Planet Money on Rent-Seeking, Part 4: The Government-Mandated Minimum Prices for Sugar
When I did my recent three-part series on rent-seeking based on Planet Money episodes, commenter jakee308 said: “Do one on sugar.”
OK.
This is Part 4 of my three-part series on rent-seeking — legal bribery of politicians to pass protectionist laws. The series discusses individual episodes from the wonderful NPR show Planet Money, a sometimes quietly subversive show which does a lot of episodes (on NPR!) that explain how government interferes with 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. Part 3 introduced readers to the “Raisin Administrative Committee” — a government-sponsored cartel that controls the raisin supply, and ruins any raisin producer who bucks the Stalinist organization and dares to sell all his raisins.
Today, we have Part 4: the U.S. federal government setting minimum prices for sugar.
The Planet Money episode opens with a CEO of a candy company talking about how he could expand his operations here in the U.S., rather than send massive parts of his operations to Mexico. What does he need? he asks rhetorically. Lower tax rates? Workers’ comp reform? A right to work law? Nope. He says he could pay no taxes, and get all those other things, and would still manufacture candy canes in Mexico. What does he ask for?
“Let us buy sugar on the free market.”
People say: What? You can’t do that?
No, you can’t.
The program explains that there are two prices paid for sugar: what people pay in the U.S., and what the rest of the world pays. The U.S. price is, on average, 15 cents more per pound than it is in the rest of the world.
Just 15 cents? What’s the big deal? Well, the candy CEO mentioned above uses 100,000 pounds of sugar a day. So he pays $15,000 extra per day. That’s between $3 million and $4 million extra per year — a “sugar penalty” the businessman must pay as a cost of doing business in the U.S.
Why? If you guessed “federal law,” you have been paying attention. The operative provision is contained in The Food Conservation and Energy Act of 2008 (aka the U.S. Farm Bill), under which the U.S. Government guarantees a minimum price for sugar: 22.9 cents per pound.
The sugar beet farmers says foreign competitors are getting subsidies. Economists respond that the solution to unfair trade practices is a complaint to the World Trade Organization — or having the U.S. slap a tariff bigger than the subsidy received by the foreign grower. Not setting a minimum price.
The most revealing story: the sugar CEO says that, according to the Ken Starr report, Clinton took a 22-minute phone call from someone while getting serviced by Monica Lewinsky. (Supposedly he was trying to break it off — but the cigar incident had not happened yet, so . . . ) Who was Clinton talking to for 22 minutes at such a moment? A sugar magnate. Now that’s access. It turns out that the sugar industry spends a ton on lobbying — double what the food and beverage industry spent as a whole in one recent year.
The hosts talk to a Congressman who is a big supporter of the minimum price. He says people call him a communist — a central planner — and he’s fine with that. After all, it’s 25% of the economy in his district. The lobbying doesn’t affect me, he says. The sugar folks support me because I support them. Sugar creates jobs in the U.S., he says.
The candy guy replies: yeah. And it also costs the U.S. jobs in my industry — jobs that are going to Mexico.
Every government intervention into the economy has consequences — often unforeseen ones that are the opposite of what government intends. Yet the machinery of interference creaks on, inevitably — as lobbying money greases the wheels. And businessmen and consumers suffer.
Yay government!
Thanks to jakee308 for the suggestion.
Ding.
Patterico (9c670f) — 3/22/2014 @ 9:02 pmWhere do you find the time to do all this, Pat? Don’t get me wrong, this is my favorite blog, so thanks a lot.
Gazzer (9399d2) — 3/22/2014 @ 9:05 pmGazzer,
I asked him the same question before. A demanding job, kids, and a blog. Any of these would fill my plate. I jokingly asked if he had time to exercise.
He responded that he just finished up a workout at the gym.
Some people can just do it all.
norcal (b1b8bd) — 3/22/2014 @ 9:16 pmI type fast.
Patterico (9c670f) — 3/22/2014 @ 9:23 pmGod bless him!
Gazzer (9399d2) — 3/22/2014 @ 9:26 pmI know a little about this. Both my parents worked at Brach Candy. And the factory did move to Mexico. My father worked in chocolate enrobing. He told me about the change in the recipe for the chocolate — from sugar to corn syrup — he was the one who mixed it. He hated it.
Checking my Hershey’s with Almonds. Nope, no corn syrup. Sugar. Good on you, Hershey.
nk (dbc370) — 3/22/2014 @ 9:33 pmSo. Americans lose jobs to other lands, which subsidize production costs, and the U.S. Congress then makes the American consumer pay as if Americans had produced the stuff to begin with.
