The food supplement industry: the hype continues.

While consumers spends billions of dollars every year on vitamins and food supplements in hopes of improving their health and fitness, many of these products lack scientific evidence to back up their purported health claims. Consumers can just cut out the supplement industry by eating decently and exercising regularly.

This is obviously a glorious time for the supplement industry, with more than half of U.S. adults popping vitamins, minerals, herbs  and elixirs. According to the available published evidence, retail sales of vitamins and nutritional supplements reached $28.1 billion  in 2010.¹ And between 2009 and 2014, worldwide value of retail sales of these products reached $88 billion.² This is a good news for both the small and the large producers. Take Otsuka Pharmaceuticals of Japan. The company is the owner of Pharmvite,  which churns out 15 billion pills per year. Other pharma giants from America and Germany, including Pfizer and Bayer, are also big peddlers of multivitamins.³

On the minus side, however, the industry seems besieged. First, there are concerns about the accuracy of the claims they make. The U.S. Department of Justice has accused Bayer Corporation for illegally promoting the effects of its probiotic, a supplement that it claimed helps to defend against symptoms like bloating, diarrhea and constipation.⁴ The company’s management is currently waiting for the  court ruling on the issue. Last month, America’s Federal Trade Commission held a workshop to evaluate advertising for over-the-counter homeopathic products.⁵ Yet, a lot of people as well as government agencies still worry the safety of these products. America’s Food and Drug Administration(FDA) mailed warning letters to firms selling pure caffeine  last  September. Their reason was that these firms sells pure caffeine products   that are highly concentrated, with one teaspoon of their products containing much of the stuff as, say, 28 cups of coffee. A large number of supplement makers sells products that were  illegally branded as food “supplements” even though they contain BMPEA – a stimulant similar to amphetamine. The supplement makers in this group have also received several warning letters from  FDA last April. In addition to the constant warnings, surveillance and sanctions they  receive from the regulators, the supplement industry are also in the radar of the law firms: numerous lawsuits are in the works, on everything from protein powders said to lack protein to allegedly dangerous diet pills.6

In spite of these attacks, the food supplements industry seems to has a good immune system of its own. Basically, the unique environment in which the industry operate – an environment characterized by lax regulation, potent marketing and millions of credulous consumers keen to pin their hopes of a healthier life on a pill – has catapulted it to prominence, making it a national sensation. Hence it is not an exaggeration to say here that the food supplement industry has proven time and again that it is very  resilient.

The United States, with its loyal consumers and uniquely helpful regulations, seems to be the industry’s honeypot. Though growth has slowed, the value of retail sales of vitamins and nutritional supplements in United States reached a record $32.8 billion last year.7 The Nutrition Business Journal is considered to be an authority when it comes to providing information about the industry – information  relating to the trends, operation tactics, products and consumer concerns. As was reported in the publication, dietary supplement sales in United States grew 7.5 percent to $34.8 billion in 2013(as noted in New Hope 360).⁸

The “vitamin” club

Catherine Price, an assistant professor at the University of Florida said it all in her book Vitamania – Our Obsessive Quest for Nutritional Perfection: America’s craze for food supplements started in the 1930s and 1940s.⁹ At that time, scientists validated the claim that vitamins are chemicals that can perform vital functions in the body. Hence pills containing vitamins are widely seen as magic pills that can boost soldiers and work alike. Soon scientist perfected the methods for synthesizing vitamins in factories rather than being extracted from nature. This important feat made vitamins to be cheaper and widely used. Following this medical trajectory, Linus Pauling, who was awarded a Nobel Prize in Chemistry in 1954,¹⁰ popularized the invalid claim that  vitamin C could prevent colds and cure cancer. Nevertheless, it was government regulations that gave the supplement industry the biggest boost. The FDA considered new rules for supplements’ health claims in the 1990s. With this development, the major players in the industry understood there were billions of dollars at stake. Their lobbyists sensationalized the issue thereby making access to food supplement an issue of personal liberty. Their major achievement in that regard was phenomenal: if bureaucrats regulates access to vitamins, it would mean that they are robbing Americans the freedom to care for themselves.¹¹

See no evil, hear no evil, speak no evil

The outcome of their activities was clear: a new law was passed to cover not only vitamins and minerals, but also botanicals, pills made from animal organs, amino acids, enzymes and metabolites. A 1994 law also made life more easier for the supplement industry: it allowed them to sell supplements without requiring FDA’s approval for efficacy or safety. The rule also authorized producers of food supplements to tout their health benefits. According to the provisions of the rule, these firms cannot claim that the pills they market to the public can diagnose, prevent, treat or cure a disease. They can, however, make vague claims that their supplements are essential for strong bones or that they can support a healthy heart, and so on. Hence, instead of restraining these supplement industry, the government, via the FDA, actually unleashed them. It is thus not surprising that since 1994 the growth of supplement products has reached exponential proportion.¹²

The logical deductions from these rules are that they fail to ensure safety and efficacy. Starting with safety, the rules on manufacturing standards apply only to the supplement-makers only. In other words, they do not apply their suppliers. In addition to this, the rules did not place any cap on the amount of nutrient that a pill may contain. Furthermore, the FDA’s powers over supplement products that are already on sale are limited. Thus, the agency cannot just ban a supplement product as they can do with other drugs. They must first of all prove that the product is unsafe before they can withdraw it from the shelves. Examined against this background, it was no surprise that it took seven years for the FDA to provide evidence that certain pills caused liver disease – an outcome that led to the outright banning of the pills. The saving grace for some food supplement –makers is that, given the FDA’s limited role, they can hire consultants to check their products’ quality. While many of the supplements-makers do this, others do not.

