Chicago has historically been one of the biggest locales for the production of candy in the country. Brach’s had their factory here, as did Ferrara Pan, Fannie May, and of course the local Frango mints sold at Marshall Field’s (yum!) were made here too. One of the more delightful and tempting things about Chicago is walking downtown in the late afternoon and having the scent of chocolate waft over you.
This is changing. Frangos are now made elsewhere, Brach’s and Ferrara Pan have closed their factories and moved production to Mexico, and within the past month the new owner of the Fannie May factory has closed its doors. The scent of chocolate will still waft, though, because we have a couple of smaller chocolatiers that are still here. For now.
Walter Williams does a beautiful job in this Town Hall column of connecting this shift to the sugar lobby and the subsidies paid to domestic sugar producers.
Chicago has been home to many of America’s candy manufacturers, but today they’ve fallen on hard times. In 1970, employment by Chicago’s candy manufacturers totaled 15,000, and now it’s 8,000 and falling. Brach used to employ about 2,300 people; now most of its jobs are in Mexico. Ferrara Pan Candy has also moved much of its production to Mexico. Yes, wages are lower in Mexico, but wages aren’t the only factor in candy manufacturers’ flight from America. After all, Life Savers, which for 90 years manufactured in America, has moved to Canada, where wages are comparable to ours.
One of the ignored stories in the clamor and demagoguery over job losses, not only in the candy industry but in others as well, is the devastating impact of congressionally created “miracles” on our industries. American sugar producers fight tooth and nail to keep foreign sugar imports out of our country. They’ve spent $722,000 in campaign contributions to both Democratic and Republican congressmen to enact sugar import tariffs and quotas.
Williams goes on to describe the cost in terms of US jobs from these protectionist sugar policies:
According to the Sugar Users’ Association, an organization that represents companies who use sugar as an input, such as candy manufacturers, the protectionist miracle that Congress has created for the sugar industry has cost anywhere from 7,500 to 10,000 jobs in sugar-using industries due to higher sugar costs. Higher sugar costs make U.S. candy manufacturers less competitive in both domestic and world markets. Life Savers became more competitive simply by moving to Canada — it saved itself a whopping $10 million dollars a year in sugar costs.
By moving to Canada! Appalling.
Another facet of the sugar protection racket that Williams does not address is the environmental impact of subsidized sugar protection. A few years ago a group in my Environmental Economics class did a research project, and found that the sugar industry is one of the prime contributors to the degradation of the Everglades in Florida. They are also blocking efforts to reclaim some of the wetlands and the ability of the wetlands to serve as a nutrient filter for the local ecosystem. And it’s not even land that they own, and they are degrading it. If we had a proper system of property rights in environmental quality, then a common law tort suit would do the trick. Grrrr.
Arnold Kling does a nice job of connecting this article with the jobs issue and asking for some intellectual consistency from the “jobs outsourcing should be stopped” camp. Simply asking
What might be the secondary consequences of legislation that discourages American companies from using overseas software programmers?
points out the hypocrisy of supporting sugar subsidies while wanting to keep existing American jobs. The secondary consequences, if the sugar and candy industries are any indication, would be to drive the production of software itself offshore, not just the work of some of the inputs. Software companies would leave the US so that they could have access to labor at a wage that better matches the value of the marginal product of their labor. Or, as Walter Williams points out, there may be other factors in determining whether a company stays in the US beyond labor costs. In the case of software I’d imagine it being costs of patenting/IP protection. But software is more labor-intensive, in the sense that labor costs are a higher share of the budget, than candy.
Hmmmm ….
As long as people can go to the store and get a 5 pound bag of sugar for about a buck, they will not have an appreciation for the mess that the sugar industry has made. I don’t see things changing until at least next year, since Florida is a state that could go either way in the upcoming election.
Chicago was (still is?) home to Tootsie Roll. My dad sold parts to their plants years ago. One Saturday, on my 12th birthday, he took me to the plant. I was led to the “special” room, full of open display boxes of candy, and told to just help myself. I did. [But I wasn’t a pig about it!] Sweet.
If you want to give people a taste (groan at the pun) of what sugar tariffs cost us, place an order at popsoda.com or one of its competitors in the internet gourmet soda business. Have you ever had a Coke or Pepsi made with real cane sugar, let alone a “micro” cola like Red Rock, Boylan, or Whooppee? By god, it’s WORTH $1/bottle.
