Mira Mang- Don’t Mess With Kerala.

fresh from getting its kundi kicked.jpg

Ah, I love being from Kerala. Now I can claim genetics as the reason for my refusing to shop at Wal-mart. Ha!

The Communist government of Kerala is threatening to ban “retail giants” from setting up shop in the Indian state. The measure, which appears to be backed by all the major political parties in Kerala, is chiefly aimed at India’s version of Wal-Mart, Reliance Industries. The concern is that a proliferation of large retail outlets would drive tens of thousands of mom-and-pop shop operators out of business. [Salon.com]

Hmmmm. That last sentence explains why I prefer Olsson’s > Borders, too.

Kerala made headlines not so long ago for attempting to ban Coca-Cola; the state has a long history of pursuing its own unique path to development. Naturally, the more gung-ho-for-capitalism elements of Indian society aren’t mincing their deprecating words: An editorial in the Indian Express made no attempt to restrain its sarcasm:
Coke poisons people. Highway tolls exploit them. Fiscal discipline starves projects that can better their lives. So, of course, big retail chains, as Kerala’s Left explained to this newspaper on Monday, are anti-people … Food minister … C. Divakaran is ever so bold in proposing to ban a business activity permitted almost everywhere bar places like North Korea. [Salon.com]

Yo, I totally feel exploited by highway tolls. It’s the only thing I don’t miss about driving to NYC. Anyway, I think it is a bold move, and an interesting one at that. Salon’s Andrew Leonard raises a sobering point:

Let’s switch venues. The safety of Chinese-made products is in the news again today, as China’s government announced that a whopping one-fifth of the products on the shelves of Chinese stores were found to be substandard or tainted. The immediate, and understandable impulse, is to blame the health hazards of Chinese products on the lack of regulatory enforcement in China, a state of affairs exacerbated by state corruption, a weak judiciary, and a general absence of effective checks and balances in Chinese society. But that’s only one-half of the picture. The other half is the imperative, in the biggest markets for Chinese exports, that demands ever-lower prices for everything.
In “The Wal-Mart Effect,” Charles Fishman makes a compelling argument that Wal-Mart’s market power inevitably forces its suppliers to cut corners on quality in order to deliver the lower and lower prices that Wal-Mart demands. So those suppliers close their American manufacturing facilities and start sourcing their products in China — if they don’t, they’ll lose their place on Wal-Mart’s shelves. [Salon.com]

Mein Gott, I’m starting to feel like a very pink democrat…

But the symbolism of Kerala’s “bold” move, however quixotic, is still potent. Markets left to themselves do not deliver perfect outcomes. Sometimes government has to push back.

Indeed, especially since those sell-outs in Bengal don’t have the stones to do so. πŸ˜‰

Interestingly, in the other Left-ruled state of West Bengal, Chief Minister Buddhadeb Bhattcharjee has rolled out the red carpet to Mukesh Ambani’s ambitious retail initiative, though coalition partners have expressed their reservations on the issue. [CNN-IBN]

Compare that reaction to THIS thenga-flavored one:

“The public mood is against Reliance, so we will stop them in their tracks,Ò€ Food and Civil Supplies Minister, C Divakaran said. [CNN-IBN]

119 thoughts on “Mira Mang- Don’t Mess With Kerala.

  1. Bring it dowwwwn Achuthanandan! πŸ™‚

    [I can already hear the critics whining about how many jobs have been lost due to this move]

    Just back from a short trip to Kerala – Trivandrum and Cochin are bustling and the intentionally paced growth of the economy has meant that these centres have been able to avoid turning into urban nightmares like Bangalore. Local business is flourishing – people from all over the country come to Cochin to shop or study and/or receive medical attention in Trivandrum.

    Both cities easily have some of the best infrastructure in the country – Cochin’s Nedumbassery airport is lightyears ahead of Bangalore or even New Delhi. Homelessness and pollution are almost non existent as compared to other urban centres. At the same time, technology parks, ports (SEZs) and tourism are flourishing. Public Health has taken a bit of a beating with the recent outbreak of a viral fever epidemic – but the government (with extra pressure form the press) has been mobilizing massively to address the issue.

