Jim Slosiarek/The Gazette via AP Images
A farmer plants crops near Walford, Iowa. Big Ag has squeezed farmers in Iowa and across the country.
First Response
On Wednesday, Donald Trump signed an executive order that the press reported as intended to force open meatpacking plants using the Defense Production Act. It doesn’t actually force open meatpacking plants. It delegates to the Secretary of Agriculture and basically tells him to do something about it. It was more of a typical PR ploy from Trump, to show his base he was working tirelessly to protect their precious hamburgers.
But there was one part of the order worth highlighting. In the policy section, the order notes: “closure of a single large beef processing facility can result in the loss of over 10 million individual servings of beef in a single day.” You may reasonably ask why we’ve created a situation where one processing plant closure due to an infectious disease can take that much food out of the system. Maybe that was the problem all along.
J.D. Scholten thinks so. He was the populist Democratic candidate who almost defeated Steve King in the deep-red 4th Congressional District in Iowa in 2018. He’s running in a possible rematch with King this year, and his home in Sioux City is situated in the U.S. county with the most rapid increase of COVID-19 cases in America. Why? “Sioux City has been an immigrant meatpacking town since the 1880s,” Scholten told me in an interview. “When my family moved her in 1984, our first family photo, which was our Christmas card that year, was in front of the stockyard plant.”
Meat processing plants are hotspots for the outbreak because of a reluctance on the part of plant managers to keep workers safe; one lawsuit indicates that workers were not given time to wash their hands or wipe their noses. Scholten visited a Tyson plant in Dakota City, Nebraska on Tuesday, where managers were testing every employee, but still telling them to work, with the test results not due back for three days. Late on Wednesday, Tyson finally closed the plant for four days.
The backlog of meat processing squeezes farmers and ranchers, who have to either continue to feed their stock, sell them to someone who can, or undergo mass kills. But Scholten points out that the pandemic only increased their existing hardship. “Just last week, packed beef was going for $100 more than live cattle,” he said. “Meat is going off the shelf at higher prices but the farmers aren’t getting a higher price. I know there’s talk about farmers and workers, but it’s both against the packers right now.”
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Meatpacking is a deeply concentrated industry. Four Big Ag monopolies control 85 percent of the nation’s beef, and 50 plants produce 98 percent of the supply. Where there were once 10,000 slaughterhouses, there are now about one-tenth. This forces ranchers to accept low prices if they want their cattle to get to market. It also hollows out communities by consolidating the skilled processing labor instead of spreading it out county by county. “That’s a lot of rural development jobs,” Scholten said. “It’s led to rural poverty and a decline in the rural economy.”
Two of those big beef companies are Brazilian conglomerates. One in four hogs in the U.S. is owned by a Chinese-owned firm like Smithfield Foods. And a lot of this product doesn’t end up on American tables. “Sixty percent of apple juice is made in China,” Scholten noted. “Here in our district there are apple orchards all over the place, and we’re not an apple area. All these policies, geared toward international trade, we’re losing sight of our base of agriculture and our food system. Who are we doing this for?”
Scholten explains that 85 percent of all food in Iowa is imported, which is crazy if you drive around the state and see endless crops. There are only two “farm to table” restaurants in his entire district, a district made up of essentially all farms. Even local groceries have been overrun by Dollar General, which doesn’t sell fresh meat and produce. Decades of prioritizing outsourcing and enabling market dominance has destroyed the local and regional culture of our food system, and ruined self-sufficiency, just like supply chains for medical equipment or defense products or almost everything else.
In the short term, Scholten wants to see short-term coordination, to end the absurdity of millions struggling to find food in understocked food banks while farmers bulldoze crops and throw away milk. He wants significant protections for food system workers, too, so they don’t have to choose between risking their life and losing a paycheck. But in the long term, Scholten proposes serious antitrust enforcement to break up Ag monopolies (modernizing the antimonopoly Packers and Stockyards Act, which turns 100 next year, tops the list), and returning to a sustainable local supply system. “We need to implement farm to nursing home, farm to prison, farm to community schools,” he said. “Ag is almost all policy driven. We can create that market and let it grow. And allow more money to stay in the communities that grow the stuff.”