Ahhh, Blommers! Can always tell when they burn the chocolate.
Just waiting for Wrigley’s to go, too!
The Tribune pointed out a few years ago that even Richard II’s bro – William – AS COMMERCE SEC couldn’t break their hold.
It’s the beets of ND, too.
And we screwed our anglosphere ally, the Ozzies, with the recent agreement. No Ozzie sugar for us.
Keep in mind that the Brach’s factory on the West Side, was the biggest single Teamster facility in Illinois.
Our “pro-union” Illinois Senator Dick Durbin happily sacrificed these jobs rather than take a leadership role promoting free trade.
Come to think of it Senator Durbin, Mayor Daley, and Speaker of the House Dennis Hastert happily sacrificed Arthur Andersen, rather than taking a leadership role promoting free commerce.
When it comes down to it, our politicians promote bigger goverment first, greater dependency on government second, while the needs of constituents falls much further down the list.
jbp
Well, John, that depends on which constituents you are talking about. Restricting sugar imports raises the domestic market price, prompting users to look for alternatives. The leading alternative, as you know, is corn sweetener, and Illinois grows more corn than any other state. As a bonus, Sen. Durbin is from downstate, not Chicago. And the leading manufacturer of corn sweeteners is Archer Daniels Midland, one of the biggest sources of campaign cash anywhere.
As a political equation, the thing to remember about sugar is that it is concentrated at the supply end and very diffuse at the demand end — the businesses to which sugar costs are very important are mostly small, and the large companies that use sugar either have alternatives, count sugar as only a small percentage of their total costs, or both. So it’s vital to a few people no one in Washington listens to, and not so important to many important companies that have many more pressing issues to talk to legislators about.
Why do sugar producers purchase more political influence than sugar users? What is the economics of that?
It’s politics more than economics. Sugar producers are divided into cane growers in Florida, Louisiana and other Southern states (plus Hawaii) and beet growers, mostly in Plains and Western states. Like most large ag producers they are not terribly diversified — their specific situations are different depending on whether they grow cane of beets but all sugar growers share a heavy reliance on artificially high, stable sugar prices.
Added to this is the power of inertia, the strongest force in human affairs. We have had sugar supports, along with other farm programs, for decades now; when farm legislation is considered in Congress sugar growers demand to know why their program should be cut when others aren’t (when others are they demand to know why they should sacrifice since government outlays on the sugar program are minimal in most years). Sugar growers benefit from quirks in the political system. For example, the senior Democrat on Senate Appropriations is Dan Inouye (D-HI), who everyone likes and whose good will many Democrats need, and who in every farm bill asks for only one thing from the Senators considering commodity programs. Guess what it is?
Note that not all of this — not even most of it — has to do with buying political influence. Politicians like most other people are glad to do things for constituents if they are asked and if it doesn’t cost them too much. Sugar users didn’t really start asking until about twenty years ago (in the context of farm programs this isn’t long at all) and never pressed their point because unlike beet and cane growers most of them could still make very good incomes from things other than sugar (like corn sweetener) or from moving facilities outside the US. In that case their employees could be out of luck, but after a plant has closed and jobs have been lost people lose enthusiasm for locking the barn door.
The Reagan administration’s response to this was fundamentally ideological (the government has no business and certainly no need to support prices for sugar farmers), with the pragmatic argument sometimes made that lowering American trade barriers on commodities like sugar would make it easier for the United States to negotiate lower trade barriers overseas for products and services that employed many more Americans. But that was yesterday’s Republican Party. The GOP we have today thinks only about the current campaign, in which sugar interests provide some votes and some campaign cash and attacking the sugar program would jeopardize both.
Apparently everyone has forgotten the reasons for the sugar subsidy. It’s a great example of the law of unintended consequences. Cuba is a great sugar producer (or at least used to be). When the U. S. banned trade with Cuba sugar prices in the U. S. rose. To keep consumers in the U. S. happy the U. S. gave subsidies to sugar producers in the U. S. Subsidies made draining large parts of the Florida Everglades for use in sugar cane production economically viable. Draining the Everglades caused environmental degradation not just in the Everglades but all over south Florida at least partially causing sink-holes, etc. So now the federal government (we) is paying to undo the damage. And all for the want of a horseshoe nail.