Tuesday, 19 January 2010

Dairy Milked

Today I haven’t been able to get a particular film out of my head: Michael Moore’s debut documentary, Roger and Me.

In that film, Moore attempts to get an explanation from then-General Motors CEO, Roger Smith, as to why he closed down several car manufacturing factories in his hometown of Flint, Michigan – costing over 30,000 jobs and financially ruining the city.  As he does this, he paints a very sad and depressing picture of how the closure of these auto-plants led to the painful collapse of Flint’s economy, community, and pride.  The lesson is simple: once upon a time the GM factories were the economic and cultural heart of the city of Flint; once those factories were destroyed though, so was Flint.

The reason this film keeps on haunting me today, is because this morning I woke up to the news that Cadbury, after four months of allegedly fighting for its independence, finally succumbed to a £12bn take-over bid from American food company, Kraft Food.

The Cadbury factory is within walking distance from my house; a house which was actually built, in the late 1800s, for Cadbury workers to live in.

The local train station around here, is proudly painted a shade of Cadbury’s trademarked purple; the local supermarkets stock special “local deals” on Cadbury’s products; tourists come from far and wide to visit the nearby “Cadbury World”; and a short walk away from where I live, the quaint and idyllic Bournville Village, where I so often take afternoon walks, simply would not exist had not Richard and George Cadbury, the sons of the company’s original owner, not bought up the old Bournbrook estate and created it.

In other words, as with Flint, Michigan and General Motors, the area in which I live is inextricably linked to the industrial goings on at the local factory: Cadbury provides jobs for people in the community, draws visitors to the area, and makes the air around our streets smell distinctly like Dairy Milk chocolate.  The idea of it being sold to the highest bidder therefore, purely for profit, leaves me extremely worried about what the future might bring.

Unlike a lot of other corporations in the world, the Cadbury brand, coming as it did from the strong Quaker traditions of its founders, was theoretically more than just about making money.  Guided by an underlying business philosophy that was driven by something deeper than the usual free-market capitalist dogmas, Cadbury purported to care for its workers, care for the local community, and generally adhere to what chief executive, Todd Stitzer recently called its unique form of “principled capitalism”. 

The ramifications of selling the business to a company who do not share these same ethical principles and underlying philosophies, could well be significant, and damning to the town in which I live.    

That said, one has to question exactly how “principled” Cadbury’s latter-day “principled capitalism” really was?  When Kraft first approached the company in late August/early September last year and began its hostile takeover, a lot of noise was made about the heritage, values, and unique position of the company both in terms of public goodwill and its ethical practices.  If any buy-out were to take place, we were told, it would have to be about more than just money.  Jobs would have to be protected, traditions maintained, ethics adhered to.  “We will continue to execute our strategy as an independent standalone company” said Stitzer, “unless someone comes along with a compelling offer, and I mean compelling.”

What he meant by “compelling”, it turned out, did not mean job protection, or a guarantee that Cadbury’s “principled capitalism” would remain in place.  All “compelling” really meant, it turned out, was Kraft raising its proposed share-price offer up ever-so-slightly, from 770 pence a share, to 850 pence a share.  A difference of eighty pence. 

Once the money was good, and all shareholders would be guaranteed a tidy profit from the sale, all that other stuff – you know, the “principled” capitalism – was thrown out the window.

Truth be told, that isn’t necessarily Cadbury’s fault.  It is more a fundamental problem with capitalism.

Under the current system of capitalism, public companies have a legal obligation to their shareholders to make them as much profit as is possible.  If I am an executive of a company and reject a highly profitable business opportunity that would make my shareholders a lot of money, I will have acted in breach of the law and against the best interests of my shareholders, even if I chose to reject that opportunity based on arguably higher principles of ethics.  Capitalism doesn’t care about rationales like that, and shareholders don’t want to hear that you are saying no to an opportunity to let them double their investment just because you want to ensure silly things like jobs, commitments to Fair-Trade, and the continued health of a particular local community.  So once Kraft increased their offer and the shareholders were offered a 850 pence jackpot, Cadbury legally had no choice but to recommend the sale go through – principled capitalism be damned.

One has to wonder about the value of an economic system like that: one which literally leaves no room for higher principles and reduces everything to the bottom-line.  That’s one of the reasons I’ve been fighting against capitalism ever since I was old enough to understand it – it’s not that its a good system gone bad, its that it is a system which is inherently flawed, and incapable of prioritizing the things that are truly important to a society if they ever get in the way of a tiny minority of people making some money.

So as with Flint, Michigan and General Motors, Cadbury unions now fear that up to 30,000 jobs may be at risk as a result of the proposed deal with Kraft. 

That was the exact number of job-losses it took for Flint to start to crumble.

Because of the amount of money needed to make the deal impossible for Cadbury to refuse, Kraft is going to be about £22bn in debt going into its new operations in Bournville.  In the past, the company have had a savage record for job-slashing and aggressive cost-cutting measures when it needed to reduce its debts: between 2004 and 2008, according to the union, Unite, Kraft shed 19,000 jobs and shut down 35 sites in order to save money and pay the bills.  That jobs at the Cadbury factory are in serious trouble, therefore, is basically beyond a doubt.

For the moment though, the factory remains open, albeit in a state of pre-emptive mourning.  It is unlikely that Kraft will shut down the place immediately, if it shuts it down at all – but what is clear is that the local community is now on edge, not knowing exactly how this story will end.  I went for a walk this afternoon, as I often do during the weekdays, and as I walked past the Cadbury’s buildings there was a look of shock and fear on the faces of workers outside.  Usually, at lunchtime, the grounds surrounding Cadbury’s are full of happily chatting people eating sandwiches and sharing jokes and stories.  Not today.  Today there are just grim smokers and news-teams.  Everywhere I look there are cameras being set up, men running frantically around with tripods, reporters interviewing locals, journalists preparing for their close-ups...  Outside the main offices, someone has attached two tiny Union Jacks to the entranceway in a futile attempt at denying the new American owners their claim.

The superstitious among you might find it interesting to note that, in late January 2009 – about a year ago today, and long after twelfth night had passed – Christmas trees were still up inside these same main offices, shining brightly into the night. 

Keeping Christmas decorations up after Epiphany is supposed to bring you bad luck.  I remember saying to friends and family at the time: if anything bad happens to Cadbury in this recession, it’s those Christmas tree’s fault.

I didn’t really believe that – I still don’t.  It’s just stupid superstition.  But I did find it interesting to note that, this year, the trees disappeared promptly on January 6th: certainly someone at Cadbury must have been thinking about it.

Yet the year they avoided the supposed “bad luck”, thirteen days later, they were sold.

Well, almost.

As yet, there has still been no official “sale”, of course – merely the recommendation of a sale by management to the shareholders: the fucking over of entire communities is not without its formalities.

But anyone who has ever watched capitalism at work, principled or not, will know that the rest is now just a rubber-stamping: it is only ever very rarely that shareholders refuse themselves the chance to make money.  Rarer still are the occasions when shareholders refuse to make money in order to save jobs and preserve a local community.

What do they care?

They got their 80 pence extra per share.

They got their 10 pence dividend.

And so, after a year of already watching one side of my local neighbourhood fall slowly victim to the recession – with once-thriving shops gradually becoming derelict and boarded up, and former restaurants and take-aways shutting their doors one night and never opening them again – I now get to watch the same thing happen all over again on the other side of the canal.

Ain’t capitalism grand?

Ain’t “principled” capitalism even better?

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