The Government's War Against Healthy Food
The Federal Trade Commission has tried to block a merger between Whole Foods and Wild Oats, claiming it would give Whole Foods too much market power.
January 5, 2009
Fred Foldvary, Ph.D.
Economist

I previously wrote on the government’s crazy attempt to prevent the merger of organic food sellers Whole Foods and Wild Oats (“Whole Phooey on Antimonopoly Action,” http://www.progress.org/2007/fold513.htm). The Federal Trade Commission claims that Whole Foods dominates the natural foods industry, even though they only have had 15 percent of that market. Moreover, many supermarkets also sell organically grown and “natural” foods, and Whole Foods is a tiny part of the overall grocery business.

I buy groceries at Whole Foods because I am willing to spend a little more to eat healthy food, and the store I go to has a great salad bar. But I also buy at other food stores that are closer to where I live. Safeway and other grocery stores sell some organic produce and compete with Whole Foods. It would be absurd to say that Whole Foods store dominates the healthy food business in the San Francisco Bay Area, where I live.

A year and a half later, even after losing its case in court, even after a judge allowed the merger, the FTC has still not given up its anti-trust action against Whole Foods. At a time when the economy is depressed and people are shifting their buying to less expensive stores such as Wal-Mart, the federal government is still inflicting costs on Whole Foods and distracting its management from concentrating on its food business.

The government action makes sense if the federal chiefs seek to drive Whole Foods to bankruptcy. The large agricultural companies engage in mass production with a heavy use of pesticides on plants and hormones and other chemicals on animals. Mass agriculture reduces current costs at the expense of depleted soils, the elimination of crop variety, the loss of wildlife, greater dependency on giant firms, and the poisoning of soil, water, and air. None of this is labeled on food crops, and consumers buy the goods as they think that government is there to protect their health and preserve the environment. Instead of paying a penalty for polluting and for not having to disclose the poisons, these firms get federal subsidies.

Organic foods were becoming more popular as people became more health conscious and also more concerned with the deteriorating natural environment. Now in 2009 the recession is making people more cost conscious. This is the ideal time to kill off the organic food business, starting with one of the leaders, Whole Foods.

Despite the opposition of the federal government, the merger of Whole Foods and Wild Oats is being implemented, both in the stores and in the company administration. The merger cannot be undone, but the FTC could split up Whole Foods, like it previously tried to do with Microsoft. Splitting the company would surely drive the split fragments to bankruptcy.

During the Crash of 2008, the federal government poured billions of dollars into failed banks, insurance firms, brokerage firms, and other financial giants, bailing them out after their chiefs had made multi-millions of dollars in fees, bonuses, commissions, options, and “necessary” expenses such as private jets. The thousands of retail stores going out of business have gotten no help. The government is propping up the failed auto and financial industries while seemingly seeking to add an unsubsidized natural-foods grocer to the list of bankrupt firms.

What is the logic? How can this make any sense? One does not have to be that cynical to see the hidden hand of special interests. Government serves the big-money interests and the political pressure groups, and the agri-business that get billions of dollars of federal subsidies also uses its clout to destroy threats to its profits, namely from food grown without the toxic chemicals that allow big agriculture to profit from not having to pay the health and pollution costs.

If anybody has a better explanation for the federal government’s subsidies to toxic agriculture and its war against healthy food, I’d like to hear it.

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Fred Foldvary, Ph.D.
Economist

FRED E. FOLDVARY, Ph.D., is an economist and has been writing weekly editorials for Progress.org since 1997. Foldvary's commentaries are well respected for their currency, sound logic, wit, and consistent devotion to human freedom. He received his B.A. in economics from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University. He has taught economics at Virginia Tech, John F. Kennedy University, Santa Clara University, and currently teaches at San Jose State University.

Foldvary is the author of The Soul of LibertyPublic Goods and Private Communities, and Dictionary of Free Market Economics. He edited and contributed to Beyond Neoclassical Economics and, with Dan Klein, The Half-Life of Policy Rationales. Foldvary's areas of research include public finance, governance, ethical philosophy, and land economics.

Foldvary is notably known for going on record in the American Journal of Economics and Sociology in 1997 to predict the exact timing of the 2008 economic depression—eleven years before the event occurred. He was able to do so due to his extensive knowledge of the real-estate cycle.