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15 questions, cut off was around 5.
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Theories of Imperialism
Political Theories
Examples: Morgenthau, Cohen
Imperialism is simply a manifestation of the balance of power and is the process by
which nations try to achieve a favorable change in the status quo. The purpose of
imperialism is to decrease the strategic and political vulnerability of a nation.
"...we are engaged in 'pegging out claims for the future'. We have to consider,
not what we want now, but what we shall want in the future. We have to
consider what countries must be developed either by ourselves or some other
nation and we have to remember that it is part of our responsibility and heritage
to take care that the world, as far as it can be moulded by us, shall receivethe
Anglo-Saxon and not another character. Remember that the task of the
statesman is not merely with the present, but with the future. We have to look
forward beyond the chatter of platforms, and the passions of party, to the future
of the race of which we are at present the trustees, and we should, in my
opinion, grossly fail in the task that has been laid upon us did we shrink from
responsibilities, and decline to take our share in a partition of the world which
we have not forced on, but which has been forced upon us." Earl of Rosebery,
Speech at the Royal Colonial Institute, 1 March 1893
Fashoda
Conservative Theories
Examples: Disraeli, Rhodes, Kipling
Imperialism is necessary to preserve the existing social order in the more developed
countries. It is necessary to secure trade, markets, to maintain employment and capital
exports, and to channel the energies and social conflicts of the metropolitan
populations into foreign countries. There is a very strong ideological and racial
assumption of Western superiority within this body of thought.
The Philippines
"I went down on my knees and prayed to Almighty God for light and guidance
... and one night late it came to me this way. We could not leave (the
Philippines) to themselves--they were unfit for self-government--and they
would soon have anarchy and misrule over there worse than Spain's was...
There was nothing left for us to do but take them all and educate the Filipinos,
and uplift and Christianize them." US President William McKinley, as quoted
in General James Rusling, “Interview with President William McKinley,” The
Christian Advocate 22 January 1903, 17. Reprinted in Daniel Schirmer and
Stephen Rosskamm Shalom, eds., The Philippines Reader (Boston: South End
Press, 1987), 22–23.
The Belgian Congo
Liberal Theories
Examples: Hobson, Angell
Imperialism is a policy choice, not an inevitable consequence of capitalism.
Increasing concentration of wealth within the richer countries leads to
underconsumption for the mass of people. Overseas expansion is a way to reduce
costs (and thereby increase or maintain profit levels) and to secure new consumption.
Overseas expansion is not inevitable, however. A state ca ...
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Fdi in multi brand retail dangerous for india aug 10, 2011
1. August 10, 2011
Prepared by Shekar Swamy, CEO, R K SWAMY HANSA Group and Visiting Faculty,
Northwestern University, in the interest of an informed debate to arrive at a
decision that puts India first. The views are personal.
2. What this presentation will cover
• This document outlines the perils and pitfalls
of the proposed opening up of the Indian
market to Foreign Direct Investment in multi-
brand retail.
• This document draws from experiences from
around the world. It shows that unfettered
admission of Big Foreign Retail is against
India’s national security, will cause damage
to the livelihood of millions, and hold both
farmers and consumers captive.
2
4. Meet one of history’s prolific hunters
• In 1873, this man set a
record for having killed
over 3,200 wild American
buffalo in just 35 days, at
the rate of over 91 per
day.
• How could he do it?
Tom Nixon
Buffalo hunter
4
5. The American buffalo
• The Bison, as it was called, used
to roam the plains of America in
the millions, as recently as the
1800s.
• It played a huge role in sustaining
the American Indian tribes,
providing them food. 5
6. The American buffalo (…contd.)
• These animals were stupefyingly easy to kill.
• If a buffalo saw the animal next to it drop dead, it
would not flee unless it could see the source of the
danger.
6
7. The American buffalo (…contd.)
• Thus one shooter with a long-range rifle could drop
an entire stand of the creatures without moving.
7
8. The American buffalo (…contd.)
• In 1870, a new method of tanning allowed buffalo
hides to be converted to high-grade leather.
• The railroads were built around that time, making
commercial shipments of hides economical.
• Buffalo hunting became obscenely profitable.
• “Buffalo men” like Tom Nixon roamed the American
plains, killing buffalo at will.
Between 1868 and 1881 - 13 years only - over 31
million buffalo were killed, stripping the plains
almost entirely of the huge, lumbering creatures.
The buffalo had no chance!
8
9. The American buffalo (…contd.)
Why didn’t anyone speak out?
