Karl Marx’s class struggle and Ceylon tea



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By Jayampathy Molligoda, CEO Bogawantalawa Tea Estates PLC


Resolution introduced by, International Socialist Congress, Paris, July 20, 1889


".. A great international demonstration shall be organized for a fixed date in such a manner that the workers in all countries and in all cities shall on a specified day simultaneously address to the public authorities a demand to fix the workday at eight hoursin view of the fact that such a demonstration has already been resolved upon by the American Federation of Labor at its convention of December 1888 in St. Louis for May 1, 1890, that day is accepted as the day for the international demonstration. The workers of the various nations shall organize the demonstration in a manner suited to conditions in their country. "International Socialist Congress, Paris, July 20, 1889.


In The Communist Manifesto, Karl Marx and his lifelong friend and collaborator wrote"the history of all hitherto existing society is the history of class struggles."


Karl Marx (1818–1883) was a German born philosopher andhis analysis of society identifies two main social groups:


= Labour (the proletariat or workers) includes anyone who earns their livelihood by selling their labor power and being paid a wage or salary for their labor time.


= Capital (the bourgeoisie or capitalists) includes anyone who gets their income not from labor as much as from the surplus value they appropriate from the workers who create wealth.


The income of the capitalists, therefore, is based on their exploitation of the workers (proletariat).According to the Marxist perspective; class conflict and struggle are inevitable in capitalist societies because the interests of workers and capitalists are fundamentally at odds with each other. Capitalists accumulate wealth by exploiting workers while workers maintain or advance their own well-being only by resisting capitalist exploitation. The result is conflict and struggle, which is reflected in all aspects of social life, from unionizing efforts to strikes to political campaigns to immigration policies.


Max Weber (1864–1920) another, eminent German philosopher agrees with the fundamental ideas of Karl Marx about the economy causing class conflict, but claims that class conflict can also stem from prestige and power.Weber argues that classes come from the different property locations. Different locations can largely affect one’s class by their education and the people they associate with. He also states that prestige results in different status groupings. This prestige is based upon the social status of one’s parents. Prestige is an attributed value and many times cannot be changed. Weber states that power differences led to the formation of political parties. Weber disagrees with Marx about the formation of classes. While Marx believes that groups are similar due to their economic status, Weber argues that classes are largely formed by social status. Weber does not believe that communities are formed by economic standing, but by similar social prestige. 


According to Marx’s theory of exploitation, living labour at an adequate level of productivity is able to create and conserve more value than it costs the employer to buy; which is exactly the economic reason why the employer buys it. Thus, the surplus-labour is unpaid labour appropriated by employers in the form of work-time and outputs, on the basis that employers own and supply the means of production.


Tea plantation workers:


Let us look at the practical aspects of Karl Marks surplus labour theory in the context of Sri Lankan tea sub sector, in particular the up country tea estates producing some quality high grown teas which are most sought after in the world markets. Interestingly, according to the current labour practices in the tea estates, the male workers who provide sundry work such as pruning, weeding, fertilizing etc. put in less than six hours work only and stop work by 1 pm.


The main plantation unions signed a collective agreement on 4th April 2013 with the Ceylon Employers Federation, signed on behalf of 20 RPC’s, thus increasing the daily wage for plantation workers by 20% w.e.f 1st April 2013 for a two year period. Unions and employers brought negotiations to a rapid conclusion on the same day before rival unions create more problems. "We were advised us to finish this matter immediately… Underlining the purpose of a quick deal", one member declared.


Under the recently concluded collective agreement, the basic daily wage has risen to Rs.450/= plus Rs. 30/= per day with additional allowance of Rs.140/= tied to attendance. Overall income depends on the workers and the management, who jointly decide the number of days of work per month—generally around 25 a month. An average worker could earn around Rs.15,500/=per month.


The additional cost of Rs. 45 /= per kilo of tea due to the recent wage increase and continuous drop in high grown tea prices at the Colombo tea auction would make most of the tea estates unprofitable and even the entire high grown tea sub sector. As a result, the estates are reluctantly compelled to curtail tea replanting work, thus making further cost increases due to static tea production. Can the plantation companies continue to cross subsidize loss making tea estates from other revenue sources? The strategy seems a flawed one.


Most of the high grown tea estates from this month onwards will run at colossal losses and the Regional Plantation companies will be compelled to either borrow money from the Banks or subsidizing tea losses with profits generated from rubber/oil palm etc. To be more specific, the tea prices at the Colombo Auction are in the region of Rs.360/=and the cost of production of a kilo of tea is around Rs.430/= thus making an average loss of Rs.70/= per kilo of Ceylon black tea.


With regards to future tea prices, waiting for some disaster to happen elsewhere such as droughts, political unrest in African tea producing countries are temporary phenomenon and the markets will reach equilibrium over time. High prices of Ceylon tea drive away global players/customers to other producers. Eg: Lipton used 100% Ceylon tea in 1950 as against present 6%.Ceylon tea image and price is already devalued as it is being blended with teas of other origins where we have no control.The estate sector would get into a vicious cycle of low productivity and relatively low prices leading to losses getting accumulated unless proper strategies are discussed and agreed by all stake holders.


The wage increase granted in April 2011 was 27% which is substantial taking into consideration the previous increases as well. The previous wage increase granted in April 2009 of 39% was also considered high. In the year 2006, the daily wage was only Rs.260/= per day and was increased to Rs. 290/= in 2007. Thereafter in April 2009 the wages were increased to Rs. 405/= per day. Now it is Rs. 620/= all inclusive. As stated above the overall income depends on the number of days of work per month, generally around 25 a month. With the allowances, the workers receive an average monthly salary of Rs 15,500=. With the over-kilo allowance the pluckers get even more.


