samedi 30 août 2008

What is a cartel? Snow and milk business compared

In further response to Fantasia on a Theme of Hilaire Belloc by Dr Carol Byrne.

The dynamics of free market Capitalism ensure that there is enough competitiveness for prices to remain within the grasp of consumers, and that no one firm controls enough of the whole market to be able to set its price indefinitely – those businesses which succeed are the ones that produce a better and more diversified product at a lower price. If any business tries to charge higher prices than its competitors, it will lose all its business to competition; as soon as it tries to undersell its competitors, they will have to reduce their prices to keep their customers. These are the powerful counter-tendencies and self-correcting measures which act to prevent the formation of a general cartel, as Distributists fear.

A cartel is that thing in Medellín that deals in narcotics, right? Well, that too.

According to Dr Carol Byrne cartels are impossible because each participant in the competition is too concerned with his own expansion and profit to submit to the rule of a cartel, limiting his chances for immediately profiting by taking market shares in order to insure long time profits by keeping up prices.

Actually, due to this egotism and this competition, every enterprise is always trying to snatch market shares from every other enterprise than itself ... or its partners. And since this is done thoroughly and since most enterprises are not partners of other enterprises in same sector and market (like by mutual shareholding or by double loyalties of physical persons) the enterprise that sets the lowest price forces all the rest to follow suite (I remember a "gazoline price war" like that ... last millennium; and OPEC is of course not a cartel).

Back to Medellín, then. Well, not physically, I am not going there to make a scoop. But to common knowledge or safe guesses about things like the Medellín narcotics cartel. Supposedly - according to Dr Byrne's line of thought - the one thing that allows them to be a cartel is that the police take down all their small competitors, if there have been any. Otherwise the price of their "snow" would be considerably lowered, not only by getting rid of the money they need to pay criminals and crooked officials, but simply by competition. I must therefore conclude, since dairy is legal, either there are no milk cartels, or the milk cartels have managed to make (potentially dangerous) competition illegal.

In Bombay* milk is usually not sold in air tight plastic bottles, like in France, nor in tetra-packs like in Sweden. Early in the morning, just after milking, the farmer leaves for the city and serves the milk from a bucket, like soup from a kettle. In Sweden or Norway, a farmer who sold unpasteurised milk to his neighbours across the street in the same village (and these neighbours, like themselves, had a fridge!) was sued last millennium. Or maybe this one. But taking your milk to town and serving it from the bucket like soup from a kettle is - at least outside India, all over the "free world" - forbidden, nowadays.

Otherwise this would be both cheap and tasty. Cheap because transport to central dairies in refrigerated milk tank cars costs, pasteurising costs, maybe other processes like skimming in alpha-Laval machines cost too, packaging in tetra-packs costs, transport in refrigerated trucks to the stores cost, and the stores take their percentage too : the "Bombay way" would give the farmer a higher price and the customer would still pay less. Tasty, because the milk is neither pasteurised nor skimmed, and above all fresh same morning from the udder.

And saving transport and storing is as hygienic as making transport and storing very elaborately hygienic. But if the hygiene adequate for milking into three buckets and driving them to town selling it within a few hours is not adequate for transporting milk across half Sweden and selling it up to three days later, somehow - it is not deemed adequate for selling your own milk 10 km from where you live either.

Because this egotism that ensures that Skaanemejerier or Arla (or Norrmejerier or Milko) wants to expand (these last years they have all tended to expand over all of Sweden, but before Sweden was divided into their regional monopolies), equally guarantees that the farmwife selling her milk would want it ... is it not so? And when she would expand (as any judge in this business would presume she would sooner or later, even against her denial) then that system of hygiene would be again inadequate (which, to my, of course, distributistically biassed mind, is the reason she would either not expand or else buy more complex hygienic arrangements if she did).

Speaking of the will to expand - Dr Byrne herself, and her collegues at University, are presumably unsatisfied with their livelyhood, and eager to expand? Somehow I doubt it. And somehow, this mythically universal ruthless egotism is both used against the hypothetical little upstart enterprise, when it is questioned "yes, that may be all right now, but how about later, when you will want to expand?" and for the real companies, as an argument that makes sure they form no cartel!

The real threat to Sweden's four dairy giants is not adding Finnish Valio to a competition of four national giants rather than four times a single regional giant. The real threat to them is precisely the reintroduction of the Bombay way of dealing with milk.

Let us return to Bombay. After all, it is a very very hot place, there are flies ... how do Indians avoid getting sick from drinking milk? If hygienic laws are applied even in cold Sweden or Norway, maybe at least they should apply there? Or does Bombay offer another solution?

  • A) They do not buy and drink fresh milk after a certain hour.

  • B) They do take the milk home to boil it. Like the basic milk candy recipy: boil, take off the skin, put it aside, take off next skin, put it on top of the first, and so on: afterwards the milk skins are "baked" to candy, usually with tasty additions.

I will offer a few suggestions along the b line, not because drinking milk while fresh is a worse idea, but because it is not very much more to say about it:

  • A) Some people enjoy milk and sugar in their coffee - or tea. To such, European customs offer an equivalent to that Indian way of preserving the milk: take the fresh milk, add an equal proportion of sugar, boil till volume is halved, and the colour is hazel nut brown. This will keep consumable for a year, if kept in a closed jar. I found the recipy in a Russian cooking book, but the emigrés on Côte d'Azur may be behind the fact that the product is also found ready made by factories in France.

  • B) Let the milk go sour, heat until it curdles, separate the curdles from whey in a clean cloth and make fresh cheese of the curdles.

  • C) Let the milk go sour, skim the cream, make butter of it.

And what is the milk and dairy cartel - since such it is - doing about the Bombay system? Tetra-Pak was these last years into the arrangements for introducing vacuum packaging into Bombay or Delhi or whatever.

Hans Lundahl,
17/30 August,

*from Portuguese Boa Bahía/Bom Bahía : "Mumbay" is no ancient name, just anti-colonialist balderdash to wash off the memory of the Portuguese colony - no matter, since I am here praising one commercial custom of small commerce in that city.

series: 1 Defending Distributism 2 Mom & Pop Stores ... 3 What is a cartel? Snow and milk business compared

2 commentaires:

Daniel Raj a dit…

Dairy has been a major part of the Indian agrarian economy for ages. The dairy business still remains a lucrative one with rising demands throughout the year. Start your own dairy business & be a part of the ‘White revolution’ in India.

Hans Georg Lundahl a dit…

Thank you for a comment that was on topic.

I do not live in India myself, but still!