Sherman Act v. Modern Conglomerate Agriculture
Agricultural Economist and Farmer Michael Smith
Sherman Act v. Modern Conglomerate Agriculture
Multiple times the Biden Administration, along with Secretary Vilsack, and other administrations have made multiple public comments and now threats of investigation of beef producers and their horizontal and vertical integration over the past few decades. The targeting of the beef industry is one of the loudest and most recent, but we fail to realize this is a problem indicative of our entire food system.
Let’s start with meat. The overwhelming majority, 85% of all meat production is handled by four companies, Tyson, the largest for chicken, Cargill, beef and now chicken with the acquisition of Sanderson, JBS, beef and pork, and National Beef, mostly beef. They all operate multi-function processing plants in both North and South America that process all consumer meat staples including turkey. The spotlight has always been on market manipulation and Monopolistic Capitalist White Men Hegemony.
This is false. We did this to ourselves.
Every time an E.Coli or Salmonella outbreak would happen, the public backlash was always immense and lawmakers, paid off by the Big 4 offered solutions. Through the USDA, all of the processing plants were to be inspected and credentialled by the government, establishing a framework that currently looks like this:
Each chokepoint, err, processing facility is owned and operated by the Big Four under the direction of the USDA. We’ve allowed them as a public to get to this point, and now that they have vertically integrated the processes behind their respective positions, have now began to Sam Walton their Monopoly power into driving up prices for consumers while also suppressing expenses from growers.
Run and I have been posting multiple articles to the matter. He recently sent me this Biden Turns to Antitrust Enforcers to Combat Inflation – News Concerns. We don’t need to look very hard for articles to support the argument, even the White House is sounding off Addressing Concentration in the Meat-Processing Industry to Lower Food Prices for American Families | The White House.
You can see from the White House analysis that the trend is much higher beef prices at retailers, but the producers are flat. Given the inflationary environment, land price crunch, and people attempting to finally make a living we see some behaviora by producers that unfortunately, in the end, leave loved ones broke, broken, and communities saddened, as with what happened in Washington state. Betting the ranch | The Counter
We focus on meat prices because those are the easiest farm direct nutrition aside from vegetables.
Other retail brands are heavily dominated in the produce space by Dole Foods, Con-Agra. In the processed foods Kraft-Heinz, Nestle, Mondelez. The ultra processed grain space held by Kellogg’s.
How did this happen? We let it. The consistency offered by each of these products is as old as Government Cheese (Kraft-Heinz), and Nilla Wafers (Mondelez-Nabisco). Retailers brought, and shelved cheap, consistent foods with shelf lives in excess of anything that had to be milked, refrigerated, or slaughtered. As popularity during the Great Depression and World War II grew, the idea of consumer Staples changed. Spam became canned highly salted pork, instead of unsolicited callers. Canned had nothing to do with Disco dancing. It was the post expansion 1960s house wife convenience that held onto and exacerbated the problems. We wanted cheap, we wanted easy. We then made these cheap, processed foods part of the governmental nutritional assistance program, SNAP, which has further carved these companies into the bedrock of America.
The Sherman Act
In 1911 Standard Oil controlled upwards of 80% of the oil market, energy. We had successfully converted our lamp oil procurement from whaling and began transforming our entire energy system with one family at the helm, the Rockefellers.
This unsavory monopoly was seen in the public as untenable, the Sherman Act was passed in 1890 and used against Standard Oil was cut into 34 separate legal entities to help drive “capitalistic competition”. It did neither. Standard Oil is now known by other names: Exxon, BP, and Chevron. Our grandparents and great grand parents essentially instructed the government to break up this monopoly only to see the government allow them to remonopolize.
Vs. Modern Conglomerate Agriculture
This is really a misnomer. Conglomerate agriculture isn’t actually agriculture. Producers of onions, beef, milk, corn, beans, and whatever else is produced from the land resources we have as a country are many. The conglomerates are the middle men controlling the markets. So how could we use the Sherman Act to break these companies up so that the nefarious behaviors stop?
We don’t. We can’t.