• At one level, it was capitalism working itself out, the
exploitation of another natural resource.
9
10. The American buffalo (…contd.)
Why didn’t anyone speak out? (…contd.)
• There was another better explanation for the lack of
protest, articulated best by a military person.
“These men (hunters) have done in the last two years … more
to settle the vexed (American) Indian question than the
entire regular army has done in the last thirty years.
They are destroying the Indians’ commissary* … for the sake
of a lasting peace, let them kill, skin and sell until the
buffaloes are exterminated. Then your prairies can be
covered with speckled cattle and the festive cowboy.”
- Gen Phil Sheridan, Commander of the Military Division of the Missouri
* Commissary - a supermarket for members of armed forces, a source of food supply. 10
11. The American buffalo (…contd.)
• Exterminating the buffalo i.e. Killing the Indians’
food, was not just an accident of commerce.
It was a deliberate political act.
11
12. Lessons for us in the FDI context
• Allowing foreign organisations to have access to,
and eventually come to control, the food supply to
the nation at large is fraught with danger.
• Like the American buffalo, Indian retailers will be
picked off in droves. They won’t even see the
danger coming.
• Allowing Big Foreign Retail to compete with our small
retailers is the utmost unequal fight. It is like the long-
range rifle versus the standing buffalo.
All of the above will be explained in detail in the rest
of this presentation.
12
13. A few comments to set the context
and explain the perspective of this
presentation …
14. Time horizon
• We must assess the impact of FDI in multi-
brand retail over the next five to ten to
twenty years, not in immediate terms.
In the short term, money will flow into the
country to benefit a few people. The
government can claim that its reforms’
agenda is intact. This is however not the
correct gauge.
The adverse implications are over time.
14
15. No speculation
• There is no guess work or speculation in this
presentation.
The negative impact of Big Retail have
reverberated, and continues even now,
throughout the world.
Everything that is said in this presentation has
already happened elsewhere. We must look
at the right examples and learnings for our
situation.
15
16. Comparison with China is wrong
• In the context of FDI in multi-brand retail,
comparison with China is flawed.
• China has a $265 bn trade surplus with the
USA alone (2010) – Exports $365 bn vs
Imports $100 bn.
• Walmart is the single largest buyer from
China.
• China’s manufacturing employment in vast.
16
17. Comparison with China is wrong (…contd.)
• China has no option but to permit the likes
of Walmart to operate in that country.
• India has an annual merchandise trade
deficit of $100 bn plus.
• Indian economy is dependent on Services.
Retail is a huge part of this.
• “As China has done, so India should do” is
not a relevant argument.
17
18. Indian situation is unique
• No other nation (except China) has the
challenge of meeting the needs of 1.2 bn
people.
• No other nation has 350 mn to 400 mn
people below the poverty level, to be
looked after and given some basic
livelihood.
• No other nation has the social complexity
coupled with a fractious polity, that can
erupt into social unrest with ease, when
inherent balance is disturbed.
18
19. Indian situation is unique (…contd.)
• Policy on FDI in retail must take into account
the unique situation of India, and not blindly
follow western precepts.
• Policy must serve the needs of the broadest
base of the population, not just those at the
top of the economic pyramid who make
the loudest noise and have access to the
media to propagate their views.
19
20. Today’s incorrect narrative
• The narrative today seems to be that
whatever has happened in the West, should
happen in India also.
• Western practices are blindly considered as
“development”.
RETAIL IN THE
WRONG
WEST IS FLAWED!
Why should we bring in a flawed system
into our country, in the name of FDI?
20
21. Big Capital vs Democratic Capital
• This is a case of BIG FOREIGN CAPITAL versus
Small democratic indigenous capital.
Indian Retail sector is a
mass of small capitalists
serving small communities
and neighbourhoods, in
order to make a living.
Every where in the world, Big Capital has
over-run the small capital of mostly family-
owned retail.
21
22. Let us examine the implications of
FDI in multi-brand retail
24. Who are we letting in?
• The likes of the following companies:
Annual Turnover $130 bn
Rs 5.85 lakh crs
Annual Turnover $96bn
Rs 4.2 lakh crs
Annual Turnover $400 bn Largest Indian company is
Rs 18 lakh crs less than half the the size of
the smallest of these four!
Annual Turnover $100 bn
Rs 4.5 lakh crs 24
25. Who are we letting in? (…contd.)
These are some of the most ferocious,
predatory companies in the world.
Their practices in the markets are ruthless
and designed to wipe out competition.
