How the Supermarket Helped America Win the Cold War (Update)

0:00:08 Hey there, it’s Stephen Dubner with a bonus episode of Free Economics Radio.
0:00:13 Our most recent regular episode was an interview with John Sullivan, former U.S. Ambassador
0:00:14 to Russia.
0:00:18 We didn’t really talk about the Cold War, but as a result of that conversation, I’ve
0:00:21 been thinking a lot about the Cold War.
0:00:26 And that got me thinking about an episode we made some years ago called How the Supermarket
0:00:28 Helped America Win the Cold War.
0:00:33 So I went back and listened to it, I really liked it, if I do say so myself, and I thought
0:00:35 you might like to hear it again too.
0:00:39 So here it is, we have updated facts and figures as necessary.
0:00:45 As always, thanks for listening.
0:00:49 When you think about propaganda campaigns, I am guessing you don’t think of this.
0:01:07 After World War I and World War II came the Cold War between the U.S. and the USSR.
0:01:13 It featured a space race, an arms race, and a farms race.
0:01:18 Things like chicken breeding and hybrid corn took an outsize and somewhat surprising role
0:01:21 in U.S. propaganda in the early 1950s.
0:01:24 The farms race had an obvious winner.
0:01:27 We clearly won the abundance war.
0:01:33 But the American victory was, to some degree, a puric victory, whose after effects are still
0:01:35 being felt.
0:01:43 Economists who don’t do U.S. agricultural policy are horrified by what they see in terms
0:01:45 of distorting markets.
0:01:51 Today on Freakinomics Radio, how a sprawling system of agriculture technology, economic
0:01:56 policy, and political will came to life in the supermarket.
0:02:00 Tell me who could possibly afford to buy food in a place such as this?
0:02:02 Well, this is just an ordinary food market.
0:02:24 This is Freakinomics Radio, the podcast that explores the hidden side of everything with
0:02:49 your host Stephen Dovner.
0:02:50 That’s Shane Hamilton.
0:02:54 He’s an American historian who teaches at the University of York in England.
0:03:00 I’m the author of Supermarket USA, Food and Power in the Cold War Farms Race.
0:03:04 Was the supermarket a purely American invention?
0:03:06 I argue yes.
0:03:12 The easy answer is that the first declared supermarket was built in the United States.
0:03:19 I think the broader answer is that what makes a supermarket a supermarket is the industrial
0:03:25 agriculture system that enables the affordability of mass-produced foods.
0:03:29 The predecessor of the supermarket was the dry goods store.
0:03:31 So they didn’t have fresh produce.
0:03:36 They didn’t necessarily have milk or meat or a bakery in-house.
0:03:40 That’s what a supermarket did, is it put all those food items and often many other things.
0:03:42 You could get auto parts.
0:03:44 You could get your shoes shined in the early supermarkets.
0:03:49 It was a kind of one-stop shopping and service emporium.
0:03:52 Another big difference, supermarkets were self-serve.
0:03:57 In a dry goods shop, you’d ask a clerk for something and they’d fetch it in a supermarket.
0:04:03 You could ogle the meat and produce yourself, even handle it, and then put it in your basket.
0:04:08 The supermarket chain Pigley Wiggly is credited with having pioneered the self-service retail
0:04:09 model.
0:04:13 It is still operating today in 18 states.
0:04:17 The biggest supermarket chain for much of the 20th century was A&P, the great Atlantic
0:04:19 and Pacific Tea Company.
0:04:27 A&P, as of the 1940s, was the world’s largest retailer by any measure, by sales volume,
0:04:29 by number of outlets and so forth.
0:04:36 Between 1946 and 1954 in the U.S., the share of food bought in supermarkets rose from 28
0:04:39 percent to 48 percent.
0:04:43 By 1963, that number risen to nearly 70 percent.
0:04:49 A&P had so much market power that the Department of Justice went after it for anti-competitive
0:04:51 practices.
0:04:56 This was an interesting development, considering that the U.S. government played such a significant
0:04:59 role in the creation of supermarkets in the first place.
0:05:06 The original goal had been to use the supermarkets to drive down the cost of food for urban consumers.
0:05:12 The U.S. becomes a majority urban nation by, I think, 1920.
0:05:17 And there’s a lot of anxiety among leaders, political leaders, thought leaders about whether
0:05:24 or not U.S. agriculture is going to be productive enough to feed this growing urban population.
