'Cause I Said So…

Law of Unintended Consequences: A Cautionary Tale

Posted in Bureaucracy, Free Trade, Libertarianism, Lobbyists, Taxes by kevinsoberg on February 18, 2010

Politicians like to think they can make economic decisions on our behalf with no downside. As usual, the “smart people” can create the biggest mistakes when trying to “do good.”

Here’s one for you. Almost since the Louisiana Purchase, the federal government has had a system of tariffs and duties on the import of sugar to the US. Originally, it was to maintain sugar prices for growers in the new Louisiana Territory, thereby keeping slave prices high. In 1934, an import quota system was added to existing tariffs and direct farm subsidies. In one shape or form, these protections for domestic sugar growers have been in place to today.

These protections are deemed necessary because the American South is not the ideal growing environment for sugar cane. Cane much prefers the moisture, warmth and sun of the tropics to the short growing season of the semi-tropical regions of the Gulf Coast of Louisiana, Florida and Texas. The resulting plants are much smaller and less productive than those grown in the Caribbean, and Central and South America.  In addition, there are the higher labor costs of the US farmer and farm worker.

The result of political intervention in the sugar market is a US price triple the world price. A 1-cent increase in sugar prices costs US consumers in excess of $200 million in increased food costs. The vast majority of this extra profit goes to the growers all at the expense of US consumers. Food costs have a disproportionate effect on lower and middle class consumers, who have less elasticity in spending ability and less disposable income.

What is the rationale politicians and the industry give for higher than necessary food prices for Americans? Food security. All of our food must be grown domestically to ensure a safe and ready supply. Really. As if in time of national emergency, we couldn’t easily secure sources of sugar in our backyard. I can think of better uses for this argument, such as domestically producing a much greater share of our own hydrocarbons. (Drill here, drill now. But that’s for some other time.)

I’m a big believer in open markets. Why should we be giving aid (alms) to countries like Haiti? They could be producing a commodity product for sale to our market. We’re being hit three times for money: payments to farmers, higher prices and foreign aid. Why not skip the middle men, save money and create opportunities for our neighbors? Sounds good to me.

If artificially high food prices were where this tale ended, it would be bad enough. However, there are other issues as a result of this tinkering with our markets. They are the transformation of the US diet and its possible health effects.

Food processors, like every other enterprise, try to maximize profits and minimize costs. Well, if one of your major ingredients was kept artificially high, what might you try to do? Substitute it, possibly? That’s exactly what they started doing.

Processors began replacing sugar with an invention of US food scientists, high-fructose corn syrup. Look at the label of almost any processed food product from baked goods to bottled soda. You will see high-fructose corn syrup. You may also see sugar, but probably not. Unless it’s a dry, powdered product, sugar has all but been replaced with this sweet liquid.

Use of high-fructose corn syrup (HFCS) as a major sweetener began in the US as a response to high domestic sugar prices. HFCS is produced from corn, the largest crop in the US, and was created as one of a myriad of uses for the huge domestic corn crop. It was introduced as a secondary sweetener, and its use as the primary sweetener in the US food market was unforeseen.

HFCS is made in a three-step process. First, the corn is physically abraded to open up the starch molecules. Second, the starch molecules are treated with chemicals to break up the starch molecules until it is a liquid solution of mostly glucose, which is standard corn syrup (ex. Kayro) and is less sweet than cane sugar (sucrose).

Okay. Big deal. What’s this got to do with anything? Well, here’s the problem. We weren’t built to consume mass quantities of fructose. Fructose cannot be used by our bodies directly. It must go through an enzymatic process to change it to glucose, which is our “common carrier” of calories. Yeah, sucrose, cane sugar, is not strictly glucose either and must be converted for use. Big difference though, sucrose is a glucose molecule bonded to a fructose molecule. There is a 50:50 ratio of glucose to fructose in sucrose. We were built to metabolize this ratio and can do it, continually, to no ill effects (assuming no medical issues). What glucose / fructose ratio do you think is used to achieve the teeth-hurting sweetness of most bottled beverages?

Another thing, while fructose is sweeter on our tongues than is sucrose, it takes longer for it to be processed to glucose. This results in our uptake of glucose to lag behind our consumption of fructose. Our hunger, or “sweet tooth”, takes longer to be sated. We end up consuming larger amounts of the food stuff before our body tells us we’re done. Also, there’s been studies associating high fructose consumption to all kinds of negative health issues. I’m not going to get into all that. Look into it yourself, if interested.

Here’s the kicker, in November 1984, Coke and Pepsi announced their switch to HFCS from cane sugar. Pepsi had been using a blend for years, so no major issue. However, Coke for all its years had been using cane sugar, exclusively. Coincidentally, the following Spring, New Coke was introduced with HFCS, not sugar. Even after “Original Formula” Coke was reintroduced, HFCS was the sweetener. All remaining soft drink manufacturers soon switched to HFCS.

Today, unless you buy a soft, energy or sports drinks from a boutique bottler, you are consuming HFCS. Take a look at the time lines involved. When did we start hearing about our kids getting so “portly”? Seems to me it was after the HFCS takeover. Now, kids like sweet stuff. I did, and ate tons of it. “Kids don’t get any activity, right?” Hey, I had video games, TV and books. It’s not like we were out on some hamster wheel all day long.

What fundamentally changed for kids, and for all of us? Might it be our diet? I can’t think of anything more basic than that. You know of Occam’s Razor, right? It’s the principle that when given a selection of hypotheses, you choose the one that requires the least assumptions. How’s this: our diet affects our health.

Without any forethought or understanding of possible negative outcomes, politicians, lobbyists and entrenched interests have worked to change the way and what we eat. To what result? We shall see. Thanks guys.

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3 Responses

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  1. Enoch_Root said, on February 18, 2010 at 10:55 am

    the Genius of DC…

  2. Peter said, on February 21, 2010 at 7:31 am

    Thanks for the post!

    One correction: a molecule of sucrose is not comprised of 2 molecules of glucose; rather, it is a molecule of glucose and a molecule of fructose. Two molecules of glucose bonded together form the dissacharide called maltose.

    • kevinsoberg said, on February 21, 2010 at 8:42 am

      Darn it. You’re right. I’m a bit rusty on my biochemistry. Having not had to use it for about twenty years. Spent more time researching the tax and trade aspects. Tried to rely strictly on memory for the chemistry. Should have known better. Thanks for the correction.


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