An Imbalance of Power

Posted on March 13, 2007 by Dave Pollard
imbalance of power
Those who preach that the ‘free’ market is the best solution to everything tend to be those who benefit from the fact it is distorted in their favour. Nowhere is this truer than in the modern industrialized food business, where a tight and ruthless agribusiness oligopoly has exploited these distortions to staggering advantage over the public interest. The chart above shows how the system works, and why it doesn’t.

Market purists argue that business cannot be put in an impossible conflict of interest by having to meet the needs of both shareholders and the public. We have a political system, they assert, that balances the interest of corporations (to maximize short-term profit for shareholders) with the interest of the public (to maximize their personal and collective well-being). The politicians and judges, who, it is claimed, are beholden equally to both groups, have the challenge of balancing these clearly conflicting interests. If they get the balance wrong, the citizens will vote them out or the shareholders will starve their re-election campaigns, and they’ll be replaced with a crew who will do the job right.

So in the case of agribusiness, it is in the interest of the food production oligopoly to squeeze out all family farms and replace them with massive factory farms that inflict unimaginable suffering on farm animals and deplete the soil until it is dust and needs to be ‘replenished’ with oil-based fertilizers and soaked in oil-based chemical pesticides and herbicides. In order to be viable, agribusiness (in North America alone) then needs to be subsidized to the tune of $150B/year. To keep costs down and profits up, the agribusiness oligopoly uses the cheapest possible ingredients (notably corn, corn sugars and other low-nutrition ‘fillers’) and adds dangerous chemicals that make foods look better than they really are, taste different than they really do, addict the customer on sugar and salt, and have the micronutrients processed out of them. They then collude to charge the public as much as possible for this processed garbage.

Oh, and the factory farms are also the breeding ground for poultry flu.

Their political actions to achieve this objective include lobbying for deregulation, for immunity from prosecution by farmers whose livelihoods have been destroyed and by a chemically poisoned, nutrition-starved, price-gouged public, and for the aforementioned massive subsidies. They also mount fierce opposition to new regulations drafted in the public interest.

On the other side, it is in the interest of the public to have prosperous, local, organic family farms that do not inflict suffering and chemical poisoning on farm animals and do not exhaust and poison the soil, producing healthy and safe foods. The political actions to achieve this include lobbying for regulation against the excesses of the agribusiness oligopoly, and for enforcement of existing regulations and full disclosure of what agribusiness is doing and what is in (and not in) their foods. And the pursuit of class actions when the politicians fall down on their job as regulators.

Theoretically, these incompatible objectives and means, and conflicting lobbying actions are reviewed and balanced by politicians who must weigh the personal financial consequences of pissing off the oligopoly against the political consequences of pissing off the voters.

Alas, the theory doesn’t work in practice. The oligopoly has a lot more resources to apply to tip the balance in their favour, shown in the lower part of the graphic above. They can muzzle the mainstream media, which depend heavily on them for advertising dollars, not to investigate or report on agribusiness misdeeds (fortunately we still have Oligopoly Watch). They can get politicians to simply ignore the regulations, citing a shortage of inspectors. This is perfect for politicians: They can placate the public by passing stiff regulations that seemingly favour the public interest, and at the same time placate the oligopoly by ignoring the regulations. This is how political business is done all the time in struggling nations (Mexico has some of the strongest environmental laws in the world, none of them enforced), and now the practice is catching on in affluent nations as well.

The oligopoly can also intimidate political opponents by running huge (and tax-deductible) public advertising campaigns specifically directed against them under the name of anonymous, phony ‘public interest groups’ with Orwellian names. And they can have their armies of lawyers threaten farmers and the public with crippling lawsuits if they utter a peep of complaint, while their huge advertising campaigns are full of blatant lies that pander to public ignorance, fear, and aversion to bad news that doesn’t have a simple fix.

So you end up with a citizenry which is largely ignorant and misinformed, and fearful of prosecution. The public lobbying ends up being done by a small group of informed progressives on behalf of a public that is unaware, unappreciative and unsupportive of their efforts, and not prepared to use their votes when that lobbying fails (as it increasingly does) to counter the more extensive, powerful, expensive and effective campaigns of agribusiness.

The result is what we have now: An agribusiness oligopoly that is obscenely subsidized with handouts from political parties grateful for the oligopoly’s generous campaign contributions. Factory farms that inflict horrific suffering. Polluted air, water, soil and food. Food that is unhealthy and even dangerous, virtually devoid of nutritional value. And political parties complicit in the continuation of this deliberate poisoning of our bodies and our environment.

You could develop a similar chart for the corporatist oligopolies of just about every other industry. The Big Pharma oligopoly, for example, is a huge beneficiary of a poisoned and malnourished public ñ more chronic diseases to come up with expensive drugs to combat for lifetimes.