    So yes, Commie-leftist governments can sometimes do a good job. Inqalaab Zindabaad! πŸ™‚

  2. Sorry Anna, I find this less amusing than you. Kerala’s shoppers, and in turn, it’s vendors will lose out. Say you are a juice manufacturer – why go to Kerala and try to set up buy orders and prices with hundreds of mom and pop shops, with all the expense and record-keeping that entails, when you can deal with a series of shops like Reliance, which can order in bulk, making record-keeping and pricing more straight-forward. Small, inefficient sellers that enjoy monopolies in local markets have always complained about big bad stores, from the time of Woolworth’s to Walmart.

    Also, WalMart is finding out it is not the behemoth it once was. Consumers have shown while they like WalMart for things like laundry detergent, cleaners, and houshold goods where price is the deciding factor, they have not had much luck in selling goods where labels matter, such as clothes and home furnishings. Plus, they are spending a lot more on upgrading their stores with wider aisles and better lighting. Walmart’s size does not make it immune to marketplace pressures.

    If you prefer Olsson’s to Borders, that is your individual choice. Governments have no business in picking winners in the retail market.

  3. Kerala’s shoppers, and in turn, it’s vendors will lose out

    Somehow I think Kerala’s shoppers and vendors will survive.

  4. KXB, I always find your comments edifying. You raise very valid points and I thank you for putting up with me on a Friday when I’m sugar-happy. But yes, I am very amused, and because of this and other stories like the Coke one I linked to above, I think Kerala is pretty wacky. πŸ™‚ And I love it.

  5. Somehow I think Kerala’s shoppers and vendors will survive.

    No. No they won’t. They don’t have Whole Foods or Reliant. Whatever do people do without such things? πŸ˜€ Does my Aunt in Ernakalum not deserve juice?? DOES SHE NOT? (Pssst, I think they’ll survive, too.)

    I need to make sure I have no more sugar for the rest of the day. πŸ˜‰

  6. Somehow I think Kerala’s shoppers and vendors will survive.

    Survival is not the same as prosperity. Kerala’s seemingly idyllic appearance to tourists is largely subsidized by its best and brightest leaving for jobs in the Persian Gulf, and sending money back home. So, since the workers are there, but their money is in Kerala, they cannot exert the same pressure on the local government to spend funds wisely. Relying upon remittances is no way to build an economy (look at India pre-1991 and Mexico today).

  7. brightest leaving for jobs in the Persian Gulf, and sending money back home

    You’re speaking to a product of the Kerala-Gulf migration demographic. My parents left for the Persian Gulf where they were able to use their superior education (as compared to almost any other ethnic group in the Gulf) to get lucrative jobs and send money home. So the remittances from Gulf countries are a result of the government’s investment in the education of its people – no subsidy here unless you want to say that the government subsidizes education and in turn the graduates of that system subsidize the economy through remittances.

    In more recent years, the migration trend has slowed and even seem some reversal – I met a number of entrpeneurs in Cochin who had returned form the Gulf to start businesses and even one who returned from Chicago to open a hotel.

    Kerala’s idyllic landscape faces more far more problems than the choice of soft-drink – agriculture is dwindling in some of the traditional ricebowl areas, water/power generation management is still inefficient and the small but very poor tribal populations are largely ignored. I we can lick these problems, I think we’ll be ok if we have to drink fresh coconut juice instead of Goldspot.

  8. No wonder Kerala has one of the highest unemployment rates in India and you find a lot of them seeking employment and business opportunities in the neighboring states of Karnataka and Tamil Nadu and of course the Gulf πŸ™‚

  9. Also, WalMart is finding out it is not the behemoth it once was. Consumers have shown while they like WalMart for things like laundry detergent, cleaners, and houshold goods where price is the deciding factor, they have not had much luck in selling goods where labels matter, such as clothes and home furnishings. Plus, they are spending a lot more on upgrading their stores with wider aisles and better lighting. Walmart’s size does not make it immune to marketplace pressures.

    WalMart is a god send for folks struggling financially and people save a lot of money by shopping at WalMart. The problem with WalMat is not its size but its employee practices. There is much to appreciate about WalMart if they fix their employee practices. Its possible to be a decent employer and still make profits. Costco and Starbucks are excellent examples of good employers. If I have to buy bulk, I go to Costco instead of Sam’s Club

  10. Another important question that arises with this Walmart/Reliance entry to retail stores etc.What happens to exploitation of the farmers/whole sale producers by the middlemen…will it increase or decrease with Reliance/Walmart style retail ? If it does reduce, then I am sure the poor farmers/wholesale producers are going to rejoice ? But remember their products are going compete with world’s better product so will they also be wiped out ?

