“El Pulpo”

20 August 2008 at 12:00 pm 4 comments

| Peter Klein |

A few years ago I read, and enjoyed, Stephen Schlesinger and Stephen Kinzer’s Bitter Fruit: The Story of the American Coup in Guatemala. (Kinzer also has a nice book on the CIA’s role in Iran.) So when I saw Peter Chapman’s Bananas!: How The United Fruit Company Shaped the World in a local bookstore — yes, the bright-yellow cover caught my eye — I snapped it up. United Fruit — “El Pulpo” (the Octopus) to its detractors — is a fascinating company, the history of which should be required reading for students of international business. Bananas is a disappointment, unfortunately. I wasn’t expecting a scholarly treatment but, even by journalistic standards, the book is weak, substituting breathy clichés for facts and analysis. And Chapman’s unfamiliarity with even the most basic concepts of economics doesn’t help. (Spend your money on Bananas instead — my favorite Woody Allen movie.)

Today I learned of at least one scholarly treatment of United Fruit, focusing on its Colombian operations: Bananas and Business: The United Fruit Company in Colombia, 1899-2000 by Marcelo Bucheli (New York University Press, 2005). Alan Dye makes some interesting points about knowledge transfer in his review for EH.Net:

One important contribution is the story the book tells of how United Fruit eventually decided to abandon its initial policy of creating barriers to competition and accept fair dealing with rivals to its core business. Although its early history was one of raising barriers to competition and exploiting the weakness of unstable governments to establish its monospony position, he argues that in the long run the presence of this, or another multinational, was necessary for the development of a commercial banana industry in Colombia. United Fruit had pioneered techniques for how to commercialize a fragile and highly perishable product. Regardless of unethical practices when dealing with locals in the producing countries, the importation of the marketing techniques that such pioneers in the industry developed were of substantial value to local industry.

As with many technologies, tacit knowledge was best transferred by individuals who had experience and organizational capabilities. But foreign first-comer advantages were not permanent. Local employees and managers learned the tacit knowledge by observing and doing, and eventually they formed organizations to compete with El Pulpo [the octopus]. Over time, the strengthening of nationalist government policies caused the industry to pass to local independent banana growers and local entrepreneurial banana export ventures. Bucheli’s analysis, therefore, raises the question of whether the company’s early exploitation through the creation of a banana enclave was not critical, perhaps even necessary, for the development of a banana industry that later became a nationally owned industry and an important sector for entrepreneurial opportunity in Colombia.

The book also appears to contain good material on compensation policy, vertical contractual relations, geographic diversification, and more.

Addendum: Here is Bucheli’s webpage, with links to other papers and projects. I should have mentioned before that he holds a joint appointment in history and business administration at Illinois, where he hangs with former O&M Guest Bloggers Joe Mahoney and Randy Westgren. Lucky guy!

Entry filed under: - Klein -, Business/Economic History, Entrepreneurship, Food and Agriculture, New Institutional Economics, Strategic Management.

Please, No More “Preneurs” Top Ten Signs Your Airline is Cutting Costs

4 Comments Add your own

  • 1. Rafe Champion  |  20 August 2008 at 5:15 pm

    Peter Bauer’s study of some third world industries like rubber might make an interesting comparison, according to the gloss on his work he showed how apparently unsophisticated village farmers built thriving industries, in partnership with western markets of course and before the maketing boards were put in place.

  • 2. Rafe Champion  |  20 August 2008 at 5:17 pm

    But of course Peter Bauer was the son of a bookmaker (at the racetrack), what would he know about markets?

  • 3. Peter Chapman  |  8 September 2008 at 4:12 pm

    Professor Klein, thank you very much for your kind mention on O&M of my book Bananas: How the United Fruit Company Shaped the World. I will put your comments down to ‘all publicity being good…’. My former lecturers at the London School of Economics would be concerned that I emerged from the MSc programme in the late 1970s without, as you suggest, even a basic familiarity with economic concepts but profesionally I am more distressed by your comment about cliches. For some years now I’ve worked at the Financial Times which prides itself with making war on cliches. Would you be good enough to direct me to one or two such examples in the book and I will have them excised for its paperback edition. With best wishes to you and all at O&M.

  • 4. Peter Klein  |  8 September 2008 at 9:03 pm

    Well, it seems that no one likes my acerbic tone these days.

    Peter, what I had in mind were not literary cliches, but substantive ones. Like this: “Once, Messrs Morgan, Rockefeller, Gould and others were imagined to rise each morning determined to do mankind down. Some of their number may well have done so. But lately there was a sense that something thrown up by ‘the system’ was at fault: the large banks and companies. . . . Their very name [‘trusts’] showed how devious they, or indeed, economics, could be. The feeling was that they could be ‘trusted’ above all to feather their own corporate nests” (p. 45). And then, on the next page, about the Sherman Act: “According to ‘natural law,’ this legislation shouldn’t have been necessary. The market, Adam Smith’s ‘hidden hand’, always intervened to rectify wrongdoing. Admittedly, this was never set to happen at any time its supporters could predict and thereby bring some hope to the suffering: the masses of unemployed, for example, that sprung into being with every market crash.” Huh?

    And then there is the list of words used, throughout, as perjoratives: “commodity,” “mass market,” “standardization,” “commercial,” “corporate,” and the like. Some of us actually think these are good things!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Nicolai J. Foss | home | posts
Peter G. Klein | home | posts
Richard Langlois | home | posts
Lasse B. Lien | home | posts


Former Guests | posts


Recent Posts



Our Recent Books

Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
Nicolai J. Foss and Paul L. Robertson, eds., Resources, Technology, and Strategy: Explorations in the Resource-based Perspective (Routledge, 2000).

%d bloggers like this: