As Robert LeFevre said, “Government is a disease masquerading as its own cure.” The American people are witnessing a grand illustration of that truth in the form of the US Air Force airlift of baby formula from Europe to the United States. The airlift is part of the Biden administration’s response to a nationwide baby formula shortage that has desperate parents searching all over for the product and even venturing to create it themselves.
As the government credits itself for racing to the rescue, most people don’t realize the baby formula crisis is largely a creation of the government itself.
Yesterday, the White House launched a publicity blitz wrapped around a slickly-produced video showing a USAF C-17 in Germany being loaded with pallets of formula.
While the video’s pretty sharp, we have to wonder which public relations whiz came up with the official name of the airlift. “Operation Fly Formula” sounds like the title of a gruesome new Jeff Goldblum flick.
Meanwhile, much as he’s prone to do on Air Force One stairways, Biden stumbled in rolling out the airlift PR blitz too. In a Sunday morning Tweet, Biden boasted that a single USAF C-17 was about to land in Indiana with “70,000 tons of infant formula.” The tweet was deleted and replaced with one that said “70,000 pounds.”
The most perceptible cause of the shortage is a months-long pause in production at an Abbott Nutrition plant in Sturgis, Michigan. Abbott suspended operations after bacteria at the plant was identified as the cause of two deaths.
The ensuring shortage was greatly exacerbated by the fact that just two companies—Abbott and Mead Johnson—represent about 80% of the U.S. market. Nestlé accounts for another 10%.
Naturally, Twitter is rife with knee-jerk hot takes decrying the shortage as a failure of “unregulated capitalism.”
Turns out, 3 companies having a monopoly on baby formula was just another terrible idea in the long line of terrible ideas brought to you by unregulated capitalism.
— The USA Singers (@TheUSASingers) May 18, 2022
However, as is typically the case, the baby formula market’s domination by just a few players isn’t caused by too little government involvement, but rather far too much of it.
That starts with the government’s presence as the overwhelming number one purchaser of baby formula. Via the federal Women, Infants and Children (WIC) program—which enables states to hand out “free” formula—the federal government buys about half of all infant formula used in America.
Worse, in administering the program, each state contracts with just one producer, and Abbott is the sole provider for roughly half the children in the program.
With those government contracts and daunting FDA regulations, the federal government erects formidable barriers to entry for would-be challengers of the big three producers.
Then there’s protectionism that shelters them from foreign competition. As Reason’s Eric Boehm explains:
“Imports of infant formula are subject to tariff-rate quotas of 17.5 percent after certain thresholds are met. As the name suggests, tariff-rate quotas are meant to be set high enough that they effectively block additional imports by making it unprofitable to pay the tariff. In a year like this one, when domestic supplies are flagging and more formula is needed, that creates a serious impediment for suppliers.”
On top of that, Trump’s USMCA trade agreement restricted imports of Canadian baby formula—a move eye-rollingly aimed at undercutting a Chinese company’s investment in a Canadian plant.
“Chalk it up as another self-inflicted wound of the trade war with China,” writes Boehm.
Some protectionism comes dressed up in the guise of consumer safety. Try importing formula that’s perfectly acceptable in the European Union. The U.S. Customs and Border Patrol will seize it for not meeting FDA regulations—and then brag about it as if they found a vial of sarin gas. In many cases, European formula is banned simply because the labels don’t meet FDA requirements.
“These companies are cemented in place and protected by government regulations and laws,” said Chris Rossini on The Ron Paul Liberty Report.
In sum, the domination of the U.S. baby formula market by just three companies happens not for a lack of government regulation, but because of it.
It's a reverse Berlin Airlift, where we're blockading ourselves and flying in our own shipments to prevent the starvation that we're at risk of causing. https://t.co/QDSvIAVaoW
— Zack Kanter (@zackkanter) May 22, 2022