What a world.
Pogo was so right.
Ed from SFV (3400a5) — 3/22/2014 @ 9:49 pmMood musics:
http://www.youtube.com/watch?v=h9nE2spOw_o
daleyrocks (bf33e9) — 3/22/2014 @ 9:52 pmAnd these 4 reports by Pat are just the tip of the iceberg. there’s many, many more.
I hate to be a Cassandra but we have tied ourselves into such a complex and interwoven Gordian knot of laws and rules and regulations that the only solution at this point will be a sword.
Too many people, corporations and foreign nations have an interest in maintaining the status quo and we’ve gone past critical mass.
This is why the economy is not recovering. there have always been bubbles and then retractions and then growth again but there has to be flexibility to allow this.
Our economy is like and old man’s circulatory system. It’s no longer flexible and one insult to a part of it brings on catastrophe.
That Obama got elected at the same time as the crisis is just pure bad luck. But it’s likely no one else would’ve been able to do much to help anyway. He’s just made it worse and dragged it out.
Now anyone with a brain can see where we’re headed but it’s the tragedy of the commons all over again.
Only some sort of revolution (not necessarily violent but whatever shape it takes will have to be extreme and unprecedented) to tear up all these laws, rules and regulations that are choking us.
Some serious triage has to take place but probably won’t occur until we are under dire threat of collapse.
jakee308 (7a57ce) — 3/22/2014 @ 10:25 pmHence Tom Woods’s book: Rollback.
HIs thesis: the inevitable coming fiscal collapse is a good thing. Maybe we can remake our country then,
I tend to see nuclear war as more likely, but I am unfortunately a pessimist by nature. I come by it honestly; so was my dad. At least I’m pleasantly surprised when things work out well.
Patterico (9c670f) — 3/22/2014 @ 10:26 pmOne of the shifts in thinking and phrasing which will help to expose the Dems for what they are is to *stop* saying “the U.S. Congress then makes the American consumer pay as if Americans had produced the stuff to begin with” for things like “The operative provision is contained in The Food Conservation and Energy Act of 2008 (aka the U.S. Farm Bill)” … it wasn’t the US Congress – it was the Democrat-controlled US Congress in 2008 that passed that law …
Alastor (2e7f9f) — 3/22/2014 @ 10:29 pmThe REAL reason for sugar price supports is to make sure that sugar is more expensive than Corn Sweetener. It isn’t beet farmers who have this political sway, it’s Big Corn. (Archer Daniels Midland, etc.)
If sugar price supports ended, Coke and Pepsi would switch back and the market for HFCS would collapse.
Steven Den Beste (99cfa1) — 3/23/2014 @ 6:03 am12. Maybe the reason the law continues. Once something exists, there are business (and labor) interests that arise that want perpetuation of the status quo. The same thing could be said of bad schools.
This probably was not the original reason for sugar price supports, which dates way back. But it may very well be true that what counts now is Archer Daniels Midland, not any sugar growers in Florida and Louisiana.
BTW:
Corn syrup is sticky.
Sammy Finkelman (798a49) — 3/23/2014 @ 6:42 amDen Beste is right. One thing reporters should be sure to ask at the next pre-Iowa-caucus debates: Should sugar price supports be ended? Do you prefer sugar to HFCS?
Kevin M (dbcba4) — 3/23/2014 @ 12:44 pmNote that Mexican soft drinks all use sugar, not HFCS. You can get Mexican Coca-Cola many places. If you are of a certain age, you will be amazed that flavor is one you remember but had forgotten.
A cynic might even think that the whole “New Coke” fiasco was to hide the change from sugar to HFCS, since the change would otherwise have been abrupt.
Kevin M (dbcba4) — 3/23/2014 @ 12:49 pmOld Coke, New Coke, and Classic Coke are three different tastes, at least to my mouth. Mexican Coca-Cola is good. Fentiman’s Curiosity Cola might be better, although it’s not as … sharp. The soda I’m most likely to drink is Fentiman’s Ginger Beer, although Izze sparkling juices, especial Blackberry and Grapefruit, are close behind.
