Equilibrium & Sustainability

Biden meatpacking reforms lack punch, say critics

AP-Andrew Harnik

Critics of the nation’s largest meatpacking companies say President Biden’s efforts to make the industry more competitive don’t go far enough and are urging him to take more meaningful steps to help smaller industries.

These advocates say that while Biden’s rhetoric and the administration’s plans to provide $1 billion to fund the creation of regional slaughterhouses is welcome, it stops short of the reforms that would make a difference in the lives of farmers — and lower prices for consumers.

The federal investment in new slaughterhouses is a “yes, yes, yes,” said Stacy Mitchell, co-director of the Institute for Local Self Reliance, because there’s “more demand for that from farmers and consumers than is being satisfied, because there’s not enough capital.” 

But the entire current structure of the American meat industry — and of economic life more generally — is tilted against the long-term success of the very small slaughterhouses the administration is subsidizing, Mitchell said.  

“Those smaller scale processing facilities won’t survive over the long term unless we break up concentrated power and deal with the big structural issues” in meatpacking, Mitchell said.

Others were blunter. “This is like dumping a billion dollars on Ask Jeeves and telling them ‘Good luck against Google,’” said Austin Frerick, deputy director of the Thurman Arnold project at Yale University, which focuses on competitive markets.

The administration is “dumping 1 billion in taxpayer money into an over-concentrated industry and counting on startups to fix it. And I’d call on them to name a time when that’s worked,” Frerick added.

Most of the meat industry is controlled by the so-called Big Four of Tyson’s, JBS, Cargill and National Beef.

“Capitalism without competition isn’t capitalism,” Biden, flanked by Agriculture Secretary Tom Vilsack and Attorney General Merrick Garland, said at Monday’s event announcing the new funding. “It’s exploitation.”

Meat industry trade groups like the North American Meat Institute (NAMI) — who were not invited to the Biden roundtable on Monday — blamed supply chain problems and labor shortages, not collusion, for the rise in meat prices criticized by Biden.

“Using taxpayer dollars to establish government-sponsored packing and processing plants will not do anything to address the lack of labor at meat and poultry plants and spiking inflation across the economy,” said CEO Julie Anna Potts of NAMI in a statement.

Mitchell said that after 40 years of federal, bipartisan support for the idea that “bigger companies and more consolidation is a good thing,” the shift from Biden is a welcome recognition that “over-concentration” in the industry is a systemic problem.

But the telltale problems with the initiative are its failure to take obvious steps that are within the federal government’s current purview, Frerick said. 

For example, Biden said the Packers and Stockyards Act, a set of anti-monopoly laws that held sway in the U.S. until their hollowing out in the 1990s, should be updated but did not provide specific new rules.

The administration also could have brought back “the cop on the beat:” GIPSA, the Department of Agriculture’s anti-monopoly regulator which former President Trump removed in 2017, Frerick said. 

“They’re saying ‘we’re working on it,’” Frerick said. “It’s a way to pretend you care when you don’t. And it’s a missed opportunity, given how bipartisan this issue has become. There’s a perfect coalition of ranchers and workers who want something done, and they’re just fumbling ball.”

He also noted that the problems in the industry are hardly novel.

In 1920, the Wilson administration pushed leading meatpackers to agree to the Packers and Stockyards Act (P&S), a “consent decree” to stay out of all other aspects of production, from animal raising to retail sales — preventing for a half-century the kind of hyper-consolidation that hit the meat industry in the 1990s.

The Trojan horse, Frerick argued, was chicken — which was left out of the P&S because Americans didn’t then eat it.

In conjunction with the Reagan administration’s deregulatory pushes in the 1980s, this laid the groundwork for a style of vertically-integrated companies to evolve in the South in the 1990s — a system in which companies like Tyson owned everything from the feed to the chickens to the slaughterhouses.

“You have this situation where chicken comes out of the south fully integrated in a way that looks like sharecropping,” Frerick said. “It’s getting all this market share because it’s super exploitative and vertically integrated – and instead of making chicken behave like other industries, [the government] made other proteins join it in a race to the bottom.”

White House economists charge that this concentration has allowed the Big Four “to increase prices and underpay farmers, while taking more and more for themselves,” allowing them to reap record profits during the pandemic while complaining of inflation. 

Companies like Smithfield and JBS paid more than $80 million — and Tyson paid $221 million — to settle government price-fixing charges, which they may have passed on to consumers, The Hill reported.

The concentration in meatpacking also serves as a deterrent to farmers who might want to sell to the new government funded startups — who know “they are unlikely to be welcomed back if the buyer fails,” said University of Wisconsin law professor and former Department of Justice antitrust attorney Peter Carstensen.

“Unless something more dramatic is done about industry structure, the changes in the markets are likely to be only marginal,” Carstensen said.

Tags Donald Trump Joe Biden Meatpacking Merrick Garland Tom Vilsack

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