Studies have found problems with lots of food supplements. Earlier this year, New York’s Attorney-General Eric Schneiderman alleged that many food supplements did not contain what they claimed on their labels.¹³ While some industry groups and consumers argued that Schneiderman’s testing method were faulty, other studies have also found problems with food supplements: a test conducted on 42 multivitamins by ConsumerLab.com, a provider of independent tests results and information on health and nutrition products, revealed that 16 of them either have too little or too much of the nutrients claimed in the label.¹⁴

Other cases dealing with the safety or purported benefits of food supplements are more serious. In October 2014, an infant from Connecticut died from a contaminated probiotic.¹⁵ In 2013, the FDA received almost 30 complaints of averse incidents associated with  a vitamin B pill(Health Life Chemistry by Purity B-50), which was later found to contain steroids. The people  who took this pill reported many bad things happening to their body: the women reported facial hair growth and missed menstruation while men reported low testosterone and impotence. Lab results also found that using the product can impact cholesterol level as well as cause abnormal liver and thyroid function.¹⁶ During the same year, the U.S. Center for Disease Control (CDC) linked Oxy-Elite Pro, a dietary supplement, to acute hepatitis. Of the nearly 50 people that were hospitalized after using the product, at least 3 received a liver transplant while person died.¹⁷

The efficacy of these products is also questionable. What made dietary supplements more dangerous is that while firms must have some substantiation  for the claims they make on the labels and ads under the Dietary Supplements Health and Education Act (DSHEA) of 1994, they are not required to submit safety information about their products to FDA  before marketing them.¹⁸ This simple fact makes it difficult for the FDA  to monitor and regulate thousands of products being marketed by these firms. So it may not be surprising that the FDA had had to rely on adverse event reports, information in the scientific literature, product sampling and other sources of evidence of danger to combat public confusion about food supplements. This further means that the consumers are virtually unprotected against unsafe food supplements.

This, however, does not mean that all food supplements are bad. A few of them does have sound scientific evidence behind them. For instance, vitamin B12  is good for the elderly and folic acid is good for women planning to become pregnant. Low levels of vitamin D is linked to cognitive decline, even though evidence that the supplement can solve the problem is lacking.¹⁹ The supplement industry’s relentless central argument is that since many Americans eat unhealthily, supplements therefore fill a need. The problem with this argument is that it is difficult to discern many supplements’ benefits. For instance, in a drug trial the individuals in the control groups takes no medicine. In contrast, in in a study of a vitamin, the people in the control group still ingest various levels of that vitamin from food, making it a big challenge to judge the effects of the supplement. Not only that, the evidence that does exist about the benefits of food supplements is often mixed. Some botanicals, such as gingko (a supplement for improving cognitive function and for treating, preventing  or reducing the effects of Alzheimer’s disease) show no effect in large studies. Another popular herbal supplement known as John’s wort is ineffective because it can interfere with blood thinners.  In one surprising study, researchers conducted a test to determine if a precursor to vitamin A can cut the risk of cancer among smokers. Their results showed that the supplement seemed to increase it.²⁰ Another study with disturbing results was conducted in 2011. According to this study results men who take vitamin E have a higher risk of getting prostate cancer than those on a placebo. Two similar studies were also conducted around the same period which showed positive results:  one showed that multivitamins  may lower the risk of cancer in men while the other suggests they may lower heart-disease deaths in women. These outcomes were contradicted by researchers in three  studies in 2013.These researchers presented  data that showed that multivitamins supplements  showed no effect on cancer, heart disease, cognitive decline or death.²¹

Armed and proud

The industry experienced some signs of weakness in 2014, the year in which it grew more slowly than at any time since 2002.²² But the major players in the industry are not giving up irrespective of the negative attention and criticisms of the industry and its products. They have three reasons for adopting this mindset.

First, further regulation of the industry in America appear unlikely. Ideally there are bills to improve oversight. However, such bills never got anywhere at the Congress. The FDA doesn’t seem to have any plan about using its existing powers to police the industry. The Council for Responsible Nutrition(CRN), a trade association representing dietary supplements and functional food manufacturers,²³ has $6 million budget to boost the interests of its members. In contrast, the FDA has only $5.2 million to police the entire supplement industry. Besides,  its strongest boss to date, who had since returned to lobbying business, was a former lobbyist for the food supplement industry.²⁴  So, you do the math: more regulation is simply impossible given the agency’s resources. The FDA’s failure to issue warnings about the stimulant BMPEA on time illustrates the agency’s limits. The FDA knew that a range of popular diet pills and spots supplements contained BMPEA since 2013. But the agency did not issue warnings to the manufacturers of these products until last April. The FDA’s failure to take regulatory action on time, as appropriate, to protect consumers may have been due to conflicts of interests. It may also be that the agency has too many tasks with no cash to accomplish them at the time. Even the agency cannot confirm that products with BMPEA  are off the shelves  for nearly five months after sending its warning letters.²⁵

Second, the food supplement industry are expert in bouncing back. So, while a negative publicity can hurt sales, they usually bounce back up: the industry has indeed consistently shown notable prowess for getting back to their feet. For instance, a study on the risks of excessive amounts of vitamin D in a body – known as vitamin D toxicity – helped depress sales growth in the supplement industry from 16.7 percent in 2011 to 1.3 percent in 2012. But in 2013, sales growth in the industry rebounded to 9 percent.²⁶ Generally speaking, if one particular product does not make a comeback, the industry simply offer a new one – a strategy that has huge resonance with the consumers.

