Crony Capitalism vs. American Food

The deadly duo of big government and big food.

On Thursday this week I took part in a great panel discussion on crony capitalism in food and agriculture at the American Enterprise Institute.

Crony capitalism in this area, to me, means that a food business’s success is often wrongly contingent upon the business maintaining a close relationship with legislators and regulators.

The lively panel, moderated by the excellent Washington Examiner columnist and new AEI visiting fellow Tim Carney, is part of AEI’s exciting new Culture of Competition Project, which promotes a true market economy in which “rewards stem from work and merit rather than political connections.”

Besides me, the panel featured talks by fellow panelists (and fellow attorneys) Doug Povich, co-owner of the fabulous Red Hook Lobster Pound food truck, and Emily Broad Leib, who leads Harvard Law School’s great Food Law and Policy Clinic. I’d previously sat on respective panels with Povich and Broad Leib, and greatly admire their respective work to defend and strengthen the rights of small food entrepreneurs.

Like me, Carney was very pleased with this week's panel.

"I think the panel addressed a swath of issues where government intervention diminishes freedom, choice, and competition in the world of food," he told me by email.

Povich’s talk focused on the struggles of food trucks in the District and neighboring communities to push back against a host of needless regulations backed chiefly by brick-and-mortar restaurants.

Broad Leib, who followed Povich, focused in large part on the many ways food safety regulations can harm small food producers, and advocated for regulations that are proportional in scope to the size of the producer and their market share.

In my remarks closing the panel, which I titled America’s Cronycopia, I discussed the frequent difficulties that exist in definitively identifying the phenomenon—which, after all, is hidden and often the result of phone calls and backroom dealings of which journalists and the public have little or no direct knowledge.

I then focused on longstanding crony capitalism in the dairy industry.

Historically, this industry has been one of the most visible practitioners of crony capitalism—at least since it began to use government to squeeze out competition from newfangled margarine—a less expensive alternative to butter—in the mid- to late-1800s. The industry later supported a similar push to ban cheap milk substitutes like filled milk—best (or, perhaps, worst) evidenced in the seminal 1938 Supreme Court case United States v. Carolene Products.

Today, as I noted in my AEI talk, large, subsidized, corporate dairy producers have turned their focus to promoting the FDA’s continued prohibition of raw milk.

For example, the Farm Bureau recently passed a resolution supporting only pasteurized sales nationwide. And powerful dairy lobbies opposed a Farm Bill amendment proposed last year by Sen. Rand Paul that would have allowed interstate raw milk sales.

The rest of my talk focused largely on farm subsidies—including new data I presented on how Red (GOP) states receive an inordinate share of these USDA handouts—which should be abolished in all forms immediately (regardless of whether they’re doled out proportionately, or whether Red or Blue states benefit most, or which food producers benefit or don't benefit from them).

Using data from the USDA and the Environmental Working Group, I compared both the agricultural output from and subsidy dollars flowing into California and North Dakota. (Note: The figures do not include crop insurance payments.) I noted that while very Blue California is far and away the number one agricultural producer in the country, it ranks a dozen spots behind very Red North Dakota in terms of receiving subsidies—even though North Dakota ranks just nineteenth in agricultural production.

While that’s an extreme example, the data I’m crunching (for a forthcoming report) appear to show that Red States and Red districts in Blue States grab an outsized share of subsidies, and that this share represents a huge overall percentage of USDA subsidy payments. Stay tuned for more on this data in the coming weeks and months.

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  • ||

    Historically, this industry has been one of the most visible practitioners of crony capitalism—at least since it began to use government to squeeze out competition from newfangled margarine—a less expensive alternative to butter—in the mid- to late-1800s.

    But the margarine industry, which benefits from the huge crony capitalist subsidies of corn and various seed oils, managed to turn that all around be getting itself wrongly branded by the government and the AMA as a "heart-healthy" alternative to butter.

  • Ted S.||

    But the margarine industry, which benefits from the huge crony capitalist subsidies of corn and various seed oils, managed to turn that all around be getting itself wrongly branded by the government and the AMA as a "heart-healthy" alternative to butter.

    Something which needs to be mentioned over and over again in response to the bansturbators in the so-called "public health" sector who want to use the force of the state to control people's dietary choices.

  • ||

    But this time the Top Men are going to get it right!

