"The milk man cometh, and the Constitution goeth."


At Liberty & Power, historian Paul Moreno has a great post tracing the American dairy industry's long and unsavory role as corporate welfare recipients and "pioneers in interest group politics." As Moreno notes, it all started with margarine (known in the 19th century as oleomargarine):

Dairy farmers organized to drive oleo from the market. They claimed that oleo was harmful—manufactured, they claimed, from "dead dogs, mad dogs, and drowned sheep." They alleged that an "oleo trust" was not only driving dairy farmers to the wall, but also impairing the marriage market, because "women are no longer a necessary adjunct to the farmer lads to help them create wealth, owing to the oleo-cotton-oil-soap-fat combine."

Failing here, they accused oleo manufacturers of coloring their product and selling it fraudulently as butter. This was despite the fact that dairymen had long colored winter butter yellow to resemble the best "June butter." They also routinely "renovated" rancid butter to bring it to market. The dairymen finally got Congress to enact a two-cent per pound excise tax on oleo in 1886.

This was the first time that Congress had used its internal taxing power for regulatory purposes, rather than to raise revenue….

Perhaps the most egregious exercise of dairy power was a New York law of 1933 that declared that milk was a business "affected with a public interest" and allowed the state to set dairy prices. The New York board set 9 cents per quart as the minimum retail price of milk. A Rochester grocer, Leo Nebbia, was prosecuted for selling two quarts of milk and a loaf of bread for 18 cents. Why, in the midst of the distress and privation of the early 1930s, did New York want to raise the price of milk? The idea was that it would raise the income of dairy farmers, who would then purchase more industrial goods, thus stimulating the economy. The Supreme Court accepted it, again giving state governments virtually unlimited power to regulate the economy. Such counterintuitive trickle-up economic theory helped to turn the 1929 recession into the prolonged Great Depression.

Read the whole thing here.