Third, Americans and the Western Europe in general love taking supplements. As a matter of fact, almost 50 percent of Americans take supplements regularly. The general belief that supplements are the holy grail of general health fuels their passion and craving for the product. Thus it is not surprising that Americans take them for their bones, their hearts and their minds, among other reasons. Added to the hype is the fact that supplement industry are also good marketers, who regularly craft targeted messages that will reach correct consumers. Not only that, conventional health care is expensive. So consumers sees supplements as an alternative, cost-effective solutions to the costly conventional health care since supplements lets them take charge of their health. Next is another important factor is what is generally known among scientists as the placebo effect: the customers’ brains responds positively to their belief that a given pill will help improve their body functions.²⁷

All these mean that the greatest threat to the industry may not be the regulators or the results of clinical trials. Their main threat is actually something that is very simple: consumers are earnestly searching for natural and organic foods. They are also willing to pay more for them. Thus in 2014, sales revenue from natural and organic foods grew by 12.7 percent compared to supplements’ rise of 5.1 percent.²⁸ But, as was expected, the supplement industry are already adapting. Last year, GNC launched a new line of whole-food-based supplements.²⁹ That same year Pharmvite acquired FoodState, a whole food supplement company which makes vitamins from fresh and local foods.³⁰

A final point: consumers can just cut out the supplement industry by eating decently and exercising regularly. But I do know that the supplement industry will not like this idea. And nobody will really blame them: they have good reason to hope that the consumers will not be that smart.

References

¹Retail Sales of Vitamins & Nutritional Supplements in the United States from 2000 to 2017 (in billion U.S. dollars). (2015). Statista. Retrieved October 19, 2015 from http://www.statista.com/statistics/235801/retail-sales-of-vitamins-and-nutritional-supplements-in-the-us/.

²Vitamins and Supplements - Miracle Healers. (2015, September 19). The Economist. Retrieved October 19, 2015 from http://www.economist.com/news/business/21665064-despite-scandals-and-scepticism-americas-supplement-industry-looks-healthy-miracle-healers.

³Ibid

⁴Long, J. (2015, June 12). Bayer Braces for Trial in Probiotic Supplement Dispute with FTC. Natural Products Insider. Retrieved October 19, 2015 from http://www.naturalproductsinsider.com/blogs/supplement-law/2015/06/bayer-braces-for-trial-in-probiotic-supplement-di.aspx.

⁵Federal Trade Commission. (2015). Homeopathic Medicine & Advertising. Press Release. Washington DC: Federal Trade Comission. Retrieved October 19, 2015 from https://www.ftc.gov/news-events/events-calendar/2015/09/homeopathic-medicine-advertising

⁶Vitamins and Supplements - Miracle Healers, op. cit., p. 57

⁷Retail Sales of Vitamins & Nutritional Supplements in the United States From 2000 to 2017 (in billion U.S. dollars). (N.D.). Statista. Retrieved October 26, 2015 from http://www.statista.com/statistics/235801/retail-sales-of-vitamins-and-nutritional-supplements-in-the-us/.

⁸The state of supplement sales in 2014. (2015). New Hope 360. Retrieved October 26, 2015 from http://newhope360.com/supplements/state-supplement-sales-2014.

⁹Price C.(2015): Vitamania – Our Obsessive Quest for Nutritional Perfection. New York, NY: Penguin Press.

¹⁰Linus Pauling - Biographical. (2015). Nobel Media.  Retrieved October 27, 2015 from http://www.nobelprize.org/nobel_prizes/chemistry/laureates/1954/pauling-bio.html

¹¹Vitamins and Supplements - Miracle Healers, op. cit., p. 58

¹²Ibid

¹³Esch, M. (2015, April 2). 14 Attorneys General Seek Congressional Probe of Herbal Supplement Industry After New York Investigation. NBC New York. Retrieved November 9, 2015 from http://www.nbcnewyork.com/news/local/Herbal-Supplement-Warning-Congressional-Probe-New-York-Ingredients-Schneiderman-Consumer-Health-298522901.html.

¹⁴Vitamins and Supplements - Miracle Healers, op. cit., p. 58

¹⁵Kroll, D. (2014, December 17). Infant Death Triggers FDA Health Provider Warning On Probiotic Risks. Forbes. Retrieved November 9, 2015 from http://www.forbes.com/sites/davidkroll/2014/12/17/infant-death-triggers-fda-health-provider-warning-on-probiotic-risks/.