Their resources are enormous. They can
invest and lose money for years. By then,
lakhs of local retailers will be wiped out.
25
26. Who are we letting in? (…contd.)
Their agenda is to dominate a market
place; nothing else is good enough.
They will compete against each other, as
they do around the world. In the process,
they will disrupt the market completely,
wiping out local players.
“When elephants fight, the ground below
gets trampled.”
26
27. Who are we letting in? (…contd.)
Want evidence?
• In just 13 years in Thailand, three foreign
retailers have taken over 38% of the market,
wiping out local retailers in the tens of
thousands.
• “What took 60 to 80 years to happen in the
West, has taken place in under 15 years in
Thailand.”
• Thailand is struggling now with the problem
of trying to contain the big retailers, and
prevent monopolistic practices.
(More evidence follows in the following pages.) 27
28. Who are we letting in? (…contd.)
• We are letting in the equivalent of modern-
day raakshashas, and justifying this by saying
that they will come and fix our “supply-chain
infrastructure”. (More on this specious argument later.)
28
29. 2) Big Foreign Retail is a game of
concentration and domination
30. Concentration and domination
• In every market in the world, Big Retail has
steadily edged out other players, leading to
unfair concentration.
Market shares range from 20% to as high as
80%+ for these retailers, making the entire
country dependent on them.
30
31. Concentration and domination (…contd.)
Grocery Retail Brand shares by country
Market MS of top
Country Top retail brands Share brands Year
Europe
Sweden ICA Stores 50% 2010
COOP 20%
Axfood AB 16% 86%
Germany Edeka, Schwarz-Gruppe 45% 2009
Rewe 24%
Aldi 15% 84%
Belgium Carrfour 29% 2009
Delhaize 25%
Colruyt 25% 79%
UK Tesco 30% 2009
Asda 17%
Sainsbury 16% 63%
France Carrefour 29% 2009
Le Clerc 17%
Mosquetaries 13% 59%
31
32. Concentration and domination (…contd.)
Grocery Retail Brand shares by country
MS of top
Country Top retail brands MS 3 brands Year
North America
Canada Loblaw Cos 37 2009
Sobeys Inc 18
Metro 14 69%
US Wal-Mart 32 2009
Kroger 8
Target 7 47%
Other Markets
Australia Woolworth 2010
Coles 79%
Mexico Walmart 47% 2010
Soriana 14%
Commercial Mexicana 9% 70%
Brazil Carrefour 14% 2009
Cia. Brasileira de Distribuicao 13%
Walmart 10% 38%
32
33. Concentration and domination (…contd.)
Grocery Retail Brand shares by country
MS of top
Country Top retail brands MS 3 brands Year
Asia
Thailand CP-All (Part of 7-Eleven) 11% 2010
Tesco Lotus 9%
SHV Makro 5%
Big C-Casino Group 5%
Central Retail 2% 32%
Indonesia Carrefour 2010
Alfamart
Indomart
Matahari
Makro Indonesia 20%
33
34. Concentration and domination (…contd.)
• Retail structure
in India is just the
opposite, with
no one player
dominating any
part of the
market.
This is beneficial
for consumers
and farmers
and suppliers.
34
35. 3) Big Retail is about control, and
squeezing costs on the supply side.
36. It is about control & squeezing suppliers
• Their business model is “Buy lowest; sell
highest”.
• They look for size and scale to gain the
ability to dictate terms.
• It is foolish to think that they will give farmers
a better price. All over the world, farmers
are only squeezed and squeezed.
36
37. It is about squeezing suppliers (…contd.)
• In 1950, US farmers received over 40 cents
for every food dollar spent at supermarkets.
Today, that is down to about 19 cents.
37
38. It is about squeezing suppliers (…contd.)
• Big Retail in USA squeezes farmers to
maximize their margins. Some examples:
Farm Retail price What
price farmers in
USA get
Whole Milk $1.45 $3.30 45%
Eggs 1.10 2.70 41%
Meat products 32%
Fruits/Vegetables 17% - 18%
Cereals/Bakery 7% - 8%
38
39. It is about squeezing suppliers (…contd.)
• If anything, Indian farmers get a better deal:
Farm Retail price What
price farmers in
India get
Whole Milk (Amul) Rs 26 Rs 34 45%
Sugar Rs 22 Rs 35/kg 41%
Rice/bread/ 50%
edible oils
• Farmers/consumers get a poor deal in fruits
& vegetables, because they are
perishables, and refrigeration infrastructure is
poor (which is a different issue).
