Guest Editorial: Shopping the Supermarket: Mirage of a Free Market

Categories:  Opinion    News & Politics
Wednesday, June 27th, 2012 at 5:30 AM
Guest Editorial: Shopping the Supermarket: Mirage of a Free Market by Robert Cogan
Robert Cogan

The May 16 issue of the Erie Reader (Vol. 2 No. 10) carried an extensive and illuminating feature story by Jay Stevens under the title “Raw Food Rebellion, The Raw Milk Controversy.” The story highlighted several issues related to ideas expressed with the phrase “the free market” or “a free market.” The specific issue of access to the market was illustrated with local color about an Edinboro farm family, the Showmans. They are allowed, under Pennsylvania law, to sell raw milk retail, but not to ship it across state lines under federal law. Theirs is a model farm. My wife and I buy eggs there confidently, because we’ve seen the farm, we know the family, and they keep free-range chickens.

Politicians have been bloviating hard about the virtues of the free market since the crash of 2008, which destroyed between $10 and $13 trillion of citizens’ purchasing power. These for the most part were completely blameless citizens. They did not lie to take over-sized mortgage loans, nor gamble speculatively on exotic securities. I know the cautious, diligent type. I’m one. I had our life savings invested moderately, in a balanced, well-diversified portfolio. I nevertheless lost about $50,000. By lucky timing, the bulk of our savings remained after the crash.

So what’s a free market and what will Free Market Fundamentalists (FMFs) seek to persuade us about it? A free market is supposed to be a system of exchanges of economic goods, on a voluntary basis, undertaken by each party because they expect some good for themselves from the exchange. Those who praise the operation of such a market insist that some of the great benefits of a free market arise from there being little or no government interference in the market. In such a market, they claim, prices are basically set by supply and demand. The opposite of a free market, they claim, is a command system, in which government plans what goods and services will be produced, their quantities and prices. They also stress the virtues of private property and claim that taxation is coercion.

I want to bring forth questions, possible criticisms of this theory. “Who, or What is ‘free’ in the ‘free market’?” First, FMFs ignore the distinction between formal freedom and effective freedom. Formal freedom is the mere legal and physical capability of doing something. Effective freedom means having the actual capacity to do it. In a market system where everything has a price, the more unequally distributed income may be, the less effective freedom there is for increasing numbers of consumers. When a market system fails to produce even nearly enough of some recognized necessity at affordable prices, FMFs are disquieted to hear critics call it “market failure.” Yet we are all familiar with it, e.g., in “housing fit for human habitation.” (That phrase was used in a manifesto of demands by the Black Panther Party, decades ago.) And low-income housing is a failure of FMF all around the world (see the book Planet of Slums, by Mike Davis.)

There are experiences adult Americans have had that aren’t usually explicitly connected to Free Market Fundamentalism. But I think they are powerful belief-influencers anyway. They are consumer experiences of shopping in supermarkets, or “just looking” in department stores, big box stores, or “hanging out” at the mall. If we deconstruct these experiences, we will see a foundation for FMF beliefs. The facts that cast doubt on them are less evident. Shopping experiences, unlike those of the natural world, are ones of a large number of discrete objects, of many colors, with a lot of them having very similar colors, shapes, and textures. The experience is almost entirely visual and auditory, less so kinetic, tactile, and olfactory. It’s also an experience of numerous buyers and sellers unknown to us. The number of products and types of products, of buyers and sellers, can’t help but create an impression of wealth, a surplus of goods far beyond what current shoppers need. The casual dress and slow stroll of shoppers further suggests some less-than-immediate needs, or wealth or leisure on their part.

But markets are much more controlled than free in the sense that choice is limited to the existing product mix. Like the song line, “You can’t always get what you want.” The raw milk case is one of many that show this. Marijuana is another. It shows that markets do not exist in the abstract, apart from societies with laws that regulate them. Regulation is inevitable. Most Americans know the facts. Marijuana is a mild intoxicant. Some people maybe have addictive personalities or brains or are in painful living conditions and will go from many first drug to another. Yet American society undertakes enormous expense to suppress freedom of individuals to market it. This goes into 800,000 arrests each year, extra police time, courts, prosecutions, prisons, guard pay, parole officers, etc. Simultaneously, at least two drug companies, Abbott and Solvay, are licensed to perform all sorts of chemical alterations on and sell it to the healthcare industry (under the name “Marinol.”) Prohibitions and subsidies illustrate how mythical is the notion that prices are determined by supply and demand.