If the Federal government is unable to allow the free market to sort itself out properly, monopolies will still exist. The USDA has prohibitively large standards put on processing facilities all around the country. It is expensive, time and resource consuming. Almost impossible for one person to even attempt. That is the point the processors and wholesale companies relish.
Much like oil and gas leases being held by the Federal government, the pipelines held in accordance to EPA standards, the transportation under the watch of the Railroad Commission, food is just as regulated by the USDA, EPA and CDC. Regulations arguably keep the public safe, kaao corporations from creating super fund sites and getting away with murder. They also create monopolies in certain sectors.
There is another way...
I grew up in a household that always had a big freezer and a garden from my age five until age 17 when my dad cashed in his state retirement to open a concession and boat livery on a state game commission lake. For meat we fished and hunted and several times we went in with a farming uncle on a young steer in the spring that my dad would slaughter in the late fall. For that we had to rent a frozen food locker because our own freezer was full of beans, squash, and game. When I was ten we moved from rural to the burbs which downsized our garden from about one acre to about 0.12 acres. In the burbs fewer than 1% of families lived like us, which made it easy to make a bit of money on the side selling tomatoes since during the peak of the season we had way more than my mom wanted to can. My mom worked only part time in retail for a while and then out of the home keeping just a couple of neighbor kids and alternatively morning and afternoons as a school crossing guard. The transformation of US families to dual income cost a lot and then single parent households took their own toll.
Corporate consolidations were primarily the result of the capital gains tax preference, especially after the dividends tax credit was rescinded in 1954 marking the beginning of the LBO craze. Attempting to manage a broken economy with a broken political system offers little to be optimistic about. If we want to have better outcomes, then we need to act early to preserve the institutions that provide those better outcomes.
Consolidation does not provide more competition or higher pay, but fighting consolidation is difficult when the financial incentives for consolidation are consistently increased in the name of economic efficiency. We have a healthcare crisis in the US today because in 1986 we took away the 501(c) tax exemption for nonprofit health insurers and in 1987 we took away that tax exemption for nonprofit healthcare providers. We have a student loan crisis in the US today because state by state we eliminated tuition free in-state admission.
The secret sauce to economic fairness and opportunity lay in our institutions. When we place our futures firmly in the hands of for-profit private enterprise, then growing inequality and consumer costs should be no surprise.
…because state by state we eliminated tuition free in-state admission for state colleges and universities.
Also, Virginia never had free college for instate students, but did have huge discounts for them which was more the norm than free like CA used to be. In any case, we took that in the wrong direction.
Also, I understand that this thread is about agriculture, but the problem is not about land and land use (yet) nearly as much as it is corporatism.
[When all else fails, then Wiki…]
New industrial state
In 1966, Galbraith was invited by the BBC to present the Reith Lectures, a series of radio broadcasts, which he titled The New Industrial State. Across six broadcasts, he explored the economics of production and the effect large corporations could have over the state.
In the print edition of The New Industrial State (1967), Galbraith expanded his analysis of the role of power in economic life, arguing that very few industries in the United States fit the model of perfect competition. A central concept of the book is the revised sequence. The ‘conventional wisdom’ in economic thought portrays economic life as a set of competitive markets governed, ultimately, by the decisions of sovereign consumers. In this original sequence, the control of the production process flows from consumers of commodities to the organizations that produce those commodities. In the revised sequence, this flow is reversed and businesses exercise control over consumers by advertising and related salesmanship activities.
The revised sequence concept applies only to the industrial system—that is, the manufacturing core of the economy in which each industry contains only a handful of very powerful corporations. It does not apply to the market system in the Galbraithian dual economy. In the market system, composed of the vast majority of business organizations, price competition remains the dominant form of social control. In the industrial system, however, composed of the 1,000 or so large corporations, competitive price theory obscures the relation to the price system of these large and powerful corporations. In Galbraith’s view, the principal function of market relations in this industrial system is, not to constrain the power of the corporate behemoths, but to serve as an instrument for the implementation of their power. Moreover, the power of these corporations extends into commercial culture and politics, allowing them to exercise considerable influence upon popular social attitudes and value judgments. That this power is exercised in the shortsighted interest of expanding commodity production and the status of the few is both inconsistent with democracy and a barrier to achieving the quality of life that the new industrial state with its affluence could provide.
