CAPITALISM “LOVES” CONSUMERS, AND WE “LOVE” FONTERRA TOO

I saw this article from 18 February 2010, and I tried to clarify in my own head, what the hell is going on in our milk industry in New Zealand. I’m still not sure:
http://www.stuff.co.nz/business/farming/4672810/Milk-price-Minister-demands-answers

We're told by Fonterra that, because we live in a global market, "sadly" we must pay global price. However, some of the reasons that New Zealand (essentially Fonterra!) is ahead in world milk production is because of cheaper labour, cheaper land, and cheaper water. So, we pay global price for milk - but milk is not produced at global cost!! Clearly, Fonterra has no qualms about crapping on its own doorstep. Remember, this is because the only loyalty a capitalist company has is to its shareholders (the milk farmers). However, in the last 150 years, since the industrial revolution, there has emerged an new class; the Executive Class - they manage stuff. Despite being elected and delegated by the shareholders, the Executive Class' priority is to maximise its own wealth - at the expense of the shareholders and consumers. The Executive Class will self-award the highest bonuses and salary, and the lowest possible return to the shareholders - that it can get away with. The Executive Class is clearly alive and well in Fonterra. Because, if you read this article, it makes you think:

http://www.nzfarmersweekly.co.nz/article/8731.html

The writer of this article, Alan Emerson, is a former farmer himself. And, if he is to be believed, FARMERS aren't reaping the benefits from the "international" milk price. I believe him. Which leads me to state that someone in the milk process is getting very rich - and it ain't the farmers. However, Alan harps on about the government stepping in and inhibiting "market forces" (that old chesnut). OK, Alan, what say New Zealand milk farmers pay "international" water prices? Various government forces have intervened ON YOUR BEHALF to prevent that. This means, that farmers' water is in fact subsidised by the New Zealand rate payers - we pay more for water because farmers pay less. And, it is still a reality that we Kiwis are bitter about paying "international" milk prices, for a product produced on our own doorstep. So forgive me, Alan, if I don't feel "$270 better off." I question how broad are your paramters, when you conjure up that figure.

The other reason that New Zealand is ahead in milk production, is because of the sheer size – and POWER – of Fonterra. Fonterra was created out of a number of New Zealand milk production companies, to have a strong conglomerate company capable of taking on the world milk market. Our intelligence was insulted when we were told that Fonterra’s creation was necessary to generate exports to make our country stronger. We were told we’d benefit from those exports with increased wages (long term), and a stronger dollar in our pocket (long term). Well, it’s been 10 years now, and I ain’t seein’ it. How “long” is the “long term?” Well, wages haven’t increased (past housing and cost-of-living), and the effect of our higher dollar has been increased interest rates on our mortgages!!

Our wages are still way behind those in Australia, but (more importantly) our prices continue to grow faster that our wages. In other words, it’s getting harder to pay for things even aside from the fact that our next door neighbour’s wages are rising faster. Houses, council rates, petrol, power, all continue to rise faster than our ability to pay for them. In other words, there are a few people getting very rich, while the majority of us are getting poorer in real terms. “Get a new job that pays better” I hear you shout. So, if we all shift jobs, does that increase our collective ability to buy goods at faster rising prices? I think not.

Oh, and milk. Milk continues to increase in price.

The Market Force economists herald phrases like this:
• “So, don’t buy milk”
• “Buy another milk brand that is cheaper.”
• “Let consumers dictate prices”

So here’s the answers to those fallacies:
• So we feed our kids cola instead, or just give them calcium vitamin tablets instead, do we? Milk is more expensive than fizzy drink.
• We’ve all tried buying another brand. How many of us now buy the “Budget” brand because the “Anchor” brand is simply too expensive? Remember, it’s essentially all the same milk. Well what happens when we’ve done that, as we’ve done? Even Budget milk products rise faster than wages.
• Well, we’d love to dictate prices, but the reality is that we can’t if the company supplying milk is the ONLY company; monopolistic Fonterra.

