To revive rural Iowa, we must fix our broken food system

A  senior official at the Farm Bureau, the nation's largest agricultural organization, recently told me that most rural communities will soon disappear. Even though the organization's nominal mission is to help 'farm families prosper and improve their quality of life,” the official seemed accepting of this fate, even a bit happy about it. Either way, he told me that nothing could be done.

The thing is, the senior official isn't wrong - the outlook for rural communities is grim. There are fewer jobs than there were a generation ago, and the ones that remain pay lower and lower wages. Iowa's agricultural system is predicated on an extractive model, where more and more of the profits flow to a few. If current trends continue, rural Iowa soon will be owned by a handful of families and corporations who will run their empires remotely with driverless tractors and poorly paid staff.

This decline occurred as a result of deliberate policy decisions made by politicians from both parties who favor multinational corporations at the expense of rural communities. Contrary to what the senior official at the Iowa Farm Bureau said, rural Iowa can be revived, but only if we challenge who holds power in the current system and create an agricultural system that rewards meaningful work.

Economic power is more concentrated today than at any other point in American history, and nowhere is this power more apparent than in agriculture. The American food supply chain - from the seeds we plant to the peanut butter in our neighborhood grocery stores - is concentrated in the hands of a few multinational corporations.

This concentrated power comes at the expense of farmers and workers. Because the supply, processing, distribution and retail networks are controlled by only a handful of firms, farmers face higher costs for their inputs and lower prices for their goods. In the 1980s, 37 cents out of every dollar went back to the farmer. Today, farmers take home less than 15 cents on every dollar. This new economic reality forces farmers to survive on volume, creating a system where only the largest farms can make a living.

Meanwhile, the nation's meatpacking industry now is more concentrated than when Upton Sinclair wrote 'The Jungle” more than a century ago. Four companies, two of which are foreign-owned, now slaughter 52 percent of all meat consumed in the United States, more than twice the market share that the four largest companies held in 2002.

As journalist Christopher Leonard documents in 'The Meat Racket: The Secret Takeover of America's Food Business,” the current system closely resembles sharecropping.

Large corporations such as Tyson Foods will slaughter a farmer's chickens only if he has an exclusive contract with the company. In many rural communities, a farmer raising animals for slaughter has the 'choice” of selling to only one slaughterhouse. And because Tyson often is the only buyer in town, it calls the shots, dictating everything from the facilities a farmer builds on her farm, to the feed she uses, to the price the farmer receives for full-grown chickens. The farmer has little power in this transaction, and this asymmetry is a key factor in why 71 percent of American chicken farmers live below the poverty line.

For slaughterhouse workers, industry concentration has contributed to wage stagnation over the course of the past few decades. Workers at a Hormel slaughterhouse in Austin, Minn., made $10.69 per hour in 1985, equal to $25.04 in 2018 when adjusted for inflation. But 33 years later, the average slaughterhouse worker makes less than $3 more. Meanwhile, Wan Long, the chairman and CEO of WH Group - the holding company of Smithfield Foods - made $291 million in 2017, the equivalent annual wages of 10,457 slaughterhouse workers.

Because farmers and other rural workers make less money, they also spend less money within their communities, creating a ripple effect that negatively impacts other local businesses. As a result, rural communities are hollowing out. Young people are leaving rural communities in droves, and the folks left behind are struggling to make ends meet.

Indeed, the recovery from the Great Recession was an urban phenomenon. If rural communities had matched urban employment growth trends, they would have added more than 850,000 new jobs. But according to the U.S. Department of Agriculture, rural areas still have not even recovered the jobs they lost in the recession.

A handful of trends reflect this loss of opportunity and the decline in living conditions. Medicaid now pays for more than half of the births at rural hospitals. Suicide rates are higher in rural America than in urban America - and the gap is growing.

The overall violent crime rate in Iowa rose by only 3 percent from 2006 to 2016, but grew by 50 percent in communities with fewer than 10,000 residents. The opioid epidemic thrives from the desperation created by these economic circumstances.

