Publication
On a recent episode of America’s Nest Egg podcast, Ancera CEO Arjun Ganesan spoke with economics expert John Dunham about regulation and innovation in America’s food supply chain.
Watch the full episode:
With over 40 years of experience in economics, Dunham discussed outdated regulatory frameworks, the essential role of infrastructure, and the hubris of price controls.
In the early 1900s, Upton Sinclair’s novel The Jungle exposed the unsanitary practices in meatpacking plants. Public outcry influenced the formation of regulatory agencies like the Food and Drug Administration (FDA) and the US Department of Agriculture (USDA).
“Really the whole regulatory state began with food regulations. And over time the regulatory state has grown, and grown, and grown, in size and in importance,” Dunham said.
Today, food regulations continue to make up a large portion of the country’s economic oversight. Some regulations provide essential benefit to consumer safety, but according to Dunham, too many others impose significant burdens on food producers without clear value.
It’s not a stretch to say that over the country’s 245-year history, a significant number of the laws and regulations enacted have outlived their practical value. There are a few humorous examples, but these frivolous laws could pose a hidden business risk.
“In Buffalo New York, every bar is required to have enough spittoons for the people in the bar… Maybe in 1863 that might have been really important, because people were spitting everywhere, but you don't see that many people doing that now, so requiring spittoons is probably not necessary anymore,” Dunham said.
Most outdated laws and regulations are rarely, if ever, enforced today, but they do expose businesses to compliance costs and open the door to retaliatory fines.
Major infrastructure projects in US history changed the way food producers distributed their goods, a the need for resilient infrastructure is more important than ever to maintain a strong supply chain.
“Infrastructure – railroads, the interstate highway system, and the canals in this country – have allowed a farmer in the middle of Iowa to have a national or even a world market, and that helps productivity. That’s why today 2% of the people that work in this economy are farmers rather than 60% back in the 1800s,” Dunham said.
Dunham added that there are some regulations that stop progress on infrastructure and the productivity that it provides.
One regulation that can have a significant impact on food prices is the Jones Act, a federal law from 1920 that requires goods shipped between U.S. ports to be transported on ships that are built, owned, and operated by United States citizens or permanent residents.
The law was originally designed to support the U.S. shipping industry, but it has had unintended consequences for industries that depend on efficient and cost-effective shipping, including agriculture and food production.
“Problem is, they don't build ships in America anymore. They only build little ships, because the Jones Act Trade applies to the rivers and the navigable waterways, and that's really the only place that U.S. ships carry anything,” Dunham said.
Regulations that don't reflect modern realities have the potential to limit economic efficiency and productivity. The Jones Act is just one of the many examples of policies that no longer serve their intended purpose.
Significant advancements in agriculture often stem from industry-led innovation, and are not necessarily motivated by regulatory requirements. Dunham emphasized the role of the private sector for innovation as a driver of productivity.
"Every company I know that I work with, at least in the food industry, is working on different kinds of innovations. In terms of government investment in agriculture, the Department of Agriculture extension services, there's a lot of working with farmers to have better farming techniques," Dunham said.
A balanced approach is needed, one that combines the private sector's ingenuity with strategic public investment, to foster a forward-thinking food system.
Price controls are often positioned as a solution to inflation, but while the government can set a price limit for goods, it cannot force companies to continue producing or supplying those goods at an unsustainable cost.
"So I'm going to put price controls on on Twinkies, and Twinkies are only going to cost 50 cents at the store. Okay? I can do that and I can make those Twinkies cost 50 cents at the store, but that doesn't mean that 'Bimbo' who makes the Twinkies is going to supply them to the store, and that's always what happens with price control," Dunham said.
Dunham cited rent control as another example of ineffective price control and advocated for increased competition and innovation as more effective solutions to managing costs and curbing inflation.
Food safety, security, and profitability requires government and industry to work together to create resilient food defense system. America’s food supply depends on it.
Powered by Ancera, America’s Nest Egg podcast hosts conversations on food science, safety, sustainability, and more. Listen to our full interview with John Dunham and other episodes at Ancera.com/podcast.
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