¹⁶Jaslow R.(2013): FDA: Anabolic Steroids Found in Vitamin B Supplement. CBS News. Retrieved November 9, 2015 from http://www.cbsnews.com/news/fda-anabolic-steroids-found-in-vitamin-b-supplement/

¹⁷FDA Investigation Summary: Acute Hepatitis Illnesses Linked to Certain OxyElite Pro Products. (2013). U.S. Food and Drug Administration. Retrieved November 9, 2015 from http://www.fda.gov/food/recallsoutbreaksemergencies/outbreaks/ucm370849.htm.

¹⁸U.S. Congress (1994). Dietary Supplement Health And Education Act of 1994. Retrieved November 9, 2015 from http://health.gov/dietsupp/ch1.htm.

¹⁹Vitamins and Supplements - Miracle Healers, op. cit., p. 58

²⁰Tanvetyanon T., Beplar G.(2008). Beta-Carotines in Multivitamines and the Possible Risk of Lung Cancer Among Smokers versus Former Smokers. Cancer, 113(1), 150-157.

²¹Vitamins and Supplements - Miracle Healers, op. cit., p. 58

²²Ibid

²³About CRN. (n.d.). Council for Responsible Nutrition. Retrieved November 18, 2015 from http://www.crnusa.org/who_about.html.

²⁴Vitamins and Supplements - Miracle Healers, op. cit., p. 60

²⁵Ibid

²⁶Ibid

²⁷Ibid

²⁸Ibid

²⁹Get Fit, Feel Great With GNC PUREDGE™ Line of Whole-Food-Based Supplements . (2014). PR Newswire. Retrieved November 23, 2015 from http://www.prnewswire.com/news-releases/get-fit-feel-great-with-gnc-puredge-line-of-whole-food-based-supplements-300000553.html.

³⁰Vitamins and Supplements - Miracle Healers, op. cit., p. 60

Remittances: From Europe with love

For decades, the flow of immigrants’ money around the world was largely unnoticed feature of the global economy. Not anymore: as more people than ever cross borders to live and work abroad, the size of these remittances has increased significantly.

 

For the immigrant in Europe and America, the road to success does not run smooth. Yet, despite all their struggles to survive and the meagre income they earn, these immigrants manages to send a little pocket money back to families in their home countries. For decades, the flow of immigrants’ money around the world was largely unnoticed feature of the global economy. Not anymore: as more people than ever cross borders to live and work abroad, the size of these remittances has increased significantly.

 According to the available published evidence, more than 250 million people lives outside their countries of birth. Not only that, over 750 million people migrate within their countries.¹ If the past ten years teaches us anything, it’s that demographic forces, globalization, and climate change will increase migration pressures in the coming decades. This trend will even increase the level of remittances more. Broadly speaking, economic migration has become so widespread that global remittances is now more  than two times larger than total global aid budget (see table 1).

Table 1: Capital Flows to the Developing World (2014)

Type	Amount($ Billion)
Remittances by Immigrants	440
Foreign Direct Investment	733
Portfolio Flows	410
Foreign Aid	175

Source: World Bank²; The Economist³

 

Not only that, many countries depend on migrant remittances. In India, Philippines and Tajikistan, for instance, migrant remittances are one of the driving forces behind their economies: they are worth 36 percent of India’s GDP, 10 percent of Philippines GDP and 42 percent of Tajikistan’s GDP.

The power of money

The obvious effect of migrant remittances is to make a place richer. Take Vennicode, a backwater village in Kerala, India. It has new houses and brand new private school built with money sent home by people working in Dubai, Oman and other countries. It also has huge advertisements for businesses like jewelry shops and has much more traffic than its narrow roads can handle.⁴

It should be noted here that even before mass migration began in the 1970s, Kerala was already one of the wealthy states in India. In fact, when compared to the national average, Kerala is now about 50 percent wealthier per head.⁵ Its migrant population are well-educated and disproportionately Muslim. Also, its families have done best. But they do have some poor families whose members have mostly stayed put. Because of this, Kerala is now also one of the most unequal states in India.⁶

The biggest beneficiaries of remittances last year are India and China, with each country receiving $60 billion. This was followed by Philippines ($24 billion), Mexico ($24 billion), and Nigeria ($21 billion). Egypt is the sixth largest beneficiary. As a matter of fact, the value of remittances in Egypt have surged from less than $9 billion in 2008 to almost $18 billion last year.⁷

But there is one problem with migrant remittances. Though there is nothing they can do about it at the moment, the migrants don’t really like those companies scrambling to capture as much as they can from these multi-billion dollar flows. The reason is obvious: in many cases the transfer fees can eat up more than 20 percent of the money the migrants send home.