The New Industrial State not only provided Galbraith with another best-selling book, it also extended once again, the currency of institutionalist economic thought. The book also filled a very pressing need in the late 1960s. The conventional theory of monopoly power in economic life maintains that the monopolist will attempt to restrict supply in order to maintain price above its competitive level. The social cost of this monopoly power is a decrease in both allocative efficiency and the equity of income distribution. This conventional economic analysis of the role of monopoly power did not adequately address popular concern about the large corporation in the late 1960s. The growing concern focused on the role of the corporation in politics, the damage done to the natural environment by an unmitigated commitment to economic growth, and the perversion of advertising and other pecuniary aspects of culture. The New Industrial State gave a plausible explanation of the power structure involved in generating these problems and found a very receptive audience among the rising American counterculture and political activists…
[Unfortunately, by the time I returned from Vietnam “the rising American counterculture and political activists” had gotten watered down by the volunteer army, disco, and a self-serving feeling of accomplishment under LBJ that completely disregarded the Nixon after-shock.]
I believe Michael is discussing a monopoly in the market which is controlling prices and supply. I believe students are in trouble for pretty much the same reasons in so much there is no escape from a student loan from commercial or government entities due to the lack of bankruptcy provisions. If you can sign your name, you are locked in till death or disability.
Yes sir. I am going to post a Wiki excerpt on JK Galbraith’s final major work that will help tie it all together.
Before you pointed it out to me then I had not known that such a large share of student loans were federal. Now that I do, then it still makes the banks suspect for the loss of bankruptcy protection. The banks want a bigger piece of the student loan gold mine as long as it is secure for them. OTOH, no one usually makes such large loans without a lien on the asset for which the loan was extended. So, politicians and bankers are likely water brothers on this matter. One solution of course would be indentured servitude upon loan default, but that seems to be what we already have in effect.
Another good example of institutional constraints would be single payer healthcare insurance. If we had not effectively dismantled the 501(c) nonprofits in healthcare by ending their 501(c) tax exemptions in 1986 and 1987, then compared to now with its vast distribution of private profits we have had a cakewalk getting to single payer healthcare. Only a few of the nonprofits in healthcare remained without their tax exemption (e.g., Bon Secours Catholic hospitals and medical centers and a small group of mutual insurers), while the New Deal BC/BS system mostly went for profit and then publicly traded share-owned marching into capital gains windfall mergers thanks to 1954. The tax “reforms” of 1954 and 1986/87 married to create an institutional juggernaut of private profits that will not easily be unwound, regardless of the apparent simplicity of alternatives. Institutions create foundations, not white boards, for social processes. Those that lay the strongest foundations then get to build on them.
The people over 35 carry the largest proportion of total student loans. Alan and I talked about how these loans got so big. That schedule of loan payments I posted shows the detail. The person already had usurious penalties. We have not even touched upon Parent Plus loans made to parents to help put children through college.
The last time I looked Federal student and parent loans are fixed. Commercial offers variable.
In my opinion and Akers and Chingos differ from mine, loans for education should never exceed 3%. Warren campaigned for lower rates and these two campaigned against touting a theory most people make it up in higher salary. Should we burden doctors, teachers, and others with costly needs for more education benefiting a nation? I think not.
We should define tax policy that is more aligned with more companies doing the same thing. Two things have happened in this country:
A. We have allowed large corporations to become ultra monopolies that can then use Citizens United to leverage political capital to make sure they stay monopolies. Extracting rents from the general public as quickly as they can.
B. We have allowed China to bankrupt our capitalist markets by way of socialism. We are too quick to judge, while allowing our corporations governmental bailouts. Socialism for corporations has happened in 2008, and 2020. We wonder why stock prices are so high…implied governmental guarantees. The Chinese socialized their steel mills, textile factories, manufacturers to capture the entirety of those markets. We socialized banks, service sector and airlines.
