Commodity Fetishism

I’d like to introduce you to a common type of fetish you may not have heard of, but regularly enjoy.

It’s called commodity fetishism and was first described by Karl Marx way back in 1867.

It’s having a significant impact on the profitability and sustainability of regional business.

How so?

There are two headlines that continue to dominate the media.

 

They are: households complaining about the cost of living and, businesses complaining about the cost of operating.

We have been groomed with new lifestyle expectations; totally convinced that everything must be had as an absolute necessity.

But as business owners we have also been groomed as consumers of inputs.

Our behaviour as business owners can also drive-up the cost of doing business.

Social researcher Mark McCrindle calls this expectation inflation.

Are we so convinced that as business owners we must have the latest, the biggest or the most of everything?

A tempting proposition.

However, overcapitalising our business beyond its reasonable productive capacity will derail it.

But why would any business owner in their right mind deliberately derail their own business?

A driving force behind commodity fetishism within a business is risk appetite.  Financial literacy is a key measure of risk appetite – normally.  But when commodity fetishism takes hold, we make purchasing decisions the implications of which we don’t understand.

Tammy May of My Budget fame has a simple yet thriving business helping those who have ‘overcapitalised’ the household budget.

Interestingly, the Regional Australia Institute identified that poor financial skills is potentially the single biggest factor negatively impacting the prosperity of regional business.

As we hang-up our stockings and think about spending, perhaps as business owners we should make 2015 a ‘socks-n-jocks’ year.

DIDO employees are shrinking regional economies.

I write a fortnightly column for a newspaper based in the Mid North of South Australia.

We tackle all things rural, regional, agribusiness and food.

Some pieces are light, topical and trending.  Some dig deeper, exploring life as a business based in the regions.

As with any of the articles or opinion pieces I’ve had published over years, there’s the anticipation of at which point you’ll touch a nerve.

A recent column that raised the issue of DIDOs in our region did just that – hit a nerve.

So I wanted to share it with my broader network and hear peoples’ feedback.

What are some examples of economic strategies to mitigate the impact of DIDOs?

With the magic of hindsight, it’s easy to see that our region was totally exposed to the creeping phenomenon of the DIDO worker.

Millions of dollars generated / provided by the region is extracted (paid) and spent elsewhere.

That money is no longer circulating in our local economy and the result is stark.

What happened in your region?  How did you mitigate the impact of DIDOs?

If you are a DIDO, what would it take for you to live where you work?

What’s worse – a FIFO or a DIDO?

Is it just me or are things pretty stagnant at the moment?  I can’t help but feel we still struggle to hold our towns together, under the weight of so many pressures that ultimately fall onto the shoulders of a shrinking pool of individuals – as is the case in rural and regional communities.

The tension is mounting.  Do you get a sense that we are the poor buggers that have been left to carry it all on?  People are getting tired, worn out and penniless.

I have a theory.  It’s about micro economics and its importance in bolstering regional communities.  You could call it grass-roots economics.

Economically we’ve lost our mojo.  Let me explain.

Everyone has heard of the FIFO – fly in fly out workers.

I’ve invented a new one.  The DIDO – drive in drive out workers.

DIDO’s draw vast amounts of money out of regional communities; money that leaves the region to be spent elsewhere.

Arguably, there is several million dollars that no longer circulates in our community.

The slow creeping effect of money leaving our communities with DIDOs has been devastating.

It’s easy to see how this region was uniquely positioned to be directly influenced by the inevitable DIDO phenomenon.

We needed an economic strategy to mitigate the impact.
 

But what if those leading the economic strategy for a region are DIDOs themselves?  Will they see what hurts those left behind in small communities?

Not an easy subject to tackle; but I think it’s important we all understand the dynamics influencing our region, as it has a direct bearing on how well we plan our economic future.

A challenge for the new councillors and one they should be allowed to sink their teeth into.

BTW - Please do not go out and round-up all the DIDOs into the triangle with burning torches.  We are all guilty of by-passing local business now and then.