  • John||

    You mean government top men fucked something up because they were taken in by industry cronies? Well knock me over with a feather.

  • ||

    In this case I think it wasn't direct cronies in the food industry that swayed government health policy in the wrong direction but the medical cartels like the AMA, ADA, AHA, etc.

  • Choey||

    Not to mention Ralph Nader's "Heart Attack on a Plate" crap.

  • VG Zaytsev||

    Crony networking for the win.

  • ΘJΘʃ de águila||

    The "rotation" of the crony capitalists. All hogs shoving their snouts into the public trough.

  • ConstituentOfClowns||

    I agree and it would benefit everyone if instead the industry was forced to tell people the truth about what's in the sludge they sell and the effect it has on health. Then, the NY ban on large drinks wouldn't have been necessary.

  • John Galt||

    Crony corn capitalism has done not merely the USA but the entire world enormous harm. Once the pseudoscience of the environmental religion was thrown into the mix the horrible was made even worse. A lot of people internationally have suffered, even died, from the great ethanol scam alone.

    Corn + Cronies = un-Consensual Corn-hole rape of the world.

  • Fist of Etiquette||

    What's going to happen when the scientists finally get around to making nutrient pastes and sustenance bricks that we will all subsist on? You're going to be able to have your raw milk in pill form, popped out of 3D printers.

  • ||

    I have a hard time seeing the benefit of having a robot do for you what billions of years of evolution has done in abundance.

  • ||

    You are talking about sex robots, right?

  • Specail Sauce||

    Soylent Xerox?

    Sounds delicious.

  • ||

    Needs moar zager and evans

    www.youtube.com/watch?v=izQB2-Kmiic

  • np||

    I like how the song structure forced them to place the dates way out in the future, making them a bit more realistic than some of their contemporaries

  • Marnee||

    Nah, more of this: http://youtu.be/7YJUis0NNQs

  • ||

    Also, while I don't think the dairy industry ought to be subsidized, nor should they be able to prevent sales of raw milk, they seem to be way, way, way down the totem pole, at least according to these guys.

  • mtrueman||

    ¨while I don't think the dairy industry ought to be subsidized¨

    I agree with you.

    This is just another of many examples of Linnekin´s self serving disingenuousness. 52 corn producers receive a total of some 4 and a half billion while 383 dairy programmes receive a total less than a million.

    Yet not a word about corn in the article. Corn of course is the main ingredient (besides water) of the soft drinks Linnekin is pushing in just about every article he publishes here, while milk is if anything a competitor.

  • Bob Straub||

    "383 dairy programmes receive a total less than a million":
    I assume you're talking dollars.
    What about the somewhat indirect subsidy of federal milk marketing orders, that dictate minimum prices for milk? Surely that's worth more than a million to dairy farmers.

  • mtrueman||

    I´m just quoting the figures provided to us in the link PS put up in
    PS| 3.2.13 @ 8:54AM |#

    It says the money is going to ¨programmes¨ not farmers. So there´s lots to question here. I think though, that we´re on solid ground repeating PS´s original point: corn is a thunderbird when it comes to subsidies, milk is a blue tit.

    Maybe if the milk producers found it in their hearts to give Linnekin some money, he would find another industrial subsidy to criticize.

  • robc||

    OT: Pseudoephedrine Dreams would make a good band/album name.

  • ant1sthenes||

    Can't we all agree to shorten it to crapitalism?

  • Gene||

    It sounds like something a Occutard might say, easily misconstrued.

  • ||

    So you're saying it will fire the public's imagination and make them more sympathetic?

  • ||

    Someone has been listening to the Michael Garibaldi er Jerry Doyle show.

  • ||

    Big city taxpayers are forced to subsidize politically connected farmers at a cost of 85 billion annually. If the country folk want money let them get a job working hard among the city slickers.

  • Xenocles||

    "If the country folk want money let them get a job working hard among the city slickers."

    And if the city slickers want food they can just go to the grocery store. Farms are obsolete.

  • Virginian||

    Except if you look at the places the checks go, it's not yeoman farmers. It's big ag companies, and rich city people who buy farmland and then apply for the ag subsidies.

    Country folk, in the sense of people who live on and work their land, are not in general receiving large amounts of direct transfer payments. They do benefit from other more indirect subsidies though.

  • Fatty Bolger||

    That's supported by PS's link above:

    62 percent of farms in United States did not collect subsidy payments - according to USDA.

