[What your chicken dinner says about wage stagnation, income
inequality, and economic sclerosis in the United States ]
[https://portside.org/] 

 THE RISE OF THE ZOMBIE SMALL BUSINESSES  
[https://portside.org/2018-09-08/rise-zombie-small-businesses] 

 

 Annie Lowrey 
 September 4, 2018
The Atlantic
[https://www.theatlantic.com/ideas/archive/2018/09/whose-farm-is-this-anyway/569227/]


	* 
	*
[https://plus.google.com/share?url=https%3A//portside.org/2018-09-08/rise-zombie-small-businesses]
	*
[https://www.facebook.com/sharer/sharer.php?u=https%3A//portside.org/2018-09-08/rise-zombie-small-businesses]
	*
[https://twitter.com/intent/tweet/?text=The%20Rise%20of%20the%20Zombie%20Small%20Businesses&url=https%3A//portside.org/2018-09-08/rise-zombie-small-businesses]
	* [https://portside.org/node/18101/printable/print]

 _ What your chicken dinner says about wage stagnation, income
inequality, and economic sclerosis in the United States _ 

 , Siphiwe Sibeko / Reuters 

 

Imagine the farm
[https://www.sba.gov/sites/default/files/oig/SBA-OIG-Report-18-13_0.pdf]
that raised the chicken that produced the meat that sits in your
sandwich: a few workers, thousands of birds, tens of thousands of
pounds of white and dark meat, work that starts before dawn and ends
after dusk, uncertain revenue, slim profits. There are thousands of
these small farms in the United States, and they benefit from millions
of dollars of taxpayer support each year.

Chicken is America’s favorite protein
[https://www.nationalchickencouncil.org/about-the-industry/statistics/per-capita-consumption-of-poultry-and-livestock-1965-to-estimated-2012-in-pounds/],
after all. Family farms are one of its most prized institutions. And
farming is tough business. According to one estimate, a new,
hangar-like chicken house costs something like $300,000 to build, and
more to maintain and upgrade. “A farmer has to invest over $1
million just to get set up—a lot of debt to carry when you’re paid
on average between 5 cents and 6 cents per pound of chicken
produced,” Sally Lee of the Rural Advancement Foundation
International-USA has found
[https://www.huffingtonpost.com/sally-lee2/chicken-farming-debt_b_11067304.html].
Even when a chicken-growing operation is established, financial
success is far from a sure thing
[https://www.ers.usda.gov/amber-waves/2014/august/financial-risks-and-incomes-in-contract-broiler-production/].
Given those realities—and given the American love for and support of
the family farm—generous taxpayer subsidies seem not just sensible,
but vital. 

But a government report [https://www.sba.gov/node/1615442] released
this spring calls into question whether all those family chicken farms
are really family chicken farms, and whether those taxpayer dollars
might be better spent elsewhere. The Small Business Administration’s
inspector general looked at [https://www.sba.gov/node/1615442] poultry
growers, and found that many of them are tied-and-bound
contractors—so controlled by their agreements with giant food
corporations that they no longer act like independent entities. Why
offer them taxpayer support meant for the little guy?

“The farm is not a real family farm, but a cog in this larger
industrial-agriculture model,” said Joe Maxwell, a fourth-generation
farmer and the executive director of the Organization for Competitive
Markets. “This is a heavily concentrated marketplace with a
vertically integrated model. That denies the consumer an independent
market, and it extracts wealth from the independent farmer.”

The paper has caused controversy and concern in the poultry world,
with farmers worried that Uncle Sam might withdraw financial aid,
members of Congress looking into lending practices, and poultry
businesses pushing back against the government findings. There are
broader ramifications, too. In sectors across the economy, from
defense contracting
[http://www.dtic.mil/dtic/tr/fulltext/u2/a449606.pdf] to pizza
delivery
[http://www.pmq.com/December-2017/The-2018-Pizza-Power-Report-A-State-of-the-Industry-Analysis/],
a handful of firms have amassed and are exerting similar kinds of
market power. Economists and policy experts believe that Goliath
controlling, contracting, and acquiring David is a key factor driving
the country’s anemic growth rates, sluggish productivity numbers,
and stark income inequality.

The Sunday roast chicken on your dining table might have come not from
an independent grower, but from a zombie arm of a giant corporation.
That chicken-salad sandwich in your lunch bag might have come from an
agribusiness leeching taxpayer support for small farms. And that
bucket of spicy fried might contain within it a lesson about why your
paycheck is so small.