Business failure is not evidence of market failure.

I recently joined the Global Food Studies program at the University of Adelaide.

We have only scratched the surface on the mountain of economic data and reports to be analysed about the global agribusiness and food industry.

One thing that is already glaringly obvious is the increasing challenge of managing the relationship between the agribusiness and food industry and Government.

The economic rationale for Government intervention in the agribusiness and food industry is very complex, especially now that food trade is almost completely liberalised, globalised and monopolised.

Long story short, most often the best financial outcome for all participants in the food chain is for Governments to simply get out of the way.

Competitive markets will create the most efficient food system. For this to happen markets need to be imperfect, because no one makes any money in markets that are perfectly competitive.

Imperfection means that some businesses will always fail or be absorbed. The fact that businesses fail is not evidence of market failure, requiring Government intervention.

There is a tendency for the agribusiness and food industry to ask for Government intervention to address the symptoms of imperfection.

Should this be the Government’s role? Will it improve the situation?

Leverage is a pre-condition for improving food systems, because it recognises the interrelationships that exist along the food chain.

A leveraged industry is well-capitalised. A well-capitalised industry is capable, productive and profitable.

This shifts the Government’s role to pulling the right economic levers locally, that improve the overall ‘investment setting’ of the agribusiness and food industry.

In today’s world of global business, it is important that individual participants of the agribusiness and food industry work towards improving their position, by understanding the global economic forces now impacting their business.

This is a key area of economic development for regional business in Australia. We need to know what to ask Governments to do. And to be clear on what we don’t want them to do.

Better understanding will help reset some old paradigms about the conversation we need to have with Government, in turn helping Government improve the application of its role.

We can turn our attention to effective policy, rather than the symptoms of being in business.

For what it’s worth, the entire world is currently grappling with this issue.

That just means more reading for me.

Farmers, consumers and the illusion of choice. (GM grain Part 2)

I’ll preface this post as per Part 1.

I’m not pro-GM.  I’m not anti-GM.

I’m pro unique food systems.  There aren’t many left.

Preserving uniqueness means challenges, compromises and consequences.

South Australia is already unique.  We are the driest State on the driest continent in the world.

 

Producing food under those conditions is unique.  So I’m also into preserving markets.

Against that backdrop, is preserving our uniqueness worth considering?  Is it the correct decision?

That is THE question all participants and stakeholders in South Australia’s local food system need to answer.

It is therefore appropriate for the Government to intervene while we remove disadvantages from the decision making process.

Should we allow grower choice at the expense of consumer choice?

It’s interesting that the current debate to approve GM grain production in South Australia is focused on the science of safety.

In Australia we have generally kept consumers in the dark about GM.  Consequently, the average shopper in the supermarket on a Saturday morning is not making buying decisions based on science.  Their decisions are influenced by other norms.

Nor are they intimidated by the power of science.  They now it achieves great things such as curing their family and friends from disease.

At the point-of-purchase, whether or not GM is safe scores quite low because people are actually indifferent on the topic.

Who let the activists in?

Ignorance creates indifference.  Indifference creates a vacuum.  This vacuum is the breeding ground for activists that purport to be the voice of consumers.  Activists can only operate where there are vacuums.  Activists don’t benefit consumers.  They only confuse, frustrate and misrepresent them.

It’s up to the food industry to fill the information void and remove indifference.

Are Australian consumers genuinely interested to hear from us?

 

Of course - they want to know the value of eating GM foods and the value of GM production systems.  It’s never been explained to them.

Be clear - tell consumers precisely what the value of eating GM is and what the value in growing GM is.

There needs to be increased effort in this area.

Consumers will benefit from greater awareness of the important trends occurring in food production.

But with more transparency comes more scrutiny.  If eating GM foods is not experientially sound and the production system is not ecologically sound, consumers will not approve.  

They simply see no value in changing our food system, which is a vote to preserve uniqueness.

