The Controversial History of United Fruit

"HBR Presence" You're listening to one of the most famous commercial jingles of all time, performed by singer Patty Clayton in 1944. She gave voice to the animated Miss Chiquita Banana, a curvaceous cartoon and a bright red dress who balanced a bowl of fruit on her head while dancing the salsa. At its peak, the Chiquita Banana Jingle was played up to 346 times a day on radio stations across America, making Miss Chiquita a household name long before she danced into living rooms on televisions in the 1950s. In the coming decades, she would help to make bananas the most popular fruit in the United States. But what Americans didn't know about the cheery looking fruit with the iconic blue sticker was the upheaval that left in its wake. Today we'll hear from Professor Jeff Jones about his case entitled, "The Octopus and the Generals, the United Fruit Company in Guatemala." I'm your host Brian Kenney and you're listening to Cold Call, recorded live in Claremont Hall studio at Harvard Business School. "So we are all sitting there in the classroom." "Professor walks in and they look up and you know it's coming." "Oh, the dreaded cold call." Jeff Jones is a historian who studies the evolution, impact, and responsibility of global business. He has written extensively on the business history of emerging markets in Latin America and elsewhere, but we'll stick with Latin America today because that's where this case takes place. Thank you for joining me today, Jeff. My pleasure. Glad to have you back on the show. We've had you here a few times before, so we'll continue exposing these cases about business history because there are so many lessons that we can learn today, obviously from what's happened in the past, so I think people will really enjoy hearing about the United Fruit Company, which is today known as Chiquita. Many of us have bananas every day. In fact, I read a statistic that said Americans eat up to 30 pounds of bananas a year, is that sound right? I'm afraid it probably is. Yes. It's a lot of bananas. I have one a day, so I'm contributing to that. Maybe you can start, as we always do, by helping us to open up the case. How does the case begin? This case begins in a very dramatic way, June 1954, and President Jacobo Arbenz, who's the first democratically elected president in the history of Guatemala, is hearing news that rebel troops have invaded to overthrow him. Later on in the case, we hear he's going on to make a speech, saying that the United States is helping to overthrow his government in the interests of a banana company. As a business historian, I'm curious, how do you decide to write about this particular case? As you mentioned, my course that I'm currently teaching deals with the rise and fall and rise and fall again of globalization. So I'm always looking for key turning points and key moments. And the overthrow of Arbenz by the CIA was a central moment in the tortured relationship between the United States and Latin America. It came to symbolize and crystallize Latin American resentment against the overbearing power of the United States. The event leads fairly directly to the Cuban Revolution five years later on and to decades of anti-American populism in Latin America. So it's a really key moment in the history of globalization. Yeah. Now we go back to late 1800s, tell us rather about the origins of the United Fruit Company. It's a very Boston, absolutely, appropriate enough. The United Fruit is formed in 1899 by the merger of two Boston banana companies. Bananas are a tropical fruit, so they're not grown in the continental United States. And so we have from the middle of the 19th century is these Boston guys going in search of a regular supply of bananas from Central America and the Caribbean. It's quite a difficult task and they end up establishing plantations, building railroads and creating shipping lines, all designed to find a source of bananas which they ship into Boston and the rest of the United States. Was there a market even for bananas at that time? If you go back to 1850, almost nobody in the United States had even seen a banana. Tell us what were the economic conditions in Central America like at this time. I think it's fair to say that Central America and Guatemala are in an absolutely horrible condition. Historically it was the home of ancient Mayan civilization, so it had once been one of the most advanced civilizations on earth. It went into decline and then when the Spanish overran the area in the 16th century they created a society in which a small white elite dominated society and the economy and ruled over the descendants of the Mayans who were in a terrible condition to poverty and illiteracy employed virtually as slaves. This got even worse in the early 19th century when the Spanish colonial regime was overthrown and this white elite established themselves entirely running that country and what we see in the 19th century is a series of despotic, corrupt dictators are ruling and exploiting the country. At the time United Fruit enters, the dictator in question is called Manuela Strada. He's murderous, he's brutal and he's quite crazy. He's a follower of the ancient Roman cult of manoeuvre, so in this desperately poor country he builds all these like Roman temples all over the place and he's the guy who gives the first banana concessions to United Fruit. Wow, so they already start in the shadow of that. What were some of the challenges that they encountered early on as they started to set up their business? The easiest challenge is politics because these state all had governments but they were easily bribeable and corruptible and you could just get concessions if you just gave them enough money. A much bigger challenge was logistical bananas are harvested when they green but as soon as they're picked they start turning yellow as starch turns to sugar. You wait too long and the banana