Yet remittances are very useful to those family members that receive them. Generally speaking, when money flows from abroad, the family members who receive them naturally stop working back-breaking jobs. This shift is very beneficial, especially for children. For instance, the Philippine peso collapsed during the Asian financial crises of 1997-1998. Philippine migrants responded by increasing the value of remittances they sent home to their relatives and families. The affected families pulled their children out of jobs and sent them back to school. According to Western Union, a money transfer firm, nearly 30 percent of the money that flows through its system is spent on education – tuition, books, and so on.⁸

In some countries, especially those with small economies, remittances can account for significant proportions of their national income. The value of remittances received by families in Tajikistan and Liberia, for instance, is equivalent to 47 percent and 31 percent of their GDPs respectively.⁹ Also in many developing countries, especially those in Africa, South America and some parts of Asia, the money migrants sent home is worth more than the aid they receive. Good examples are Mexico, Guatemala, Bangladesh and Senegal, where migrant remittances are larger than foreign investment and aid  combined.¹⁰

According to World Bank’s estimates, migrants in the UK sent nearly $4 billion in remittances to India in 2011. When we compare this to the $450 million in UK aid India received that year, we will be correct to infer that it was indeed a terrific boost to that country’s economy in 2011. Bangladesh immigrants who live in UK also sent a total of $750 million home to relatives and family members in 2011. This is equally a significantly large amount when compared to the $370 million of foreign aid it received that year.¹¹

The reason for the rise in size of migrant remittances is simple: people, especially the migrants, feel an obligation to help their families and relatives back home. It is hard to see an immigrant who do not feel a sense of obligation or a sense of connection with the people, especially the relatives at the home country.

Even though there was a dip in 2008/2009 due to the recession, the remittance phenomenon has been largely recession proof. The biggest complaints from the migrants is not about the amount of money they sent home regularly. Rather, it is about the cuts taken by the banks and transfer firms. In 2009, the G8 countries made a pledge to lower the global cost of sending money to an average of 5 percent by 2014.¹² That was last year, and the average fees is still about 9 percent, which means that it cost $9 for every $100 sent. And in some places or banks, the remittance fees can be as high as 20 percent.

The word on the street

It is worth bearing in mind that the rising interest in remittances and the impact they could have in reducing global poverty does not mean that we should ignore the challenges migrants faces in foreign countries, especially those related to abuse and exploitation. Also, the psychological toll on children is another concern: when parents work thousands of miles away from home, it would seem as if their children are growing up as virtual orphans. For example, some villages in places like Philippines are almost devoid of parents. In such villages, the grandparents are literally left to shoulder the burden of childcare.¹³

Meanwhile in January 2013, Saudi Arabia executed Rizana Nafeek, a Sri Lankan domestic worker, for an alleged killing of a baby in her care.¹⁴ Her execution by the Saudi government despite numerous clemency pleas by the Sri Lankan authorities and other groups highlighted the often brutal conditions faced by migrant workers there.

Foreign workers began migrating to Saudi Arabia soon after oil was discovered in the kingdom in the late 1930s. Today, the kingdom has one of the largest migrant population in the world. So naturally, money transfer from migrants who live inside the kingdom to their families back home is huge: at $28 billion in 2011, it was the third largest amount across the globe that year.¹⁵

One thing is for certain: at this time of global economic and financial distress, attention to the plights as well as the rights of migrants is very important. As the list of rich countries forced into austerity by the markets continue to grow, we are seeing more discrimination against migrant workers, proposed immigration laws that allows the police to profile migrants with impunity, and xenophobic rhetoric that encourages violence against undocumented migrants.

Although an international convention on migrant workers’ rights does exist, only a few countries have ratified it. And those that did are mainly the developing countries where majority of the migrant workers come from. The EU and the Gulf countries has not signed it, nor have the United States.

 

References

¹Merrell   J. Tuck-Primdahl, I. C. (2014). Migration and Remittances. Retrieved September 28, 2015 from http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:20648762~pagePK:64257043~piPK:437376~theSitePK:4607,00.html

²World Bank (2015): Migration and Development Brief. Retrieved September 28, 2015 from http://siteresources.worldbank.org/INTPROSPECTS/Resources/334934-1288990760745/MigrationandDevelopmentBrief24.pdf

³Remittances: Like Manna From Heaven. (2015, September 5). The Economics. Retrieved September 28, 2015 from http://www.economist.com/news/finance-and-economics/21663264-how-torrent-money-workers-abroad-reshapes-economy-manna.

⁴Ibid p. 73

⁵Ibid

⁶Ibid

⁷Claire P. (2015): Migrants’ Billions Put Aid in the Shade. The Guardian. Retrieved October 1, 2015 from http://www.theguardian.com/global-development/2013/jan/30/migrants-billions-overshadow-aid

⁸Remittances: Like Manna From Heaven, op. cit., p. 74

⁹Claire P. (2015): Migrants’ Billions Put Aid in the Shade, op. cit., para. 10

¹⁰Ibid

¹¹Ibid

¹²Anderson M. (2014): Global Remittance Industry Choking Billions Out of Developing World. The Guardian. Retrieved October 5, 2015 from http://www.theguardian.com/global-development/2014/aug/18/global-remittance-industry-choking-billions-developing-world

¹³Claire P. (2015): Migrants’ Billions Put Aid in the Shade, op. cit., para. 18

¹⁴Sri Lankan maid Rizana Nafeek beheaded in Saudi Arabia. (2013, January 9). BBC.  Retrieved October 7, 2013 from http://www.bbc.com/news/world-asia-20959228.

¹⁵Claire P. (2015): Migrants’ Billions Put Aid in the Shade, op. cit., para. 20

 

Refugees and migrants: Hope nonetheless

The best thing for Europe would be to welcome refugees and migrants, not only for moral reasons but also for selfish ones too.  Just like the United States did with successive waves of refugees in the 20^th century, a more open Europe with more flexible labor markets could turn this refugee and migrant crisis into a rewarding opportunity.

