Working life

It’s been a long hard and cold winter. My Flemish friends noted that it snowed before St Niklaas (that’s 6th December to the rest of you). Since New Year the thermometer has barely risen above zero. The heating has stayed on at night (albeit low), otherwise it is uncomfortably cold in the morning. And the sun now rises before my alarm goes off, making it almost as redundant as the blinds in my bedroom are in keeping out light in the morning. It’s easier to get up in the light.

A few days ago I finished (editing) my first PhD thesis of the year. This one was an economics text about pineapple supply chains in Benin and how to improve them. It drew on institutional economics to describe the various supply chains and their modes of governance. These are quite familiar ideas to me – but worth explaining to many readers. In short different markets have different characteristics. There’s what people call the ‘spot market’ where things are bought and sold on the day’s trading price. Pretty much like your average fruit and veg. market (‘1 euro a kilo’) or the stock exchange. The two actually have a lot in common. They are both characterised by price volatility, opportunistic behaviour, a lack of trust between traders and what economists call ‘information asymmetry’ (one set of traders having more information than the others and using this to their – unfair- disadvantage).

On the other hand there are more structured markets, which are characterised by ‘asset specificity’. For example, you might be making a component that has very specific standards, performance etc. In this case you don’t sell on the spot market but enter into long term contracts, in which the product characteristics, pre and after sales service etc. are specified in detail. As a producer you may have to ‘tool-up’ your factory/farm and/or workforce to meet certain production criteria and need assurance that your investments will be worthwhile. Such relationships are characterised by long-term commitments and, as a general rule, the more specific the product/component – the stronger the relationship between buyer and seller. In the world of food, organic food or food with a regional origin, tends more towards the latter kind of market. For example organic coffee growers - in say Guatemala - will enter into agreements with buyers to grow in an organic manner. In return they will receive some training, perhaps some capital and a guaranteed minimum price. It’s a system that has a stabilising effect on the market and trading relations.

As individual consumers we are often bombarded with information that tries to make us ‘spot market’ buyers. In reality that is far from the case. We want a dentist, mechanic, accountant etc. whom we can trust. If they mess up, or their prices become exorbitant, then we will probably look elsewhere but the transaction (cost) of finding a new supplier – in terms of time of time if not money - can be daunting. So while we may look for the cheapest avocado we look for a reliable and trustworthy mechanic, etc.

Anyway, the point of this thesis was that pineapple growers in Benin could do much better if they were to enter into reciprocal agreements about quality, quantity, price etc. It would help them overcome the problems of not knowing who their buyers might be and also potentially offer them some access to up-front finance (pineapples have a long growing season and are capital intensive).

For my part I learned about the different characteristics of pineapple varieties, some of which (e.g. Cayenne Smooth) are in demand in northern markets, others more favoured in the countries where they are grown (e.g. Sugarloaf). To celebrate finishing this first thesis of the year I stopped by at Brussels biggest market to buy myself a pineapple. Despite the huge immigrant population in this part of town, I could only find Cayenne Smooths while my mouth was tingling remembering how good the green ones taste.