0:05:28 That is Ann Effland, a former senior economist at the USDA.
0:05:34 The U.S. Department of Agriculture, established in 1862, had a long history of funding and
0:05:36 conducting scientific research.
0:05:42 You know, a lot of the seed development and livestock breeding, one good example would
0:05:49 be the research done in the 1890s on animal disease, on bovine tuberculosis, for example,
0:05:55 to identify the causes of those diseases and then to develop ways to treat that.
0:06:00 There was also research on developing new kinds of machinery that would be less heavy
0:06:04 on the ground or less damaging to crops.
0:06:08 The USDA’s promotion of agriculture went even further than farm machinery and animal
0:06:09 breeding.
0:06:14 There was a need for better transportation from the farms to the cities.
0:06:21 So USDA had a unit that did engineering research on the best road materials and road construction
0:06:22 methods.
0:06:27 The Rural Electrification Administration was part of the New Deal USDA.
0:06:33 The private electrical companies didn’t see a profit in expanding out into rural areas
0:06:36 and so that was taken on by USDA.
0:06:42 But perhaps the biggest changes to American agriculture were mechanization and automation.
0:06:49 If I may say so, I lived through the structural transformation of the agricultural economy.
0:06:52 That’s Peter Timmer, an economist who used to teach at Harvard.
0:07:00 I’m a retired professor, have worked on agriculture and food policy, poverty reduction, economic
0:07:04 development for well over 50 years now.
0:07:08 And before that, Timmer was a farm boy in Ohio.
0:07:13 He worked for the Tip Top Canning Factory, which was founded by his great-grandfather,
0:07:14 and the Factory’s Tomato Farm.
0:07:21 I’m old enough to remember when we handpicked all of our tomatoes and we hand peeled all of
0:07:22 our tomatoes.
0:07:24 But that, of course, changed.
0:07:31 When I was in grade school or junior high school, if we could pack 40 or 50,000 cases
0:07:37 of canned tomatoes and product in a year, that was a pretty successful year.
0:07:43 By the time I had graduated from graduate school, the company was putting out a million
0:07:45 cases a year.
0:07:50 This was thanks in large part to a mechanical tomato harvester, which came out of the engineering
0:07:56 school at the University of California, Davis, with the help of federal research money.
0:08:00 It had taken years to get the harvester right, mostly because they first had to get the tomato
0:08:06 right, breeding a new variety that could withstand the rough treatment of the mechanical harvester.
0:08:12 I remember when we bought our first one, it was a huge expense, and it just revolutionized
0:08:13 our operation.
0:08:20 I was just in a microcosm of what turned out to be very general trends in the entire US
0:08:26 food system at the time.
0:08:33 The general trends could best be characterized as high volume and standardized agriculture.
0:08:38 If you would describe US agriculture policy as aggressive in earlier decades, then in
0:08:42 the Cold War era, it was pretty much on steroids.
0:08:47 This wasn’t just about feeding a growing US population.
0:08:52 This had a political thrust, meant to show the Soviet Union and the rest of the world
0:08:55 just how mighty the US was.
0:08:56 Shane Hamilton again.
0:09:02 I don’t mean to deny the power and the might of these weapons systems that were deployed
0:09:08 in the space race and all that, but fundamentally, this was a contest to demonstrate that either
0:09:13 communism or capitalism was a superior political economic system.
0:09:17 After Sputnik, when the United States was trying to understand why it was falling behind
0:09:21 in the space race, or why it thought it was falling behind in the space race, many of
0:09:27 the commentators said, “The problem is we’re not funding basic research.”
0:09:32 After 1957, the budgets of not only organizations like the National Science Foundation, but
0:09:37 also specific government departments like the Department of Agriculture, their budgets
0:09:41 for research increased dramatically on the theory that this is how the United States
0:09:45 would win the Cold War by doing the best science.
0:09:46 That is Audra Wolf.
0:09:49 I’m a writer, editor, and historian.
0:09:55 Wolf’s latest book is called Freedom’s Laboratory, The Cold War’s Struggle for the Soul of Science.
0:10:01 And it really looks at the ways that science as an idea became a tool for propaganda in
0:10:04 the Cold War, especially on the American side.
0:10:08 There’s this idea that you can change hearts and minds, and you can establish a climate
0:10:13 of opinion that makes people more willing to accept the American way of life as the
0:10:14 better choice.
0:10:19 And one of the things that made America so great, it’s agricultural system.
0:10:25 Things like chicken breeding and hybrid corn took a outsize and somewhat surprising role
0:10:28 in U.S. propaganda in the early 1950s.
0:10:29 But there was a tension.
0:10:35 The United States wanted to promote personal exchanges, scientific and technical exchanges
0:10:37 as a way to promote American values.
0:10:41 But at the same time, it was very, very nervous that by doing so, it would lose the advantages
0:10:44 that it had, particularly in grain production.
0:10:48 In 1955, the U.S. government unexpectedly had its hand forced.
0:10:54 A newspaper editor in Iowa named Lauren Soth invited Khrushchev to the United States to
0:10:56 see the wonders of American agriculture.
0:11:00 That’s Nikita Khrushchev, then leader of the Soviet Union.
0:11:03 And somewhat to everyone’s shock, Khrushchev said yes.
0:11:07 Now, Khrushchev didn’t come himself until 1959.
0:11:13 But in 1955, a group of 12 Soviet agricultural experts came to the United States to see the
0:11:15 wonders of American agriculture.
0:11:17 They saw how contour farming worked.
0:11:19 They saw the wonders of hybrid corn.
0:11:20 They saw the chicken breeders.
0:11:26 And what were those chicken breeders working on?
0:11:27 The chicken of tomorrow.
0:11:28 That’s coming up.
0:11:29 I’m Stephen Dubner.
0:11:31 This is Freakonomics Radio.
0:11:44 We’ll be right back.
0:11:48 Chicken in the 1920s was pound for pound as expensive as lobster.
0:11:54 By the 1960s, it was so cheap that it was quickly becoming America’s most popular meat.
0:12:00 That again is Shane Hamilton, a historian and the author of Supermarket USA, Food and
0:12:03 Power in the Cold War Farms Race.
0:12:07 In the book, he tells the story of a project called the chicken of tomorrow.
0:12:13 Really, the chicken of tomorrow is the chicken of today in that we’re all eating the kind
0:12:17 of genetic progeny of the original chicken of tomorrow.
0:12:23 What it was was a contest to produce the most efficient chicken using genetic techniques,
0:12:24 basically.
0:12:30 And it not only had to be an efficient chicken, but very heavy breasts, very light colored
0:12:34 feathers so that when it’s plucked, it would look good under cellophane and then later
0:12:36 plastic packaging.
0:12:42 And the birds had to be relatively disease resistant so that they could be put in intensive
0:12:47 rearing operations without dying too quickly.
0:12:54 This agricultural bounty, those heavy breasted cheap chickens, those millions of cases of
0:12:59 tomatoes, all this was a good candidate for the U.S. propaganda machine.
0:13:01 The U.S. Information Agency.
0:13:08 We’re searching for concrete forms of propaganda to display America’s wealth.
0:13:13 After one of the most concrete forms of display imaginable, the supermarket.
0:13:19 The supermarket is not just a retail box, but actually the endpoint of an industrial agriculture
0:13:21 supply chain.
0:13:26 A supermarket can’t exist without the inputs of mass produced foods.
0:13:31 The Farms Race was about how do you get the food from industrially productive, technologically
0:13:38 sophisticated farms to, you know, this display of abundance and the display was really crucial.
0:13:43 Since the average citizen living under communism wouldn’t have access to a piggly wiggly or
0:13:48 an A&P, the U.S. government brought the supermarket to the communists.
0:13:54 The 1957 supermarket USA exhibit in Zagreb, Yugoslavia, which was then a communist country.
0:13:59 It was a fully operational 10,000 square foot American supermarket filled with frozen
0:14:02 foods and breakfast cereals and everything else.
0:14:06 They airlifted in fresh produce from the U.S. because they didn’t think Yugoslavian produce
0:14:08 was attractive enough.
0:14:13 It was about this display of affordable abundance available to American consumers.
0:14:18 For anyone who didn’t get the message, there was also a sign touting, quote, “The knowledge
0:14:21 of science and technology available to this age.”
0:14:26 In other words, if you like our breakfast cereal, just think how much you like the rest
0:14:27 of our capitalism.