    Ten percent collected 75 percent of all subsidies. Amounting to $172.2 billion over 17 years.

    Top 10%: $31,400 average per year between 1995 and 2011.

    Bottom 80%: $594 average per year between 1995 and 2011.

  • Xenocles||

    That was not a defense of subsidies, it was more of a jibe at stupid city dwellers.

  • Godly66||

    like Francisco explained I'm shocked that a single mom can earn $4886 in four weeks on the internet. did you look at this web link http://www.wow92.com

  • Xenocles||

    FdA, are you pimping single moms again?

  • Heroic Mulatto||

    I'd subsidize that.

  • ||

    Child support?

  • Heroic Mulatto||

    I was thinking paying for a lap dance in the Champagne Room.

    As for child support...

  • ||

    As long as you tip well. She's just trying to put herself through school. Although she may be studying environmental science or sociology.

  • ||

    "As an entertainer, I believe in giving back to the community, so I do a lot of work with unwed mothers. You know, just helping them get their start."

  • ||

    Oh, that bitch made $5K in a month alright...

    But it had nothing to do with the intertubz.

  • ||

    Well you should think about it then, you'd probably be able to get a lot more business that way.

  • Patrick Black||

    While I agree with the substance of the article, I would suggest that "crony capitalism" is a contradiction in terms. It is either cronyism or capitalism, and what is referenced in the article is definitely cronyism. By continuing to use the phrase "crony capitalism" we reinforce the idea that the system we have today is a type of capitalism, which is certain is not.
    From dictionary.reference.com:
    private ownership of the means of production, distribution, and exchange, characterized by the freedom of capitalists to operate or manage their property for profit in competitive conditions

  • ||

    Your objection to "crony capitalism" is rooted in a definitional claim about capitalism, which according to you could never be corrupt. But is such a defintion analytically sound?

    Suppose that there's a business that obtains 100% of its revenues through peaceful, non-political means but that through political entrepreneurship has shifted away 1% of the costs it would otherwise have. In spite of these antics, however, it remains true that most of the business' activities are capitalistic. For example, it's still true that C = A - L. Private ownership of the means of that business' production remains, and the owners are still competing against alternatives to their goods or services.

    But according to your definition of capitalism, the business is no longer capitalistic. That's silly.

  • VG Zaytsev||

    Capitalism was a slur developed by Marx to denote a political system where the state was dominated by financial interests. Basically what we call cronyism today.

    I've never liked the word and prefer economic liberty or free markets to denote an economic system free of political influence.

  • ||

    You know, one of the best ironies of Marxism is that Marx prescribed state monopoly capitalism as a solution to the problem of government being like a committee that manages the affairs of capitalists.

  • ||

    Yeah I always thought it was rather stupid to use Marx's denigrating term rather than free market.

  • np||

    We should just call it cronyism

    But sadly, it seems like more already think that you can't do anything without government approval, so much so that the cronyism becomes an expected part of capitalism

  • Capt Ace Rimmer||

    You motherfuckers didn't build that!! I want my cut!!

  • ||

    No fuck you, cut spending!

  • 21044||

    I noted that while very Blue California is far and away the number one agricultural producer in the country, it ranks a dozen spots behind very Red North Dakota in terms of receiving subsidies—even though North Dakota ranks just nineteenth in agricultural production.

    Just how is the agricultural output measured? I have to wonder if the disparity between CA & ND is not just an artifact of measurement and/or the relative importance agriculture to the states economy.

    Never been to ND, but I hunt in SW Kansas every year. Most of the land is planted in milo. I have to wonder if comparing an area dependent on a single crop milo per year to the vegetable farms near Oxnard, CA is reasonable. Moreover, at least what I have seen from the Interstates, there are a lot of feed lots in CA. Feed lots are dependent on cattle feed grown elsewhere, possibly milo grown in SW KS.

  • 21044||

    vegetable farms near Oxnard, CA

    What I meant to add here, was this farm land around Oxnard seems to have a continuous stream of high value crops 12 months per year. I also have to wonder if keeping the land in farm production is not really a way of keeping the land taxed at agricultural rates while the supply of land for houses is restricted to maximize the price of the land when it is released to the housing market.

