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Advancing Austrian Economics, Liberty, and Peace

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Making Economic Sense
by Murray Rothbard
(Contents by Publication Date)

Chapter 22
By Their Fruits . . .

One of the most horrifying features of the New Deal was its agricultural policy: in the name of "curing the depression," the federal government organized a giant cartel of America's farmers. In the middle of the worst depression in American history, the federal government forced farmers to plow under every third acre of wheat and to kill one-third of their little pigs, all to drive up food prices by forcing the supply of each product downward. Leftists blamed "American capitalism" for the government's forcing deep cuts in farm supply while urban Americans were starving; but the problem was not "capitalism," it was organized pressure groups--in this case agribusiness--using the federal government as the organizer and mighty enforcer of farm cartel policy. And all this in the name of helping the "one-third of a nation" that Franklin D. Roosevelt saw "ill-nourished" as well as "ill-clad" and "ill-housed."

Since 1933, New Deal farm policy has continued and expanded, pursuing its grisly logic at the expense of the nation's consumers, year in and year out, in Democrat or Republican regimes, in good times and in bad. But there is something about government brutally destroying food during recessions that rightfully raises one's hackles--if the media bother to deal with it at all. The latest outrage is now occurring in the central valleys of California, a state in deep recession.

The particular problem is fruit, slightly "undersized" peaches and nectarines grown in California. Since the 1930s, the Secretary of Agriculture has been setting minimum size standards for peaches and nectarines. Any fruit even microscopically below the minimum size and weight set by the government is illegal and must be destroyed by the farmer, under pain of severe penalties.

It's not that these slightly smaller peaches and nectarines are unsalable to the consumer. On the contrary: most people, including trained fruit pickers, can't tell the difference visually, so they are forced to use expensive weighing and sorting machines. It is estimated that, during the 1992 growing season in California, fruit growers will be forced to destroy no less than 500 million pounds of this undersized fruit.

Thus, Gerawan Farming, the largest peach, nectarine, and plum grower in the world, has been accused of violating federal law because, instead of destroying all of its small fruit, it dared to sell some to a wholesaler in Los Angeles, who in turn resold it to morn-and-pop grocery stores who catered to poorer consumers eager to buy the cheaper, if smaller fruit.

The cheapness, of course, is the key. The Secretary of Agriculture does not dream up these vicious regulations out of his own noodle. By law, these minimum sizes are determined by farmers' committees growing the particular product. The farmers are permitted to use the government to enforce cartels, in which larger and more expensive fruit is protected from smaller and cheaper competition. It's as if Cadillacs and Lincoln Town Cars were able to enforce minimum size car standards that would outlaw every smaller-size car on the market.

Perhaps the most repellent aspect of this system is the rationale by the farm committee leaders that they are doing all of this in pursuit of the welfare of consumers. Thus, Tad Kozuki, member of the eight-man Nectarines Administrative Committee, opines that "smaller fruit isn't as appealing to the eye, so the committees tried to please the consumer, thinking the demand for our fruit would rise."

To top this whopper about "pleasing the consumer," John Tos, chairman of the ten-man Peach Commodity Committee, solemnly states that "we eliminate those small sizes because of what the focus groups tell us," adding that these two committees are now spending $50,000 on a more detailed study into consumer fruit preferences.

Save your money, fellas. I can predict the result every time: consumers will always prefer larger peaches to smaller ones, just as given the choice, they would prefer a Cadillac to a Geo. Given the choice of receiving a gift, that is, without having to pay for the difference. And price, of course, is the point of the whole deal. Smaller peaches will be cheaper, just as Geos will be cheaper, and consumers should be able to choose among these various grades, sizes, and prices. 

Eric Forman, deputy director of the Fruit and Vegetable Division of the Agricultural Marketing Service of the U.S. Department of Agriculture, was a little more candid than the cartelist farmers. "Consumers are prepared to spend more money for larger fruit than smaller fruit," said Forman, "so why undermine the higher-profit item for the grower?" That is, why allow growers to "undermine" the high profit items by what is also called "competition," apparently a Concept that Dare Not Speak Its Name in agricultural circles.

Sound on the fruit question are consumer groups and the beleaguered Gerawan Farming. Scott Pattison, executive director of Consumer Alert, correctly declared that the whole policy is "outrageous." "Why are bureaucrats and growers telling us there's no market?" asked Pattison. "If consumers really won't buy the small fruit, then the growers will give up trying to ship them. But I think low-income mothers would welcome a smaller fruit that they could afford to buy and put in their kids' lunches." And Dan Gerawan, head of Gerawan Farming, held up a nectarine, and declared sardonically: "This is evil, illegal fruit." Gerawan added that the government "is sanctioning the destruction of fruit meant for the poor."

Here is the essence of the "welfare state" in action: The government cartelizing and restricting competition, cutting production, raising prices, and particularly injuring low-income consumers, all with the aid of mendacious disinformation provided by technocrats hired by the government to administer the welfare state, all meanwhile bleating hypocritically about how the policy is all done for the sake of the consumers.

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