Dear Friends,
It seems to me… government is a corrupting influence on business. The more power government has to effect markets, consumers and regulate behavior, the more perverting it is. While interfering with the economy is very lucrative, for politicians and corporate executives, it comes at a great cost to the people in our life outcomes. Politicians have a myriad of reasons, justifications and lamentations to explain to us, why they need to decide who wins and who loses, in an economic transaction. Often it is for our own good, because we are too stupid to reason for ourselves, not smart enough to know what’s good for us… and to “protect” jobs. No matter the justification, every interference is to benefit a politically favored player at the cost to society, the people and our economy.
In the meat industry there are farmers, feed lots, slaughterhouses, meat cutters and grocers. They all have a part to play in the logistics of getting meat created and into the mouths of consumers. Each is a value added enterprise. The feed lot fattens the farmer’s cows, the slaughterhouse kills them and does the initial packing, while the meat cutter further cuts it to consumer portions and the grocer sells them to the final user. Why doesn’t the farmer just sell his meat directly to the consumer? Because the vertical integration that would require is far less efficient than using Adam Smith’s division of labor. Each segment operating at optimal efficiency to keep the cost of food as low as possible. (So poor people can afford meat). While, if farms did it all, the cost would necessarily be higher.
Each segment of the supply chain works to lower the cost by being efficient… except when they aren’t. Efficiency is expensive and hard, but if government will grant you a lock on your segment of the supply chain, you can be as inefficient as you want. If the farmer no longer can, legally, go around the system. All it takes is a good lobbyist and some cash to lubricate the process. Once government steps in and regulates an industry, to protect politically favored entities, the entire paradigm of efficient production goes out the window. Once other firms see what you have accomplished, they will go the same route, lowering the efficiency of the entire nation’s economy. It should be obvious what the long term effects on a nation and the wealth of it’s people is… under such a system of incentives.
The meat industry is not alone in being regulated to inefficiency by government bureaucrats and politicians, every industry is effected. Some states have outlawed the sale of Tesla’s because it eschews car dealerships… ostensibly to protect the jobs at those dealerships, but in reality, to protect the wealth of the politically favored who own those dealerships. The milk industry is rife with regulation, preventing people from buying unpasteurized milk directly from farmers, supposedly to keep us “safe,” but really to protect the firms that process milk and prevent people from making cheese at home, protecting the cheese industry. Did you know you pay more for sugar in the US than anywhere else in the world? To protect the US sugar producers from foreign competition.
Like Milton Friedman said, Why produce a higher quality good, at a lower price point, when you can get the government to close down the competition instead? The more power government has, to intrude into private affairs, the more it will interfere with the running of the economy. Making it less efficient, and creating dangerous incentives. The high price of sugar in the US has led firms to use high fructose corn syrup instead, which has led to an epidemic of diabetes. Helping the medical establishment to great profits. There is little that can lower the economic outcomes of the people, more than a powerful government interceding, for the “good of the people.” Such governments have plenty of justification for their intrusions, “good intentions” they want us to only see, rather than the road they put us on.
Sincerely,
John Pepin