0:14:31 There were quite a few people who thought that if you showed that American consumers
0:14:38 could access affordable food, you know, strawberries in December without having to wait in line,
0:14:41 that that might actually cause the whole communist system to collapse.
0:14:45 The supermarket USA exhibit proved tremendously popular.
0:14:48 More than one million Yugoslavs visited.
0:14:51 Some received free bags of American food.
0:14:55 Immediately after seeing it, Marshall Tito, the leader of the country at the time, ordered
0:14:57 the whole thing to be purchased.
0:15:01 And it was bought wholesale from the United States exhibitors and used as a model.
0:15:06 They hired a consultant from an Atlanta supermarket firm to come over and teach them how to build
0:15:10 their own chain of socialist supermarkets.
0:15:15 So Yugoslavia, along with other European countries, started building American style supermarkets,
0:15:20 which created new buyers for processed and frozen foods from America.
0:15:26 This did not, however, lead to a wider embrace of American culture, much less the downfall
0:15:28 of communism.
0:15:32 But just a couple years later, the Americans took another shot this time in Moscow at the
0:15:35 American National Exhibition.
0:15:41 They built a split level ranch style American house, its kitchen stocked with food and the
0:15:44 latest labor saving appliances.
0:15:45 The message was clear.
0:15:51 The American economy, based in free market capitalism, was capable of producing things
0:15:56 that the Soviets command and control economy simply couldn’t.
0:16:02 The exhibition opening was attended by Nikita Khrushchev and then U.S. Vice President Richard
0:16:03 Nixon.
0:16:06 They engaged in what came to be known as the kitchen debate.
0:16:08 You must not be afraid of ideas.
0:16:27 Richard Nixon and Nikita Khrushchev are two of the most explicit users of this Cold War
0:16:29 Farms Race language.
0:16:34 Khrushchev declared that by outproducing the U.S. in per capita meat and milk production
0:16:40 that would be the Soviet equivalent of hitting American capitalism with a torpedo.
0:16:43 Nixon retorted that if there was going to be a torpedo fired, it was going to be by America’s
0:16:48 farmers and ranchers to which the farmers and ranchers listening to his speech applauded
0:16:49 very mightily.
0:16:54 A few months afterward, Khrushchev finally visited the U.S. and he got to see for himself
0:16:57 the sprawling cornfields of Iowa.
0:17:01 But this was of little help to the Soviet farmers back home.
0:17:10 The fact is they were unable to modernize Soviet agriculture with the economic structure
0:17:12 and strategy that they were following.
0:17:15 The economist Peter Timmer again.
0:17:18 It was not a technological problem.
0:17:21 It was a management and marketing problem.
0:17:27 There was a total divorce between what consumers wanted and what the managers of the big state
0:17:29 farms were told to produce.
0:17:34 Before it was part of a World Bank team that visited the Soviet Union, he saw for himself
0:17:37 their agricultural system and supermarkets.
0:17:38 Oh gosh.
0:17:40 I mean, the shelves were empty.
0:17:42 It was just weird.
0:17:48 We stayed at a government hotel and there was hardly anything to eat to talk with the
0:17:54 staff of the research agencies in places like that who would struggle just to come up with
0:17:56 basic foods.
0:17:58 They knew it could be better than that.
0:18:05 Khrushchev, despite his bravado, was ultimately forced to buy imported grain from the US.
0:18:09 Some historians would argue that this was one of the crucial factors that led to his downfall,
0:18:14 that it was just embarrassing on the world stage for the Soviet Union, this vast country
0:18:20 with enormous agricultural resources having to turn to its arch enemy for grain.
0:18:25 Khrushchev’s successor, Leonid Brezhnev, continued the policy of importing food from
0:18:28 the US to cover domestic shortfalls.
0:18:32 If the two countries had been normal trading partners, this wouldn’t have been a big deal,
0:18:35 but they weren’t normal trading partners.
0:18:41 They were Cold War adversaries, the global icons of capitalism and communism.
0:18:45 And it was becoming clear which system would prevail, at least on the food front.
0:18:48 Peter Timmer’s final analysis.
0:18:54 It was a fundamentally failed strategy for agriculture that brought down the Soviet Union.
0:18:56 They didn’t grow enough and they didn’t grow the right things.
0:19:01 And there were no price signals telling you what’s expensive and what’s cheap.