Between the retraction of labor law and the decline of antitrust
enforcement, “you’ve got a regulatory black hole in which a
powerful company can exert total control with no responsibility,”
said Marshall Steinbaum, the research director at the Roosevelt
Institute. “Between the Amazons of the world and the Ubers of the
world and the chicken farmers, when you step back and look at it, you
think, ‘Oh wow, this is not an isolated thing. This is actually a
big thing.’”

Much of the chicken that ends up on your plate comes from one of a
handful of big businesses, such as Tyson and Perdue. The big company
provides the chicks. The contract farmer raises them into chickens.
The big company slaughters them for meat. It packages and brands that
meat under one of dozens of labels. And it sells it cheap to the
American consumer.

The issue, the Small Business Administration report found
[https://www.sba.gov/node/1615442], is the level of control that the
integrated poultry company exerts over the farmer. These big
operations do not act like department stores, choosing goods from a
broad variety of vendors and fostering competition and innovation.
They instead act like a lord with serfs, or a landowner with
sharecroppers.

The big chicken producers argue against that characterization. “The
situation is no different than any other small business that enters
into a contractual relationship to provide services to a larger
company,” said Tom Super of the National Chicken Council, a trade
group, in an email. “These loans, approved by the federal
government, go directly to small, independent family farms in rural
America which has allowed people to start their own businesses, expand
or diversify their farm operations, create jobs, and stay and work on
their farms with their families. If anything, the government should be
doing more, not less, to drive growth and opportunity in the rural
economies that feed America and the world.”

But farmers have complained about
[http://www.wypr.org/post/new-book-explains-how-perdue-s-chickenizing-changed-world#stream/0]
and litigated against such contractual relationships for years. “The
company has 99-and-a-half percent control over the grower,” said
Jonathan Buttram, the president of the Alabama Contract Poultry
Growers Association and an outspoken critic of the industry. “I’ll
list what they tell you: what time to pick up the chickens, what time
to run the feed, what time to turn the lights off and on, every move
that you make. Then, they say we’re not an employee—we are
employees, but they won’t let us have any kind of benefits or
insurance.”

Yet for all the control the poultry businesses have over the farmers,
the farmers maintain significant financial and legal risk. They have
little job security. They can get dumped for a different supplier, and
face a tournament
[https://www.ers.usda.gov/amber-waves/2014/august/financial-risks-and-incomes-in-contract-broiler-production/]-style
system that pits them against fellow growers. They are responsible for
financing their own operations, and face the persistent threat of
foreclosure.

Buttram said that he worried about the safety and health of the birds
being produced for slaughter, many of which live lives of constant
sickness and pain. “They pack these chickens in these houses so
tight,” he said. “It's nasty. It is hard to see.” He described
farmers being instructed to dig pits to dispose of thousands of
diseased chicken carcasses.

The system also takes an extraordinary toll on the contract growers
themselves. The work is hard, the trade uncertain, the remuneration
sometimes scant. Mental and physical health problems are common.
“Back a few months ago, a grower called me and said he was going to
kill his broiler manager and kill himself,” Buttram told me. “I
never thought that I would have to be talking people out of committing
suicide or committing murder. It shouldn't be that an entity can
coerce you into committing suicide when you have put everything on the
line—your mortgage, your farm—and the company has nothing invested
in it but a few chickens.”

The meat of the issue, experts said, is growing market concentration.
If, as a farmer, you are not going to raise chickens for one of the
big players, who are you going to raise them for? How are you going to
get them to market? How would you ever get a loan? According to USDA
data
[https://www.sba.gov/sites/default/files/oig/SBA-OIG-Report-18-13.pdf],
about 20 percent of of growers report that there is only one
integrator in their area, with another 30 percent reporting that there
are only two.

The industry is highly concentrated by many other measures. “Where
there were once 1.6 million independent farms across the country, a
rapid shift to a vertical-integration model has resulted in just
25,000 contract farms raising the vast majority of America’s
poultry,” Representative Nydia Velázquez of New York noted
[https://www.youtube.com/watch?time_continue=8&v=DbLKcgMbtuc] at a
hearing the House Small Business Committee held on the report in
April. Most broiler chickens in the United States come from operations
that process
[http://www.pewtrusts.org/en/research-and-analysis/fact-sheets/2012/07/18/how-corporate-control-squeezes-out-small-farms]
more than 500,000 birds a year.

It is not just a chicken-and-egg issue, either. The top four beef
producers account for more than 80 percent of the market. The top four
hog processors account for more than half. Much the same is true
across the economy. The top four players account for more than 90
percent of overall revenue in a wide variety
[http://news.cision.com/ibisworld/r/top-10-highly-concentrated-industries,c9219248]
of market sectors and for a wide variety of consumer goods: web
search, toilet paper, wireless services, arcade operations, soda,
light bulbs, tires.

