If we have published a lot (1) on our vision of equity and solidarity in and with the company, including on our blog RémiG DPP (See in particular the article "Model of ideal remuneration in company"), the news of the milk and meat sectors brings us to return on our approach of the equitable distribution of the added value in the food chains. The following is therefore inspired by the treatment proposed in the book "Proposals for a Fair Economy" (2).
Proposal for an Equation for Economic Equity
Iniquity is particularly flagrant in the case of producer-consumer chains, where producers facing competition without frontiers and the behemoths of the distribution struggle against each other, where potters fight against iron pots, through middlemen who want to let go or lose, via diktats from elsewhere. And the news is regularly responsible for showing the reality of our allegations even dramas thus generated ...
Our suggestion seen through the farmer-producer of milk ...
The first of the food chain "milk" and derived products (and which does not make the "weight" to negotiate the price of its own raw materials: fertilizers, hydrocarbons ...) must receive, under any circumstances, that is to say say "structurally" provided, legislatively, the guarantee of a minimum profit B1 due to its work in relation to the totality of the profit realized by "its downstream".
Thus, calling Pc is the price for the final consumer of milk, Pf the minimum selling price of the farmer-producer, C his cost price includes, B1 his minimum profit (Pf = C + B1) and Bn-1 the total of the downstream profit, putting λ the value reported to the downstream value added, ie λ = B (n-1) / (Pc-Pf), then the minimum profit B1 to be guaranteed - in our opinion - for the farmer-producer would verify B1 / (C + B1) = λ, ie:
B1 = C.λ / (1-λ)
And Pf = C + B1
(And, calling Bn all the profits of the sector one would always have B1 / (C + B1) = B (n-1) / (Pc-Pf) = Bn / Pc = λ)
A numerical example:
If C = 0,5; Pf = 1; Pc = 2; B (n-1) = 0,25
Then λ = 0,25 / (2-1) = 0,25
And B1 = 0,25 x 0,5 / 1 - 0,25) = 0,166
(Bn = 0,5)
And Pf = 0,5 + 0,166 = 0,666
It is then observed that, according to the suggestion, the value of B1 increases with the cost price C and with the value of the "downstream" profits. The device allows the farmer-producer to encourage the challenge of quality, avoids the "downstream" margin abuse made to the detriment of the first supplier of the chain, while leaving it free to his strategies optimization for its cost of production C (play the qualitative against the quantitative etc.).
At the same time the device lends itself to a formal administrative control (a posteriori).
(2) See ed. the Harmattan "Proposals for a fair economy" (R. Guillet, 2012 and e-book version in 2015)