Odds and Sods
Yesterday I got scooped. It happens. Vice reported that Sheila Bair, former FDIC chair and fighter for ordinary people during the last economic crash, was under consideration for chair of the Congressional Oversight Commission, the panel monitoring the bailout. I heard about this yesterday too and was in the midst of reporting on it when the Vice news dropped. So I wrapped up my reporting and posted this story.
Bair is a Republican, but she might have more support on the progressive left than the right for this position. She was really great on the bailouts and would be one of the few people to make this panel relevant. We’ll see what happens.
Also at the Prospect today, Suzanne Gordon writes that, while Trump has damaged the Veterans Health Administration’s ability to obtain personal protective equipment for health workers, it was actually under Obama that their crisis response mechanisms were eliminated. And Alex Sammon reports that health insurers are lobbying to suspend the medical loss ratio as an economic aid measure—when the proceeds will likely go to pad profits.
All of our coronavirus coverage is at prospect.org/coronavirus.
Too Big to Lend?
You don’t get much more fundamental for a bank than lending money. The Paycheck Protection Program (PPP) loans for small businesses are among the simplest ever devised. Banks are held harmless for any falsification on the applications; Treasury Secretary Mnuchin has confirmed that any audits would be held at the applicant level. Banks pretty much have to figure out that the applicant is a human being, and that’s about it. For that, they get on average 3 percent of the loan.
Our friends over at the Institute for Local Self-Reliance have a report out today, provided to the Prospect, that reinforces the suspicion that too big to fail banks are also too big to manage even this wildly simplistic program. They plotted out states by concentration of smaller and community banks (under $5 billion in assets, about 13 percent of the total banking market) to see if those states filed a greater percentage of loans. “Nearly three times as many PPP loans were made per capita in the ten states with the most community banks per capita, compared to the ten states with the fewest,” the report concludes.
There are a couple mitigating factors here. PPP loans don’t make much sense in high-rent areas; because 75 percent of the loan has to go to payroll to be forgiven, companies that spend excessively on rent would mostly go into debt (albeit with a modest interest rate), and with the future uncertain, they would likely pass. High rent correlates well with coastal in-demand areas, and that also happens to correlate with high concentration of national banks.
And yet, this is consistent with other findings. Community banks still practice relationship lending, where they know their clients and can move personnel resources quickly to meet their needs. One small bank in Oakland put 80 percent of its staff on PPP loan production. With ties to the community, they have a stake in its success. The big banks didn’t devote resources to the program and mainly saw it as an opportunity to reward their wealthiest clients in the hopes of upselling them other products down the road.
There’s one very interesting finding in the report. The best state by far for PPP loans was North Dakota, which has a thriving community bank sector, with nearly 10 per 10,000 residents, six times the national average. North Dakotans got over 11,000 loans, or 1.444 loans for every 100 people in the state.
What’s unusual about North Dakota’s financial system? They have a public bank, the Bank of North Dakota. It’s a sort of central bank for the state that partners with community lenders to make loans. This has built the community bank sector in the state, and it paid off with efficient delivery of disaster relief to small businesses. Maybe the public bank model, which mostly saves states money on bond costs, also is better at what we need a banking system to do.
And if big banks are bad at lending money, why exactly do they exist?
Today I Learned
- Weekly unemployment claims at 3.8 million, with 30 million total claims since the pandemic hit. The monthly report for April will be brutal. (Calculated Risk)
- Meanwhile, unemployment has barely budged in Europe, because they’re giving direct payroll support to businesses, and keeping employees connected to workers. (Washington Post)
- May Day strike at Amazon and other delivery services tomorrow. (Vice)
- Six warehouse workers told not to take sick days ended up dying from the coronavirus. (The Intercept)
- Elon Musk, it turns out, is fairly stupid once you get him out of his lane. (Boing Boing)
- Not coronavirus-related, but CFPB apparently manipulated research to justify gutting regulations on payday lending, which in this economy will be used much more I fear. (New York Times)
- The first dog in the U.S. contracted coronavirus. It’s a pug. He got better. (Time)