An estimated three-quarters of industries have seen
[https://finance.eller.arizona.edu/sites/finance/files/grullon_11.4.16.pdf]
a substantial increase in market concentration in the past two
decades. There were about half as many publicly traded companies in
2014 as there were in 1997, a decline “so dramatic that the number
of firms these days is lower than it was in the early 1970s, when the
real gross domestic product in the U.S. was just one third of what it
is today,” researchers have found
[https://finance.eller.arizona.edu/sites/finance/files/grullon_11.4.16.pdf].
Those public companies are three times as big as they were in the
1990s.

Economists and policy experts argue that the rise of big businesses is
having a number of harmful effects on the economy. For instance,
increasing concentration seems to be stifling innovation.
Market-dominant players might dampen innovation by buying up their
smaller, leaner, and more creative competitors; by patent-trolling;
and by signing contracts with suppliers and clients that in effect
black-ball their competition out of the market. The end result? Higher
profits for the few, and a slower and less dynamic economy for the
many.

That lack of competition sometimes leads to higher prices for
consumers as well, economists argue. For instance, researchers have
found [https://core.ac.uk/download/pdf/6408104.pdf] “clear
instances” where agribusinesses have used their market power to jack
up prices. “The four producers of lysine, a key ingredient in animal
feed, were able to raise prices by amounts ranging from 40 [to] 70
percent,” one study found. “The government’s attempts to induce
competition among the three makers of infant formula are just as
striking; the federal Women, Infants, and Children (W.I.C.) program,
which purchases about half of the infant formula consumed in the
United States, pays wholesale prices for formula that are one fifth
the wholesale price offered to non-W.I.C. buyers.”

The growing power of big firms also might be suppressing wages and
increasing inequality, experts think. Having fewer businesses around
reduces the ability of workers to hopscotch between companies in
search of greater wages. It increases the chances that employers might
collude
[https://obamawhitehouse.archives.gov/sites/default/files/page/files/20161025_monopsony_labor_mrkt_cea.pdf]
to keep wages low or to prevent their talent from getting poached.
Local labor markets with fewer and less competitive
[https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3088767]
employers show a 17 percent decline in posted wages, one recent study
found. That wage suppression helps to drive income inequality, as does
the excess profitability of firms in less-than-competitive industries.
Firms in more concentrated industries have
[https://finance.eller.arizona.edu/sites/finance/files/grullon_11.4.16.pdf]
“enjoyed higher profit margins, positive abnormal stock returns, and
more profitable [merger] deals.”

What to do about it? Policies aimed at increasing competition across
industries might be best, helping everyone from the family farmer, to
producers struggling to meet big-box stores’ demands, to consumers
sapped for choice, to workers hurt by falling real wages. Enforcing
antitrust law, forcing huge companies to split apart, barring mergers,
strengthening labor standards, targeting patent trolls, and barring
exploitative contract practices: Such government actions would not
just help the growers Buttram works with or the farmers Maxwell
represents, but everyone else in America, too.

We want to hear what you think about this article. Submit a letter
[https://www.theatlantic.com/contact/letters/] to the editor or write
to [log in to unmask]

Annie Lowrey [https://www.theatlantic.com/author/annie-lowrey/] is a
contributing editor at _The Atlantic_, covering economic policy. 

	* 
	*
[https://plus.google.com/share?url=https%3A//portside.org/2018-09-08/rise-zombie-small-businesses]
	*
[https://www.facebook.com/sharer/sharer.php?u=https%3A//portside.org/2018-09-08/rise-zombie-small-businesses]
	*
[https://twitter.com/intent/tweet/?text=The%20Rise%20of%20the%20Zombie%20Small%20Businesses&url=https%3A//portside.org/2018-09-08/rise-zombie-small-businesses]
	* [https://portside.org/node/18101/printable/print]

 

 		 

 		 

 INTERPRET THE WORLD AND CHANGE IT 

 		 

 		 

 Submit via web [https://portside.org/contact/submit_to_portside] 
 Submit via email 
 Frequently asked questions [https://portside.org/faq] 
 Manage subscription [https://portside.org/subscribe] 
 Visit portside.org [https://portside.org/]

 Twitter [https://twitter.com/portsideorg]

 Facebook [https://www.facebook.com/Portside.PortsideLabor] 

 		 

 


https://portside.org/privacy-policy

To unsubscribe, click the following link:
&*TICKET_URL(portside,SIGNOFF);