Monday, November 4, 2013

Tilly-Sabco chickens out of the world market…fallout for the French middle classes




The news tonight started with about a thousand jobs lost. In other words, a thousand less middle class people in France if they all become unemployed and are unlikely to find a job.

A first level analysis of the problem is very simple. These people were employed because their industry was subsidized by the EU. As EU takes away the subsidy, the French chicken produced in Brittany by Tilly-Sabco can no longer compete against the Brazilian chicken. So, evidently, lucky people to have been employed for so long, thanks to their European compatriots.

A second level analysis indicates that it’s the strong Euro and the weak Brazilian real which is creating this problem. Once again, France and/or someone in the EU must be exporting many other things to keep the Euro strong. So, it's obvious that if they are not competitive in the chicken market, they must be competitive elsewhere. If total French exports fall and Brazilian exports rise, slowly the currency parity will change. But it may also be only a sectorial difficulty.

A third level analysis is therefore required: does it make a difference? For this we have to see what we are exporting and what we are importing. If we are exporting capital intensive goods and importing labor intensive ones, then the net result is going to be unemployment. This translates into less middle classes, less taxes, less capacity to provide subsidies and more need for doles, without which these people will one day start questioning what French ministers are doing to earn their living.

To start with, what is French minister for Agriculture, Stéphane Le Foll, doing? After all, the Chicken crisis is not the only crisis in Brittany. We've already seen crisis in pork and fish. Let us assume that he postpones the day or reckoning by giving subsidies of 200,000 Euros per enterprise. This permits ten full time jobs at the minimum wage, or many more if it is disguised unemployment we are talking about. Or he may further postpone the ecotax? But this is not entirely in his hands alone.

Obviously, if these middle class jobs are lost and if doles are to be provided, then the capital-intensive goods which are being exported need to pay higher taxes or social security charges. But, these exports may be in a country different from the ones where jobs are being lost. So, without a good fiscal federalism policy, we will soon have the Greek problem in France! Either all the countries in the EU should then compete in the capital goods manufacturing markets or the ones who want to be competitive should finance the others. Sounds like common sense, but solidarity still doesn't cross borders!

The problem also requires understanding what kind of chicken we are talking about. If these are mass produced industrial chickens, and if this market can be attacked by the Brazilians successfully, should we go back to the old biological chicken, which is three to four times as expensive and far more tasty. The problem is that at three times the price, it is not sure that the middle classes can afford it. Will they move from tax and subsidy based nationalism to bio local producer based nationalism, just to protect jobs?

Not that there is anything wrong with protecting your neighbor's jobs. A busy neighbor is a good neighbor. Gandhian economics being learnt the hard way. Schumpeterian ecology being slowly ushered in. Perhaps the lesson needs to be repeated till it is learnt. Slow food, slow money may be the answers for tomorrow. Slow management…M. le Foll. We are organizing a conference in French on the 11th of December 2013, in Dijon. Like to attend?


3 comments:

  1. There's an old Irish Gaelic saying, that translated reads: When you are working as hard as you can, & still not succeeding, then try working "smarter"!
    Losing entire industries - especially those in food growing/processing/packaging fields -is not always "price based": The mainstream consumer may not be willing - or even able - to pay double or more for the SAME product (especially if it's only on the basis that it was produced more locally); but they more often WILL be willing to pay somewhat more, IF there's a "value added" feature to motivate them.
    A major problem with managers who are dealing with "subsidized" industries - whether it by from cash infusions or simply tax/labor cost breaks - is simply: They become lazy, indifferent & unwilling to put in any efforts to make their operations more efficient/cost-effective &/or competitive. But until governments are willing to discipline themselves to stop giving out "no strings attached" handouts to the capitalist-mentality (which usually at least implies "opportunist"), such failures are sure to continue to drag the EU's overall economy/competitiveness down.
    Finally, if the "Middle Class" party wants to do something REALLY essential & productive, it should make some strategic alliances with totally independent Private
    Sector management trainers, & equip those employees to effect an Employee Managed takeover of such operations: They usually know more about the in's & out's of their processing than their indifferent "bosses" EVER did, in any event!

    ReplyDelete
  2. I am very much in favor of Employees and other stakeholder managed solutions, including cooperatives. However, these are not always the solution, as the FagorBrant bankruptcy concerns show. Fagor is itself a mish-mash of cooperatives. I'll make a separate blog on this, but I agree that continued subsidization doesn't help anyone.

    ReplyDelete
  3. Nevertheless, it seems that our good minister, Stéphan Le Fall has managed to get 15 million Euros of subsidies from the EU to help Tilly-Sabco and other chicken outfits.

    http://www.lemonde.fr/economie/article/2013/11/23/le-gouvernement-vole-au-secours-de-doux-et-de-tilly-sabco_3519225_3234.html

    ReplyDelete