There are two possible approaches to trying to restore the balance so that the public interest at least has a fighting chance:

  1. A combination of public media (not in thrall to corporate advertisers), real campaign finance reform (no corporate financing, and equal public funding for all), and stronger consumer protection laws (with enforcement requirements constitutionally enshrined ñ the right to healthy food, water and living environment), or
  2. A change to corporate charters to require corporations themselves to balance the public interest against the interest of shareholders, and hold the officers and directors liable for failure to do so.

There are compelling reasons why neither will ever come about, and why neither would work even if it did. If fixing this complex problem was easy, someone would have already proposed a solution and some vanguard jurisdictions would have acted on it. But this is a global problem, and no one has found an answer to it. There may be no answer, even if we can one day prove beyond a reasonable doubt that the agribusiness oligopoly’s actions kill thousands of people every day.

But getting more people to be aware of the problem, and to realize that the ‘market’ is utterly incapable of resolving it in any balanced way, is astart. One step at a time.
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8 Responses to An Imbalance of Power

  1. MLU says:
    March 13, 2007 at 21:18

    It’s nice that the words of such giants as Madison and Hamilton are in the libraries, since such wisdom has nearly vanished from public discourse. It’s interesting that Marx was able to spread his ideas because he found one wealthy capitalist (Engels) but that his followers can’t see how the preservation of freedom depends on private concentrations of wealth. So they would bar private associations from having any voice at all no corporate financing and they would hand over to incumbents the keys to power–equal public funding for all. To me, it’s something of a marvel that at this stage in history anyone could suggest that a consitutionally enshrined. . .right to healthy food would do much more than empower the high-level bureaucrats to define “health” to the liking of moneyed interests. The local organic growers would be quickly outlawed in the wake of such problems as e coli in spinach. And of course, once “the public interest” is enshrined in law, the messy disagreements about what it means will be resolved in favor of those at the top, and the plurality of goods that makes agreement hard would be resolved by fiat. If I could just get the cash, I could pursue the good as I see it.The old republic of liberty was to my liking, but it has few friends today. We must make do with the incoherence of arguments to be left alone to do our own thinking on Tuesday followed by calls for all the important decisions to be made by bureaucrats in some Euro-style false untopia on Wednesday.Maybe you think Chavez–after the demogaguery about equality and concern for the poor–really will serve the interests of those without power? That they will find the rhetoric more to their liking than, say, a chance to get to Walmart with a paycheck?At present, nothing prohibits corporations from pursuing various “public interests” or prohibits stockholders from purchasing goods and services and stocks from such corporations. No changes in laws or infringements on our freedom is needed. All that is needed is a slight change in our thinking, and a few new markets that make visible more information about corporations than the financials that they are currently required to report. And therein lies our salvation, although we have some trouble we still need to go through before we will see it.Freedom and capitalism are wonderful things, though neither is better than we are.

  2. Marty says:
    March 14, 2007 at 11:06

    To make the imbalance of the power and the resultant folly of the markets more real, here is a story: In Heron Lake, Minnesota, they are constructing a 50 million gallon coal-fired corn ethanol plant, funded by farmer-investors. They are doing this because the price of natural gas is going up, and coal is cheaper in the Upper Midwest. Federal government subsidies support this expansion of agricultural production. These include a 51 cent tax credit for each gallon of ethanol sold in the U.S. Also, ethanol producers receive a 10 cent per gallon production income tax credit for the first 15 million gallons. There are so many things wrong with this picture. First, the energy economics of ethanol production: Robert Rapier, who writes for the Oil Drum, says for every 1 unit of energy expended on producing corn ethanol, we get 1.3 units of energy. Second, the greenhouse gases burned by using coal to heat the ethanol mash. Third, the enormous water usage of ethanol plants, depleting groundwater sources. Fourth, the increase in acreage devoted to corn production created by higher prices, which is reducing acreage put into conservation programs. Fifth, the soil erosion, fertilizer, pesticide and herbicide costs on the environment associated with corn production, including the “dead zone” in the Mississippi River. Sixth, the rising costs of corn driving up the costs of everything from tortillas to meat, not to mention driving down the Mexican peso. This is the wisdom of the markets, folded, spindled, and mutilated. All in the name of energy independence. Incredible.

  3. Bharat says:
    March 14, 2007 at 20:30

    Marty, interesting story. Thank you.

  5. Joe says:
    March 16, 2007 at 16:13

    Marty,Good post. I’ve shaken my head quite a few times in the last month or two about the economics (both the money sense of the term and the energetic sense of that term) of ethanol production.