is ruined. The business depended on creating a supply chain that worked perfectly from picking the banana to shipping the banana to the United States to get it in the hands of consumers. If you get anything wrong you'll have a lot of rotten bananas. Shipping was quite crucial which is why United Fruit created a giant shipping fleet, the Great White Fleet, which at one point was the biggest shipping line in the world. The third problem was as we began by talking people didn't know what a banana was. The company has to start persuading people to eat these bananas if they can get them to it and they invest heavily in teaching materials for schools or sorts of ways to introduce the banana to people. One of the most interesting things they did is joining forces with Kellogg, the serial company and they persuaded Kellogg to put pictures of bananas on their corn flakes to show people they went very well together and the message all the way through was that bananas were a very healthy fruit just like drinking milk, eating bananas you'd be a lot healthier. And it works very well. It's a very brilliant marketing campaign and it convinces Americans to eat bananas. The jingle that we played at the top of the show is actually an educational song. Who's telling listeners when they should eat the bananas, right? Absolutely. I mean, eating bananas is not a natural thing to do. People have persuaded eating bananas is a healthy thing to do for a very sophisticated marketing campaign. Tell us what was the conditions like for the people who worked on the plantations at that time? Was United Fruit taking care of their employees? The conditions of the indigenous and Guatemala were horrible even before United Fruit arrived. So in some respects United Fruit improved their conditions. They provided housing, basic schooling, basic medical facilities which was quite important because the bananas were grown in like malaria infested areas. That said, they did this with highly restrictive conditions. For example, workers were not given money. They were paid in vouchers which you then had to use on the plantation shops. So by the interwar years you have an increasingly militant labour movement trying to protest against these kind of conditions. How did they fare? Did they make any progress? It was in the interwar years extremely hard to make progress because you have these brutal governments which put down any sort of movement which even hints at association with the Communist Party which had now emerged. So the United Fruit is fully supported by their regimes in the area. What was the competitive landscape like in the banana industry? Where the United Fruit wasn't the only player in this game? No. For a time it's almost the only player when you get this merger between the two Boston companies. It's an attractive business. You get new entrance. The most important new entrance was Sam Zimari, he's an immigrant from Russia. He sees the banana and he has a vision that that's the basis for an amazing empire. So he starts selling bananas along the train lines in New Orleans and by the 1920s he's got into Honduras and establishing a large plantation business and he becomes a formidable competitor to United Fruit. The case focuses on Guatemala so I was curious in reading it. The banana industry was spread throughout Central America at this time so they were in Honduras as you mentioned in Guatemala and other places. Why did you focus on Guatemala for the case? It's absolutely true. United Fruit is highly diversified. In some countries there are legal or other restrictions which stop United Fruit actually owning plantations. So in those countries like Costa Rica for example it will buy bananas from growers and then do all the rest or the transportation. In Guatemala its involvement is a lot deeper. It has huge plantations. It becomes the largest company in the country. It owned all the infrastructure like trains would also radios, communications, infrastructure and shipping and it comes to account for 75% of the country's banana exports and almost the only thing the country exported was bananas apart from some small coffee. So it's a hugely dominant influence. Even though elsewhere it was also dominant, Guatemala is mega dominant. There's a central character in the case such a Kobo Arbins. Would love if you could talk about what led to his rise and the role he plays in the case. Kobo Arbins is not one of the landed elite. His father was a Swiss immigrant, eventually commit suicide in his youth. His mother was a Guatemalan but not one of the top elite. So he does what a lot of people do in many places. He joins the army as a way for social mobility. By 1930s there is drawing resentment among the, you could call them the urban megal class. The top landed elite totally dominate the place. In the early 1940s he takes part as a young captain in a military coup to overthrow the last dictator. And the coup is successful. He's then part of this new generation of military who attempt to begin a process of reforming Guatemala. They make racial discrimination a crime, they legalize trade unions and they set up free and fair elections. The very first one is 1951 when he stands as the candidate and wins the vote. And this is where the United States starts to get involved in ways that maybe they hadn't been earlier on in the company's history. You mentioned before the CIA is involved in significant ways. Can you talk about why the US government was like so concerned about the political affairs in Guatemala? The key concern of our bends is to move away from the fuel or nature of Guatemala society. What he's concerned to address is land reform. So he actually copies the American imposed land reform on Japan which involves expropriating unused land and giving it to the peasants. So he's trying to create a fair society. And that is unfortunate from the American perspective because United Fruit is a leading