We talk of democratic socialism like it’s a cancer, yet we have seen how it works both in China and USA.
It boils down to this, a conversation I had this morning. Our country/society would rather saddle an 18 year old with a mortgage worth of debt and no way out of it as apposed to a small business loan, or even journeymans grants for the trades.
We are killing our productivity with these loans. They will never get paid back. It with the loan holder to their graves.
I know that you want to do the right thing. That and a couple of bucks…
Sometimes college works out well for people and sometimes it does not, but everyone I know got through that phase of life before higher education price inflation, which seemed to come along hand-in-hand with credentialism. In any case, trade schools are a good choice for many. Not sure that small business loans are for kids right out of high school though. Most people develop some skill first.
I raised three girls, but was not their biological dad or the mom’ husband, just her live in lover. The oldest went to community college on her own dime for an associates in accounting and stayed pat on that. Number two went to college two years for her LPN and works in a long term care facility. Number three went on to an MA to teach special ed. My first wife worked in personnel for Allied Chemical after getting her BA in social work. Went on to get her LCSW and mostly does marriage counseling because helping the poor pays poorly and is heartbreaking as she found out doing her undergraduate field work. My second wife married a man of great inherited wealth. She had a college degree and started a little business making stained glass windows for restaurants and such, more as a hobby out of the house than a living. Marrying well is better than a graduate degree. My best surviving friend is semi-retired in Tucson after career in nursing (RN+), first in ER and ICU, then for a doctor while his kids were small, then back to ER and ICU for more money to put his kids through college. He met his wife when they both worked in ER and ICU. Once kids began she move to obstetrics and never looked back. The down side to that is bringing life into the world is more rewarding than being around death every day, so she has no plans to retire. My next best friend is an LCSW in Walsenburg, CO and he voted for Trump. So, if anyone asks then recommend nursing for the college bound and not social work.
Doctors probably get their money’s worth out of college, but I gather GP and Internists still have to work for it. Good lawyers are one thing and bad lawyers are another. All indications are that a CPA can still pay his/her own way. For these though, I just have to go with conventional wisdom. The only doctors that I know are my own healthcare providers. I am glad to say that I have had no reason to know any lawyers or CPAs. I spent a few minutes with a lawyer one day to close on my home and that was that.
[Looking for a quotable reference about “water brothers” I stumbled across this 1990 “review” of the unabridged Stranger in a Strange Land that gave us Valentine Michael Smith with his “grok” and “water brothers.” Just one of the reasons that I liked it so much I guess. Linked below with its final paragraph excerpted.]
“…Heinlein was bemused by those who claimed that the work provided a blueprint for a new society. The novel was not written, he explained to one fan, to promulgate any set of beliefs. ‘I was not giving answers. I was trying to shake the reader loose from some preconceptions and induce him to think for himself, along new and fresh lines. In consequence, each reader gets something different out of that book because he himself supplies the answers . . . . It is an invitation to think — not to believe.’ — RICHARD E. NICHOLL”
I wouldn’t be too down on anti-trust. For one thing, anti-trust solutions don’t have to be permanent. The whole point is to dynamite the logs out of the stream to get it flowing again. If the logs build up again downstream, then you get some more dynamite. The point of anti-trust is to induce a certain level of fear which is hard to do nowadays since the government is so easily bought.
I know farmers who have run into USDA slaughter and state level slaughter problems. They only sell in-state now. The USDA seems kind of crazy. They were unable to certify some buffalo they had slaughtered since the USDA requires this to be done on a concrete surface, not grass or soil. They don’t have a suitable concrete surface and slaughtering animals isn’t something you can do in a supermarket parking lot. On the other hand, there’s no way to sanitize a grass or soil surface, and the USDA has had to deal with the consequences of that. It was worse for the people who died.
It looks like it’s time for the threat of a vertical break up. Does this make sense? A lot of stuff with regards to the AT&T breakup didn’t either. Splitting out the choke points and requiring that they become co-ops or regulated utilities or common slaughterers would make sense as a solution, though one can see the problems that will arise 20-30 years down the road. If the threat is credible, the processors may decide to do a Microsoft and backpedal. If they don’t, there are the costs of litigation and bad publicity. There’s even the possibility that they’ll lose or new more restrictive laws will be passed.