0:19:08 They wasted a lot of what they were producing on the land and never got into the supermarkets.
0:19:12 Timmer was actually in Moscow when the Soviet Union collapsed.
0:19:18 The neat thing is I have a passport going in stamped Soviet Union, but my passport coming
0:19:21 out, the exit stamp, is Russia.
0:19:27 People were so optimistic about what was going to happen.
0:19:32 They knew that American supermarkets were a miracle.
0:19:36 They had seen it on television.
0:19:42 That point had clearly gotten through at least to everybody that I talked to.
0:19:47 And so it seems as though the mighty supermarket may indeed have played a role in America’s
0:19:48 Cold War victory.
0:19:49 Yeah.
0:19:55 I mean, this is, it’s central to the kind of lie really of the supermarket as a weapon.
0:19:57 The historian Shane Hamilton again.
0:20:03 So when the supermarket is upheld as this, you know, effectively missile this concrete
0:20:10 consumer weapon against the claims of communism, it’s built on this idea that supermarkets
0:20:14 are producing this affordability just through the workings of supply and demand.
0:20:19 But you know, it’s unfettered markets that are somehow making food so affordable for
0:20:26 American consumers where the reality is for everything from milk to beef to grain to processed
0:20:33 foods of all kinds, there’s massive government investment in the science and technology that
0:20:39 enables the productivity of American farms from fertilizers to frozen food processes
0:20:42 to distribution and so forth.
0:20:44 And that’s all erased.
0:20:48 The image is that it’s just the supermarket itself that is the source of abundance.
0:20:52 So when you describe it like that, it’s certainly, I mean, you use the word lie and you talk
0:20:56 about the hidden components and you make it certainly sound nefarious.
0:21:01 But couldn’t you argue that, you know, the role of a government is to invest in science
0:21:06 and technology that’ll benefit private industry and ultimately the citizenry?
0:21:07 Yeah.
0:21:10 I actually don’t have a problem with the U.S. government investment in science and
0:21:14 technology and encouraging, you know, more productivity.
0:21:20 The concern is with, you know, that being disguised as a free market when it’s not
0:21:21 particularly free.
0:21:25 I mean, taking that to a propaganda level and attacking another country for not having
0:21:31 free markets, it’s just duplicitous, right?
0:21:36 You may or may not be as disturbed as Shane Hamilton is by what he calls the duplicity
0:21:41 of the U.S. government for promoting the supermarket as an emblem of free market capitalism.
0:21:48 To me, the big question is this, what was the ultimate cost of this supermarket victory?
0:21:53 What are the economic and political and health consequences of more than a hundred years
0:22:00 of agriculture policy that encouraged industrialization, standardization and low prices?
0:22:14 It’s coming up right after this.
0:22:19 So the U.S. won the so-called farms race with an industrial approach to agriculture
0:22:23 that was heavily influenced by government policy and funding.
0:22:27 What were the long-term results of that victory?
0:22:31 We need to go back about a hundred years to figure that out.
0:22:35 That is on the advice of Ann Effland, the former USDA economist we’ve been hearing
0:22:36 from.
0:22:42 Effland thinks there’s one key event that really drove U.S. food policy.
0:22:46 That is, production increases around World War I.
0:22:49 Farmers expanded their production to meet wartime goals.
0:22:53 And there were some price supports during that time that provided incentives for increased,
0:22:57 especially wheat and pork and some of these other staple commodities.
0:23:03 But there was no real planning for the aftermath after the increased demand and the price supports
0:23:06 that are set up for war go away.
0:23:11 And it left a number of farmers who had, in good faith, developed larger farms and more
0:23:14 productive farms with very low prices.
0:23:18 So after the war, farmers were producing more food than was necessary.
0:23:22 Then came the Great Depression, the economist Peter Timmer.
0:23:29 I mean, demand collapsed, but agricultural productivity did not.
0:23:32 And what that meant was prices just collapsed.
0:23:42 And so that so totally set the mind frame for U.S. agricultural policy.
0:23:47 That’s when we see the beginning of real price policies for agriculture.
0:23:52 Price policies for agriculture would take many forms over the ensuing decades, from
0:23:55 crop insurance to loans and direct payments and many more.
0:23:59 Now, you can understand why the government would want to make agriculture financially
0:24:02 viable and remove some of the uncertainty.