  11. Just a quick note about unemployment in Kerala which I’ve seen reported as high as 20%. This recent study from the Centre for Development Studies in Trivandrum points to the social rather than econoimc roots of the high unemployment rate – i.e. some people don’t work because they don’t need to or are not permitted to by family rather than because they lack the opportunity:

    The paper concluded with the observation that unemployment in Kerala is much more a social problem than an economic problem. Five factors lead to this conclusion. First, nearly 70-75 percent of the unemployed in 1998 became employed within five years, the hard-core unemployment lasting more than 5 years being only about 5-6 percent. Second, there is no geographical area that remains a high unemployment area for longer periods of time. Third, the unemployment rate among persons 30 years of age or more was only about 6 percent. Fourth, many of the unemployed came from relatively well-to-do households living in “good or luxurious” houses furnished with expensive household durables. Fifth, the unemployed are rarely the breadwinners of the households concerned, but are mostly unmarried sons or daughters of the head, or married women whose husbands are the breadwinners.
  12. Back to the juice metaphor – you can get fresh, local juice from local fruit in Kerala. That beats mass-produced packaged juice any day. It’s obscene to ship inferior processed foods long distances into markets that have their own local produce. I have no problem with importing manufactured goods (like appliances) and stuff that isn’t available locally, and pricing them according to the “global market,” but fruit is something else entirely.

  13. Wal-MartÒ€ℒs market power inevitably forces its suppliers to cut corners on quality in order to deliver the lower and lower prices that Wal-Mart demands.

    Right, the “the big bad guy made me do it” defense. Real nice. Suppliers cut corners when they take the easy way out.

    And Kerala should also ban cars and buses because they drive mom-and-pop rickshaw pullers out of business.

  14. Badmash has the right idea. If they can survive why shouldn’t the govt come and shear the hair off the hairy sheeple? Why not I ask you.

  15. because they drive mom-and-pop rickshaw pullers out of business

    Wait a minute… you may be on to something there! Greener transportation – every man can pull his own rickshaw πŸ™‚

    I thinkt that we’re doing just fine without the big box stores. People in Cochin like getting their fish from vendors who come to their homes. And since the municipal governments of many cities and towns in Kerala have banned the use of plastics in retail stores, I don’t know how the big boxes would be able to package their sub-standard goods for sale anyway!

  16. And Kerala should also ban cars and buses because they drive mom-and-pop rickshaw pullers out of business.

    Right, the let’s-extend-everything-to-its-most-idiotic-extreme defense. Real nice.

    People can’t have it both ways– we want everything at “every day WalMart” uber-cheap prices, but then we’re bereft when our dog dies from tainted petfood, etc. Why is this very real issue being dismissed?

  17. Another important question that arises with this Walmart/Reliance entry to retail stores etc.What happens to exploitation of the farmers/whole sale producers by the middlemen…will it increase or decrease with Reliance/Walmart style retail ?

    I am betting it will squeeze the middleman out of business.

  18. Back to the juice metaphor – you can get fresh, local juice from local fruit in Kerala. That beats mass-produced packaged juice any day. It’s obscene to ship inferior processed foods long distances into markets that have their own local produce. I have no problem with importing manufactured goods (like appliances) and stuff that isn’t available locally, and pricing them according to the “global market,” but fruit is something else entirely.

    If you are buying as an individual, or as the head of your household, that’s one thing. But say your are the principal at a local school, and you have to set up a budget for the cafeteria. You have a certain amount of money to spend on juice, but due to bad weather or fungal infection, the local juice crop is ruined. So, do you wait until the next harvest, or do you buy juice from a neighboring state, which while it may not be local, can meet the needs of your students?

    One of cousins in Calcutta told me the following story, “I never buy milk from some guy who pours it out of one of those large jugs, I only buy it in sealed cartons. I found out he was mixing milk with water, and charging the same price. The store restocks their goods, I don’t have to wait for him to bike by the house, and if I buy something that turned out to be spoiled, he is anxious to keep my business and makes amends.” As a man with a wife and child, he saw little charm in the mom and pop operators swindling him out of his limited income.

  19. KXB

    I agree. Half of Kerala population lives and works outside of the state because the economy is so slow.

    The real losers will be the farmers. They lose a lot by their dependency on middlemen and changes in demand. Supplying to supermarket chains will make their livelihood more stable by cutting out middlemen and being able to better forecast the demand. Luckily rest of India will lead the way and Kerala might change its laws.

