Economic inequality is killing the food system.
By: Kendall Dix
Tags: Agriculture, Inequality, Fishing, Economics

In April, quarantined shoppers walked by empty meat counters in their local grocery stores while hungry people waited in line for hours at food banks.

The chairman of Tyson, the nation’s largest meat supplier, warned that farmers and ranchers would have to kill their animals unless the federal government forced sick, underpaid workers back to the slaughterhouses.

“The food supply chain is breaking,” he said.

This was not supposed to happen in a wealthy democracy like the United States of America. Food shortages are supposedly for developing nations that were too socialist or weren’t industrious enough to build a massive, centralized food system.

But it turned out that the empty meat counters were not caused by a shortage in production. There was plenty of meat being slaughtered that could have been used for domestic consumption, but the industry exported near-record amounts of meat in May, mostly to China.

Journalists, policy experts, and producers along every part of the food supply chain have spent decades diagnosing what’s wrong with how the U.S. feeds itself. But few have looked at the relationship of imports and exports and the connection to U.S. poverty. To put it bluntly, we export high quality domestic products to wealthier people overseas and import cheap, low quality food for poor people.

For farmers, fishermen, and chefs who have spent their lives producing and selling food, a question that comes up again and again is why can’t more Americans afford food that is produced ethically and sustainably?

Those who have studied the food system at length seem to agree that any fix to its well-documented labor and environmental problems will involve food getting more expensive. But decades of growing income inequality and poverty mean that raising food prices is impossible for the last crucial link in the supply chain: eaters.

The COVID-19 Stress Test

Seafood harvester Kevin Scribner has experience with almost every link in the seafood supply chain.

Kevin Scribner

Scribner started fishing as a summer job during college on the Washington coast in the late ’70s before moving to Alaska to catch sockeye in the salmon fishing mecca of Bristol Bay in the ’80s. Scribner noticed that there was an untapped domestic market for higher quality fish that had been carefully handled, so he became a seafood broker and helped establish Alaskan salmon as a premium ingredient worth a premium price.

“Bristol Bay was a gonzo fishery back then,” Scribner said. “We had to learn to pull away from treating salmon like a stick of wood.”

For a few years, Scriber worked with a high-end grocery chain that catered to more upwardly mobile customers, but he soon discovered they were selling cheap farmed salmon alongside the wild-caught salmon. The farmed salmon was so much cheaper that the grocery store could mark up the price, get a higher margin, and the salmon would still be less expensive than the wild salmon.

The experience left a bad taste in Scribner’s mouth, so he walked away and looked for new ways of helping small-boat fishermen get a fair price for their labor.

Before the virus hit, Scribner was working on scaling up models of cooperative ownership in seafood distribution. He re-shifted some of his energy to shortening the supply chain between eaters and harvesters to keep fishermen afloat while restaurants were closed.

“70 percent of pre-pandemic seafood went to restaurants,” he said. “That’s vanished. Just like 2008 was a stress test for the financial system, this pandemic is a stress test for our industry.”

You could go further: COVID-19 has become a stress test for the entire food system.

Fishermen like Scribner, small farmers, and independent restaurant owners have known for years that the supply chain has been breaking. The coronavirus is simply the big yank that finally pulled apart some of the most important links.

Trade deficits

In 1988, more than 273,000 people were commercial fishermen, but by 2000 that number had fallen to 53,000. Since the early 2000s, the industry has continued to shed jobs.

In 2018, Trump had just started the trade war in earnest. Some seafood harvesters were excited about the possibility of more tariffs targeting China’s food system. Shrimpers have long cited competition with cheap imports as the primary downward force on seafood prices, and this was the perfect opportunity to level the playing field with Chinese shrimp.

For Secretary of Commerce Wilbur Ross and others at the National Oceanic and Atmospheric Administration (NOAA) which oversees our nation’s fisheries, the seafood trade deficit represents a different opportunity to close the trade deficit.

