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Bureaucrats vs. babies: how government caused the baby formula shortage

Chinese Baby Formula
Baby formula in a store in China. |

Jesus singled out children as subjects of special care and protection. He rebuked His disciples for not letting children come to Him and threatened millstones to those who cause littles ones to stumble. And of course He said “And whosoever shall give to drink unto one of these little ones a cup of cold water only in the name of a disciple, verily I say unto you, he shall in no wise lose his reward.”

If giving water to a little one carried a special reward, what judgment lies in store for those who prevent others from giving bottles to thirsty babies? Given the tragic, unjust and unnecessary government edicts which have led to the recent shortage in baby formula, that’s a question our government should be asking itself.

The shortage of baby formula first appeared last fall and was due to supply chain bottlenecks resulting from the pandemic. Then in February, the Food and Drug Administration (FDA) shut down the Abbott Labs plant that produces around 23% of all formula in the country. U.S. manufacturers produce 98% of all formula sold here. Just four companies produce 90%. This raises a lot of questions.

When FDA bureaucrats shut down a plant that makes a quarter of the formula for babies, why didn't anyone consider that this may cause a critical shortage? The supply before the shutdown was already short about 20% and parents were screaming for relief. Is no one at the FDA smart enough to see that shutting down the Abbott plant would severely worsen the shortage, and so plan to alleviate it? Or were they too busy with LBGQT+ training to bother?

A full four months later, the federal government grudgingly decided to allow imports from Europe. That, along with re-opening the Abbott plant, should begin to help. But why did it take four months? And why haven’t we been importing European baby formula before this? After all, their standards are higher than those of the U.S. in some cases, and basic economics informs us that competition reduces prices while boosting quality. 

The American Institute for Economic Research reported, “U.S. Customs recently seized nearly 600 cases of formula from Germany and the Netherlands over labeling requirements. The agency’s self-congratulatory press release reads as though it had made a major drug bust, lauding its and the FDA’s ‘collective efforts to help keep our citizens safe.’”

And the Wall Street Journal wrote, “Parents who tried to purchase directly from Europe had hundreds of dollars of formula seized by U.S. customs agents. One parent reported that she had nearly $700 of formula destroyed at the border—in the middle of a national formula shortage.”

Why do only four companies control 90% of the supply? The answer lies in the desire of the majority of voters to have the federal government regulate industry. Americans believe in a fictional entity that is omnipotent, omniscient, omnipresent, always good, and watching over their welfare night and day. They call it Government. This fictional entity battles like a valiant knight against an evil, corporate dragon that would burn down every city and devour the helpless inhabitants if the Government knight didn’t defend them.

Mental magic keeps people from seeing that the Government they idolize is not what they imagine but is made up of nothing more than humans like them: politicians and bureaucrats have a strong tendency to selfishness, greed, envy, and all the other evils individuals are subject to. Or they imagine magic happens to the humans who become bureaucrats and politicians which transforms them into angels.

Mainstream economists have perpetuated this fairy tale for a century: they see market “failure” everywhere, so much failure that it’s a wonder the market works at all! Then they proclaim that the fictional character known as Government can fix these failures. But their definition of market failure comes from another fairy tale they authored, that of “perfect competition,” taught in every intro to econ text. The real world doesn’t and can’t match their fairy tale, but instead of admitting they are devoted to a fairy tale, they declare the real world market has failed.

The economist James Buchanan won a Nobel Prize for telling people that politicians and bureaucrats aren’t angels. He informed us that those politicians and bureaucrats are real flesh and blood humans. They go into government work for selfish reasons, not to magnanimously shepherd every detail of your life. They are no less or more selfish, greedy, envious, dishonest, or power hungry than the executives of corporations. Most Americans would be horrified to know that their knights and dragons are best buds.

Each talks smack about the other in public, but in private they often share beers. That’s because politicians lust for power, and need money to get it to win their next election. Corporations give them the money. But like any good businessman, CEOs want  something in return. Usually, they want politicians to put their corporate people on the regulatory agencies that oversee their industries. The process is known as “regulatory capture.”

Once on the staff of regulatory agencies, the corporate bureaucrats write regulations that favor the largest corporations. Of course, their motives are “pure as snow.” They only want to “promote” the health and safety of the American people. But few of the regulations they write have anything to do with health and safety and everything to do with blocking competition. After all, we have known for decades that Canada and Europe produce high quality baby formulas that the FDA refuses to allow Americans to buy.

For a detailed explanation of the process, read Bootleggers and Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics. In short, bootleggers and Baptists had the same goal: to end legal sales of booze on Sunday. They had different reasons for wanting that. Baptists thought they were saving society; bootleggers wanted to have the Sunday market to themselves by eliminating competition from established liquor stores. But they cooperated to get the regulations or legislation passed. 

In the formula fiasco, the FDA plays the role of Baptists: they only want to “protect” the health of babies. Corporate baby formula makers are the bootleggers: they want to limit competition from smaller businesses and foreigners. The result for babies has been higher prices for their food, or no formula at all.

Economists, mostly on the Austrian side, have been informing people about this racket for decades, but most have pressed their hands to their ears. For change to happen, adults must quit believing in fairy tale characters like Government and open their ears and eyes to reality.

Roger D. McKinney lives in Broken Arrow, OK with his wife, Jeanie. He has three children and six grandchildren. He earned an M.A. in economics from the University of Oklahoma and B.A.s from the University of Tulsa and Baptist Bible College.  He has written two books, Financial Bull Riding and God is a Capitalist: Markets from Moses to Marx, and articles for the Affluent Christian Investor, the Foundation for Economic Education, The Mises Institute, the American Institute for Economic Research and Townhall Finance. Previous articles can be found at facebook.com/thechristiancapitalist. He is a conservative Baptist and promoter of the Austrian school of economics.

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