So what do consumers value these days?  What will they choose?

Consumers have stated preferences and revealed preferences.  At the point-of-purchase consumers look for salient messages about origin, quality and authenticity.  

Is this healthy or unhealthy?  Is this natural or artificial?  What’s the price?  Done.

The food industry is told to give messages about provenance, sustainability, organic, fresh, ethically produced, ecologically sound and so and so on.

It’s really about allowing consumers to make guilt-free choices with very little thinking.

In the new era of guilt-free food, is there a value proposition for GM grain?

Is GM grain more nutritious?  Is GM grain a more natural production system meaning fewer chemicals?

If GM grain production can’t score highly in the area of guilt-free, then preserving uniqueness may be the correct decision.

The current moratorium on GM grain production in South Australia should not be about safety.

It’s about deliberately targeting and scoring highly on points-of-value with global consumers.

It may not achieve a premium.  But it may just preserve our markets.

Remember:  we are a remote outpost of the globalised food system.  We are the driest State on the driest continent located at the bottom of the planet.  Why would anyone want to rely on us to feed them?

If South Australia wants to grow GM grain, then we need to become THE WORLD’S BEST at convincing people the value in growing and eating them.

Otherwise we teach them to rely on us because of our uniqueness.

That’s a guilt-free story the world will buy.

Why GM grain production won't fly in South Australia. (Part 1)

I’m not pro-GM.  I’m not anti-GM.

I’m pro South Australia’s food industry.

This means finding a business model that allows our food system to access markets profitably.

To achieve that outcome there will be compromises.  There always is when achieving a consensus on strategy.  The alternative strategy is we do nothing.

I think we all agree, we don’t want the compromise of that.

The current discussion about growing GM grain in South Australia is far from centred.

People are debating issues that have little relevance to the actual outcome they seek.

Alarmist headlines are not helping.

Let’s be clear.  There is currently a moratorium in GM grain.  Not a ban.

My observation is that advocates have failed in their bid to halt a suspension on the introduction of GM grain production in South Australia, not because of what they have said, but because of what they haven’t said.  Or rather, the key question they haven’t answered.

That is, how will the introduction of GM grain into South Australia’s highly differentiated food system, add value to processors and consumers here and abroad?

The South Australian Government has adopted an integrated perspective of South Australia’s food industry.  For example, understanding the relationship between food and tourism is why an integrated approach is important for South Australia.

Hence we have Tourism Ministers making announcements about our food system – a smart marketing move.

Individual debates such as those concerning GM grain will always circulate.  But the ground-swell of opinion across South Australia’s broader food industry is that we need to dare-to-be-different and use this to build an individual sense-of-place about South Australian food that can be marketed to the rest of the world.

The South Australian food industry has adopted the mantra to provide premium food produced to the highest standards and to give processors and consumers of our food system an authentic food experience.

Consequently, the South Australian Government has developed, prioritised and committed itself to a range of programs and market-centric strategies propelling South Australia’s food industry and its participants around the globe, capturing a niche in consumer sentiment.

This is achieved because contrary to popular opinion, whether or not GM grain is safe is not the issue.  It is the current view of processors and consumers that GM grain is not premium quality or an authentic food experience – safe or otherwise.

For the moment it means some individual farm-gate requests have not been met in order to achieve the greater-good for South Australia’s food industry.

Over the next 5 years, it is vital the local grain production community soundly demonstrates how their wishes to grow GM grain can be integrated into the greater vision for South Australia’s food industry already underway.

The moratorium is an important period allowing grain producers to now view themselves as part of the broader food value chain community in South Australia or risk being isolated from future decisions.

Part 2 asks if the introduction of GM grain into South Australia’s highly differentiated food system will add value to processors and consumers here and abroad; and why the discussion should not be centred on the issue of safety.

What is the value in eating GM grains?  This is a key issue.

Unless the question of value can be answered for food consumers the proposition we will grow GM grain in South Australia is unlikely from a food marketing perspective.