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Deregulation, Market Concentration at the Root of Egg Recall

(photo: Zyada on Flickr)

Jon Cohn explores the egg recall in greater detail, and comes to a similar conclusion as I did: that it just shows a continuation of E. coli conservatism, particularly the fervor for deregulation that goes back 30 years:

This is not a story that begins with the administration of George W. Bush. It begins, instead, with the administration of Ronald Reagan. Convinced that excessive regulation was stifling American innovation and imposing unnecessary costs on the public, Reagan’s team changed the way government makes rules.

Prior to the 1980s, agencies like the FDA had authority to finalize regulations on their own. Reagan changed that, forcing agencies to submit all regulations to the Office of Management and Budget, which cast a more skeptical eye on anything that would require the government or business to spend more money. The regulatory process slowed down and, in many cases, the people in charge of it became more skittish.

And this is how we get the circumstance that the FDA cannot even recall foods, and has to hope that corporations do it on a voluntary basis. There are new egg regulations in place now, implemented this year, but the food safety bill, which would give the FDA authority over recalls, has languished. So has proper levels of funding for the agency.

Basically, this has been the result of an attitudinal shift in Washington, that devalues regulation and safety and trusts elites and corporate interests. But it’s about more than just an aversion to regulation: it’s about a highly concentrated industry, and how that can lead to the metastasizing of problems when they crop up:

By this logic, there’s much to love about the U.S. egg industry. According to Food & Water Watch, half of U.S. egg production is concentrated in just five states: Iowa, Ohio, Indiana, Pennsylvania, and California. And for decades, egg producers have been scaling up and implementing “the most efficient technologies” — forgoing the farmyard chicken run and moving their hens into massive, streamlined, highly mechanized factories […]

No one can say these mega-producers aren’t adept at keeping prices rock bottom. According to its Investor Report, Cal-Maine sells fully a third of its eggs to Walmart. I just got off the phone with the Walmart in Boone, N.C., near where I live. A carton of 18 eggs sells for $1.86 there — about a dime an egg. Walmart, with its vast fleet of trucks, highly rationalized inventory/storage system, and nationwide web of stores, is surely a highly efficient conduit for getting eggs from gigantic facilities to consumers.

But the egg recall is now exposing, yet again, the underside of maximum efficiency and regional concentration of the food system. Those fleets of trucks don’t just move millions of eggs from a handful of companies to hundreds of millions of consumers; they also, with stunning efficiency and breadth, move pathogens hatched in those very factory-scale facilities along with eggs.

It’s worth noting that the two firms embroiled in the recall, DeCoster and Hillandale, have more in common than the Iowa locations of their salmonella-tainted operations. “Hillandale Farms of Iowa and [Decoster-owned’] Wright County Egg Farm share a number of common suppliers because they are in the same industry in the same state,” Hillandale recently declared in a statement quoted by the New York Times. Indeed, “the company said that it bought young birds, called pullets, and feed from a company run by the DeCosters,” the Times reports.

This is what people mean by “the high costs of low prices.” But these externalities aren’t borne by the egg producers; they’re borne by the public, in the form of health care costs and productivity loss from sickness. It’s not worth saving a dime on eggs at the margin when they have the potential to sicken you.

There are a number of ways to contain this problem but they all involve government actually fulfilling its role of promoting the general welfare.

CommunityThe Bullpen

Deregulation, Market Concentration at the Root of Egg Recall

Jon Cohn explores the egg recall in greater detail, and comes to a similar conclusion as I did: that it just shows a continuation of e.coli conservatism, particularly the fervor for deregulation that goes back 30 years:

This is not a story that begins with the administration of George W. Bush. It begins, instead, with the administration of Ronald Reagan. Convinced that excessive regulation was stifling American innovation and imposing unnecessary costs on the public, Reagan’s team changed the way government makes rules.

Prior to the 1980s, agencies like the FDA had authority to finalize regulations on their own. Reagan changed that, forcing agencies to submit all regulations to the Office of Management and Budget, which cast a more skeptical eye on anything that would require the government or business to spend more money. The regulatory process slowed down and, in many cases, the people in charge of it became more skittish.

And this is how we get the circumstance that the FDA cannot even recall foods, and has to hope that corporations do it on a voluntary basis. There are new egg regulations in place now, implemented this year, but the food safety bill, which would give the FDA authority over recalls, has languished. So has proper levels of funding for the agency.

Basically, this has been the result of an attitudinal shift in Washington, that devalues regulation and safety and trusts elites and corporate interests. But it’s about more than just an aversion to regulation: it’s about a highly concentrated industry, and how that can lead to the metastasizing of problems when they crop up:

By this logic, there’s much to love about the U.S. egg industry. According to Food & Water Watch, half of U.S. egg production is concentrated in just five states: Iowa, Ohio, Indiana, Pennsylvania, and California. And for decades, egg producers have been scaling up and implementing “the most efficient technologies” — forgoing the farmyard chicken run and moving their hens into massive, streamlined, highly mechanized factories […]

No one can say these mega-producers aren’t adept at keeping prices rock bottom. According to its Investor Report, Cal-Maine sells fully a third of its eggs to Walmart. I just got off the phone with the Walmart in Boone, N.C., near where I live. A carton of 18 eggs sells for $1.86 there — about a dime an egg. Walmart, with its vast fleet of trucks, highly rationalized inventory/storage system, and nationwide web of stores, is surely a highly efficient conduit for getting eggs from gigantic facilities to consumers.

But the egg recall is now exposing, yet again, the underside of maximum efficiency and regional concentration of the food system. Those fleets of trucks don’t just move millions of eggs from a handful of companies to hundreds of millions of consumers; they also, with stunning efficiency and breadth, move pathogens hatched in those very factory-scale facilities along with eggs.

It’s worth noting that the two firms embroiled in the recall, DeCoster and Hillandale, have more in common than the Iowa locations of their salmonella-tainted operations. “Hillandale Farms of Iowa and [Decoster-owned’] Wright County Egg Farm share a number of common suppliers because they are in the same industry in the same state,” Hillandale recently declared in a statement quoted by the New York Times. Indeed, “the company said that it bought young birds, called pullets, and feed from a company run by the DeCosters,” the Times reports.

This is what people mean by “the high costs of low prices.” But these externalities aren’t borne by the egg producers; they’re borne by the public, in the form of health care costs and productivity loss from sickness. It’s not worth saving a dime on eggs at the margin when they have the potential to sicken you.

There are a number of ways to contain this problem but they all involve government actually fulfilling its role of promoting the general welfare.

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David Dayen

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