Against Monopoly

defending the right to innovate

Monopoly corrupts. Absolute monopoly corrupts absolutely.

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Mass Natural

From the NY Times Magazine [because registration is required I will only quote them when they do something dumb] it seems that cheap organic food is a bad thing

To index the price of organic to the price of conventional is to give up, right from the start, on the idea, once enshrined in the organic movement, that food should be priced not high or low but responsibly. As the organic movement has long maintained, cheap industrial food is cheap only because the real costs of producing it are not reflected in the price at the checkout. Rather, those costs are charged to the environment, in the form of soil depletion and pollution (industrial agriculture is now our biggest polluter); to the public purse, in the form of subsidies to conventional commodity farmers; to the public health, in the form of an epidemic of diabetes and obesity that is expected to cost the economy more than $100 billion per year; and to the welfare of the farm- and food-factory workers, not to mention the well-being of the animals we eat. As Wendell Berry once wrote, the motto of our conventional food system at the center of which stands Wal-Mart, the biggest purveyor of cheap food in America should be: Cheap at any price!

To say you can sell organic food for 10 percent more than you sell irresponsibly priced food suggests that you don't really get it that you plan to bring business-as-usual principles of industrial "efficiency" and "economies of scale" to a system of food production that was supposed to mimic the logic of natural systems rather than that of the factory.

This type of hatred of Wal-Mart must surely stem from jealousy of their success, not any sort of rational consideration of the great good they have done.

Addendum: In the comments Melinda objects that I am too quick to pass over the enviromental issues. She makes some good points. See the comments.


I'm not all that fond of "Don't hate me because I'm beautiful" so-called critiques and I'm sorry to see one here.

There are so many things that could be said about agriculture in the US, organic agriculture, and Walmart's role in the market that I think, perhaps, some real discussion wouldn't have been out-of-place. There are several different reasons for interest in organic food. Health is one of them and Walmart's entry into the organic goods marketplace would make sense in that context. However, if your interest is in sustainability, there's an obvious problem with the kind of large-scale production practices that make it possible for Walmart to be highly profitable on insanely thin margins, and there's a problem with the distribution and shipping that become necessary when you're dependent on huge centralized production facilities, as well. It's not that cheap organic food is a bad thing, but that the processes required to produce cheap food on the scale of a Walmart are inconsistent with the don't-crap-up-the-world goals of the sustainable agriculture movement.

Melinda says:

However, if your interest is in sustainability, there's an obvious problem with the kind of large-scale production practices that make it possible for Walmart to be highly profitable on insanely thin margins, and there's a problem with the distribution and shipping that become necessary when you're dependent on huge centralized production facilities, as well.

I'm afraid that the problem isn't obvious to me. The fact that the large-scale practices are cheaper suggests to me that they are more sustainable not less. True Walmart doesn't pay for the pollution involved - but do you have some reason to believe that the small-scale practices of existing organic food producers create - for each unit produced - less pollution? Large scale shipping produces a lot less pollution per unit weight than small scale shipping for example. Are there some relevant facts here?

Part of the reason that large-scale agricultural operations are "cheaper" is that costs are shifted around and that there are significant external costs that aren't reflected in the product price. That's not to say that there aren't tradeoffs - for example, it's definitely cheaper and less resource-intensive for the wholesaler to pick up a huge pile of milk from one dairy producer than it is to make a bunch of stops at smaller, more environmentally-sustainable operations. On the other hand, the big feedlots do an enormous amount of environmental damage and the costs for that aren't reflected in the price that the consumer pays at the market.

For example, a big dairy CAFO here in northern NY had a retaining wall on one of its manure pits collapse last year, and 3 million gallons of offal spilled into the Black River. It contained fecal matter (including e.coli and other bacteria) and ammonia, and in addition to just plain stinking up the place and making the water unsafe for humans, it killed several hundred thousand fish, which in turn did considerable damage to the region's tourism industry. The farm at which this happened got a walloping fine from NY DEC, but given the vagaries of the dairy industry they didn't have latitude to push up their raw milk prices and the costs were never passed on directly to the wholesalers or to the consumers.

