Guest Opinion: Price controls don't work
The Great Depression was notorious for its ill-conceived government interventions to prop up prices and “create” jobs through unnecessary and unproductive make-work programs, which only served to prevent needed corrections in the economy and ended up prolonging the depression. Yet, many of these policies persist to this day. A Michigan cherry farmer recently illustrated the fallacy of one such example: agricultural “marketing orders.”
Under a marketing order, growers of certain agricultural commodities form what is, essentially, a cartel and turn over crop supply decisions to boards overseen by the U.S. Department of Agriculture (or a similar agency at the state level), which are empowered to try to “stabilize” markets. During bumper years, the government sets restrictive quotas to artificially suppress the supply of crops, thereby raising prices higher than the free-market rate.
Such arrangements were authorized by the Agricultural Marketing Act of 1937. Today there are marketing orders for roughly three dozen agricultural products, including milk, fruits, vegetables, nuts and specialty crops. One of those marketing orders, the Cherry Industry Administrative Board, covers tart cherries grown in seven states — Michigan, New York, Pennsylvania, Oregon, Utah, Washington and Wisconsin.
The CIAB recently directed farmers to prevent a portion of their crops from making it to the market in an attempt to bump up prices. For cherry farmer Marc Santucci, owner of Santucci Farm in Traverse City, Mich., this order, which came just four days before his harvest, meant that he had to dump 40,000 pounds of his tart cherries — 14 percent of his crop. The CIAB even sends people out to ensure that farmers have dumped their crops on the ground, where they are left to rot.
Santucci decided to protest the order in a very public way by posting a photo of the dumped cherries on Facebook. The image went viral, and has been shared nearly 67,000 times.
“I posted it because I want people to know that we sometimes do stupid things in this country in (an) attempt to do the right thing — we end up doing the wrong thing,” Santucci told UpNorthLive.com, the website of a local NBC affiliate in Traverse City.
The move is particularly foolish, Santucci said in a separate Facebook post last month, because of the global nature of agricultural markets. “(I)t is a shame that we had to drop 14 percent of our cherries while at the same time (the United States was) importing the equivalent of 200 million pounds of cherries, or 40 percent of U.S. consumption,” he asserted. “The only way we are going to stop the continued growth in imports is to compete head-to-head, not with one arm tied behind our back.”
Such food waste and artificially-high prices would not happen in a truly free market. Agricultural commodities should be subject to the same laws of supply and demand as other goods, which would provide consumers with more food at lower prices, allow for greater competition and encourage a more efficient allocation of farmland for growing various crops. It is the marketing orders themselves which should be allowed to wither and rot.