NOAA often cites the statistic that the United States imports an eye-popping 90 percent of its seafood to help make the case that we need to ramp up seafood production to meet our insatiable demand.

The NOAA plan for increasing production is not to increase fish stocks by improving water quality and carefully managing what we catch. It’s to intensify aquaculture production, which means bringing factory farming to the ocean. On May 7, NOAA got its wish, and Trump issued an executive order that would expedite permitting of offshore aquaculture facilities.

The problem with the 90 percent import statistic used to justify the executive order is that it’s misleading. The United States is also a top-five exporter of seafood. So if the U.S. has such an insatiable demand for seafood, why aren’t we simply eating our own seafood instead of shipping it all over the world?

Scribner says the most likely explanation for the trade paradox is that we’re exporting relatively expensive wild seafood and importing relatively cheap aquacultured seafood. The United States has some of the best managed fisheries in the world, and our seafood commands a premium price. A similar trade dynamic exists within the meat industry in which we import the most beef of any country in the world but are also the fourth largest exporter. As with seafood, we export expensive meat and import cheap meat.

The USDA has reported that diet correlates with income. The rich can afford to eat a diverse diet full of local vegetables and quality protein while the poor eat more highly processed grains. Because the two-tiered food system still keeps people from starving, the U.S. avoids the full-tilt social unrest that accompanies hunger in other parts of the world. The availability of cheap food helps make extreme income and wealth inequality just barely palatable.

Problems on land

When the city of New Orleans issued its COVID-19 quarantine order on March 20 and shuttered local farmers markets, farmers and independent distributors scrambled to set up new distribution networks.

The city didn’t yet have a plan to keep its local supply chains viable, so farmer Marguerite Green did what she could to keep farmers in business and growing food. Green runs SPROUT NOLA, an organization that provides technical assistance to both new and seasoned farmers. SPROUT also runs a weekly market for BIPOC and women farmers in New Orleans’ Mid-City neighborhood.

Marguerite Green

Green reached out to a local food box delivery service to start an ad hoc CSA. It was so successful that the Crescent City Farmers Market adopted and expanded the system. She eventually kept the market going by coming up with a safety protocol that could keep farmers and shoppers safely distanced.

“In this moment of crisis, we need to build the food system we want to see,” Green said. “Supporting local food shouldn’t be something that people see as an act of charity.”

In some ways, the virus has provided new opportunities to bring local produce directly to people who might otherwise not be able to afford it. Sustaining this new system will require long term investment in farmers and distribution systems but also in consumers.

The median U.S. farmer nets a little more than $4,000 each year from producing food. That’s farm owner, not farmworker. If this sounds low, it is. At 2.5 percent, agriculture has some of the slimmest profit margins of any industry.

Low net agricultural income can also partially be explained by the significant expenses associated with farming and the tax advantages that come along with capital-intensive industries. Say you’re a corn farmer who had a bumper crop and the market was paying high prices that year. You might think it was a good time to buy a new $400,000 piece of machinery to offset your gross income and reduce your tax liability. Plenty of farmers take that deal.

The only problem is that they also rack up ballooning debt payments that will eventually come due. Farm bankruptcies spiked in the early 1990s after decades farms being pressured to borrow money to grow their operations through federal “get big or get out” agriculture policy. Bankruptcies had tapered off for much of the 2000s but are on the rise again and hit their highest levels since the Great Recession last year.

While high expenses are one factor in low farm incomes, it’s also true that farmers just don’t get high prices for what they produce. In 1995 — long after the Green Revolution had already industrialized much of the world’s food systems and sent food prices plummeting — food production and forestry still accounted for 7.5 percent of the world’s GDP. By 2017, that number had fallen to 3.4 percent globally.

