Milking the System
Washington Post, January 28, 2025 Magazine WorkThe dairy industry takes more of your money by erecting barriers to competition. Got rent-seeking?
As you trundle your shopping cart through your grocer’s refrigerated section, myriad milk options beckon. Milk tapped from ungulates such as cows, goats and sheep coexists on the shelves with other milks squeezed from nuts, grains, seeds and legumes. Oat milk shares space with goat’s milk; pea milk lies down with the cow-born variety; almond milk nestles alongside its rice-derived cousin.
It only appears to be a peaceable consumer kingdom. For more than a century, the dairy industry has been hurling contention at any new food that directly competes with its animal-born products, enlisting government to pass legislation to bury the competition. In the 1890s, the newcomer was margarine, an affordable substitute for higher-priced butter. The dairy states used their government influence to impose taxes and meddlesome regulations on margarine instead of letting consumers make their own choices in a fair competition. Today, Big Dairy is calling a similar play to boost its bottom line: banging for a federal law (H.R. 1462). The measure, which federal legislators from dairy states wholeheartedly endorse, would prevent foods from being labeled “milk,” “yogurt” or “cheese” unless they owe their provenance to lactating farm animals.
It’s a brazen attempt to steal power, status and money from plant-based milk makers and drinkers. The Food and Drug Administration has long allowed plant-based drink makers to apply the m-word to their product as long as they pair it with a qualifier such as “soy” or “almond” to allay consumer confusion. Acting like the feudal lords of the medieval world, the dairy interests seek to carve up resources and markets for their own gain while returning few gains for their subjects. Already the beneficiaries of considerable subsidies and tariffs, the dairy industry wants government to further manipulate markets to their benefit to kill competition, narrow consumer options and hinder innovation. The measure is so pro-dairy that a cow must have written it.
It’s never wise to position yourself between two trade associations when they’re warring for the last word. Interviewing officials from the dairy lobby and the plant-milk trade association back-to-back about the proposed legislation, I found myself buried in nonintersecting grievances. Alan Bjerga of the National Milk Producers Federation noted that the federal government strictly regulates which beverages can call themselves juice, so why not do the same for plant-based drinks “misbranding” themselves as milk?
Marjorie Mulhall of the Plant Based Foods Association attacks laws such as H.R. 1462 for attempting to “pick winners and losers in an already uneven market” while stifling product innovation. The dairy folks present survey data showing consumer confusion about the nature of the two competing foods. The alt-milk advocates point to their own data to counter that claim. They maintain that their milk is superior for the lactose intolerant and that plant-based milk production is both more ethical than dairy farming and better for the environment. Many independent scorekeepers call the contest between mammal milk and the plant variety a draw when judged on flavor, nutrition, cost, the environment and animal welfare.
As we navigate a comfortable distance beyond the refrigerated section and the lobbyists’ debate, the milk skirmish reveals itself to be less about nutritional excellence and lactose intolerance than about rent-seeking — an off-putting phrase that buzzes in the layman’s ear like something from an Econ 101 textbook. Since Gordon Tullock and Anne O. Krueger established the concept decades ago, economists have used it to analyze disputes such as the current spat over milk. Rent-seeking, the economists tell us, happens when businesses or individuals pursue special government privileges that allow them to benefit financially without doing anything to earn this new wealth.
Rent-seeking causes economic stagnation, harms the poor while benefiting the rich and connected, contributes to societal distrust and corruption, reduces the incentive for innovation, and wastes resources, economists agree. Think about that the next time you spike your morning coffee, whether with 2 percent or almond milk.
Rent-seeking can be found in almost every industry and enterprise, from aerospace to defense, sugar to barber shops, medicine to sports stadiums. If you’ve ever wondered why the penny has been retired in Canada, Australia and New Zealand but survives in the United States, look no further than the rent-seeking company that provides blank, faceless coins to the treasury per the terms of a decades-long government contract. The penny company has spent nearly $3 million on lobbying to reap $1 billion in revenue since 2008, according to the New York Times.