  20. Umm, this is slightly off topic here, so please excuse me. In the caption underneath the picture in this page, I noticed a very interesting word. From my association with Tamil friends, I have come across a very similar word in Tamil. However, this word in Tamil is very un-parliamentary language, to say the least. But of course, I’m assuming its something entirely different in Malayalam. πŸ˜‰

  21. However, this word in Tamil is very un-parliamentary language, to say the least. But of course, I’m assuming its something entirely different in Malayalam. πŸ˜‰

    Nope. πŸ˜€

  22. Thank you for the clarification, Anna. One more word to add to my (limited) Malayalam vocabulary list. πŸ˜‰

  23. Kerala is a different growth stage economy, you can’t compare what worked for a mature market like the US to work in Kerala. The needs are guided by different preference, in most parts of India US style chain stores are a novelty and it will be a while till the novelty phases out, that is why there is a rush for single brand retailers to invest in India. Retail is pegged to be the highest growth sector in India. Why don’t we let the customer decide what they want, if they don’t want a reliance or a walmart, they wouldn’t shop there.

  24. Brown – an interesting side note to shopping in India. One of the foundations of the big box retail model is the high use of cars in suburbs. Thus you build massive parking lots and customers will drive in and buy lots of things. What I find is that even in places like Gurgaon where malls abound, Indian households prefer the convenience of having vendors drop off products at their homes. So for example, they’ll call the local store and give them a list which will then be dropped off. I’m not saying that Reliancefresh and Walmart won’t adapt, but I think in the absence of a similar car-culture in India and the preference of home delivery, smaller vendors will still survive.

  25. Badmash,

    True, but from what I have heard reliance will have home delivery similar to your local vendor. Also I am not sure if you know the McDonalds in India have home delivery which is absolutely different than their model here. I am not saying supporting local businesses is bad, all I am saying is let the market decide. The market in India is waiting for this kind of development and I don’t think it will be stopped. It will be good for the consumer and local suppliers.

  26. ACfd…

    There is much to appreciate about WalMart if they fix their employee practices.

    That seems like a pretty big if to hang your argument on.

  27. I’m not sure if their strategy will be the same in India, but in the US, Wal-Mart has solved this problem. (As has Starbucks.) The business model is to deliberately set about putting small competitors out of business. They open stores in strategic locations, drive the local stores out of business, then close the ‘dummy’ stores and force everyone to travel to the nearest Wal-Mart. They make sure that people don’t have other options. This is also why there’s such an outcry when Wal-Mart refuses to carry things like emergency contraception or unedited R-rated movies– there’s nowhere else for people to go.

    This practice also drives down wages– if there’s nowhere else for people to work, they’ll settle for minimum wage. And in the case of immigrants in the US, Wal-Mart has been caught repeatedly paying undocumented immigrant workers less than minimum wage and locking them in stores overnight.

  28. all I am saying is let the market decide… it will be good for the consumer and local suppliers

    True – then again, big players have a way of squewing the market so while I am in sympathy with your support of the idea of consumer choice, I remain skeptical.

  29. Oops, I meant to quote Brown at 25– “Why don’t we let the customer decide what they want, if they don’t want a reliance or a walmart, they wouldn’t shop there.”

  30. Apropos all this business about “the market deciding”, if the market “truly” decided (as in textbooks) there would not be a Wal Mart….more generally firms would not exist; so I would be careful about blithe pronouncements about “markets”.

  31. Sarah,

    I am not sure what Walmart’s strategy is in India but the ground reality is not the same as the US. Take the example of small car market in India, even though the choice is far greater then what it used to be few years back, maruti is still the largest selling car with competition from local players like Tata and then Hyundai in the small car segment. I may not be able to articulate it well but for me the preference of the consumers in a developing country is different than a mature market like the US. For most who have seen an increase in their disposable income for the first time, shopping at big chain stores is more of an indication of their status. Wage rate parity and price of juice is not a concern. 50 plus years of government interference had made the consumers deprived of choices and I personally feel more the choices, better it is for consumers.

  32. 28 · TheBarmaid on July 6, 2007 01:49 PM

    Wow, could that be, is it possibly, THE BARMAID? Who doesn’t spew love and haterade in public any longer?

  33. There is much to appreciate about WalMart if they fix their employee practices. Its possible to be a decent employer and still make profits. Costco and Starbucks are excellent examples of good employers.