39
40. It is about squeezing suppliers (…contd.)
Something to think about:
• If Big Western Retail is so good at increasing
farm income as claimed, how come the
western countries are pouring so much
money into farm subsidies?
• In 2009, industrialised countries provided a
farm subsidy of $1,260 billion (OECD Report).
40
42. It is against national security
• The retail industry represents the nation’s
food supply chain.
• It is how food flows from the farm to the
dinner table.
• Certainly, no part of the food supply chain
of the nation can be handed over to foreign
companies.
42
43. It is against national security (…contd.)
• Indians paid
the salt tax
for 187 years
– from 1759
to 1946.
Lesson: Do not give control or influence
over supply of food essentials to a foreign
company. It is madness.
43
44. It is against national security (…contd.)
Lessons in protecting national security from the USA:
1. 2005 – China National Offshore Oil
Company bid for UNOCAL … denied on
grounds of national security.
2. 2006 – Dubai Ports World acquisition of
major US ports … denied on grounds of
national security.
Lesson: National Security is above all other
considerations. This is well accepted
everywhere.
44
45. It is against national security (…contd.)
• Even for the western nations, concentration
and control over their nation’s food supply
chain is not a good idea.
Imagine if TESCO, which controls nearly a
third of UK’s food supply, shuts down even
briefly. It will cause food panic in that
country.
“Too big to fail” is not just for banking. It is
also a cause for worry in retailing.
45
46. 5) Big Foreign Retail will cause
massive disruption and
unemployment.
47. It will destroy employment
• India’s employment structure: (Source NSSO)
Self employed 51%
Regular wage employment 16%
Casual labour 33%
• One of the biggest avenues of self
employment is in Retail.
• Indian economy is not a good generator of
jobs – about 17 lakh jobs a year (not
adequate for our growth in population) 47
48. It will destroy employment (…contd.)
• Retail has very little entry barriers. For a
population like ours with limited skill sets, it
provides an excellent safety valve.
• If Big Foreign Retail forces closure of small
retailers, or if this avenue is blocked, there
will be a huge loss of livelihood for people
who cannot be engaged easily elsewhere.
The resultant social pressure and strife
cannot be imagined.
48
49. It will destroy employment (…contd.)
• Contrary to myths being spread, Big Foreign
Retail will not create net additional
employment.
For every one job created by Big Foreign
Retail, at least two to three jobs will be lost in
India (and that is a conservative estimate).
49
50. It will destroy employment (…contd.)
• Retail in India is the second largest
employment provider.
• There are over13 million retail establishments
in the country. (Source: Technopak)
– Growth rate at GDP level of 8% means over 10
lakh new retailers every year.
• Over 25 mn Chief Wage Earners depend on
Retail for their livelihood (Source: IRS 2010)
50
51. It will destroy employment (…contd.)
How Big Retail reduces stores – US experience:
(Source: Chain Stores in America, and Wiki)
USA Total retail Independents Chain
population establishments stores
1951 155 mn 1,770,000 1,600,000 105,000
2011 312 mn 1,500,000 1,145,000 350,000
• This is clear evidence that Big Retail will shut
down this avenue of employment in the
country. The safety valve will be shut down,
causing major pressure build up.
51
52. It will destroy employment (…contd.)
• In Thailand, over 30% of independent small
retailers were taken out in 10 years!
If this happens in India, the loss of
employment will be enormous:
Number of Chief Wage Number of
retail outlets Earners lives
closed losing jobs affected
1% of losses 130,000 250,000 12.5 lakhs
30% of 39 lakhs 75 lakhs 3.75 crs
losses in 10
years
52
53. It will destroy employment (…contd.)
Offshoring of jobs:
• Big Foreign Retail will source products from
all over the world. US unemployment is to a
considerable extent because of this.
53
54. It will destroy employment (…contd.)
Offshoring of jobs:
• When foreign retailers enter India, it would
be foolish not to expect global sourcing of
products.
• This will surely reduce employment in Indian
manufacturing.
It will also mean our farmers will have new
competition.
54
55. 6) Big Foreign Retail will increase
prices to consumers.
56. It will increase prices
• It is a major claim of Big Foreign Retailers
that they reduce consumer prices.
This is only true when it comes to On Sale
merchandise, which is in the nature of “loss
leaders”.
• Indian prices are already among the lowest
in the world. What is important is to look at
Retail Mark Ups i.e. the extent to which
selling price is increased vis-à-vis sourcing
price. 56
57. It will increase prices (…contd.)
• It is a complete myth that foreign retailers
will help reign in inflation.
57
58. 7) Big Foreign Retail will displace
existing players, not create new.
59. It will displace, not create new markets
• Big Foreign Retailers will come in to take
over an existing market only.
• This is unlike telecom or other industries
where entirely new categories and market
opportunities were created, resulting in net
addition to the economy, Retail investors will
not be creating any new markets.
Their whole game is disruption and
displacement. This is not good for the
existing, carefully built eco system.
59
60. 8) There is massive ongoing
investment in Retail from within.
61. Massive investment in Retail
• As mentioned earlier, there is robust ongoing
growth in domestic Retail.
• Indian families and businesses are investing
continuously in this sector.
• Assuming a growth in line with GDP, over 10
lakh retail outlets are being created
indigenously.
• The investment in this can be modestly
estimated at Rs 20,000+ crs per annum.
61
62. Massive investment in Retail (…contd.)
• This is mostly small, silent investment from
people’s own sources.
• There is no fanfare; there are no headlines. It
continues to happen no matter what the
global economy goes through.
• Big Foreign Retail will only disrupt this
naturally occurring phenomena.
• It is completely incorrect to say that the
Retail sector is not attracting investments.
62
63. 9) Big Foreign Retail’s impact on
building supply chain infrastructure
will be minimal
64. Minimal impact on supply chain
• Our twin problems of infrastructure:
1. Roads – 94% of our 3 mn kms road system is
in districts and villages. This is a “first mile”
problem.
2. Power – We will continuing power shortage
of 10% or more for the next five years. Cold
chain needs robust power supply.
• No foreign retailer can address these issues.
64
65. Minimal impact on supply chain (…contd.)
• It is a mockery to even suggest that foreign
retailers will sort the nation’s supply chain
infrastructure.
In fact, such retailers will make a major
demand on our already inadequate power
supply. They are highly energy consuming,
compared to our existing market place.
Studies have shown how ecologically
unfriendly the Big Foreign Retailers are.
65
66. 10) How should we protect India’s
interests against Big Foreign Retail?
67. Protecting India’s interests
• The best thing we can do is NOTHING
“Maintain Status Quo”.
We stay as we are. No one can force us to
open our markets to outsiders, since it is
against our national security.
WE SHOULD CHANGE THE LANGUAGE OF
THE DEBATE TO HIGHLIGHT NATIONAL
SECURITY ISSUES.
67
68. Protecting India’s interests (…contd.)
Lessons from Japan:
• 1973 - the Large Scale Retail Store Law
(daikibokouritenpohou) came into effect to
protect small retailers. Law was unchanged
till 2000.
This regulated everything: the amount of
selling space, store opening hours, and
yearly amount of business holidays.
No big store could be put up without the
approval of the affected parties!
68
69. Protecting India’s interests (…contd.)
Lessons from Germany:
In Germany only large German retailers
prevail. They control everything:
1. It is illegal to sell below cost in Germany. No
predatory pricing is possible.
2. Store hours are restricted, among the lowest in
Europe.
3. Big stores cannot be put up except in designated
city areas. Zoning laws are very strict.
4. Big retailers have to use union labour. No cost
advantage to any player on this count.
69
70. Protecting India’s interests (…contd.)
Litigation record
• We should have a simple clause that Big
Foreign Retailers with a poor record of
litigation against them will not be permitted
to enter India.
– Walmart has nearly 1200 cases against it.
(www.wal-martlitigation.com)
– All big foreign retailers have been hauled up
some place or the other for violating laws and
pushing monopolistic practices. Why do we need
such corporates in our country?
70
72. Nothing is fundamentally wrong
• There is no Indian complaining that they
can’t find products.
In fact, our bazaars and markets are full of
goods and well supplied.
• There is complaint on price rise, but the
reasons for that are fundamentally
elsewhere.
72
73. Nothing is fundamentally wrong (…contd.)
• If anything, our markets are very
competitive, and Indian prices are among
the lowest in the world.
• Our traders and merchants operate with
some of the lowest mark-ups and margins in
the world.
• The Retail sector provides the social safety
valve that the country fundamentally needs.
• Sure there are some shortcomings, but there
are shortcomings with Big Foreign Retailers
also.
73
74. Nothing is fundamentally wrong (…contd.)
• Our markets are near perfect, in a fully
competitive sense, with millions of suppliers
selling to millions of wholesalers and retailers,
selling to crores of consumers.
No one dominates and everything is at a
fine balance.
Disturbing this equation will be a terrible
disaster for the nation!
74