0:24:06 A national food supply is a pretty important thing.
0:24:11 One key policy tool the government used was a price support system, guaranteeing farmers
0:24:16 a certain minimum price for a specific crop at a specific time.
0:24:20 There was an idea of something called parity, which was that the price should be such that
0:24:25 it would give farmers the same purchasing power in comparison to workers and others
0:24:29 in the economy that they had had before World War One.
0:24:33 And that was the guideline for what those price support levels ought to be.
0:24:38 But if you increase the price being paid without limiting the amount being produced,
0:24:40 well…
0:24:45 One of the problems with this is that it leads to a large surplus.
0:24:50 This would leave the federal government to buy and store excess produce.
0:24:55 In the early 1930s, when the U.S. government guaranteed farmers 80 cents per bushel of
0:25:01 wheat, the government wound up buying and storing more than 250 million bushels.
0:25:05 These things all take place in the context of their own times.
0:25:10 Having policies that found a way to increase farm incomes in the 1930s, I think would be
0:25:16 seen as a good thing, but there are also consequences of that over time as they get embedded.
0:25:22 If you ever wonder why the USDA’s old food pyramid, the diagram of recommended servings
0:25:28 of different foods, why the biggest category at the bottom of the pyramid was bread, cereal,
0:25:34 rice, and pasta, well, the U.S. had an awful lot of all those foods.
0:25:41 And if you, as the USDA instructed, there’s a good chance you put on a few pounds.
0:25:45 You can’t think about nutrition without thinking about agriculture policy.
0:25:50 And U.S. agriculture came to be driven by financial incentives.
0:25:56 Incentives that, given how government funding often works, weren’t always entirely sensible.
0:26:06 You know, economists who don’t do U.S. agricultural policy are usually horrified by what they
0:26:15 see in terms of distorting markets, picking, okay, corn, soybeans, wheat, you guys get
0:26:23 big subsidies, apples, grapes, fresh fruits and vegetables, you’re on your own.
0:26:29 We incredibly regulated both federally and at the state level just a mess, just an awful
0:26:30 mess.
0:26:36 With price guarantees for certain crops and the resultant glut of supply, the government
0:26:41 sometimes paid farmers to plant fewer crops, but even this wasn’t fully successful.
0:26:46 So we have controls on how much can you plant on an acre, but not on how much your yield
0:26:49 is on the acres you are planting.
0:26:50 There’s a huge boom.
0:26:55 Lots of new chemicals, fertilizers, machinery that make farms more productive.
0:27:00 So even though we’re trying to control by reducing the acreage, there continues to be
0:27:04 increasing production and surpluses don’t go down.
0:27:11 But Anne Eflin says this was a problem the USDA wasn’t all that unhappy about.
0:27:16 Problem solving on the scientific and technical and engineering side tends to run on its own
0:27:19 track and be seen as a positive outcome.
0:27:25 I don’t think there’s ever a point at which the policy side is saying, “Oh, stop providing
0:27:30 good science and better agricultural practices so we don’t have these surpluses,” because
0:27:35 when you do that, what you’re saying is then stop this economic development.
0:27:43 Solving problems and making farming more efficient are still seen as good projects to continue.
0:27:49 The fact that they also create these surpluses is sort of a different track of problems that
0:27:53 the farm policy then is trying to figure out solutions to.
0:27:59 One solution was to use surplus grain for animal feed.
0:28:00 Shane Hamilton again.
0:28:06 This massive surpluses of cheap corn and later soybeans encourages the rise of industrial
0:28:14 meat production, concentrated animal production, livestock feeding operations that’s enabled
0:28:16 by cheap grain production.
0:28:21 Industrial meat production fueled by cheap grain meant cheap meat too, and helps explain
0:28:26 how the U.S. became one of the world’s biggest consumers of meat per capita.
0:28:34 Today, more than 30% of corn, more than 50% of soybeans grown in the U.S. goes toward
0:28:36 feeding cattle and other livestock.
0:28:39 But even that left a lot of surplus production.
0:28:41 So, what happened?
0:28:49 High fructose corn syrup, yep, you’ve got surplus corn and you’ve got a demand for easy
0:28:55 convenient sweetener in the food sector, and that was just a perfect storm.
0:29:01 That syrup revolutionizes food processing because instead of a powdery sweet thing,
0:29:06 it’s a liquid, and liquids are way easier to handle in food processing.
