Here is a question pointed out to me by a colleague: One kilo of tomatoes is bought from the peasant at 5 Turkish liras in a small village only 70 kilometres away from the capital city and sold for 50 liras in the city by the trader. How do you explain and then solve this problem?

Would you argue that the difference between the village and city price is a socialist question? If you do not expect socialism to come in some future and solve everything by determining the price of everything in one day, then this MUST be a socialist problem.

In my post on Red Star, I argued that instruments of government and market as well as technology can be used for alternative ways of organizing economic life. In Red Star, our problem was a fair allocation of labour, which would concomitantly respond to the needs of the overall economy and individual freedoms. In this post, I am thinking about how we can organize fair exchange relations in a sector by reducing transaction costs and information asymmetries between buyers and sellers. At first glance, this might seem more like an institutionalist question rather than a Marxist one. But some of the problems faced by capitalists regarding the economy will ALSO be the problems of socialists who design the economic life. Therefore, unless you want to stick to the idea of a central government, which buys everything as the monopoly trader in the economy from producers and then sells it to citizens, the following case on a flower auction can be quite interesting to derive some insights. I am not saying that the model as such is a socialist model to be adopted, I am rather saying that some properties of the model can be creatively used for a post-capitalist system.

I am planning to visit the auction this summer in Istanbul, but the person who first talked about it in a Turkish newspaper in 2008 is Koray Çalışkan (http://www.koraycaliskan.net), the author of a highly recommended PhD thesis which examined how the price of cotton is made in the global market, from a small village in Turkey to the Chicago Cotton Exchange in the US. Even though I am critical of some of his theoretical arguments, I find his work high quality, thought-provoking and innovative. The information I give below relies on his short article on the subject where he says that socialists have to take seriously the organization of exchange relations and should not limit themselves to the analysis and change of production relations.

FLORA is a cooperative for the flower market with 5000 members. The cooperative became more significant since the recent agricultural reforms, which pushed families from traditional crops to flower cultivation. The cooperative establishes auctions in 15 different places via an electronic network between producers and buyers. In 2009 the largest exchange of the cooperative has been opened in Istanbul and enabled 400 buyers to buy flowers.

According to the article of Çalışkan (2008), the cooperative trucks are collecting flowers from farmers and allocating them in a fair way to fourteen different auction places. The registered buyers are allowed to join the auctions and have to mention in advance how much money they are willing to spend. They can spend less, but not more. In other words, the farmers have a rough idea of how many flowers the traders will buy. The flowers are put on a walking band. The representative of the cooperative, which governs the auction predicts the average price of each flower which is reflected on an electronic board as soon as the flower appears and is read by the microphone. If traders like the flower, which passes on the walking band, they press the button, which is in front of them. Dozens of them can press the button at the same time and the price starts rising up. The last bidder wins the flower. If nobody likes the flower, then the price starts falling down and when it falls sufficiently, more traders are willing to but then. The price suddenly rises again and sometimes even more than the initial price. A flower, which has not been bought at a low price can later on be sold for a higher price. Eventually, all flowers are sold out.

I think that the simple mechanisms established by the FLORA cooperative make more sense if the problems and inequalities in contemporary markets are taken into account. FLORA solves the problem of information asymmetries in the market, because farmers do not depend on middlemen. Thanks to the cooperative, they can make sure that traders are all subject to the same system of auction and same rules of competition. Every trader has the right to press the button at the same time with others. No single trader can control the market in principle. The cooperative distributes flowers to different auctions so that florists can benefit from the auction system equally.

The cooperative trucks do solve the problem of transaction costs. The florist families do not need to go literally to the market place and encounter the buyers themselves. Transport costs are already met efficiently by the cooperative, which is an institutionalised form of collective action. Moreover, since average price is announced by the cooperative, the florists do not depend on the middlemen’s discretionary power to keep prices down. Yet, this does not mean that prices cannot fall or rise. What is guaranteed in this system is that all flowers finish the same day. This helps the reproduction of all florist families’ daily income.

The average price in the Flower Market is not like a government set minimum price to protect farmers. It gives a reference for both traders and florist families in the market from which the final price is gradually derived. The final price of the flower is the aggregate effect of individuals’ interventions (pressing the buttons at the same time) so that no single individual can control it (in that sense there are some similarities with the labour allocation system in Red Star). In other words, price is found out as the impersonal result of individuals who compete with each other on an equal basis. There is a degree of competition, but it has an enabling function for traders and florist farmers rather than devastating them.

The fact that traders have to announce the money they will spend in a transparent way give signals about the demand side. Yet, what happens if the supply of flowers exceeds too much the demand, given that flower is becoming an alternative to traditional crops (a problem of capitalist economy)? This question remains unclear for the moment. Following the principles of Red Star, one could argue that there should be a mechanism which prevents over-supply of production in a given sector, which reminds once again how production and exchange relations have to be thought together. There might be other problems in the market, which I ignore due to limited information. I have to do more research on possible power relations, distribution of profit among cooperative members, the legal status of the cooperative, entry/exit conditions, the decision-making processes, the gender dimension of the allocation of income within the family…etc. Yet, electronic boards of the auction, which can transmit transparent information as did telex networks of Cybersyn or statistical agencies of Red Star, the mediation function of the cooperative and the reproduction of florist families can be still seen good starting point for designing a fair exchange system.

Çalışkan, K. (2008) ‘Köylü, Piyasa, Çiçek Mezatı ve Devrimciler’, Birgün Gazetesi, 15 Nisan.

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