  6. Dave says:
    March 18, 2007 at 22:41

    I showed this article to my Dad (a semi-retired farm financial consultant). Here is his response. What do you think?—————–Dave:I had a quick look at the the link and I consider the writer rather extreme. In fact we don’t have a “free” market there are lots of regulations and restrictions on both sides. I would be interested to know how he defines a “factory” farm – I suppose it’s any operation where the animals aren’t allowed to roam freely outside. There is something to be said for confinement housing – when it’s -40C or +40C. In any of the so called “factory” farms (in Canada) that I’ve see, I think the animals are much better cared for than when they’re roaming outside (and in many cases have to fend for their own feed). Why would farmers when want to abuse animals when it’s been clearly shown that any stress has a negative effect on performance? Sometimes animals are kept in pens or stalls so they will not harm each other (eg.. separating bulls or boars). The trend in the hog and poultry industries for the past 10 years or so has been to use only “minimal disease” stock which require little or no medication because vet medicines are costly and require extra labour to administer. One of the few ways farmer have to be more competitive in the generic market place is by reducing costs.Farmers do have alternatives such as forming value chains with processors, distributors and retailers (or do it all themselves as at farmers’ markets or Sunterra Foods) if they don’t want to be part of the mass-produced, generic commodity market. As such, producers can deal directly with consumers and charge a premium for their products such as free-range, organic, grain fed, picked fresh that morning etc. :Unfortunately, farmers by nature are very traditional people in character and style of operation and are very reluctant to change. One of the largest problems I encounter with farm financial consulting is that many farmers think they haveno options (besides the generic production style) but they do.Even the multi-national are in the differentiated product business. Dow has a specialized variety of canola that they have developed (Nexera) that is supposed to have extraordinary health benefits for consumers of the resulting oil (I just don’t remember what they are – you can look it up on their website). Presently Dow is offering farmers a 12 to 15% premium for growing the product.OK I better stop I think I’m starting my own rant. ———————

  7. Brooke says:
    March 29, 2007 at 22:39

    Hi Dave,Nice blog – well done. I have just started reading it so apologies if you’ve covered my comment in some later post.I believe the answer may come in the form of Global Warming. If it is managed well. The hope is that it will be a common cause that will bind us all together. Everyone will be somewhat more involved in the issues and will start to question the bullsh!t that the corporate world pushes. We’ll see if this is going to happen through our energy systems. If we develop local renewable energy sources to power towns / suburbs then we will be on the road to peace and prosperity. If the centralised monolithic power stations (coal with “carbon capture and sequestation!”) and / or nuclear persist and grow and thus leave the power in the hands of few, then we’re doomed as we keep going down this road you speak of.I’m someone working on Climate Action and am pushing as hard as I can for the decentralised model. The great thing is that many more people are pushing that same way, and through our public displays (Walk Against Warming) and general public presentations, we hope we can break the threshold through a collective of concerned citizens.Peace!Brookeps. I think the father of a reader who posted a response (18/3/2007) missed the point. (He’s the semi-retired farm financial consultant). Sure, there will always be exceptions. As another example, how about trees – a fight that almost every nation on earth has – to log them or keep them standing? There are quite a few jobs attached to the forestry industry so the governments want it. The forestry industry wants it as it as a felled tree is worth alot of money to them. The business sector wants it as it means nice white virgin fibre paper they can print their Annual Reports on. The public are mostly all involved in these industries so they want it. The educated and informed don’t want it as it means loss of biodiversity / extinctions / creek, river and water table poisoning and it’s just plain wrong. The capitalist corporate drive wins out. The secondary point I’m making here is that we are all in this together, well most of us anyway. The shareholders want a return from their investment and are pleased when the companies they have invested in increase their profits and pay out dividends. The companies want to appease their shareholders (which includes themselves of course) and so come up with any legal to do so. Often the details of how they make their profits aren’t readily disclosed so all the punters see is a dividend and increasing share price. We are all driving this system and that is what will make it so difficult to stop. Hopefully global warming will raise people’s desire to know more about what the companies are doing to our earth?

  8. john says:
    April 8, 2007 at 21:21

    Your comments about how agribusiness wants a deregulated world could not be farther from what actually happens. Regulation of the farming industry, is how the consolidation of the food production system to occur, currently. The more and more regulated the industry becomes, the more difficult it is for the independent producer to meet those regulations. The USDA requirements for an inspected meat production system, reducing the numbers of packers by 80-90% since the early 70s. The pasturization of milk requiring large investments to be made in equipment to do so, thus eliminating the small producer. On and on.Throw on a worldwide economic system which has made the dollar the reserve currency for the world (making US products more expensive), a tax system which encourages people to maintain large loans on their homes, and yet invest their money in the stock market (where they will make large financial gains), leaving the average person to invest in someone else as opposed to themselves. The socio-engineering that occur within the legislative process, does not help to make the world a more equitable place. The more laws we have the less freedom we tend to have. Government is not the solution.Though the idea of publicly funded campaigns is a good one, then we will not have The best democracy that money could buy.Peace

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