United Fruit Company, United States, Chiquita discussed on Freakonomics Radio
Fact that they're all imported, you might expect a banana to be much more expensive than those very American apples. And yet, they're not an answer. Typically lesson half the price of apples. In fact, there among the cheapest fruits around how can this be how did an imported luxury item become cheap American staple? Well, let's start here this impart a story of economies of scale, that's the economist Douglas, Southgate, an emeritus professor at Ohio State University, he started studying bananas because, well, the short answer is that my wife is from Ecuador, which happens to be the leading export bananas and has been for the last sixty five years, even though the country's no larger than the state of Colorado bananas are grown in many warm countries around the world in the eastern and western hemispheres bananas are far and away, the most widely traded fruit of route or vegetable, basically there. One hundred thirty five countries that grow bananas and their one hundred forty five million tons of been on this produced every year. That's eight hundred billion bananas and that's Andrew byles until recently worked at Chiquita, one of the world's largest banana companies his title at Chiquita was CEO of bananas, and pineapples. Seriously? That's the title as for the bananas in the world. It's the fourth most important crop of two rice, wheat and cold. The economic value generated by the banana indices. Some fifty two billion. There is some four hundred million people that rely on bananas, FRA staple food staple source of income, there are many countries that did not have been on this. They would go showed a food the Kevin dish banana accounts for just under fifty percent of global banana production but again, almost one hundred percent of exported bananas and Ecuador alone accounts for more than a quarter of all, Kevin dish exports. If you produce something, and very, very large numbers than you bring down the per unit or average cost for the early American banana companies the transition from luxury fruit to mass import was a strategic move. I think the key to the strategy our understanding the strategy was to realize that they made more money from having a smaller margin on a much larger volume than they would have had continuing to treat bananas, electorate item and how did they accomplish this? Consider the history of Chiquita. Started way back in the eighteen hundreds and was accompanied that I went public believe it or not in nineteen. Oh, three back, then it was known as the United fruit company and United free happen to have the largest fleet of ships in the western hemisphere only the US navy had a larger fleet of ships. In fact, the navy would requisition some United ships during World War Two, but in peacetime. Well, they use those fleets to move bananas to the United States, very, very efficiently. And as always the case, practically always the case, the major beneficiaries of this officiency were in fact, consumers prices were slashed and within a few years bananas, were no longer a luxury item. They were instead of fruit of poor people, the first food that a lot of poor babies aid after weaning where mashed bananas today's. Before canned baby food, it would be hard to overstate here the role of the United fruit company. What we have here is a company, the created of an auto industry. It was called the octopus because it had a near monopoly on production. United fruit. Definitely had its tentacles wrapped around this industry. Most of United's bananas were grown in the Spanish speaking, countries to our south Costa Rica, Honduras, and other Central American nations happen to be an ideal setting for raising bananas for the US market ideal because of the climate. Yes, but also because land and labour were both very, very cheap. So American consumers were winning United fruit was really winning. And what about those Central American countries keep in mind, they were largely undeveloped at the time. Foreign companies led by United fruit were willing to make the investment to. Clear land, put an infrastructure and so forth to start producing bananas on a massive scale for the US market. But only if they were awarded vast tracts of land and largely exempted from taxation so that gave them the dominant position. That's what led to banana republics. Yes before it was a clothing store, banana Republic meant something, very different. Essentially a fragile country, whose economy and often political.