Obviously, this can’t be a permanent solution, but sometimes things change and it doesn’t need to be a permanent solution. Who uses landlines anymore? Who uses photographic film? Even fossil fuels and the railroads aren’t as critical as they were. The GDP can grow fine without more or them. Consumers are exploring meat alternatives. Right now, it’s probably 0.01% of the market, but that doesn’t mean that won’t change. Sometimes kicking the can down the road is a reasonable solution.
You’ll like part 2
Never found a cell phone that did not fade the talker whenever the listener coughed. They cannot simultaneously transmit and receive in the manner of RJ11 twisted pair or VoIP. So, I still have a landline for home. My wife and I each have a cell phone for travel, but only she has an iPhone. I have a $20 Tracfone with a one year $99 for 400 minutes plan. It usually sits on my bar connected to its charger. I also have a Nicon FM2 33mm from the early 80’s. It still shoots better quality than any digital under $1K.
Fake meat is not meat, but I do use the fake meatballs along with ground turkey breast for big pots of pasta sauce as I will this coming Sunday. I will make about 9 quarts and freeze all but the one we will have Sunday and Monday night. My wife and I eat this kind of semi-healthy stuff, but I never feed it to guests.
We are bordering on white out conditions here in central VA at this time. I hope it slacks off soon so I can sweep off the car and truck and put some mulch in the patio roses before the temperature falls into the teens tonight. Yesterday we had a high temperature in the low 70’s.
We have allowed China to bankrupt our capitalist markets by way of socialism….
[ This is ridiculous, but blaming the Chinese for American difficulties and showing a disdain for China has evidently become habitual and endless. ]
Michael Smith was not just showing the usual garden variety disdain for China and socialism that you might normally see. He had a specific context in mind that was as much disdain for the US as it was for China. He said “The Chinese socialized their steel mills, textile factories, manufacturers to capture the entirety of those markets. We socialized banks, service sector and airlines.” That seems more like an incomplete account of US the financialization of non-financial markets rather than racial, political, or ethnic bias. That is an easy failing to have. When I explained it about a decade ago at EV, then only Owen Paine had any idea what I was referring to and he really was understanding without agreeing. I gave up long ago. Everyone has their own hobby horse to ride in the political-economy blogosphere and I still want a pony. Michael Smith is at least trying to think things through, but still has a ways to go. If you can work with him then you both might learn something. Recall from a decade or so ago this taken from the article at the Wiki link below.
“…In the wake of the financial crisis of 2007–2008, the governor of the People’s Bank of China named the reserve currency status of the US dollar as a contributing factor to global savings and investment imbalances that led to the crisis. As such, the Triffin Dilemma is related to the Global Savings Glut hypothesis because the dollar’s reserve currency role exacerbates the U.S. current account deficit due to heightened demand for dollars…”
If that makes it look like the Chinese central bank is aware of balance of payments effect for the global reserve currency and the US central bank is not, then that is a incorrect perception. Greenspawn certainly knew and it is unimaginable that Bernanke did not. Greenspan walked precisely because he knew what was coming and Bernanke had superior bona fides in financial crash economics. No telling about Yellen, but only because she was after the fact giving me no reason to research her. She has to know though would be my SWAG. In a nutshell, the US has followed the economics plan of JP Morgan instead of JM Keynes because JP was rich and JM was not.
Full disclosure, JM Keynes was rich enough compared to most folk, but both normalized to mid-2010’s dollars then JM Keynes had a net worth of about $30M and JP Morgan had a net worth of about $1B.
Biden reading AB?
“The event is scheduled to begin at 1:30 p.m. ET.”
but it hasn’t started yet..
Biden came in about an hour late… you can forward this video to about 1:07 to watch it…just a handful of speeches, first Biden, then Vilsack, then Garland, then a few speakers from state orgs on Zoom..