Tobacco is legal to market under hardly any limitations, even though it is implicated in over 400,000 premature deaths per year and all the costs they impose on nonsmokers as well as smokers.  But tobacco production is, off and on, subsidized by the federal government; in 2000, $345 million was allotted for this; a decade later, $194 million. Workers are not free to withhold taxes that go to pay for subsidies for crops. Such subsidies became the major solution, decades ago, to a chronic problem of capitalism: overproduction and under-consumption. The situation is fraught with paradox. Economics comes into existence to help solve a real problem of scarcity. Free market capitalism for personal wealth accumulation, in advanced countries, actually does solve it on the production end. But then overproduction becomes a kind of market failure that can’t really be solved, logically, within the private property, wealth accumulation operation.

American agriculture became over productive a long time ago, soon after the Civil War. And dealing with excess food has been a headache ever since. Consider corn. Its American production has been subsidized over the last 15 years to the tune of $2 billion to $10 billion per year. Shortly after NAFTA passed, a flood of U.S. subsidized corn into Mexico put 2 million Mexican small farmers out of work. Many of them had to emigrate to the U.S. Some, in desperation, turned to the drug trade.  Mexico, instead of flourishing as free traders predicted, collapsed and needed a $60 billion bailout by the U.S. Since then, Mexico has deteriorated, by impoverishment, into a near-terrorist Narco-state.

Subsidy has made a corn extract, high-fructose corn syrup, a cheap sweetener. Recently the entry of Goldman Sachs, and other speculating megabanks, into the food futures commodity market, has raised food prices in Middle Eastern countries to the extent of contributing heavily to the demonstrations, riots, and wars there. Far from it being an “Arab Spring” outburst of desire for freedom (although there may be a little of that too) it’s when people can’t put food on their tables that they go into the streets.

Marketers strive to sell as many products of as many brands as they can. This leads to supermarket shelves loaded with vast numbers of over-sweetened cereals and obesity. It causes a paradox of over-choice. A very large number of slightly different but almost all over-sweetened choices reduces my effective freedom to find and choose a sweetener-free one I can sweeten with what I choose and to my tastes. Food revolutionaries, humorously called “foodies,” tend to be young people who have become aware of constraints on the “free market” in food and are revolting against them. More power to them.  The more you know about commercially produced and packaged food, the more you become concerned that a consumer’s free choice in the market is heavily influenced in the direction of stuff that is actually harmful to your health. Additives beyond what one desires are my pet peeve.

Consider sugar. I took photos of one side of the cereal isle in my local big box store. There must be several score brands of cereal there. I have a fair amount of patience. But sometimes my patience runs out before I find the one or two types of “Original” cereals that I can buy so that I can put my own amounts of sugar substitute on them. At 71, I’m maybe 15 pounds overweight. And I see quite a number of people who are waddling around the store or wheeling around in electric motor shopping carts. I’m not fully effectively free to choose an unsweetened cereal, unless I go to another store. The Harvard Health Newsletter has a list of about 80 cereals with their sugar content. Maybe 15 to 20 have less that 20 percent sugar by weight. And almost all of them are actually produced by only five cereal makers. The health-wise irresponsible policies of only five producers contributes measurably to our obesity problem.

A last point about shopping in markets: subsidy alone makes clear that price is an illusory measure of value. It fails big time to take account of externalities. Externalities are costs that someone pays, but that are not in the sale price. Good examples are found in meat, particularly hamburger, and oil to gasoline. Conventional capitalistic accounting doesn’t even have a generally accepted way of accounting or estimating this. But individuals and groups use methods that may seem reasonable and try to do it. On this basis, Raj Patel, in his book, “The Value of Nothing,” quotes a study that estimates the real cost of a hamburger, covering all costs paid by everyone involved including taxpayers for subsidies, healthcare costs socialized, energy production costs, and degradation of land, water and CO2 produced, totals about $200. An example of this is the beef industry’s fattening cattle on subsidized corn. That subsidy saves the beef industry about $562 million per year.

Another example of this is the “social subsidy” we all pay in increased taxes because of the low wages employers pay to fast food workers, $15,000 average per year.  Poverty-level wages require supplement with food stamps (now SNAP) child-nutrition programs, Medicare, Medicaid, state healthcare, and welfare (now TANF.) The cost for Burger King employees alone, is about $273 million per year. And in energy costs, there are 15 to 20 forms of subsidies, direct payments and deductions from taxation for all sorts of “costs” of oil to gasoline production.

President Obama has recently made an issue of these. Lobbyists and their Republican rental Congressmen are furiously opposing lowering these subsidies. The lift cost of production of a barrel of oil (55 gallons) including exploration, is only between $5 to $15 per barrel. By the time all the monopolists extract excess money for their control of raw oil production itself, through transport, limited refinery capacity, and speculation in oil futures, the real cost of a gallon of gas may be $16 to $20. But because most of that cost is defrayed, the consumer watches like a hawk and complains when the gas cost rises a few pennies below $4.00. Such are the illusions of the free market.

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