Corn syrup (both commercial and home-made) has its uses in my kitchen, small amounts in some chocolate and candy things. HFCS isn’t here. For baking and cooking, I use Crystal or C&H brands of beet sugar except for frosting, that’s C&H Cane.
htom (412a17) — 3/23/2014 @ 1:33 pmthe Sugar monopoly and the concomitant legislation and protectivism was going on long before “Big Corn” got into the act. (although price supports there were also out of control)
One of the reasons (I believe) why Iowa has such a say in where the primaries are held first although this distorts the whole process and their system is a fraud.
People don’t realize that so much of our food is not produced by small farmers anymore it’s produced by corporations and they receive a lot of money to NOT produce.
They are also responsible for the travesty of the Ethanol requirements in gasoline.
It’s amazing but we pay a premium for ethanol gasoline which in turn gives us less mileage AND (bonus) we’re turning our feed into gasoline thus raising the prices all across the board for food from corn flakes to chickens to beef.
jakee308 (7a57ce) — 3/23/2014 @ 3:41 pmI used to work for Coca-Cola. One of my great pleasures back in the day was to buy Kosher-for-Passover Coke when we produced it, because it was made using beet sugar, not HFCS. This minimum price thing is a complete scam, and I don’t know why we, as a nation, put up with it. Mexican Coke tastes better, Brachs and others are moving jobs to Mexico, kids are getting fat on HFCS, it’s a complete scam.
Remember, Bob Dole bought his condo at a very attractive price from the head of ADM, who produce most of the HFCS.
More importantly:
So, given a few minutes of ‘service’ before and after the call, that’s like a half hour of ‘service?’ Can Ms. Lewinsky blow a call into Mrs. carlito, just to give her some perspective?
carlitos (e7c734) — 3/24/2014 @ 10:12 amFor a bribe to work, you don’t actually have to tell the person being bribed that it is a bribe.
It still can color his judgement.
The Rabbis in the Talmud wearned against this (Ketubot (or Kesuvos) 105b
Then they give a sort of etymology of the Hebrew word Shochad – she-hu Chad (that he is one. This is more wordplay than etymology.
And they cite examples of Rabbis who recused themselves – two or three cases where afteer refusing to hear the case they found themselves thinking, if he wished he could plead this, or if he wished he could plead that.
Sammy Finkelman (798a49) — 3/24/2014 @ 10:37 amAlso, the bills used to pay the Watergate burglars came from an ADM donation.
In 1996 I used to say that the two reasons why I would not vote for Bob Dole were ADA and ADM.
Milhouse (b95258) — 3/24/2014 @ 11:05 amNone of this is at all new. Back in the ’90s Life Savers moved its operations across the lake to Canada for exactly this reason.
Free trade is the original cause of the Liberal political movement, now known as “conservative”. The Liberal Party arose out of the Anti Corn Law League. There is no room in the tent for protectionists.
Milhouse (b95258) — 3/24/2014 @ 11:09 am❓
carlitos (e7c734) — 3/24/2014 @ 11:21 amcarlitos – Milhouse is talking about the U.K. for some reason.
daleyrocks (bf33e9) — 3/24/2014 @ 11:59 amI’m talking about the UK because that is where the movement then known as liberalism, and now known as “conservativism”, arose.
Milhouse (b95258) — 3/24/2014 @ 9:59 pmYawn
daleyrocks (bf33e9) — 3/24/2014 @ 10:25 pmI’m not sure if this will matter much to any of you, but:
That candy company CEO in the video at the link? He put a full-page ad in the local paper in October 2008, explaining to all of his neighbors why they should vote for Barack Obama.
I don’t care if he has to pay $100 a pound for sugar. To hell with him.
There are import tariffs on the steel that we use, in our small business, meant to protect steel mills in the US. I don’t see anyone, particularly this candy company CEO, coming to our defense.
Pastafarian (aff6f7) — 3/25/2014 @ 9:14 amI’m a pessimist. I’m afraid that no matter how dire the situation gets, most people will believe that the solution is more of the problem. We can not be said to have a free market capitalist economy. Government spending comprises about 40% of GDP, and as you point out the remaining 60% is essentially centrally directed.
You can open a business. But the government will tell you how to run it.
It’s dismaying that so many people believe that the problems with our economy can only be fixed by more government control and regulation. And not just college-aged Occupiers, either.
http://www.vatican.va/holy_father/francesco/apost_exhortations/documents/papa-francesco_esortazione-ap_20131124_evangelii-gaudium_en.html
I would dearly love to ask the Pope where, exactly, in the world does the marketplace have “absolute autonomy.” Or, anyone really. Can someone give me an example of a country where the marketplace has “absolute autonomy” and states don’t exercise any form of control? I’d like to move there.