When Blue Origin (founded by Jeff Bezos, who owns The Post) or SpaceX seeks a government contract, you can suspect rent-seeking. When farmers petition Congress for subsidies and price supports, when the government bails out failing banks and businesses, when single-home residents appeal to their city councils to zone out apartment buildings in their neighborhoods, when the captains of Big Tech travel to Capitol Hill to discuss how best to regulate their industry, it’s fair to ask if rent-seeking is afoot. When tech and pharma CEOs visit Mar-a-Lago to stroke the president, when failing companies petition him for import quotas or tariffs or loans, when U.S. shippers maintain the ban on cargo transport between U.S. ports by ships with foreign flags, when your hairdresser defends the licensing of his profession, or when a local restaurant persuades authorities to outlaw food trucks, they might try to convince you that their selfless goal is to advance the common welfare. But in almost every example, you’ve scented the trail of a rent-seeker using government power to indirectly steer wealth to enrich himself at the expense of others.
Rent-seekers gather to feast when legislators hold session, when regulators write new rules and when treasury vaults crack open. The precise costs of rent-seeking are hard to pencil in. Much of what the multibillion-dollar lobbying industry does is rent-seeking, as businesses and individuals wheedle legislatures and regulatory agencies for advantages. But estimating the exact costs is like grasping at shadows. How do you estimate the costs of steering government favors to the politically connected over the less connected? Or if the government grants a loan, subsidy or bailout to a connected company, how should the damage done to the company that finds itself frozen out of capital markets be determined? Economists shy from putting a dollar figure on it, even though rent-seeking pervades all industries.
Over the coming months, this column will survey the economy for examples — grand and petite — of rent-seeking. An early goal will be to devise a catchier label for rent-seeking, perhaps one that refers to leeches, tapeworms or lampreys. But that would be unfair to tapeworms and leeches, which can be burned off or killed by drugs, while deeply ensconced rent-seekers are generally impossible to evict.
The dairy industry doesn’t rank anywhere near the top 20 domestic rent-seekers. So why pick on it?
Dairymen aren’t the most flagrant rent-seekers, only the most consistent. Their century-plus of rent-seeking successes gives us a lens to view how the rent-seeking racket works and thrives. This column hopes to convince you that alt-milks shouldn’t be restricted by law as long as they don’t claim to spout from an udder. It also hopes to prepare you for an expanded investigation of rent-seeking in the coming months. Economists and politicians will be consulted, histories traced, legislative records ransacked and rent-seekers fingered.
Dairy is a relatively small industry, worth about $60 billion a year. But as milk consumption continues to fall, the 15 percent market share represented by alt-milks fills the dairymen with terror, prompting them to use the government as a shield against a competing product that sells for about 50 percent more instead of less. (Historically, industries have sought government protection when threatened by cheaper competing products.)
Like other rent-seeking battles, the dairy industry vs. alt-milk requires unwinding to fully appreciate. The dairymen insist that plant-based milks should already be prohibited from calling their liquid protein “milk” under current FDA regulations and have been fighting aggressively on that front at least since the late ’90s, when the soy milk brand Silk was first packed in the gable-top cartons we associate with cow’s milk and shelved in the refrigerated section.
In defense of the alt-milks, none of them market themselves as “milk,” relying instead on portmanteaus such as “soymilk,” “almondmilk,” “flaxmilk,” “oatmilk” and the like to distinguish themselves from animal products. When Almond Breeze, for example, boasts that it “tastes creamy like dairy milk,” it’s more guilty of metaphor than impersonation. When encountering such alt-drinks as Malk and NotMilk, you'd have to be drunk or in deep denial to mistake them for cow’s milk. If you lack the patience to compare the nutritional information tattooed on containers before making your “milk” purchase, the onus should be on you. Nor has the dairy industry always disparaged the various counter-milks. In 1998, the Silk brand was saved from bankruptcy by dairy company Dean Foods. Dean later bought, and sold, Silk’s parent company, proving that even the original milkmen once saw value in the upstart milk. That financial endorsement didn’t mean Dean viewed Silk as milk, of course — only that it saw nothing wrong with alt-milk products.