However the general perception on the estate workers by the trade unions and the general public who are sympathetic towards the working class is "With the high cost of living, this salary is not enough even for meals each day, let alone other expenses…. ’ The World socialist website reported: "They are among the most oppressed layers of the Sri Lankan working class, living on the plantations in cramped accommodation without essential facilities such as electricity and running water."Socialism in capitalist tea bottle/cup


Capitalism is an economic system in which the means of production are privately owned and operated for a private profit; decisions regarding supply, demand, price, and investments are made by private actors in the market rather than by central planning by the government.


According to Marx, the central driving force of capitalism is in the exploitation of labour. "The ultimate source of capitalist profits is the unpaid labour of wages." Marx calculates that the total required for subsistence is equivalent to about six hours of labour a day. "But will the owner allow his workers to knock off at the end of their six hours? To earn their wages, they must work for another six hours, thus providing the "surplus labour" that creates the owners profit." Marx argued. As states previously, according to the current labour practices in the tea estates, the male workers who provide sundry work such as pruning, weeding, fertilizing etc. put in less than six hours work only and stop work by 1 pm. However, the present labour law is minimum 8 hour work rule per day. From the above it can be seen that, within the overall tea plantation working environment, the determination of daily wage and the number of working hours per day makes no surplus money for the estate as Karl Marks claimed in a capitalist system.


Seven years ago, the World Bank in releasing its report on Sri Lanka’s poverty assessment in 2005/06, said the estate sector comprising 5% of the country’s population poses a significant challenge to Sri Lanka’s poverty reduction. The poverty headcount in the estates was seven (7) percentage points higher than the national average. The report also revealed some crude facts that stated the "higher poverty among estate households is associated with the remoteness or lack of useable year-round roads linking the estate to the nearest town." The estate sector was reportedly posing the highest incidence of poverty with a headcount of 30% in 2002.


The Department of Census and Statistics has completed the Household Income and Expenditure Survey (HIES) 2009/10 conducted once in every 3 years, aiming at investigating the living standards of household population in Sri Lanka. The poverty level is measured by Head Count Ratio (HCR) which presents the total number of persons live under the poverty line as a percentage of the total population. The value of the Official poverty line of Sri Lanka was Rs. 3,028/= real total expenditure per person per month for the 2009/10 survey period.


The latest calculation of poverty shows that poverty level of the country has further declined from 15.2% reported in 2006/07 to 8.9% in 2009/10 (In 2002 /03 it was 22.7%). However the bitter increase of poverty in estate sector reported earlier was an eye opener towards the hard working estate population who contribute heavily to the growth of the country’s export trade. We are pleased to note that the estate sector has recorded a substantial reduction of the % below poverty line from 30% to 9.5%.


Ceylon tea marketing:


MTI consultants who recently studied tea marketing aspects in collaboration with the industry players and Sri Lanka Tea Board, in their presentation mentioned; "Sri Lankan tea industry was like a slow burning candle, burning on three sides. On the demand side, ‘power’ lies with top global brands, retailers and food service chains. Source: MT consultants.


However, the writer’s own view is that Sri Lankan tea industry could look at aggressively manufacture/blend/pack /export "true" value addition to enhance net foreign exchange, currently around: $ 1.4 Billion, provided winning strategies are designed and implemented by the tea industry players.


Here are some trends in global tea marketing as identified by experts in the industry. As we know the "Tea bags" market is the growing trend globally and traditional tea drinking is fast disappearing. ("Real tea" Quality is now irrelevant withvariousflavors in offer) Also "Store brands’’ are emerging and will overtake own brands in the international distribution channels of tea trade. Middle East countries which consumed leafy teas in the traditional manner are also converting into tea bags market now.Change in life styles- The customers will always have a choice and will switch to a similar or substitute products sooner or later. On the supply side, the countries like Indonesia and Vietnam are producing poor quality (as perceived by traditional tea industry players in Sri Lanka) teas at very low price.


In this scenario, it is true that in order to improve and/or maintain a certain level of quality of the teas, Ceylon tea is being used by blenders globally, which helped Ceylon teas (up to a point) to maintain a reasonable level of prices.It is important to realize that the total tea production of Sri Lanka is approximately 325 million kilos. Only 80 to 100 million kilos are suitable for tea bags. Having said that a certain percentage of "Ceylon tea" has a small niche market such as the specialty tea standards which includes BOP, BOPF, OP, FBOP etc. (during the quality season this fetches high premium prices.)


Conclusion:


The cost of production (COP) of tea in Sri Lanka is completely disproportionate to the costs of the competitors in India and African countries.No significant volume change in production would be possible for the producers of Sri Lanka due to socio-political structure of the tea industry (Limitation of the land availability, application of technology etc.)Living in the assumption that ‘Ceylon Tea’ will continue to command a premium price in the global market place above that of other growers, is a delusion.As stated above, the declining tea prices coupled with increased COP has already made tea estates unprofitable. The writer’s article published in the Sunday paper appeared in 5thJuly 2010 titled" Is tea a perennial crop or a beverage?" and "Das kapital in tea cup" appeared in September2011 had tried to address these twin issues in order to generate a meaningful discussion to map out strategies.


1. Are we to play only in the niche market and continue to expect a premium price for Pure Ceylon tea or should we look at the bigger picture and become a player in the global beverage market, and increase net foreign exchange from tea exports?


2. Are we tolook at daily wage increase only at the collective agreementsor should we discuss with the unions to get the estate workers to come and work 8 hours per day as per the law with a view to increasing productivity and reduce COP?


 
 
 
 
 
 
 
 
 
 
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