Steve57 (4507bb) — 3/25/2014 @ 11:21 amSteve, I think the Pope would respond that he was talking about ” ideologies which defend the absolute autonomy of the marketplace and financial speculation” which would lead to a situation where “a new tyranny is thus born, invisible and often virtual“.
My own answer would be any place where a black market exists.
felipe (b5e0f4) — 3/25/2014 @ 11:38 amfelipe, did your read the encyclical? The Pope makes it clear that he’s talking about the current situation. Not what would happen if those ideologies were to prevail, but how he thinks our current global economy is a result of them having prevailed.
I just find this encyclical full of just so much that is wrong. Sure, I throw away a lot of food at my restaurant. But that’s the law. And the Pope thinks the solution is more laws?
Here in Dallas the city will try to stop you from feeding the homeless. That’s the law.
http://reason.com/blog/2013/03/29/feeding-the-homeless-without-permission
I find it ironic that the entity that tried to stop religious groups from feeding the homeless is what the Pope believes to be the solution and not the problem.
Hundreds of thousands of dollars and six years later this group can legally feed the homeless.
I guess if the Pope is such a fan of the government then he won’t mind when his religious orders in the US have to provide abortion and contraceptive coverage to their workers if they’re going to try and feed the homeless. Because Obamacare does not define this as a religious activity. To qualify as a religious activity you have to confine yourself to ministering to people mostly of your faith.
If Jesus had tried to perform his miracle of the loaves and fish to feed a multitude while Obama was the Emperor, Obama would have had him stopped if the disciples didn’t have insurance that covered abortifaceants and contraceptives. Mother Theresa can open a hospice in Calcutta with less interference than in Washington DC.
So I guess if the Pope thinks the answer is more government, he won’t mind when the Little Sisters of the Poor and other orders have to pay for things that violate a Catholic conscience. So he shouldn’t have any complaints when he and his church are on the receiving end of “the right of states, charged with vigilance for the common good,” exercising control.
Steve57 (4507bb) — 3/25/2014 @ 12:32 pmYes, Steve, I read it when it was made available. Please remember that the Pope is always speaking from a perspective of faith and morals and the Pope is, if you will, speaking directly to the reader. The questions raised in this document are posed to you (and me), personally, not to someone else, and certainly not to the wind. Whether or not you are of a Christian denomination, and whether or not you are a believer should make no difference since the reader is a member of humanity.
You make very valid points, sir,and those points are for you to consider and struggle with:
“I just find this encyclical full of just so much that is wrong”
May I humbly suggest that it is your interpretation (perhaps mindset)that is wrong? Perhaps you may not be reading with the “eyes of faith”? I do not know, but you certainly do.
I find it encouraging that you have such a strong reaction to this document because it shows that you are engaged in the search for truth. I respect that.
The Pope is the “Vicar of Christ” Who (Jesus)is a sign of contradiction in the world. Your reaction bears witness to this.
felipe (b5e0f4) — 3/25/2014 @ 12:52 pm“So I guess if the Pope thinks the answer is more government, he won’t mind when the Little Sisters of the Poor and other orders have to pay for things that violate a Catholic conscience. So he shouldn’t have any complaints when he and his church are on the receiving end of ‘the right of states, charged with vigilance for the common good,’ exercising control”.
Comment by Steve57 (4507bb) — 3/25/2014 @ 12:32 pm
That is a gigantic “IF”, Steve. Let me paraphrase Jesus:
“Render unto Caesar the things of Caesar, render unto God, the things of God”. The Little sisters could, in this spirit, do as you suggest.
felipe (b5e0f4) — 3/25/2014 @ 12:59 pmJesus gave is explicit instructions on what to do when the State makes certain demands of you:
Turn the other cheek, go two miles when one is demanded, give your cloak also – all of this cheerfully. Being a Christian is not easy, in fact if we practice Christianity correctly, we can expect no less than Jesus got.
felipe (b5e0f4) — 3/25/2014 @ 1:12 pm“Turn the other cheek, go two miles when one is demanded, give your cloak also – all of this cheerfully.”
felipe – Then if they don’t leave you in peace, crush the little, heathen, bastard, sinners and savor the lamentations of their women. 🙂
daleyrocks (bf33e9) — 3/25/2014 @ 1:17 pmLOL, Daley.
felipe (6100bc) — 3/25/2014 @ 4:07 pm