The Federal Government’s sugar price supports are crony capitalism at its worst. It’s enabled sugar producers to enjoy government largesse at the expense of the public. It’s an industry enjoying an easy life with politicians in its pocket. It’s driven candy manufacturers to move their factories out of Chicago and to relocate in Canada where free market prices for sugar prevail. It’s been the catalyst for the creation of a nasty substance called high fructose corn syrup which has been linked to insulin resistance in rats and may be partly responsible for the epidemic of type 2 diabetes in the United States.
Adam Smith warned in his seminal work, An Inquiry Into the Causes and Nature of the Wealth of Nations (1776) that, while capitalism is the engine of wealth creation for the most people in any society, constant vigilance is required to prevent rent-seeking merchants and manufacturers from forming alliances with government wherein they trade political support and even financial gain* to politicians in exchange for special favors:
The interest of the dealers . . . in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens.
When the government enables an industry to limit its competition a free market no longer exists. Without a free market the fruits of capitalism are reserved for the few against the many.
Economist Mike Munger comments on recent events in the dishonorable policies of the Federal Government’s sugar price supports:
The US government is a welfare agency for farmers with an army! Take the case of sugar (please). This year, the government spent over $100 million buying up sugar to “support” its price. However, producers made so much that the price was somehow not high enough to repay the annual loans they get from the USDA. So the growers just default, to the tune of $171 million!
And and and and and and…. they get to BORROW AGAIN from the same program for next year, como si nada! [“as if nothing happened”] So far the USDA has issued another $86 million in loans, sometimes to companies that had just defaulted.
Like Amalgamated Sugar. Defaulted on $17 million this year, borrows $18.8 million for next year. This isn’t like the World Bank giving new loans to countries so they can pay off their old loans. That’s fresh cash with no strings.
And and and and and and… experts expect the producers WILL DEFAULT AGAIN NEXT YEAR!
It’s not a bug, it’s actually a feature of our insane farm policies.
This is not merely crony capitalism. It’s theft from the treasury.
*Nothing else explains Bill and Hillary Clinton now being worth hundreds of millions of dollars, unless you think they earned it legitimately. If so, how? Cattle futures? Same can be said for Harry Reid, whose annual salary of $174,000 has somehow enabled him to accumulate millions.