As an academic economist who regularly reads newspapers and other media, the amount of economic ignorance promoted by professional journalists is astounding to me. Perhaps we should not be surprised, given that most of the economists quoted in the media are economic illiterates like Paul Krugman and Joseph Stiglitz.
Economic illiteracy is a regular staple of the establishment media. One cannot go through any issue of the New York Times without running into the promotion of economic fallacies. Occasionally, however, a “prestigious” publication goes off the rails so badly that it demands a response, with the latest outrage appearing in The Atlantic, called “The Great Grocery Squeeze: How a federal policy change in the 1980s created the modern food desert.”
Written by Stacy Mitchell, the article claims that the Reagan administration’s decision not to enforce the Great Depression-era’s Robinson-Patman Act ultimately led to a modern condition in which many communities are not served by grocery stores. Thus, the notion of the “food desert.”
According to Medical News Today:
Food deserts are areas where people have limited access to a variety of healthful foods. This may be due to having a limited income or living far away from sources of healthful and affordable food.
The United States Department of Agriculture (USDA) defines a food desert as an area that has either a poverty rate greater than or equal to 20% or a median family income not exceeding 80% of the median family income in urban areas, or 80% of the statewide median family income in nonurban areas.
In order to qualify as a food desert, an area must also meet certain other criteria.
In urban areas, at least 500 people or 33% of the population must live more than 1 mile from the nearest large grocery store. In rural areas, at least 500 people or 33% of the population must live more than 10 miles from the nearest large grocery store.
More than 20 years ago, I wrote about food deserts, noting that the conventional wisdom as promoted by the media clashes with the facts, and especially with what really is causing this situation. Of course, no account of food deserts would be complete without someone blaming Walmart or some other large retailer:
As one who in his professional life has heard numerous complaints about the alleged “oppression” that is created by the presence of a Wal-Mart or some other large chain store, it is interesting to see how the academic left shifts gears and now blames these same retailers for not having enough stores in existence. Social activists have worked overtime to keep the Wal-Marts and Safeways from opening in rural and urban areas; now we see that the real problem, according to activists, is that many rural and urban people do not have access to the inexpensive food that these markets sell.
The question, then, would be why do these conditions exist? As the Atlantic story points out, most communities at one time were served by grocery stores, but over the last several decades, the small retailers have closed. Unfortunately, the Atlantic retells the tired but popular story (or at least popular with progressives): Ronald Reagan did it.
It is not unusual to see multiple renditions of what really is the same story: When Reagan took office in 1981, the United States was a happy, well-adjusted country in which everything worked well, and democracy flourished. However, Reagan and his cronies soon deregulated nearly everything and cut taxes on the rich, which created great income disparities and made everyone poor—except for the top one percent. (Historian Heather Cox recently posted something like this on her Facebook page.)
Since it is popular to lay every social ill on the Reagan administration, why not the “food desert,” too? Mitchell writes:
Food deserts are not an inevitable consequence of poverty or low population density, and they didn’t materialize around the country for no reason. Something happened. That something was a specific federal policy change in the 1980s. It was supposed to reward the biggest retail chains for their efficiency. Instead, it devastated poor and rural communities by pushing out grocery stores and inflating the cost of food. Food deserts will not go away until that mistake is reversed.
The policy change, she claims, is the decision not to enforce Robinson-Patman. While enforcement was the preferred policy, the results supposedly ensured most Americans had access to grocery stores:
During the decades when Robinson-Patman was enforced — part of the broader mid-century regime of vigorous antitrust — the grocery sector was highly competitive, with a wide range of stores vying for shoppers and a roughly equal balance of chains and independents. In 1954, the eight largest supermarket chains captured 25 percent of grocery sales. That statistic was virtually identical in 1982, although the specific companies on top had changed. As they had for decades, Americans in the early 1980s did more than half their grocery shopping at independent stores, including both single-location businesses and small, locally owned chains. Local grocers thrived alongside large, publicly traded companies such as Kroger and Safeway.
With discriminatory pricing outlawed, competition shifted onto other, healthier fronts. National chains scrambled to keep up with independents’ innovations, which included the first modern self-service supermarkets, and later, automatic doors, shopping carts, and loyalty programs. Meanwhile, independents worked to match the chains’ efficiency by forming wholesale cooperatives, which allowed them to buy goods in bulk and operate distribution systems on par with those of Kroger and A&P. A 1965 federal study that tracked grocery prices across multiple cities for a year found that large independent grocers were less than 1 percent more expensive than the big chains. The Robinson-Patman Act, in short, appears to have worked as intended throughout the mid-20th century.
The New Deal Mantra: Raise Prices
What is important to understand is that much of the New Deal economic legislation was based upon the belief that low prices caused the economic downturn and that the key to recovery was to keep prices high, hence the impetus for both the National Industrial Recovery Act and the Agricultural Adjustment Act. Both laws sought to cartelize portions of the US economy in order to keep prices high by reducing output. Despite Mitchell’s claims that the Robinson-Patman Act was passed to increase competition (or to permit smaller food retailers to compete with the grocery giant of the time, Atlantic and Pacific Tea Company, or A&P), the law existed to keep prices higher than they would be in a free market setting.
Mitchell’s argument in favor of Robinson-Patman is framed as government intervention keeping the grocery markets competitive, which on its face is questionable. First, and most important, price fixing—which is at the heart of applying the R-P law—by definition cannot promote competition. Second, the lack of small grocery stores in many neighborhoods not served by the “big box” grocery stores like Walmart is not simply a matter of stores being priced out of the market.
Victims of Crime and Local Activism
Instead, many small grocery stores, especially in the inner cities, are victimized by local residents who steal merchandise at will and often direct violence against the store owners and employees. For example, Korean immigrants have set up small businesses in places like New York City and Los Angeles only to be driven out of business by hostile customers, criminals, and neighborhood activists. Racial demagogues like Al Sharpton for years led other activists in New York, targeting stores owned by Koreans and driving them out of business.
Mitchell’s rhetoric notwithstanding, one of the main reasons that small business owners in the inner cities have shut down their enterprises is because of the high levels of street crime which often is directed at small business owners. Moreover, when there are riots in these cities, small stores often are looted and burned, a situation that at least some progressives in politics, academe, and the media seem to support.
For example, National Public Radio enthusiastically endorsed Vicky Osterwell’s In Defense of Looting, which claimed that the mass looting and burning of businesses in the riotous summer of 2020 was a positive event that bolstered “democracy.” Likewise, academics chimed in on the “looting is good” theme, and Sen. Bernie Sanders accused the “ultra rich” of “looting” everyone else.
Because many of the so-called food deserts are located in cities that are governed by progressive Democrats, business owners face obstacles that often are insurmountable. Governing councils in these cities often are dominated by activists who never have been entrepreneurs and are ideologically opposed to private enterprise and who believe that the mere sale of goods is an act of theft. It does not take long for the costs of petty thefts to overwhelm these small businesses, and progressive city governments are unsympathetic to their situation.
But we are supposed to believe that had the federal government aggressively enforced a law that was passed to keep prices high and suppress competition, the results would have been an abundance of grocery stores everywhere with affordable food prices. That an upside-down idea like this was touted in an “elite” publication tells us that progressives are even more economically illiterate than ever.
