Why can’t Americans afford food?

A couple days ago, my friend Alec Williams posted this:

“40 million Americans are receiving some form of food assistance. The richest country in the world leaves 1 in 8 people unable to afford their own food.”

If you are on the left, you might argue that the gap between the rich and the poor is too wide in America, and that businesses are not working hard enough to get Americans jobs. If you are on the right, you might argue that some of those poor are changing their spending habits and life activities because they know that assistance is coming, and service union demands have made it harder for companies to employ people. You’d have an argument either way. But I think there’s a simpler explanation that isn’t discussed nearly enough. It’s this:

Food is too expensive in America.

Here in the middle of Taipei, I don’t run my refrigerator. It’s not cost-efficient, since it would mean running my electricity all day long, and I can already eat fresh and nutritionally balanced food from restaurants and food stands for $7 a day. An upscale restaurant would charge me $8 for a meal. In China I could make it on even less, something like $2 a day. I’ve been to plenty of countries with less expensive food. It isn’t because they have magic beans: Norman Borlaug, the man who did the most to end world hunger, was an American. It’s for other reasons.

Some are innocuous: health regulations and paperwork cost money and time. The cheapest food here is sold in small, popular roadside stands that seem like they don’t have to answer to anybody.

Some are simple trade-offs: sales and income taxes hurt producers as much as they hurt consumers. Labor costs are higher in the U.S., partially because of Social Security, medicare taxes, health benefits, and minimum wage laws, partially to compete for labor. (Some readers have said labor costs are the biggest factor.) They have to raise prices until they can turn a profit or get out of the business: luckily for them, everyone needs food, so demand is inelastic. (On a related note, food stamps might drive up prices, too, since producers know the bottom of their market is subsidized.)

My friend Antonia Wang says that since Americans spend 9.5% of their income on food, which is the lowest percentage of any country ever, we shouldn’t call our food expensive. The problem, rather, is that the wrong things are cheap: processed foods. She says, “The ultimate reason is that Americans don’t cook anymore. And making pancakes from Bisquick and pasta from Hamburger Helper is NOT cooking! People can’t tell good food from bad food if they don’t know good ingredients from bad ingredients. And they can’t distinguish because they get packaged and boxed stuff instead of fresh, unprocessed produce and meats.”

And then there’s farm subsidies and trade barriers, which are ubiquitous in both the States and in Japan. In both countries, farmers are influential in the less-populated states, and that means they influence both the politicians who represent them and the politicians who need their votes in national elections. (I suspect ethanol’s massive subsidies are attributable to Iowa’s position as the first state in the presidential primaries.) In the States, subsidies are so skewed toward the big farmers that Willie Nelson still has to do Farm-Aid for the little ones. When subsidies create surpluses (like what we have with corn), they do drive down food prices, and when they keep people in business who are less effective, they push prices up. The Franklin Roosevelt administration paid farmers not to farm in order to prop up prices; we don’t do that anymore, but we do pay farmers not to farm to protect wildlife and pay some people who aren’t farming. On the whole, people have argued to me, subsidies drive prices down, provided you exclude the tax money spent on the subsidies in the first place.

Trade barriers lift prices up by locking out cheaper goods from other countries. Only Americans know what high-fructose corn syrup is, and it’s because our sugar is so protected and so much more expensive than everyone else’s that our companies substitute that yellow stuff. Japan is protective of its own rice. I’ve mentioned before that U.S. farmers demand we send their food as aid to struggling countries, which helps wipe out their local farmers who can’t compete with free meals.

Everything is too expensive, and we produce too much of the wrong things because we change the incentives. Processed food is cheaper than fresh food, so we’ve substituted toward buying things that are worse for us. But not enough people realize what’s happening, so our legislators pass farm bills year after year. As a legislator, Barack Obama voted for them just like everyone else.

So that’s farming, but I think it’s symptomatic of a larger problem. Well, okay, nothing can be more important than food, but bear with me.

I think the problem in our country isn’t corporations or welfare: it’s corporate welfare. One of the best articles I’ve ever read is this one: Corporations Versus the Market by Roderick Long. I’d read the whole thing, but in short, big businesses have the same weaknesses as big government: blindness to local problems, cumbersome bureaucracy, inflexibility, and so on. Local businesses can do very well against them if they work hard and are innovative. McDonald’s, for all its success, is limited: it has to make food the same way all over the country. A local restaurant can make things you couldn’t have anywhere else, but McDonald’s can’t because consistency is its mantra. You and I may never know about the greatest restaurants in the country, but they’re out there.