The fuse that led to the current influx of refugees and migrants in Europe was lit in Syria in March 2011 when an anti-regime uprising spiraled into civil war.¹ The situation became worse when the Islamic State in Iraq and Syria (ISIS) came into the picture.² ISIS, a vicious terrorist group that is now realizing that sustaining a caliphate is much harder than declaring one, does not hide its brutality. On many occasions, it had burned men alive or impaled their heads on spikes and posts the videos online. And its fighters boast that they are doing God’s will when they rape and enslave infidel girls and women. So naturally, the fugitives or refugees from ISIS-occupied Syria and Iraq would be frightened to return home.  And the world governments, especially that of Europe must believe they are telling the truth and welcome them into their territories.³

European Union: Live and let live

The citizens of the European Union (EU) are lucky to be living in one of the richest and most peaceful regions on Earth. They also like to think that they set the standard for compassion. Generally speaking, all the countries that make up the EU accept that they have both moral and legal duty to grant safe harbor to people with a well-founded fear of persecution. The problem, however, is that the recent surge of asylum-seekers – about 300,000 migrants (see table 1)⁴ – has tested Europe’s commitment to its ideals. In Germany, the government’s effort create a welcoming atmosphere for refugees has sometimes being thwarted by Neo-Nazi thugs who have torched asylum-seekers’ hostels on many occasions. In Sweden, an anti-immigrant group is now the most popular political party in the country. The story is the same in Hungary, where the prime minister warns that illegal immigrants, which he considers a burden to the country’s public services, threaten his nation’s survival.

Table 1: Migrants and Refugees Detected Entering EU Illegally, Jan. –July, 2015

Nationality of Migrant/Refugee	Number of People
Syria	106,939
Afghanistan	61,826
Eritrea	23,878
Nigeria	10,747
Pakistan	6,641
Kosovo	23,260
Other Sub-Saharan Countries	9,766

Source: Culled from BBC Data, 2015

So far, almost 270,000 asylum seekers have reached Europe by sea this year. This means that more refugees and illegal immigrants entered the continent this year than last year. But that number merely represents one asylum-seeker for every 1,900 Europeans and, unfortunately, many of them will be turned away by their host countries.  It is important to note here that helping refugees and asylum seekers hold more pluses than minuses. And, when it comes to being nice to refugees and asylum seekers, the evidence of history seems to be on the side of some  nations that are even poorer that Western European countries. Lebanon, for instance, has welcomed approximately 1.1 Syrian refugees into their territory. This means that the size of Syrian refugees welcomed by a tiny and poor country like Lebanon is so large that it is almost the size of a quarter of the country’s local population. Turkey has also taken in 1.7 million refugees. Even Tanzania, a poor African nation whose average income is less than one-fiftieth of EU nations, has hosted hundreds of thousands of refugees from Congo and Burundi  for decades without complaining like Europe is currently doing. By contrast, when the European countries like Greece and Italy where Arab and African refugees first arrived asked for help with looking after them, the responses of other EU states has exposed them to a well-founded charge of hypocrisy. As of last week, they grudgingly agreed to take only 32,256 refugees over two years.⁵

What Europe must do now: The economics of generosity

The best thing for Europe would be to welcome the refugees and migrants, not only for moral reasons but also for selfish ones too.  First, Europe’s labor force is ageing, which means that it will soon begin to shrink.  European governments are also drowning in debts, which they plan to dump on future generations. But if those future generations are smaller in number, it will be a challenge for them to manage Europe’s debts.  This is where the refugees and immigrants comes into the picture: they are typically young and eager to work. In other words, these refugees and immigrants (including the asylum seekers) can help Europe ease this problem once they are re-settled. Simply put, the refugees and immigrants can help care for Europe’s elderly as well as help the region shoulder a share of debts they had no role in running up. As an example, Arabs and African refugees and migrants are usually young. So if European governments handles this refugee crisis and all types of migration sensibly, they can borrow some of their vitality. For Europe, this may be a politically hard decision to take, especially given that it will also require a reform of the region’s labor markets.⁶

It is quite understandable why Europe is leery about absorbing these refugees and migrants, given the intensity of global terrorism. To take care of this concern, Europe should be firm when screening the asylum applicants. But the screening process should also be swift and generous.  It will not be an exaggeration to say that these refugees and migrants will not become slackers overnight – certainly not after crossing stormy seas and deserts to get to Europe.⁷ On the contrary, there is documentary evidence that immigrants around the world are more likely to start businesses than the native-born. In the United States alone, large technology companies like eBay, Google and Intel were founded by immigrants. In fact, many of America’s greatest brands – which include General Electric, IBM, AT & T, Budweiser, McDonald, Apple and Colgate – were started by founders who were either immigrants or are the children of immigrants.⁸ Immigrants are also net contributors to the public purse and are less likely to commit serious crimes. Examined against this background, the fear that they will poach jobs or drag down local wages, even though it may have huge resonance with the European public, is also misplaced. Without putting it in so many words, when refugees and migrants are properly settled, they actually tend to raise the wages of the native-born overall because they bring complementary skills, ideas and connections with them. Though their presence may slightly reduce the wages of the unskilled local men, at the end of the day, everyone in the host country will be better off.  What is certain is that these refugees and migrants can become several times more productive, and their wages will rise accordingly if they are allowed to settle in Europe and other advanced countries with predictable laws and efficient companies.

