Patterico's Pontifications

3/21/2014

Planet Money on Rent-Seeking, Part 3: The Government-Created Raisin Cartel

Filed under: General — Patterico @ 7:40 am

This is Part 3 of a three-part series about rent-seeking: legal bribery of politicians to pass protectionist laws. The series discusses individual episodes from the wonderful NPR show Planet Money, which often makes a surprising case for the free market.

Part 1 of the series dealt with state-created monopolies for car dealerships. Part 2 addressed the Jones Act, which creates an absurd and costly rule that shipments between U.S. ports must be made with American-made ships.

Today is Part 3: raisin outlaws. In this episode we meet a scofflaw who refused to join a government-sponsored raisin cartel, and broke federal law by selling all the raisins he had produced.

The show opens with an investigator who is looking into an illegal scheme in the Central Valley of California. Footage shows a truck showing RAISINS BEING SOLD!!!!!!!

RAISINS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

It is illegal, this act of selling raisins. Il-LEGAL!

Because the government has created a cartel for raisins. Meet the Stalinist-sounding “Raisin Administrative Committee.”

During the New Deal, a glorious time of rampant government intervention into the economy, the geniuses in the federal government passed the Agricultural Marketing Agreement Act of 1937. Pursuant to that law, during the Truman administration, the Secretary of Agriculture issued a marketing order — Marketing Order 989 — which established the “Raisin Administrative Committee.” The committee, made up of raisin producers but overseen by the federal government, formally restricts the supply of raisins through programs of “diversion.” People sit in a room around a table. People make motions that are seconded and voted on. The upshot: producers divert some of their raisins into a “raisin reserve” — to limit the supply of raisins for sale, in order to keep the price high.

A Washington Post article quoted an expert calling this what it is:

It’s a cartel. Let’s use the power of the government to operate a cartel,” said Daniel Sumner, director of the University of California’s Agricultural Issues Center.

That’s correct. The producers are colluding. This type of action would normally be prevented by antitrust law. (I doubt it should be; but while I might be OK with cartels, I don’t like them when they are protected by the government.)

But some people don’t want to collude. Enter Marvin Horne. He refused to obey the “Raisin Administrative Committee.” The Washington Post article put it well:

In the world of dried fruit, America has no greater outlaw than Marvin Horne, 68.

Horne, a raisin farmer, has been breaking the law for 11 solid years. He now owes the U.S. government at least $650,000 in unpaid fines. And 1.2 million pounds of unpaid raisins, roughly equal to his entire harvest for four years.

His crime? Horne defied one of the strangest arms of the federal bureaucracy — a farm program created to solve a problem during the Truman administration, and never turned off.

He said no to the national raisin reserve.

More than 10 years ago, Marvin Horne sold all his raisins. In 2002, the “Raisin Administrative Committee” decided to “divert” 47% of the raisis into the reserve. Marvin Horne said: No. I will not do that. He and his wife spent nights reading the law to see if there was some way they could sell all their raisins. Seriously, they did. And they thought they found a loophole.

But then they had to pack the raisins. And the packers most people use to pack their raisins? Those packers had been to the meeting of the “Raisin Administrative Committee” too. So Horne and his wife had to pack their own raisins, to keep from getting nabbed for the illegal act of selling what they had produced.

They got caught. The Supreme Court (yes, this case has been there) details what happened next:

After petitioners refused to surrender the requisite portion of their raisins, the United States Department of Agriculture (USDA) began administrative proceedings against petitioners that led to the imposition of more than $650,000 in fines and civil penalties.

Hand over the raisins!!!! As Justice Scalia said in oral argument on the case: “Your raisins or your life, right?”

So how did the Court rule? Horne argued they couldn’t take his raisins without compensation, as it would be an illegal taking. Sounds good, right? Alas, the case presented a mere jurisdictional issue in the procedure posture that went up to the High Court. The whole thing is back in the hands of the Ninth Circus.

So: to review: to help business owners, the federal government sponsors a cartel. If someone tries to violate the edicts of the cartel, the government comes after him and imposes fines and penalties that, if upheld, will ruin him.

Nice free-market economy we have here in the United States of America, isn’t it?