  • ||

    When dealing with crony capitalists, it's all well and good to critique and to condemn the rigging of commerce in food. But let's not by blinded by the AEI crowd and its allies who are eager to trivialize the relevance of a monopoly protection racket that was established on the pretext of self-defense.

    That protection racket, aka the military, will inevitably be in the business of choosing winners and losers in the contest to supply the racket with muskets, powder, shot, uniforms, tents, food, and other supplies. Furthermore, the racket will resort to a variety of tricks such as paying for suppliers with looted wealth and, when looted wealth is in short supply, with issuing scrip called the Continental in lieu of something that ought to be valued. The protection racket will require bureaucratic machinery to work, and once established, this machinery, which is operated under the color of law, will be available to manipulate and massage commerce in creative new ways not necessarily limited to the production of food sufficient to satisfy the demands of militarists who want to keep their goons drilling and marching.

    So, any "exciting new" analysis of crony capitalism that systematically trivializes or neglects the militarism problem is an analysis worthy being counted as a circus act put on by apologists of crony capitalism, which is a species of organized crime.

  • ||

    A testable hypothesis from from AEI?

    Timothy P. Carney helps direct AEI’s Culture of Competition Project, which examines barriers to competition in ALL areas of American life, from the economy to the world of ideas. [Emphasis added.]
  • ||


    ---------- Forwarded message ----------
    From: Domestic Reagent
    Date: Sat, Mar 2, 2013 at 11:06 AM
    Subject: Why not the 'Culture of Unrigged Commerce' project?
    To: timothy.carney@aei.org


    Tim,

    I have questions related to the Culture of Competition project:

    If we wanted to start a project called the Culture of Unrigged Commerce project, would not we need first to explain the phrase unrigged commerce? Also, is "Competition" defined by AEI such that it's a synonym of the phrase, unrigged commerce, or such that the word "Competition" encompasses the idea of unrigged commerce?

    What do you think?

    Thanks,

    DR

  • Mr Whipple||

    They can have my raw milk when they suck it from my cold, dead titty.

  • EDG reppin' LBC||

    Why are you obsessed with your customers desire to squeeze the Charmin?

  • Heroic Mulatto||

    Bull milk doesn't count.

  • Mr Whipple||

    THAT'S NOT MILK!!!!

  • Albertus Magnus||

    What about Malk? Sure, its milk from rats, but its filled with 100 % of your daily value of vitamin X!

  • Homple||

    As an aside to all this, if you want to drink raw milk, remember why pasteurization became common in the first place: to prevent the spread of Brucellosis, Tuberculosis, and some other nasty microbes as well.

    Caveat emptor.

  • Mr Whipple||

    They also used to leave your dairy products in a little metal box that wasn't refrigerated by your front door.

    And there was the eggman, too.

    https://www.youtube.com/watch?v=og_85XJTOac

  • jangtrang||

    Sometimes man, you jsut have to wonder. Wow.

    www.PlanetAnon.da.bz

  • Paltrow||

    Glad to see this take in Reason. Usually we hear nothing but how out there the anti corporate food lobby is. As if their claims that "natural" food is better means modern food production should be outlawed. Heck, just make it legal for small farmers to compete!
    As always, we don't need regulate more. We need to regulate less. Regulation keeps a lot of small and mid-size business people/farmers out of the business and makes sure only the wealthy and large companies can farm and sell legally. We should also promote private rating agencies that evaluate food and production techniques based on the values important to the individual.

  • joetybee||

    This article could have been condensed to one paragraph. Writer spent most of it bragging about his background, connections, and writings.
    Then admitted his political leanings at the end.
    What a waste of time.

  • Brazen||

    like Vincent implied I'm in shock that a mom able to make $6936 in 1 month on the computer. have you seen this site link http://www.wow92.com

  • Waterside||

    just as Edward said I'm in shock that anyone can make $9973 in a few weeks on the computer. did you read this page http://www.wow92.com

  • Hunter5||

    til I saw the receipt four $6575, I be certain that...my... friends brother was like they say realey bringing home money in their spare time on their apple labtop.. there sisters roommate started doing this less than fifteen months and a short time ago paid for the morgage on there home and bought a top of the range Citroën DS. I went here, http://www.wow92.com

  • lucasw908||

    my friend's step-mother makes $63/hr on the computer. She has been fired from work for six months but last month her payment was $15870 just working on the computer for a few hours. Read more on this web site
    http://qr.net/ka6n

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