Those Europeans who oppose immigration may argue that the refugees and migrants may bring in new cultures whose effects on the region will be profoundly unsettling. They may equally argue that Europe is neither willing nor able to absorb big inflows of refugees and migrants.  Broadly speaking, Europeans recoil each time they see crowds of unassimilated and jobless immigrants. Also, since the disarming of a gun-wielding Moroccan on a French train last month⁹ and after the massacre at Charlie Hebdo,¹⁰ Europeans have become more scared of Islamist terrorism.

To be fair to the Europeans, their concerns are quite understandable.  And, if the experience of the past few years teaches us anything, it is that monitoring of jihadist groups needs to be stepped up. Nevertheless, Europe still need to figure out a practical and lasting solution to their current refugee and migrant crisis. If I have my vote, the solution is simple: to assimilate them better, European nations should let them work. This formula has been used before in Vancouver, New York and London and it worked well.¹¹ By working together and interacting with the locals at the workplaces, the re-settled refugees and migrants can learn their customs, and vice versa.  The bottom line here is that, just like the United States did with successive waves of refugees in the 20^th century,¹² a more open Europe with more flexible labor markets could turn this refugee and migrant crisis into a rewarding opportunity.

References

¹CNN(2015): Syria Civil War Fast Facts. Retrieved September 9, 2015 from http://www.cnn.com/2013/08/27/world/meast/syria-civil-war-fast-facts/

²Landis J. (2014): The Battle Between ISIS and Syria’s Rebel Militias. The Clarion Project. Retrieved September 9, 2015 from http://www.clarionproject.org/research/battle-between-isis-and-syria%E2%80%99s-rebel-militias

³Migration to Europe - Let Them in and Let Them Earn. (2015, August 29). The Economist. Retrieved September 9, 2015 from http://www.economist.com/news/leaders/21662547-bigger-welcome-mat-would-be-europes-own-interest-let-them-and-let-them-earn.

⁴Why is EU Struggling With Migrants and Asylum? (2015, September 1). BBC News.  Retrieved September 9, 2015 from http://www.bbc.com/news/world-europe-24583286.

⁵Migration to Europe – Let Them in and Let Them Earn, op. cit., p. 13

⁶Ibid

⁷Ibid

⁸Anderson S. (2011): 40 Percent of Fortune 500 Companies Founded by Immigrants or Their Children. Forbes. Retrieved September 14, 2015 from http://www.forbes.com/sites/stuartanderson/2011/06/19/40-percent-of-fortune-500-companies-founded-by-immigrants-or-their-children/

⁹Jamieeson A. (2015): How American Heroes Prevented Terrorist Train Massacre. New York Post. Retrieved September 14, 2015 from http://nypost.com/2015/08/22/americans-hailed-as-heroes-for-thwarting-terrorist-attack/

¹⁰The Charlie Hebdo Massacre in Paris. (2015, January 7). New York Times. Retrieved September 14, 2015 from http://www.nytimes.com/2015/01/08/opinion/the-charlie-hebdo-massacre-in-paris.html.

¹¹Migration to Europe – Let Them in and Let Them Earn, op. cit., p. 14

¹²Ibid

Self-Service revolution.

Self-Service revolution.

It defeats the purpose when businesses heap work on their customers.

 Once upon a time shops used to keep all their goods behind the counter. When customers came to the shop, all they had to do was to tell the sales clerk what they wanted, and then wait while their purchases are bagged up. It is only then that they would hand over their money. All these changed in 1916 when Clarence Saunders, the father of modern retailing, opened his first Piggly Wiggly supermarket in Memphis, Tennessee.¹ Saunders changed the face of retailing when he introduced the idea of self-service, in which customers selected their own groceries from the shelves. They will then take their baskets or carts to a cashier on their way out. Saunders claimed that his idea would slay the demon of high prices by cutting labor costs.²

 
By 1932 the Piggly Wiggly store was the undisputed king of the retail industry, with 2,660 stores across United States. In the 1920s, Saunders did lost control of the company. However, that did not stop him from continuing to innovate and look for ways to perfect the fully automated shop. One of his innovations include the “shopping brain” – a feature that allows customers to choose items displayed under glass as well as keep a tally of their bills.³ As a business, Piggly Wiggly is no longer as popular as it used to be. As a matter of fact, it is now a shadow of its former self. As of three months ago, it has only about 600 stores in United States, and it operates only in 17 states.⁴ But their “self-service” idea, among others, has conquered the world.