company. But it's more unfortunate that it comes to be seen as influenced by the Communist Party. This is the height of the Cold War, the newly elected Eisenhower administration. It's the forefront of fighting the Cold War. The Secretary of State John Fust Dulles, who sees the fight between the United States and communism as a back all between good and evil. The United States becomes progressively concerned that we're seeing here a communist takeover of the country. On the other hand, it must be said that the shaping of this concern is heavily influenced by Sam Zamurri and United Fruit. As the Marie Hires, a guy called Edward Bernays, who is known as the father of public relations and who's very instrumental in persuading women to smoke in into war America, for example, is a brilliant guy and he sets to work using all the powers of public relations to convince policymakers in Washington that we're looking at a communist takeover of the country. That was lighting a fire in the minds of people like President Eisenhower and Secretary of State Dulles. Was this playing out in the media? So these days, obviously, if something like this were to happen, you know, with the internet and social media, it would be hard to keep a lid on it. But at that time, was the media buying into this story or were they really trying to dig in and report on what was actually happening there? Bernays is a very small person. He takes journalists on tours of Guatemala. He's a master of working with the media, so he builds a highly convincing case. And remember, this is the McCarthy area. This is the era of huge concern about communism. So we sort of come up to the current time United Fruit still operates. They're operating as Chiquita. That's the legacy that they've left in their wake in Central America. The overthrow of our bends wrecked Guatemala society. For the next 50 years, there is horrendous civil war. This is civil society has never really recovered. Now it's one of the poorest countries in the whole region. 23% of the people live in extreme poverty and it's a major source of immigrants seeking to go north and it's a major source of narcotics trading. So the country itself is devastated by the coup in 1954 and it has a bigger effect too on wider Latin American perceptions of the United States. The United States comes to be seen as a country which will overthrow democratic governments in the interests of banana companies that shapes how generations of Latin Americans have regarded United States and American business. The United Fruit Company came to represent what American companies do. Kind of a devastating effect on the legitimacy of American capitalism. As you study emerging markets today, could something like this happen in contemporary society as you know, is there a place in the world where you could have the same level of corruption and open the door for this to happen again? Large parts of the world where there's this level of corruption and thrown interference. Many of them are found in Africa, actually, places like Congo, where you have the same story of foreign companies seeking resources, corrupted governments, very poor legal frameworks, very limited international governance, controlling what is going on. Would the United States be involved in overthrowing governments now in support of American business? Not at all. At the same time as the Guatemalan coup does the CIA overthrow the government in Iran, which also has very bad consequences in future American relationships. But that era of overthrowing governments more or less ends in the 1970s and it's been replaced by particularly the use of sanctions and attempt to penalize governments which are regarded as hostile to American interests or American business. So we now act in the era of sanctions rather than covert operations. And for the most part, the sanctions like the covert operations haven't worked terribly well. A worse threat in legitimacy. You've discussed this case in class before? Yes, I've discussed this for several years. Yeah, so I'm curious what kind of reaction you get and particularly if you have students in the class that are from this part of the world. I think there are multiple levels of reaction. The first is shock. So the most part, students have no idea about the story of United Fruit or the overthrow of Guatemala or where bananas come from. So that is a huge shock. Then what to do about that shock? I've had a variety of reactions. I've had students from Central America almost in tears that finally this has been discussed in the classrooms of Harvard Business School. I've had Cuban Americans saying this was a very good thing. The overthrow of Arbenz or else Guatemala would have ended up like Cuba under a pleasant communist regime. It creates very strong tensions among the students and cause for concern. And then some of the biggest debates are actually about Sam Zamorey himself, the guy who launched this coup. Because as the case says, he is also an amazing philanthropist. He virtually almost builds to Lane University. He funds the first chair for tenured women in Harvard University, which is still occupied now. And that's all done with money from sponsoring wars in United Fruit and the Guatemalan episode. So that creates, I think, an important and meaningful conversation about business philanthropy and whether it matters, where the money comes from. That's the whole other case, I think. You're going to have to write a case about that so we can discuss it. Jeff, thank you for joining us today. My pleasure. If you enjoy cold call, you should check out our other podcasts from Harvard Business School, including After Hours, Skydeck, and Managing the Future of Work. Find them on Apple Podcasts or wherever you listen. Thanks again for joining us. I'm your host, Brian Kenny, and you've been listening to Cold Call, an official podcast of Harvard Business School, brought to you by the HPR Presents Network.