It’s (Social) Capitalism … Stupid

An item in AlterNet caught my eye. Ari LeVaux shows how the new corporate parent of Silk Soy Milk has basically dropped American Soy Bean farmers as suppliers and now purchases most of its soybeans in China. The ultimatum to American farmers was: meet the Chinese price or else. This represents a stark reversal of the commitment to American farmers made by Silk in the pre take-over days.

My first reaction was “Duh!” What did you expect. Ever since corporate America has turned organic agriculture into a lifestyle choice rather than an alternative model for agriculture, the bottom line beats all other considerations.

The take-over of a small “ethical” company by a large corporation happens all the time. In the case of chocolate, think Scharffen Berger, Green & Black, Dagoba, Seeds of Change, Endangered Species Chocolate.

After the take-over, it’s only a question of time before the environmental, ethical, or social commitments of the old company fall by the wayside. David Teather has shown in a 2007 Guardian article, that the Ethical Consumer Magazine score for each of eight “ethical” companies declined steeply after they were taken over by large corporations.

The real issue here is legal organization of the “ethical” start-up. As long as they are organized along the normal business model–sole proprietorship, limited liability corporations or straight corporations–there’s only one option when the “ethical” founders wants to get on with their lives: sell the company. And more often than not, the buyer is a corporate giant which has been lusting after that particular market niche.

We are so caught up in the image of the entrepreneur, the mythical person who pushes a dream into a successful business, that we cannot conceive of alternatives. What if all to social capitalists had just dropped the capitalism part and formed cooperatives instead? Worker-owned cooperatives to be specific. I’m thinking here of Equal Exchange in MA. It’s a fairtrade coffee and chocolate worker-owned cooperative that practices in its own structures what it preaches to farmers around the world.

Once organized as a cooperative, the entire question of what to do with the company when one gets tired of the day-to-day operations is a non-issue. The other owners continue, you get your share and that’s it. Of course, there wouldn’t be the multi-million dollar pay-off waiting at the end. Maybe that’s the rub. But if it is then the ethical pretensions of the entrepreneur were never more than skin deep in the first place.

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6 thoughts on “It’s (Social) Capitalism … Stupid

  1. RodneyNorth

    Michael,
    In some circles this is called “The Legacy Problem”. An influential journalist/author, Marjorie Kelly, wrote about it (& us) back in 2000 in her magazine Business Ethics (see http://www.meadowbrooklane.com/business.ethics.legacay.pdf )

    Unfortunately there’s been little progress on this problem. For example, in the meantime other firms like The Body Shop, Tom’s of Maine and Honest Tea have all been bought up.

    Coincidentally we also wrote about this, and how we avoid it, in our just published 2008 Annual Report. see p 12 (or screen 14) at http://www.equalexchange.coop/annual-reports

    Other notes:
    A prof at Michigan State, Phil Howard, nicely graphs how corporations have bought up many organic brands that most folks presume are still independent mission-driven companies, such as Horizon (Dean Foods), Cascadian Farms (General Mills), and Tazo tea (Starbucks).
    https://www.msu.edu/~howardp/organicindustry.html

    Dean – owner of Horizon and Silk has also done the following. Silk was originally a 100% organic brand, but over the years Dean has steadily backed away from that practice, but in a subtle way that many shoppers probably didn’t notice. Today many or maybe even most Silk products are NOT organic.
    Similarly they are now using the same tactic with Horizon (a 100% organic brand ’til now) and introducing “natural” (but not organic) milk under the Horizon name.

    While Endangered Species was sold by the founder I wouldn’t call the buyers (Wayne Zink & Randy Deer) a “corporation” in the same sense as Mars or Hershey. However when Wayne and Randy moved the company from Oregon to Indiana (and about 20 employees had to move or quit) I bet that distinction was little consolation. You can read about the messy take-over at http://www.redorbit.com/news/science/258276/bitter_chocolate/index.html
    Lastly, Michael, do you know that we’re doing the “Reverse Trick-or-Treating” campaign again this year?

  2. Endangered Species Chocolate

    Endangered Species Chocolate remains a privately-owned company. One that is deeply loved and cared for by its owner and 50 employees. We are passionate and committed to providing our chocolate-loving customers a product that supports species, habitat, and humanity.

    We appreciate your post discussing small companies being purchased by large corporations – but wish to call to your and your reader’s attention that we are a thriving privately-owned company.

    Chocolate Regards,

    Monica Erskine
    Senior Customer Service Rep and Chocolate Goddess
    Endangered Species Chocolate

  3. Bernard

    Greetings,

    I am an activist with the worker-managed organizations in the SF Bay area. See http://www.nobowc.org for more on that.

    Your comment re: “We are so caught up in the image of the entrepreneur, the mythical person who pushes a dream into a successful business, that we cannot conceive of alternatives.”

    Exactly. But what can we expect? When Business Schools must compete with essentially the same stupid program, marketing a “difference” is essential. So we have “green” programs or “social” entrepreneurism, meaningless distinctions meant to draw upon the idealism of young people to keep the old crew of profs and their corporate sponsors in the “green” – the old green dollars, that is.

    One of the projects of the co-op movement must be to demonstrate the superiority of a collaborative economic process and program. Kelty’s new book, “Two Bits,” is a great introduction to the collaborative process known as Open Source. And the success of worker co-op development, granted that they are tiny, is beyond dispute. For example, the three replications of the Cheeseboard (in Berkeley) have all exceeded expectations. The model for co-op economic development is Mondragon.

    That model is currently being explored in Cleveland and in rural Wisconsin. See http://www.jasecon.org for more on that.

    Personally I think that one of the major stumbling blocks towards thinking of collaboration, and overcoming the entrepreneurial “spirit,” is the current way in which ownership takes center stage when discussing cooperatives. Traditionally co-ops had members, not owners. Membership connotes stewardship. Ownership connotes property.

    I think we need to return to the perspective that sees cooperative development as a vision of an alternative economy and move away from trying to insert co-ops into what passes as “mainstream” economic practice.

    Need I say that this so-called mainstream practice has just collapsed. To seek support from “ordinary folks” based on the exploitive economy that today throws more and more lives into the dumpster boggles the mind.

    The experience of folks in the cooperative movement is that people are searching for an alternative economy. We have an opportunity to promote an alternative, and one that works, if only we are up to the task.

    -bernard marszalek