The 29% ethical Co-op & what Adam Smith might have made of Tesco

Co-op Fairtrade Mini Flapjack Bites: 29% Fairtrade ingredientsThese Fairtrade Mini Flapjack Bites are a touch too chewy for my tastes, but they’re moreish all the same. That’ll be the Belgian butter doing its job, I guess. But what caught my eye was the claim to be 29 per cent Fairtrade. It maybe facetious to suggest the remaining 71 per cent has been unfairly traded, but maybe not. And it does make you wonder if it is possible to be only partly ethical.

There’s no shortage of allegations that supermarkets trade unfairly with suppliers in the developed world (who make 71 per cent of Co-op’s Fairtrade Flapjacks). The FT’s upset Tesco with some forensic accounting that implies Tesco and Asda fund their growth via a credit ploy. The alleged ploy is a very old one: pay suppliers as late as possible – long after the goods have left the supermarkets’ shelves – and use this credit instead of bank finance to grow. Tesco have hit back with Royal Bank of Scotland research that shows they pay within 33 days on average. I’d be delighted if my clients were that good (although averages like that can hide many sins). The FT’s research will worry Tesco against whom allegations of supplier mistreatment and calls for break up are rife.

And yet I’ve nothing but admiration for Tesco who have gotten where they are by doing a better job than everyone else. The real issue is that in capitalist societies, capital consolidates, monopolies are created and markets corrupted. Eliminating competition will always save costs in the short term, which makes it an inevitability. Adam Smith, too often misappropriated by capitalism’s nuttiest apologists, warned such monopolies always end in ‘negligence, profusion and malversation’. A tipping point will come where Tesco is simply too big. It won’t be their fault, but it will happen and at that point government will have to step in and break them up.

Leave a Reply