day in day out citizens are being bombarded with the slogan that FDI in retail sector would help Indian  millions of small farmers without any iota of logic or reality. Large behemoths have no relevance in a country like India where there are millions of small farmers and entrepreneurs eking out a living and it is only wise to adopt the old maxim "a bird in hand is better than two in the bush" when it comes to taking reckless risks!  

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com