The ace in the hole for big businesses is that their size makes it possible for them to negotiate with politicians and bend the market in their favor. Do you remember when Wal-Mart was in the news all the time, and the right said it was an example of free markets while the left said it was destroying small towns? It turns out Wal-Mart holds out for tax breaks and incentives when it looks to open new stores in order to guarantee its success.

The Bush and Obama Administrations have bailed out the people on the top (banks, car companies, you know them – Goldman Sachs and the US Government are like best buddies now) and the people at the bottom (mortgage plans, cash for clunkers, stimulus, extended unemployment payments). Small businesses employ half of private sector employees and have produced two-thirds of the net new jobs over the last 17 years, according to the SBA. When the Yomiuri Shinbun newspaper the opinion of the Japanese business community, it asks the presidents of the biggest corporations. It’s like asking the lions what’s best for the food chain. What about all the small businesses? Can I mention Joe the Plumber and keep your esteem?

It’s like burning a candle at both ends. It’s like a novice chef making a soup and adding too much salt. He can add all his other seasonings too, but that would make it too strong, like a school lunches where the kid mixes everything together in the middle of the tray. He could add more water, but his pot is only so big, and that would thin out everything else. It’s hard to find the right balance when you start tampering, so it’s easier to keep it simple. Let’s start over by taking the privileges away from the titans.

(Footnote: I’m sorry there aren’t more citations; my time is limited.)
(Second Footnote: Thanks to my friends for helping me edit this article: Spencer Hahn, Brian Hornung, and Antonia so far. Writing about national politics is difficult.)

Explore posts in the same categories: Business, Politics, USA

3 Comments on “Why can’t Americans afford food?”

  1. Naughty Stuart Says:

    Hi James… How’s it goin? I’m baaaack!

    “Labor costs are higher in the U.S., partially because of Social Security, medicare taxes, health care mandates, and minimum wage mandates.”

    *****Only partially… Labor input is indeed the biggest reason food here is more expensive. The reason it is more expensive back home is PRIMARILY because costs of living are higher. Everything else is peripheral.

    “And then there’s farm subsidies and trade barriers, which are ubiquitous in both the States and in Japan.”

    ***** And in a whole bunch of other places, too! Trade barriers and subsidies in the EU and UK are even bigger than the US. Even some “developing” countries like Brazil do the same.

    “they do drive down food prices, but when they keep people in business who are less effective, they push prices up.”

    ***** Not buying that at all… Subsidies on the whole drive prices down. I dislike food subsidies as much as you do, but they are not the reason for higher food prices. That’s counter-intuitive.

    “I’ve mentioned before that U.S. farmers demand we send their food as aid to struggling countries, which helps wipe out their local farmers who can’t compete with free meals.”

    ***** Yep, and you can add economies of scale to that as well. Delivering food to developing countries who often have only small farmers can quickly wipe out that competition. Not to mention… High fructose corn syrup is so g-d damn unhealthy (see… I know you’re religious so I’m not gonna swear!).

    “which is just as much of an Asian island as Japan, and find everything so much cheaper”

    *****Have you gone to Carrefour lately? Stuff like shaving cream, body wash, pens, notebooks and other things are obscenely expensive in “greater” China and much of the rest of “developing” Asia. That crap is often more expensive here than in the US!!! Look for yourself if you don’t believe me! Why? Because retailers can’t get their shit together. Their supply chains are inferior and unreliable. I say this to illustrate that the US has some stuff going for it.

    “Goldman Sachs and the US Government are like best buddies now”

    ***** They’ve been best buddies for awhile, my man…

    “Can I mention Joe the Plumber and keep your esteem?”

    ***** No.

    “Let’s start over by taking the privileges away from the titans.”

    ***** Public execution is the answer!

  2. jsmyth Says:

    Thank you for checking me again, haha! Your comment about subsidies decreasing prices led me to add a disclaimer to my sentence, as you’re probably right.


  3. [...] Why can’t Americans afford food? « James Smyth says: September 29, 2010 at 10:13 am [...]


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