The current Democratic Party platform mentions 'agriculture” and 'food” six times each; the Republican Party mentions them only a few times more. But neither party recommends substantive changes to the current system. The recently passed farm bill, which received significant support from both parties in December, largely maintains the status quo. The crop subsidy program, for example, will continue to give 80 percent of all farm subsidies to the top 20 percent of American farmers. It is little wonder why monopolies and corporate farms have grown more powerful at the expense of workers and family farmers.

Beyond the farm bill, the inability of either party to challenge concentrated power in the American food system is best illustrated with the meat monopolies. The Obama administration tried to stand up to chicken monopolies by proposing new regulations to prevent abusive behavior but cowered when the industry pushed back.

And if the Democratic Party ignored the concentration of power of the meat monopolies, the Republican Party, particularly under Trump, has exploited and entrenched it. The Trump administration recently increased the speed caps for killing lines in slaughterhouses and is considering removing them for hogs, making dangerous work even more dangerous. In November, the administration eliminated the Grain Inspection, Packers, and Stockyards Administration, an agency under the U.S. Department of Agriculture that oversaw enforcement of antitrust law in the meatpacking business. In doing so, it removed one of the few safeguards for workers and small businesses in an already unbalanced marketplace.

America's agricultural system should allow regular folks to make a decent living producing food. Deliberate policy decisions caused the decline in farmers' share of the food dollar, and many of the same policy decisions explain why wages for slaughterhouse workers have stagnated during the past three decades. Reversing these decisions can help farmers, slaughterhouse workers and other working families within the food industry, and would help revive rural communities.

There are a number of simple actions that can help reverse the downward trajectory. For example, a ban on contract farming and tournament-style pricing would help realign the power dynamics between chicken farmers and the large corporations that exploit them. For workers, capping the killing line speeds at slaughterhouses and requiring meat inspectors to be public employees would similarly realign these dynamics. These actions would level the playing field for farmers, workers and small businesses, and restore dignity and respect to workers at all levels of the American food system.

But the best way to reshape America's food system to benefit rural communities is to restore competition by replacing the current pro-monopoly antitrust regime. In 'The Curse of Bigness: Antitrust in the New Gilded Age,” Columbia Law School professor Tim Wu records the enforcement history of antimonopoly laws in the United States. For much of the 20th century, the federal government administered an antitrust framework that sought to avoid concentrated economic power. This framework helped ensure competitive balance, and sparked broad economic growth that benefited workers across the economic spectrum.

But in the early 1980s, the Federal Trade Commission and the Department of Justice - influenced by the work of Robert Bork - pared back antitrust enforcement. Bork argued that the government must focus only on the effect of consumer prices when assessing anti-competitive harm. This approach, known as the 'consumer welfare standard,” has resulted in less antitrust enforcement. And with the assumption that larger firms can create efficiencies that lead to lower prices for consumers, firms have gotten bigger and industries have become more consolidated.

The problem with the consumer welfare standard is that its basic premise has been disproved. In 'Mergers, Merger Control, and Remedies: A Retrospective Analysis of U.S. Policy,” economist John Kwoka analyzed the effects to prices after mergers. After reviewing almost 200 recent mergers, he found that post-merger prices increased by an average of 4.3 percent. Thus, the consumer welfare standard fails to meet its own modest goal of reducing consumer prices.

Perhaps most importantly, the consumer welfare standard is a misguided enforcement strategy because it does not account for the chicken farmers who are squeezed by Tyson, or the slaughterhouse workers whose wages have stagnated even as profits within their industry have soared. It does not consider the ripple effects that harm small businesses or the communities that have been hollowed out as the industries that support them wither away.

It is time to turn the page on this failed theory and put the 'anti” back into antitrust. The decline of rural communities and the consolidation of the American food system was the result of deliberate policy choices.

If we acknowledge the consequences of these choices, we can understand why the grim future projected by the official at the Iowa Farm Bureau is possible, but that our fate is not yet sealed. Rural Iowa can thrive once again, but only if we're willing to challenge who holds power in the current system.

' Austin Frerick of Cedar Rapids plans to expand this article into a book. He has published research in the National Tax Journal, Tax Notes, and at the U.S. Department of Treasury, and his research has been cited in The Washington Post and The New York Times. A version of this article originally appeared in The American Conservative.