In the United States, food production is even less of a factor in our overall economy. Farming, forestry, and fisheries accounted for just 0.9 percent of our country’s economic output in 2017, one of the lowest rates in the world. Our low food-to-GDP ratio can at least be partially explained by how little we spend as a country on eating. Per capita, the U.S. spends the lowest percentage of its income on food anywhere in the world.

David Conner, a professor of economics and development at the University of Vermont, says there are two major market failures within the food system that make it financially unsustainable: (1) Food is too cheap because it doesn’t reflect the true environmental and labor costs of its production, and (2) A few companies have so much power that certain sectors of the food and ag economy are no longer competitive.

Food prices are kept artificially low by a food system built on underpaid labor and inexpensive commodity grains reliant on fossil fuels for powering farm equipment, manufacturing fertilizers and pesticides, and transporting food through a globalized distribution network. Some of that grain is fed back to us in the form of ultra-processed food, but a significant percentage is fed to animals. This is likely why the United States has cheap meat prices compared with the rest of the world. It’s also why the U.S. also leads the world in diabetes prevalence in so-called developed nations.

There is evidence that Americans would like to spend more money on healthy food. Almost 80 percent of hungry people report that they buy less healthy food to save money for other expenses.

Since 1993, the United States Department of Agriculture has been documenting what percentage of money spent on food actually goes to farmers versus food marketers or food processors. Adjusted for inflation, farmers captured just 14.2 percent of all food expenditures in 2018.

More than 85 percent of food dollars go to what the USDA calls “marketing,” which is everything that adds value to the food from transportation to processing to packaging. For processed foods, money also goes to factory owners and the people who are paid to tweet like a frozen steak sandwich. Because whole foods like raw vegetables require far less processing and packaging, more of those dollars can go to farmers.

Value added?

The largest piece of the marketing pie (37.4 percent) goes to restaurants and other food service establishments, but very little of that finds its way to food service workers.

Farmworkers are notoriously low paid and exploited, and wage statistics are unreliable because a reported 70 percent of farmworkers are undocumented. But based on official labor statistics, food service workers are paid even more poorly than farmworkers. Eight out of the top 10 lowest paid jobs are in the food service sector.

It’s not just the laborers who are suffering. Restaurants as a whole are in big trouble.

Brett Jones worked just about every job in the restaurant industry from cook to server to manager. In 2019, Jones opened Barracuda, a counter-service taco shop in uptown New Orleans.

A first-time restaurant owner, Jones had been open for less than a year when the Governor issued a statewide order to close all restaurants due to COVID-19. Barracuda stayed closed for a month and half, and Jones got to spend some precious time with his newborn baby and young daughter and wife. Prior to the lockdown, Jones had spent most of his waking hours getting the new restaurant off the ground.

When Louisiana lifted some of the lockdown restrictions, Jones converted Barracuda to a make-shift market offering takeout only. Jones feared that staying closed any longer would probably have shuttered the restaurant for good.

“On a personal level, I’d rather be closed,” Jones said. “But when the gods of capital say you gotta open, you gotta open.”

Brett Jones

Jones is making decent money because he’s running with a lean staff and working six 16-hour days every week. He had to lay off most of his staff but said that meant they were making more on unemployment, which Jones said was what he wished he could afford to pay them all the time if it didn’t mean raising prices he already felt were high. The biggest challenge when Barracuda finally reopens at full capacity will be restaffing the restaurant, but other restaurants will likely remain closed for good.

Industry insiders have been worried for years that the restaurant bubble would finally burst. Before the virus hit, restaurants in New Orleans had trouble finding staff even though the city’s unemployment numbers outpaced national averages. Online classifieds couldn’t fill the void, so a local knife shop frequented by cooks and chefs took to posting restaurant job openings on social media.

Now the bubble may have finally burst for good. Celebrity chefs are wondering aloud in The New York Times whether the thin margins and long hours are worth it anymore. By some estimates, up to 30 percent of restaurants won’t survive the coronavirus and will shutter permanently. James Beard winner Andy Ricker recently announced that he’s closing all but one of the restaurants in his mini empire.