0:29:12 If I had only one thing to say about the impact of our agricultural programs on what you see
0:29:18 in the supermarket and subsequent health issues out of the diet, I would have said the fact
0:29:24 that we use so much high fructose corn syrup, that’s the example of how things can go badly
0:29:26 wrong even if well intended.
0:29:33 I mean, don’t get me started on ethanol, because that’s the next step in reducing
0:29:39 the surplus, but I don’t want to go there.
0:29:45 The rise in agricultural productivity tended to favor larger, more industrial farms.
0:29:50 It didn’t hurt that they often received the government price supports designed for smaller
0:29:51 family farms.
0:29:56 As you can imagine, this began to put a lot of small farms out of business.
0:30:04 We didn’t manage that process very well, but I think just basic economic forces would
0:30:06 have pushed us in that direction.
0:30:08 It just wouldn’t have pushed us as far.
0:30:13 Peter Timmer, you will recall, grew up working on the tomato farm and cannery founded by
0:30:15 his great-grandfather.
0:30:19 You’ll also recall when the Tip Top Canning Company got their first mechanical tomato
0:30:21 harvester.
0:30:24 It just revolutionized our operation.
0:30:29 When the mechanical harvester was introduced, there were around 5,000 tomato growers in
0:30:30 the US.
0:30:35 Within five years, 4,400 had gone out of business.
0:30:40 The Timmer family farm and canning factory made the cut, and they lasted for decades.
0:30:49 But between 1940 and 1969, 3.4 million American farmers and their families stopped farming.
0:30:56 Right a few historians suggest that this all-out push to productivity killed the family farm,
0:30:57 effectively.
0:30:59 Shane Hamilton again.
0:31:01 It’s hard to deny that.
0:31:07 On the other hand, we don’t apply the same kind of metrics to industrial manufacturing,
0:31:11 where similarly there’s been massive US government investment in science and technology to support
0:31:14 economic growth and productivity.
0:31:19 I’m sympathetic to those who see it as overall in that positive gain.
0:31:23 However, the pain is real.
0:31:28 Peter Timmer says this massive consolidation on the production side was driven by what
0:31:34 was happening on the consumption side, the growth of supermarket chains.
0:31:39 Supermarkets were able to manage the supply chains all the way back to farmers, but they
0:31:41 didn’t want little tiny farmers.
0:31:43 Just one supplier please.
0:31:47 It’s just way too complicated to contract with 50 or 100.
0:31:54 That has changed then the nature of production, right down at the level of Tip Top Canning
0:32:02 Company and how we would be able to provide the kind of regular quality and supply and
0:32:07 low price that a Walmart or a Kroger or a Publix would need.
0:32:12 I mean, Walmart really came in and looked at the landscape of American supermarkets and
0:32:15 saw inefficiencies everywhere.
0:32:21 What Walmart did was build on its successful model of general merchandise sales with hyper-efficient
0:32:26 logistics and distribution, brought that into the supermarket industry and really shook
0:32:27 things up.
0:32:34 I used to ask my class, I’m talking 1985, where is the world’s largest supercomputer?
0:32:37 And the correct answer was, it’s at the Pentagon.
0:32:42 Okay, where is the world’s second largest supercomputer?
0:32:51 Bentonville, Arkansas, home of Walmart, they used that computer to track every single item
0:32:55 on every single Walmart shelf.
0:33:04 That information technology is what revolutionized food marketing and it was pretty much invented
0:33:06 by Walmart.
0:33:12 This technology would spread across the world, affecting not just the demand side, supermarkets,
0:33:14 but the agriculture supply side.
0:33:21 So the U.S. experience is formative and it’s formative for two reasons.
0:33:31 One, U.S. universities train so many ag economists, food scientists, food policy people to go back
0:33:37 to other countries that the U.S. model is pretty well ingrained intellectually.
0:33:47 But the other thing, of course, is the biological and mechanical technologies mostly came out
0:33:49 of the United States.
0:33:53 Another consequence of the scaling up of American agriculture?
0:33:55 More standardization and less variety.
0:34:01 So apples, in the early 20th century, consumers in say New York state would have access to
0:34:05 literally hundreds of varieties.
0:34:10 Even in mass retail markets, by the mid 20th century, it’s down to just a handful and red
0:34:13 delicious really dominates the whole market.
