Coles, Woolies & the Long Chain Economy

Coles and Woolies dealings with the farmers is a powerful case for the ‘long chain economy’.

In the last week we have seen debates about the Murray Darling Basin, the backpacker tax, yet another story about foreign workers being underpaid on farms, and abuse of market power laws that impact on the power struggle between farmers and supermarkets.

These debates have all been treated as separate issues, when in reality they are all about the same thing. They are all about how money is distributed along the food production chain.

The farmers argue the oligopoly purchasing power of the major supermarkets is putting an unsustainable downwards pressure on farm margins. The farmers argue they are being squeezed to the edge of subsistence.

This then plays into the issues we are seeing in how farmers treat their workforce.  They argue it is too expensive and too much hassle to entice Australia’s languishing pool of  unemployed workers into fruit picking.

It is cheaper and easier to employ overseas workers. Preferably backpackers that don’t speak much english and have no idea about their rights.

The same squeeze is being applied to the Murray Darling Basin.  In their current contracts with Coles and Woolies, the farms need to take a lot of water out of the system to get the crop yields to survive. However this short term economic survival is coming at the cost of the long term survival of the river system.

The long term sustainability of the river system is not just an arcane desire to protect odd species of frogs.  Issues of salination and long term degradation of the river system present a long term threat to the whole eco-system and the agriculture it supports.

It is a reflection of the poverty of current economic approaches that all of these issues are treated as separate rather than interlinked. It is a powerful example of why new economic approaches need to shift away from regulating markets, and instead focus on value chains.

The deepest disconnect of all, however, is on display in Labor’s rhetoric on the battle between Coles and Woolies and the farmers.

“Putting consumers first has always been the guiding principle of Labor’s approach….we will not abandon our commitment to … reforms that help families doing their weekly grocery shop or paying their utility bills get a better deal.”

Really? Even if the cost is the destruction of the Murray Darling Basin? The exploitation of foreign workers? And abandoning Australia’s unemployed?

Since when does Labor endorse exploitation in the production chain to deliver cheaper prices to consumers?


Thinking in terms of long chains would open up more innovative and socially productive policy options, rather than simply focusing on regulating single markets.



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