    Starbucks may have made it trendy to drink overpriced coffee, but somehow I don’t see Walmart adopting a similar strategy with their cut-throat pricing model.

  34. Don’t have too much time to comment today, but I’m glad somebody called out Costco. They are good employers, unlike the hypocrisy that is Whole Paycheck. At least, Walmart bares its fangs, so you know you’re cosying up with a vampire.

  35. Ok, came off a little too strong there. Hypocrisy is probably not fair, but moralizing sure is. There’s the entire non-small-farmer supporting, flying-organic-food-across the country, anti-union aspect of Whole Paycheck, and it probably wouldn’t irritate me as much if they didn’t pretend to be whiter than Lalitaji’s saree.

  36. KXB,

    I had the same reaction to Sigh’s comments, I think his or her motive may be sensationalism so I think it is best ignored

  37. I almost spit my juice on my monitor!!

    Was it juice from WalMart? πŸ˜€

  38. Was it juice from WalMart? πŸ˜€

    Nope – Jewel, a major chain around these here parts.

  39. This most excellent attitude will ensure that Kerala remains an inexpensive holiday for me & French anarchists/anti-WTO protesters. Nothing removes papier mache encrustations from months of effigy making better than the warm waters of the Arabian Sea. Relaxing by the sea with a coconut full of kal while a PhD in Physics from Trivandrum University kneads all cares away…

  40. AS if Mom and Pop shops do not cheap out on employee expenses in India. It would have been better if Kerala enforced some strict Min Wage and zoning laws to limit the number of retail giants per region.

  41. ACFD:

    You compare WMT to Costco. Costco is actually not making much money off its retailing operations- all of its profits are through membership fees. There is a high cost to good employee practices, which is why the WMTs of the world do what they do and in some ways have to do to survive/thrive as business entities.

  42. I was not kidding. Read the following article to begin with: Coase, Ronald. “The Nature of the Firm” in Economica, Vol. 4, No. 16, November 1937 pp. 386-405. Coase received his bank of Sweden nobel memorial prize for among other things, solving the puzzle of why firms existed, since they are not supposed to according to the then prevailing model of costless transactions. Once you are done read some Herbert Simon (another laureate). Start with something simple like, his “Organizations and Markets” Journal of Public Administration Research and Theory: J-PART > Vol. 5, No. 3 (Jul., 1995), pp. 273-294

    and I accept your apologies (and chalk your pronouncements to ignorance)

  43. What do Mom & Pop stores really offer? For the consumer, you have limited selection and higher prices. For their supplier, you have a customer that often has limited credit history, cannot buy in volume. An employee in a Mom & Pop is probably the worst off – no benefits, no pension, limited or non-existent advancement. Plus, such business generally do not last beyond the lifetime of Mom & Pop, which means once it closes, what does that leave the local consumers?

    To quote George Costanza, “What’s so special about a Mom and Pop store? Let me tell you something, if my Mom and Pop owned a store, I wouldn’t shop there.”

  44. To quote George Costanza, “What’s so special about a Mom and Pop store? Let me tell you something, if my Mom and Pop owned a store, I wouldn’t shop there.”

    Classic!

  45. Keralam may be years ahead of the rest of India in many aspects, yet the mosquitoes are unbearable much like all parts of India. Refreshingly different is Trivandrum, where are not very many buzzing around and biting the crap out you. Also, if they want to promote their beaches ( kovalam has probably one of the most beautiful coastline and beaches)they need to install basic amenities like toilets. On a recent trip to the beach, I had to bribe a waiter of a nearby beach hotel, to let us use the facilities because the one public “latrine” available was stinky, filthy with human faeces everywhere but the bowl and no water!! ( imagine- you are near the biggest body of water-Indian Ocean).

    The likes of mini walmarts have already sprung up in big cities like Cochin, Trivandrum, Kottayam etc and the affluent malayalees are eagerly lapping it up imitating their brethren in the Gulf and America. In other words Consumerism has crept in and threatening.

  46. “Shopping at Mom and Pop stores” is really just code for a different way/pace of life where the shopkeeper knows your name etc; a different shopping experience. It’s a fine argument to make if the 5% markup in prices is generally inconsequential to your budget. I suspect someone who’s barely month-to-month would forgo the smile/name-recognition for 5% savings, especially in India where this mentality is very much ingrained even in the middle-class.