President Donald Trump is boldly facing the problem of high meat prices but also dealing with the financial strains on farmers themselves. The issue is reconciling the two. Lower prices are great for consumers but also add to the financial problems of small farmers. Gradually, Trump has come to the conclusion that the real bottleneck is with the meatpackers themselves, which is one of the oldest corporate monopolies in U.S. history.
Immediately, however, friends of mine in the free-market movement cried foul. He is blaming private enterprise, whereas these corporations should be left alone by government to do whatever they want. They treated Trump’s call for intervention as some kind of imposition of government force on the freedom of commerce.
Who is correct here? Once you understand the history, which goes very deep, you can see that Trump has hit an important point. The meatpacking industry has been consolidating since the 1880s. This was codified with the Pure Food and Drug Act, signed into law by President Theodore Roosevelt in 1906, alongside the Meat Inspection Act.
It was the first federal law to regulate food and pharmaceutical products. It not only prohibited the manufacture, sale, or transportation of adulterated or misbranded food, drugs, medicines, and liquors, but it also forced inspection on all U.S. meat processing and laid the foundation for the modern Food and Drug Administration, or FDA. It thereby created or really codified the meat cartel in the United States, something that has vexed small meat producers ever since.
The problems began in the 1880s, when meatpackers sought to penetrate European markets. Imports were banned because the Europeans did not trust the quality. The industry then went to the government to certify the cleanliness and safety of their meat. The scheme worked and set forth a model for a different kind of competition. Industry would unite with government as a way of assuring consumers and also driving up the costs of entry into markets such that small processing operations could not afford them.
As Rothbard wrote:
“In February 1906, Upton Sinclair’s The Jungle was published and revealed many alleged horrors of the meat packing industry. Shortly thereafter, Roosevelt sent two Washington bureaucrats, Commissioner of Labor Charles P. Neill and civil service lawyer James B. Reynolds, to investigate the Chicago industry. The famous ‘Neill-Reynolds’ report that apparently confirmed Sinclair’s findings, in fact, only revealed the ignorance of the officials, as later congressional hearings indicated that they poorly understood how slaughterhouses worked and confused their inherently foul nature with unsanitary conditions.”
After “The Jungle” came out, J. Ogden Armour, owner of one of the biggest packing firms, defended government inspection of meat and said the large packers had always favored and pushed for inspection. Armour wrote:
“Attempt to evade [government inspection] would be, from the purely commercial viewpoint, suicidal. No packer can do an interstate or export business without Government inspection. Self-interest forces him to make use of it. Self-interest likewise demands that he shall not receive meats or by-products from any small packer, either for export or other use, unless that small packer’s plant is also ‘official’—that is, under United States Government inspection.”
There you have it. The big players in the industry actually favored government intervention.
Thomas E. Wilson, representing the large Chicago packers, said the following during the congressional debate: “We are now and have always been in favor of the extension of the inspection, also to the adoption of the sanitary regulations that will insure the very best possible conditions. ... We have always felt that Government inspection, under proper regulations, was an advantage to the live stock and agricultural interests and to the consumer.”
Imagine, that was 120 years ago, and we are still dealing with the same problem. No meat can be sold to the consumer without being processed by a plant certified by the U.S. Department of Agriculture (USDA). Even the quality of meats on the shelves is named according to official processing: USDA Prime, USDA Choice, and so on.
This has gradually put enormous pressure on small farmers who have to pay exorbitant prices for processing, when cheaper alternatives are readily available. Most small farmers would love to process their own meat onsite and sell it directly to the consumers. But federal law forbids them from doing so. This has been true since 1906 and remains true today. The devastating results are the crisis we see today.
What about the issue of safety? Federal regulation did nothing to improve it and much to degrade it. They used the “poke and sniff” method to investigate safety and did so for decades after, even though this method was known to spread pathogens from one carcass to another. It would have been much safer without federal intervention.
I’m thrilled and surprised that we are finally getting some discussion of this important topic today. The meat cartel certainly needs to be broken up. But the best method of doing so is simply to dismantle the regulatory impediments to competition. Farmers should be allowed to process and sell meat in any way that is advantageous to them. You would think that this would be an easy sell in Congress.
Part of the reason this topic is so triggering is that people do not understand the real history of the U.S. meat industry. If people did understand, it would become much clearer how it is that so many federal agencies are captured by industry interests. Indeed, capture might be the wrong word. They were set up to help big businesses in the first place. Helping small businesses instead requires the real restoration of a genuine free market.