Smaller farms don't produce so much waste that they can't dispose of it. More diversified operations have better field/head balance so that they can spread the waste on their own fields and use it as fertilizer. However, those kinds of farms aren't going to be able to get their prices low enough to meet Walmart's targets. This is the kind of thing that the NY Times was identifying as a problem, or at least inconsistency, with "organic" products at Walmart.

The dairy spill is a good example. But while smaller farms may not have huge spills they still create problems with bacteria and run-off. And big spills don't happen all the time. I would be interested in estimates of how the total environmental damage by big farms per unit of output compares both to that of small farms and to the total cost of production. For example, if large farms are more fuel efficient because of economies of scale, that may be more important than occasional spills. Cost reductions that conserve on expensive inputs such as gasoline and oil are environmentally friendly as well.

I am dubious that products that are significantly more costly in the usual sense (such as current organic food) are really so environmentally friendly that they are lower cost when environmental damage is taken account of.

Anyway I can think of two solutions here

1. some better labeling so that consumers are aware of the environmental cost of products and have the opportunity to buy the more environmentally friendly products

2. do a better job of charging firms for environmental damage, for example, through taxes

The advantage of (2) is it would work. I am dubious about (1). Consumer education - maybe better described as propaganda - has resulted in some changes in behavior - recycling for example - but unfortunately the changes have resulted in practically no environmental improvement, or in some cases made things worse.

To bring the discussion back to monopoly, there is a third solution

3. Give Walmart a monopoly over all food sales. Then they will jack up the price, so people will consume less food = less environmental damage. As an additional plus Walmart won't have so much reason to squeeze their suppliers in an environmentally unfriendly way. We'll see if anyone votes for this one.

I guess this is why they call economics the dismal science.

OK, I think the last reply was unfair to Melinda. I take the point about the large dairy spill is that a single large spill is worse than a number of smaller spills adding up to the same amount but spread over a longer period of time. So offsetting the economy of scale in production is a diseconomy of scale in environmental damage. Morever, my suggestion #2 wasn't responsive to the issue of spills so large that the firm causing the damage can't afford to pay for it. So a better #2 would be to have stricter liability combined with a requirement of adequate insurance. So a larger operation prone to more damaging spills would be charged a higher premium by the insurance company that ultimately has to pay.

My point, however poorly made, was that I don't think the solution is upstream with the consumer or even with Walmart but downstream with the producers causing the environmental damage.

[Also, since it may not be clear: #3 wasn't intended as a jibe at Melinda or environmentalists. It isn't a proposal I've ever heard anyone make in the environmental context. It was a jab at intellectual property absolutists. It is one of the arguments they made in favor of retroactive extension of copyright.]

As a sidebar to the interesting exchange between Melinda and David, the New York Times has run several articles the last decade or so about how subsidized the dairy industry is in New York state, which is why consumers in the Empire state pay very low prices. Its taxpayers take it in the shin, as always.

Wal-Mart is a lean, mean logistics machine, and this is one key to its everyday low prices.

I am also dubious that organic farming is cleaner than "industrial farming," particularly when scale economies are figured in. Horse-drawn transportation was "organic," but it was also slower and more costly than that made possible by the internal combustion engine. The former was also a lot dirtier, as comparative accounts of roads, air, and public health, in both medieval (vs. modern) Europe and late-19th and early-20th century America make clear.

Horse-drawn transportation required that food supplies be located much closer to consumers. Hence, to use one example, the rise of the meat packing district in New York City, which is now home to trendy restaurants and clubs and boutique shops, with home owners and renters with incomes to match. The last meat packer moved out around 2000, I think. They've scattered to Brooklyn, Long Island, and New Jersey.

Organic food doesn't mean that it doesn't pollute. In fact, due to its Luddite refusal to use technology, it uses a lot MORE fertilizer. It's funny that Monica mentioned e. coli and feces, because all organic fertilizer is LITERALLY manure. When you eat an organic fruit, you're literally eating shit.
Why'd you have to go and bring Wal-Mart into it? Wal-Mart's current position and growth is due less to it's current practices and more to the growth momentum it was carrying at the time of Sam's death. The current Wal-Mart management methodologies as well as their decisions to treat their base employees as cattle, are doomed to collapse the company. Sam's rolling over in his grave.

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