At its simplest, profit is a two-variable math equation: revenue minus expenses. To increase profit, businesses can try to reduce their expenses by, for example, cutting labor costs or using cheaper supplies. They can also try to increase revenue by selling more stuff or by raising prices.

Jones thinks most restaurant owners avoid raising costs because they remember what it was like to work low-wage jobs and want their food to be as accessible to as many people as possible. But Jones acknowledged that an industry can only focus on lower costs and higher volume for so long.

“There’s so many layers of fear when it comes to raising prices,” Jones said. “There tends to be a mentality in the industry that we’ve always done it a certain way, and we don’t know how to do it any other way.”

Jones said he was seeing more creativity in terms of business models in response to the coronavirus but sit-down restaurants that rely on lots of labor and alcohol sales would be hit the hardest. When restaurants are feeling the squeeze, their commitment to buying more expensive local produce is often one of the first casualties, which in turn harms local farmers who rely on high-end restaurants that can charge more.

While those who do want to save the industry bemoan that customers are not willing to pay more for food, few consider that the customers may simply not have the money. Real wages haven’t risen in 40 years. Meanwhile, the bottom half of the country has lost almost a trillion dollars of wealth over the past 30 years.

Artist-activist-chef Tunde Wey wonders whether the whole industry should be allowed to die. If restaurants fail, small boat fishermen and diversified farms could die right along with it.

Socialized food

Restaurant workers shouldn’t be pitted against farmworkers as they fight over every last cent of the ever-shrinking food dollar. The United States is still one of the richest countries in the world, with the second most financial assets per capita. Studies have shown that seafood consumption rises with income, so increasing wages could increase food spending across the board.

Food economist David Conner says that while it is possible to correct the market failures within the food system, it would mean that food will become more expensive. Even before the pandemic hit, about 40 million Americans relied on the Supplemental Nutrition Assistance Program (commonly referred to as food stamps) to be able to afford food. Conner says that if food prices rise, we will have to increase wages, increase government spending on food stamps, or both.

“If we fix the food system, prices will increase,” Conner said. “But we can do it if we pay a fair wage to everybody.”

By redistributing income and wealth and expanding the welfare state, we can support a stronger and healthier food system with an increased portion of our food dollars going to farmers, ranchers, and fishermen.

Both Conner and Marguerite Green agreed that at the bare minimum, we should raise the minimum wage and give farmworkers and restaurant workers the most basic of labor protections they are currently excluded from. To claw back our wages that have evaporated into the ether of the top tax bracket, we could raise taxes on the rich and corporations.

We can save money on healthcare expenditures by implementing a national insurance program like Medicare for All that will meet the needs of restaurant workers, farmers and fishermen, who have uninsurance rates four to five times the national average. Universal healthcare will also free up all eaters to spend more of their disposable income on supporting food producers.

Green is working within the market system for now but believes the whole system should be changed.

“The way food is priced now shows that we don’t value it,” she said. “We’re always going to come up short if farmers are working 100 hours to grow food, but some people get to pay 10 hours worth of labor to pay for it.”

Green is a member of Democratic Socialists of America and ran for Louisiana State Commissioner of Agriculture and Forestry. An open socialist in a state where Republicans are a near-super majority on the verge of writing a new constitution, Green won more than 250,000 votes, or more than twice as many as her more established Democratic opponent.

So far, neither presidential candidate has put forth a plan for radical change. So instead of focusing on national electoral politics, Green is devoting her few available hours outside of work to supporting the movement for black lives’ uprising against police violence.

The ground feels more fertile for big changes to the food system now than ever, but the working poor continue to grow in numbers. The COVID-19 economic shock is going to add more people to the rolls of Americans who can’t afford to buy domestic food. So if we’re serious about saving farms, fishing vessels, and restaurants after the coronavirus has subsided, we will have to make sure that the poorest eaters come first.