ARTICLES: "Retailers Rally Against Wal-Mart as It Edges Into India: Stores Seen as Threat To Traditional Shops," by Amelia Gentleman, New York Times, 10 August 2007, p. C3.
EDITORIAL: "Wal-Mart in India: Why everyday low prices aren't the norm in Delhi," Wall Street Journal, 11-12 August 2007, p. A8.
ARTICLE: "Warming Threatens Farms In India, U.N. Official Says: More frequent floods and droughts could decimate the food supply," by Somini Sengupta, New York Times, 8 August 2007, p. A6.
A huge chunk (like 40%) of American labor was in the ag sector in 1900. Now, it's about 3 percent. Cue up Willie Nelson for the tears, unless you grew up in a farming community like I did and witnessed what a tough life that is (I have worked in many jobs over the years, but nothing ever compared to farmhand in terms of sheer effort).
The efficiencies of big farming, coupled with the efficiencies of big-chain store supply chains, means the price of food will drop significantly as your country industrializes, but yeah, a lot of small businesses get crushed as a result.
This is a sad loss of history to some, but a serious uptick in living standards to the masses.
And Wal-Mart, that clever marketer to the bottom of the pyramid, is exactly the type of change agent for the job of upgrading the retail/food sectors.
Wal-Mart is currently trying to sneak into India, where the government, in its infinite protectionist wisdom, does not allow multibrand foreign retailers to sell directly to consumers, although it does allow wholesale ops. So Wal-Mart is buying into a joint venture with the Bharti Group to generate a bunch of large Sam's Club-like outlets.
Naturally, this brings a fear-threat reaction from local business, not unlike those Wal-Mart faces when it comes into any town. European supermarket chains face similar resistance in India.
The cry is a familiar one: millions will lose their jobs. But if you've ever been to India, it's clear the place is one vast sea of under-employment. You go into any shop and you've got this huge ratio of workers to customers, with everyone sort of working.
But it's the supply chain behind all those shops that's truly inefficient. As the WSJ points out:
The biggest problem facing Indian retailers and consumers is a dysfunctional supply chain. Because the market is highly fragmented--about 96% of the retail marketplace consists of small shopkeepers--economies of scale are elusive and both producers and retailers depend on long chains of middlemen to bring goods to market. Agricultural produce typically travels from farmer to trader to commission agent to wholesaler to retailer, and each step imposes new costs.
By one count, the amount an India consumer pays for food is five times the amount the farmer actually receives. In the U.S., the ratio is closer to 2-to-1. Waste is also a problem--about 60% of the value of India's agricultural output is lost between farm and market, as processing delays and "wear and tear" on delicate produce take their toll on quality.
Tell me how anyone is served by this state of affairs, especially the environment?
And yeah, with global warming, that environment is going to get a lot harsher for already steamy India, so the question of rationalizing that system is more than crucial, unless you believe the job of India's ag and retail sector is to be as pollutive as possible and to underemploy as many people as possible.
The simple reality remains for India: it is nowhere close to matching America's sort of efficient multi-state economic union (again, from the WSJ editorial):
Indian has also yet to match America's feat of creating a single internal market for consumer and agricultural goods. Each state imposes its own inspection requirements, duties and regulations on shipments that cross its borders, even en route to another state. In the U.S., a trucker can haul a load 1,000 miles in about 20 hours. The equivalent journey in India takes four to five days.
Again, you make that system more efficient or it chokes on its own growth and ambition.