You are on your own, folks

 The self-service revolution is still very popular on to this day. In many states, the CVS, a large American pharmacy chain, has replaced cashiers with self-service pay-points. Also a British grocery chain by name Waitrose, offers their customers what can be considered a modern-day version of Saunders’ shopping brain. In that regard their customers were given the choice to scan and tally their purchases. Another institutions that has almost perfected the self-service model are the banks. Most banks are cutting down their branches while, at the same time, making it ever easier for customers to do transactions online as well as via the ATM. Companies like Unilever and other consumer goods giants are seeking to convert some of their emerging market customers into freelance sales folk – a model pioneered in United States by such firms as Avon and Tupperware. Such customers who became their freelance sales people peddle Unilever’s products to friends and neighbors.⁵

 The travel  industry has also joined the elf-service club. And the industry is very ruthless when it comes to engineering its own employees out of its business. For instance, by using the apps in their smartphones, customers can now book their own trip. They no longer need the airline employees to print their boarding passes as they can do this in their houses before setting out. When the customers get to the airport, they are allowed to scan their boarding passes and passports at a machine. And in some airlines, customers can weigh and tag their own luggage. They can even haul it to the conveyor by themselves. In many hotels, a customer may not see any check-in staff or porters. A good example is the Omena Hotels – a Scandinavian hotel empire. This hotel sends PIN codes to its customers to enable them open their doors. Soon all the customer needs to do to get into their room at this hotel will be to simply wave the Apple Watch on their wrists.⁶

It is not an exaggeration to say that the variety of businesses touched by the self-service revolution is growing every year. Take Threadless,⁷ a group of clothes designers. This company invites customers to submit their own patterns, after which they are given the chance to vote on which ones should be produced. Threadless is just one of them: some technology companies now turn their smart customers into unpaid troubleshooters. They do this by encouraging these customers to participate in user forums where their insights can be used to solve other customers’ technical problems. Some newspapers, particularly the Huffington Post, encourage its readers to write as unpaid columnists. How about multinational companies like GE? The story is the same: GE is currently working towards creating a new business model. Under this model, GE will no longer need to keep a stock of spare parts for its jet engines. Instead, their customers will have the option of downloading digital designs of the parts on their computers. They can then make such parts on their own by means of a 3D printers.⁸

 There is no doubt that all these are wonderful for businesses. But does their customers feel the same way?  According to the available published evidence, these days many people are constantly being asked to do “unseen” jobs by everybody from Amazon to the Internal Revenue Service. No wonder many people constantly feel stressed and overworked. And because people these days spend so much time pressing buttons and speaking to machines rather than interacting with other people, they also feel so alienated sometimes.⁹

The above picture may look too gloomy, but they are not always the case. This is because the self-service revolution is not only about the companies. As a matter of fact, it is sometimes driven by customers’ preferences. For instance, there are lots of customers who finds it quicker to choose their own groceries than to wait for someone to do it for them. A lot of customers don’t like queuing at the check-in counter at the airport. Such customers usually prefer to print their boarding passes at home. Besides, customers can always fight back if they get frustrated about a company’s self-service model. For instance, many companies were forced to revert to having people answer the phone when customers complained about automated telephone services. Also many people now choose to have their shopping delivered to them, instead of driving to out-of-town, self-service supermarket.¹⁰

 The vital questions

The self-service revolution did raise two key concerns. First, self-service industries may claim that they have eliminated personal touch from their mass-market offerings. But they had continued to chase the wealthy and the well-heeled customers with extravagant, premium offerings. In other words, they had divided consumers into two classes: the poor consumers belong to the “cattle class” while the wealthy consumers are the “business class.” This classification makes it easy for these companies to “herd” the cattle class into the back of the cabin and to offer them little service; while the business class are pampered with superior service. A good example is Virgin Atlantic, a British airline. Their customers that fly Upper Class were provided with private cars to take them to and fro airports – a privilege which economy class customers do not get. Their Upper Class customers also have flunkeys waiting in the lounge to cut their hairs and polish their shoes. One thing is for certain: this type of preferential treatment might intensify resentment of the haves by the  have-nots. Not only that, it also make it hard for the have-nots to get entry-level jobs.¹¹

 Second, businesses need to understand the importance of meeting with their customers. If they never meet their customers, the result may be disastrous: they will lose touch with them.  From a business standpoint, self-service is great for saving costs. But this saving comes at a high cost for the business. This is because the effect of self-service over time is to train customers to shop on price. This means that the customers can easily switch as soon as a slightly cheaper rival comes along. And one final point: British’s mainstream supermarkets are now suffering from an inversion of German discounters.¹² Firms will be making themselves vulnerable to the same fate if they stop trying to differentiate themselves with good service.

 

 

References

 

¹Clarence Saunders. (2014). NNDB,  Retrieved August 25, 2015 from http://www.nndb.com/people/054/000166553/.

²Schumpeter: The Piggly Wiggly Way. (2015, May 9). The Economist. Retrieved August 25, 2015 from http://www.economist.com/news/business/21650554-businesses-should-think-carefully-about-continuing-heap-work-their-customers-piggly.

³Mitchell, Tucker. 2013. "A Pig’s Tale: How the Grocery Store Was Invented ." SCNow, January 16: Retrieved August 25, 2015 from http://www.scnow.com/opinion/columns/article_5137c928-56c3-11e2-a5c2-001a4bcf6878.html.

⁴Schumpeter: The Piggly Wiggly Way, op. cit., p. 64

⁵Ibid

⁶Ibid

⁷Threadless(2015). Shop Threadless. Retrieved August 25, 2015 from https://www.threadless.com/

 

⁸Schumpeter: The Piggly Wiggly Way, op. cit., p. 64

⁹Lambert C.(2015): Shadow Work – The Unpaid, Unseen Jobs that Fills Your Day. Berkeley, CA: Counterpoint.

¹⁰Schumpeter: The Piggly Wiggly Way, op. cit., p. 64

¹¹Ibid

¹²Ibid