0:34:18 And apples became remarkably tasteless by the mid 20th century.
0:34:24 So certain qualities were given up in order to gain that advantage of price and abundance.
0:34:31 We clearly won the food wars in terms of supply and abundance.
0:34:34 We won the abundance war.
0:34:44 What we may be in the process of losing is the health and quality dimensions going forward.
0:34:50 I think today we’re certainly witnessing, perhaps especially among millennials, an attempt
0:34:54 to kind of reconfigure values.
0:34:58 What are you actually looking for when you go to a supermarket?
0:34:59 It’s not just price.
0:35:06 Price does not contain all relevant information for many shoppers in a contemporary supermarket.
0:35:12 So the costs of pollution, of degraded animal welfare that are currently not being borne
0:35:17 by either producers or consumers of food would have to be borne.
0:35:25 If we had worried much, much more about the quality of farmland, of sustainability, about
0:35:31 environmental side effects from heavy fertilization on corn, we got a dead zone in the Gulf of
0:35:37 Mexico that is directly attributable to putting fertilizer on corn up in the Midwest.
0:35:42 I accused my brothers of poisoning the Gulf of Mexico, and they said, “Well, what are
0:35:43 we going to do?
0:35:45 We have to get high yields.”
0:35:52 There was this sense of everybody being trapped in an old paradigm, and now how do we break
0:35:53 out of that?
0:35:57 I hate to say it, but the current government seems to be trying to take us back to the
0:36:03 old paradigm rather than a more sustainable, environmentally friendly, let’s make agriculture
0:36:05 do more on organic and natural processes.
0:36:10 That doesn’t seem to be the political driver right now, but it has to come back.
0:36:20 We have to make agriculture green, which is a strange thing to say.
0:36:25 Peter Timmer has seen a lot of change in the farming business over his lifetime, and who
0:36:29 knows, maybe he’ll see the change he’s hoping for now.
0:36:34 But it’s going to be hard to break the status quo, at least in terms of how financial incentives
0:36:36 drive food production.
0:36:40 For instance, when the first Trump administration placed billions of dollars of tariffs on
0:36:46 Chinese imports starting in 2018, China responded with their own tariffs on imported American
0:36:50 crops like soybeans, alfalfa, and hay.
0:36:56 American crop exports to China fell dramatically, as did, of course, farmers’ revenues.
0:37:02 In response, the U.S. government announced a $16 billion welfare package to U.S. farmers.
0:37:07 That was followed by more farm aid tied to the COVID-19 pandemic.
0:37:13 Together, the Trump and Biden administrations have authorized over $157 billion in direct
0:37:16 government payments to farmers and ranchers.
0:37:21 And now Trump is promising more tariffs in his second term, which means the cycle may
0:37:29 start again.
0:37:30 And that’s it for this bonus episode.
0:37:34 From our archive, we will be back shortly with a new episode.
0:37:36 Until then, take care of yourself.
0:37:40 And if you can, someone else too.
0:37:42 Freakonomics Radio is produced by Stitcher and Renbud Radio.
0:37:46 You can find our entire archive on any podcast app.
0:37:51 It’s also at Freakonomics.com, where we publish transcripts and show notes.
0:37:55 This episode was produced by Matt Hickey and updated by Theo Jacobs.
0:38:00 Freakonomics Radio network staff also includes Dalvin Aboulagi, Alina Cullman, Augusta Chapman,
0:38:05 Eleanor Osborne, Ellen Frankman, Elsa Hernandez, Gabriel Roth, Greg Rippon, Jasmine Klinger,
0:38:10 Jason Gambrel, Jeremy Johnston, John Snars, Muirak Bowditch, Morgan Levy, Neil Carruth,
0:38:14 Rebecca Lee Douglas, Sarah Lilly, and Zach Lipinski.
0:38:20 Our theme song is “Mr. Fortune” by the Hitchhikers, and our composer is Luis Guerra.
0:38:23 As always, thank you for listening.
0:38:28 When I was a Fulbright scholar and had to explain myself to the cohort when we got to
0:38:32 London, I said, “Well, my background is tomatoes,” and everybody just laughed.
0:38:48 I hadn’t realized that it was not such a normal background.
0:38:49 Stitcher.
0:38:52 (upbeat music)
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