And then, as I was writing this, THESE stories were released a day later!!!!
http://www.stuff.co.nz/business/farming/4676611/Fonterra-freezes-prices
http://www.stuff.co.nz/business/industries/4677953/Call-for-shops-to-freeze-milk-prices

My wife’s uncle loves his phrase “Capitalism Loves Consumers.” Well, frankly Alistair – that’s bollocks. These articles above show that capitalism doesn’t love consumers, it exploits them. It’s true, in a loving relationship, there is some f*cking - because that's what's happening to us consumers! However, this kind of exploitative behaviour from companies like Fonterra is wrong, it’s pimping and it's raping. Companies generally view consumers cynically, as untrustworthy, with no loyalty, who will buy from another company when there’s a favourable price shift. And that’s true – but there’s nothing wrong with that!!! Apparently, that’s called “Market Forces.” And that’s why Fonterra was formed – to stop that consumer shifting. Capitalism doesn’t “love” consumers, it exploits them.

I’d like to think that the Fonterra climb-down (the milk price-freeze) is a victory for consumers. However, in reality the Agriculture Minister David Carter has had to step in to “rein in Fonterra's domestic market power.” This is the FIRST time he’s done that: not because he’s worried about consumers having to pay more, but he’s worried about unfettered capitalism upsetting the right-wing National Party’s attempts to secure a second term. This is election year. In fact, I DO see this as a small victory - for democracy. Voter pressure has forced our elected representatives to do what voters want (there's a first!). However, if it hadn’t been an election year, David Carter wouldn’t have given a toss.

Fonterra’s continued, cynical attempts to raise the price of our milk over the last ten years, demonstrates they will continue to do so. Let’s be quite clear: price has NOTHING to do with cost-of-production. Price is ONLY about our willingness to pay for it. You can make something for $1, but if consumers will only pay 50c, then it won’t sell. You can also make something for $1, but consumers might be willing to pay $5: that might be capitalism and “the market,” but it doesn’t make it right or ethical. As consumers, we are prepared to pay a fair price for a fair product. Fonterra’s continued scaremongering, and the associated publicity, about “rising world dairy prices” are attempts to FUD (fear-uncertainty-doubt) us into raising our willingness-to-pay. Thankfully, it’s not working.

Remember, Fonterra has this power because of its privileged monopolistic position. As we all know, Privilege has Power. Fonterra has power, because there are no competitors. Where small milk operators in New Zealand do try to establish a foothold, we see this:
http://www.nzherald.co.nz/tatua-co-operative-dairy-company-ltd/news/article.cfm?o_id=204&objectid=10420907
In other words, Fonterra raises the milk price it pays to its farmer-suppliers in the region where there is a Fonterra competitor. Fonterra calls it “tactical pricing.” I call it abuse of monopolistic power.

At this point, I want to tell you about the people who talk about “too much government interference” or even “we don’t need government – let market forces do the work.” Yeah? What would the victims of Somali pirates say about the effects of there being no government there? What about the children working 12 hours a day in the mines of the industrial revolution? Capitalism NEEDS regulation. Capitalism will ALWAYS exploit and work towards increasing market share of a particular industry. In other words, it will try to secure 100% market share – monopoly. Fonterra is an example of that “success.” New Zealand consumers are getting a taste of unfettered capitalism through this experience. If it hadn’t been an election year, we’d be paying more for milk. I wonder, how long after the election will we be having this debate again?

Frankly, capitalism with no restraints scares the crap out of me. The milk debate has nothing to do with “Market Forces” here in New Zealand, and everything to do with global capitalism fighting for maximum returns. In other words; greed. It’s quite a shame really, because I remember there was a sense of pride around New Zealand when Fonterra was formed – a company from small NZ, capable of taking on the world. However, why did the scorpion sting the fox as he was hitching a ride on that fox across a wide river, knowing that he too would drown? Because that’s what scorpions do. Fonterra is going to continue to screw us, going to continue to push the price of milk for New Zealand consumers whenever it can. It’s what capitalism does. Change will only come about by regulating these companies who try to harm us financially. Get used to that fact, or send us back to the industrial revolution.