34 Responses to “Planet Money on Rent-Seeking, Part 3: The Government-Created Raisin Cartel”

  1. Ding.

    Patterico (9c670f)

  2. If you outlaw selling raisins, only outlaws will sell raisins.

    JD (534747)

  3. The term “sycophant” from, Gk. sycophantes, literally means “fig revealer”. Ancient Athens had a similar law on the export of figs, with the inevitable consequence of fig smuggling by farmers and shippers who wanted to evade the law (Greeks are not really a docile people). A sycophant was the snitch who ratted out the smugglers (impliedly) to curry favor with the authorities.

    nk (dbc370)

  4. It would seem to me, though, that if you are going to have a cartel it should be a government-run one, Patterico. Merchant leagues and trade guilds were great when they were fighting feudalism. Taking advantage of modern democratic/egalitarian societies not so much.

    nk (dbc370)

  5. There was another case of liquor price-fixing*, which the Court found violated the Commerce Clause but it could because of the 21st Amendment.

    *Retailers had to sell at a certain markup or more above their wholesale cost.

    nk (dbc370)

  6. “Nice free-market economy we have here in the United States of America, isn’t it?”

    I don’t think I’ve seen any market in the U.S. during my lifetime that was a “free market” Patterico, but this raisin law has got to be one of the most preposterous. And the fact that the government would go to such lengths to enforce this nonsense even to the point of ruining a man’s business and depriving him of his property is outrageous in this land of ours.

    Who, may I ask, comes up with this stupid crap? Or is this just the end result of lobbyists and crony capitalism on steroids?

    In Philly we have “Jewelers Row”. Blocks of jewelers competing for your business. We have “The Airport Autoplex” and “The Golden Mile” where car dealers do the same. When I was in the restaurant business I always looked for a location near and around other restaurants. I wanted to compete in the market not control it. I wanted to be around other restaurants because to paraphrase Willie Sutton; that’s where people went to eat.

    I am not against voluntary associations even to promote business or personal ambitions. I am against the government putting the force and penalty of law behind such associations. There is nothing wrong with a Chamber of Commerce until it joins forces with a government agency to use force to do what it wants. Then the system becomes despotic.

    Hoagie (511e55)

  7. You are all neo-feudalist neo-confederate neocons for questioning the government in this matter.

    JD (534747)

  8. This was New Deal legislation, Hoagie. It may have even met an overwhelming governmental interest test at the time. People were jumping out of windows. Now?

    nk (dbc370)

  9. Anyone know when the last time a bureaucracy in the federal government was terminated? Not merged with another bureaucracy or re-labelled, but shut down permanently?

    Get the government out of the business of maintaining a “safety net” for farmers, businessmen, consumers — that is, picking the winners and the losers — and these problems go away. If there is no military-university-industrial complex, there are no “special interest” lobbyists.

    Separation of business and the state: that’s a good thing.

    J.P. (bd0246)

  10. This program, like a lot of new deal programs, was intended to deal with a common structural problem where the rational self-interest of individuals causes them to pursue strategies which work in isolation but which, when everyone follows them, are harmful to everyone. The rational short-term response to a price dislocation is to increase production to make up for the lost income; if everyone does that, it just causes prices to spiral downward. This was a severe problem in the Great Depression.

    That said … it should have been a *short-term*, *emergency* measure, and it should have been ended two generations ago.

    aphrael (5cffd4)

  11. “This program, like a lot of new deal programs, was intended to deal with a common structural problem where the rational self-interest of individuals causes them to pursue strategies which work in isolation but which, when everyone follows them, are harmful to everyone.”

    aphrael – So a short-term solution is the government to assign farmers production targets, price supports or subsidies, compensate them for idling fields, etc., to get them over temporary dislocations? I think we still have that short-term solution in place today in the agricultural sector.

    daleyrocks (bf33e9)

  12. Daleyrocks: We *do* still have that short-term solution in place today in the agricultural sector, and as I said, it should have been ended two generations ago. :)

    aphrael (5cffd4)

  13. SO you can now grow and sell pot in many places but the Feds will get you if you try and sell raisins?

    What about peanuts? Did they used to have a limits on the growing peanuts?

    WarEagle82 (b18ccf)

  14. a lot of times you can substitute currants

    not always but sometimes

    happyfeet (8ce051)

  15. The only thing surprising about this is that they didn’t send a SWAT team to shoot his dog and confiscate the raisins. Perhaps that was a minor deleted detail.

    htom (412a17)

  16. You can see why if we suddenly decided it was open season on lawyers there would be no bag limit and you could take all you could find. I’m sure some would survive to raise a new herd that will need culling.

    Curt (bd5f4e)

  17. His crime? Horne defied one of the strangest arms of the federal bureaucracy — a farm program created to solve a problem during the Truman administration, and never turned off.

    Three words:

    Wool and Mohair.

    Not only did it take them over a decade of serious effort to kill it, after they did so, various scumbag politicians (not that that’s anything but the primary sort of politician, or anything) RE-INTRODUCED most of the measures that were removed.

