Republic, Lost_ How Money Corrupts Congress--And a Plan to Stop It - Lawrence Lessig [21]
Liberals are often untroubled by the idea of the government mucking about in the market. They like the idea of the government stepping in to help the weak. And certainly, as we non-farmers are likely to believe, farmers are among the poorest in our society. If a bit of milk regulation keeps a few cows on a dairy farm, latte-sipping Starbucks customers can afford it.
But these subsidies don’t help poor farmers. Nor are they produced because of a concern for the poor. The biggest beneficiaries are the world’s richest and most powerful corporate farmers.27 Ten percent of the recipients of farm subsidies collect 73 percent of the subsidies—between 2003 and 2005, $91,000 per farm. The average subsidy of the bottom 80 percent? Three thousand dollars per farm.28 And among those receiving large farm subsidies are Fortune 500 companies such as John Hancock Life Insurance ($2,849,799), International Paper ($1,183,893), and Chevron/Texaco ($446,914); many celebrities, such as David Rockefeller ($553,782), Ted Turner ($206,948), and Scottie Pippen ($210,520); and several prominent current and former members of Congress such as Chuck Grassley (R-Iowa; 1975–: $225,041), Gordon Smith (R-Ore.; 1997–2009: $45,400), and Ken Salazar (D-Colo.; 2005–2009: $161,084).29
The same story can be told about steel. If the United States wanted to help steel workers hurt because of shifts in the market for steel production, it could compensate them directly. But “instead of direct compensation to workers… [the] government imposed tariffs to protect fewer than nine thousand jobs in the steel industry”—which in turn was likely “to cost 74,000 jobs in steel-consuming industries.”30
The list of anti-free-market interventions by our government is endless. But the particular regulations I want to focus upon here tie to the cost of sugar and high-fructose corn syrup (HFC). For the interventions with this are quite extreme, and they produce quite obvious effects. HFC is cheap relative to sugar for two very anti-free-market reasons: the first is tariffs; the second, subsidies.
Tariffs: Sugar in the United States is two to three times as expensive as in other countries. That’s because the U.S. government protects the domestic sugar manufacturers with tariffs (there are all of forty sugar companies in the United States, just eight producing 75 percent of sugar, constituting 0.5 percent of farms in America, and employing a total of sixty-two thousand workers).31 That tariff gives those manufacturers about $1 billion in extra profits a year. It costs the overall economy (through increased prices and inefficiency) about $3 billion.32 Worst among those costs might well be the environmental damage to the Florida Everglades. For as we’ve pushed sugar production into Florida, it has poured millions of gallons of polluted water into the ecosystem.33
This protectionism hurts American business. (Every penny in increased sugar prices is estimated to cost at least $250 million in increased food costs.)34 It hurts American jobs. (The Commerce Department estimates more than ten thousand jobs between 1997 and 2002.)35 It hurts developing nations. (The State Department estimates that burden to be at least $800 million a year.)36 And it obviously hurts America’s selling of pro-free-trade ideology: our behavior makes a mockery of those important, wealth-producing ideals.37
This protectionism does, however, help at least one group beyond the sugar barons: corn producers. For the higher the cost of sugar, the safer the market for sugar substitutes such as HFC. Which explains why one of the biggest supporters of sugar tariffs is a company that doesn’t produce any natural sugar: ADM. Sugar tariffs produce a “price umbrella” for HFC, protecting that enormously profitable business from a more natural competition.38
Subsidies: The shift to HFC, however, is not explained simply by the high cost of sugar. It is also explained by the low cost of corn. Corn in the United States is cheap relative to other nations because we subsidize its production. In the fifteen years between 1995