    Laws in our currant (pun intended) system are freaking zombies.

    I’m with Heinlein: Bicameral legislature — one passes laws, with a 2/3rds supermajority.

    One REPEALS laws with only a 1/3rd minority. If one third of the people think something should not be Federal Law, it probably should not be.

    And eliminate this @#$%#$%$@$# crap about bureaucrats passing regulations that have force of law. That’s YET ANOTHER example of how the system explodes with endless regulations on how often one can FART each day.

    Smock Puppet, "Si tacuisses, philosophus mansisses." (225d0d)

  18. If you outlaw selling raisins, only outlaws will sell raisins.

    Not precisely. Some will sell really small prunes… :^P

    Smock Puppet, "Si tacuisses, philosophus mansisses." (225d0d)

  19. I hear in NY, Cali, Connecticut, and New Jersey they’re looking to limit the number of raisins you can put into a sample pouch tucked into periodical publications next.

    Yep. They’re going to limit you to less than ten raisins per magazine.

    Smock Puppet, "Si tacuisses, philosophus mansisses." (225d0d)

  20. This is an example of why I say no matter the rhetoric of conservatives or free market advocates or just plain capitalists, we will most likely be unable to turn the country around because we have enacted so many laws that are hindering it’s economic lifeblood.

    No President, No House Leader, no Senate Leader will be able to roll back all the laws and regulations that are strangling us.

    And that’s the main problem right there; we are strangling in red tape and no one can/will do anything about it because there’s always going to be someone who makes a living off that red tape existing or being enforced who will put up political roadblocks to any changes.

    So anyone who thinks that electing all Republicans to the Senate and one in the WH will mean economic recovery in this country is dreaming.

    I’m pretty sure that’s why Boehner and McConnell and others make the choices that they do because there are no good choices left. There are no cures. We can only stumble on until we finally fall.

    Then and only then after a complete collapse might we be able to roll back all the crazy laws and regulations and begin to have a vibrant and growing economy again.

    Don’t hold your breath till that happens though.

    jakee308 (7a57ce)

  21. Wealth buys power, power seizes wealth. A rational polity constrains both, and directs them to the greatest good for the greatest number.

    nk (dbc370)

  22. there’s always going to be someone who makes a living off that red tape existing or being enforced who will put up political roadblocks to any changes.

    I’ve read that in France, a large percentage of young adults aspire to work for the government. That even though the salary of the average public-sector employee reportedly isn’t as high as it could be, that the promise of greater job security offsets that and means many people in France set their goal in life to being a part of the French bureaucracy.

    Vive la France! Sort of like blue-state America but on a larger scale.

    Mark (cc48f8)

  23. Australia, back in the 1950s, had an “Egg Board: with similar powers.

    It appears to have morphed into some sort of cartel. I can’t tell if it penalizes producers who sell their own eggs as the Egg Board used to do.

    MikeK (cd7278)

  24. Wool and Mohair.

    IIRC, Sam Donaldson was in on that Mohair gravy-train with some ranch property he owned in NM.

    askeptic (2bb434)

  25. askeptic – Donald Trump has taken over the mantle from Sam.

    daleyrocks (bf33e9)

  26. Sorry, that’s not what you meant.

    daleyrocks (bf33e9)

  27. But I thought about it after I posted.

    askeptic (2bb434)

  28. Give me raisins or give me death!

    scrubjay (4385b6)

  29. scrubjay – “… or give me death !” is *not* a good raisin d’etre !

    Alastor (2e7f9f)

  30. Everything happens for a raisin.

    daleyrocks (bf33e9)

  31. Are we living in the age of raison?

    felipe (6100bc)

  32. nk #8 … From the article – “During the New Deal, a glorious time of rampant government intervention into the economy, the geniuses in the federal government passed the Agricultural Marketing Agreement Act of 1937. ”

    By 1937, everyone jumping out of windows cuz of the Market Crash had already landed about 2 administrations prior …

    If I remember correctly, 1937 was about when the New Deal stuff was taking the Great Depression from a feeble recovery back into yet another recessionary period …

    Some of us have been saying for quite a while now that Pres’ent Obama is sadly “learning from” and copying the wrong Presidents, trying to be the next FDR – cuz he sure is managing to make some remarkably similar mistakes with remarkably similar results …

    Alastor (2e7f9f)

  33. Raisin is the mistress and queen of all things.

    Cicero

    daleyrocks (bf33e9)

  34. Government-sponsored cartels, and there are many of them, are simply the “war on the poor.”

    Otto Maddox (990b3b)


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