The current milk contest reopens a scrimmage that can be traced to the late 1890s, when 26 states passed laws prohibiting the addition of yellow food coloring to margarine to make it resemble butter. (In its natural state, margarine is white or gray.) At the behest of dairy interests, margarine taxes were imposed, and the feds passed a law defining butter as a product of regular milk. In dairy-centric states such as Vermont and New Hampshire, margarine sales were further suppressed with laws that required manufacturers to dye their margarine pink.
Margarine bootleggers thrived in this environment. Baseball legend Bob Uecker joked that he was born in Illinois when his parents drove there from Milwaukee to pick up some margarine. When colored margarine was finally legalized in Wisconsin in 1966, an assembly leader said the measure would “crucify the family-sized farmer on a cross of oleomargarine,” deploying the hysterical argumentation style typical of rent-seekers. Even today, margarine hasn’t been fully decriminalized in Wisconsin. A restaurateur who serves margarine as a butter substitute — unless the diner explicitly asks for it — faces a maximum fine of $500 and up to three months in jail.
Opposition to rent-seeking is one of the few issues that unite economists. From Joseph Stiglitz on the left to George Stigler on the right, economists have damned rent-seeking for its unfairness and distortion of the economy. Contrary to the propaganda of rent-seekers, economists agree that rent-seeking doesn’t create jobs, make us wealthier or boost the overall economy. What it does do is reward rent-seekers. “In business school we teach students how to recognize, and create, barriers to competition — including barriers to entry — that help ensure that profits won’t be eroded,” Nobel laureate Stiglitz wrote in 2013.
Why haven’t legislators heeded the economists’ advice about rent-seeking and put an end to it? Perhaps it’s because rent-seeking has a talent for concealing itself in the bramble of law, regulation and doublethink as part of the natural order. Or perhaps because rent-seekers have the means to overload the zone with lobbyists and lawyers.
Why haven’t more journalists blown the whistle? In a just universe, daily newspapers would cover the recurring atrocities of rent-seeking the way they do crime, war, weather, sports and political intrigue.
Why haven’t taxpayers wised up? Some economists blame “information asymmetry,” the fancy way of saying they’re not aware of rent-seeking’s extent or how it personally affects them. Also, the cost of any single successful rent-seeking operation to an individual is small, giving them little incentive to beef, even though the process delivers concentrated benefits to the rent-seekers.
These new privileges are not the only ones the dairymen seek. Their other rent-seeking adventures include the price supports and subsidies that promote milk consumption and other similar initiatives, such as the national school lunch and breakfast programs and the Special Supplemental Nutrition Program for Women, Infants, and Children. The government maintains dairy tariffs, supports the production and marketing of milk, and even helps dairy farmers get rid of their manure.
The rent-seekers might win this econo-political battle and curb competition to pocket undeserved market share, but there are limits to their dominion. They have as much chance of preventing consumers from calling alt-milk “milk” as they did stopping diners from saying “pass the butter” to summon a crock of trans-fat-loaded margarine to the table, indicating that consumers are wise to their grift.
As alt-milk companies developed new forms and varieties of “milk,” the dairy industry has done the same, repeatedly reformulating its product to win customers. It markets several types of lower-fat milk. It sells lactose-free and organic versions, milks that are fortified with vitamins and omega-3 fatty acids, packaged raw and ultrapasteurized, produced by grass-fed cows, flavored with strawberry or chocolate, and otherwise powdered, ultrafiltered or evaporated.
The dairy industry insists that this entire menu of processed foods is “milk,” but it would deny the label to popular plant-based rivals. When rent-seekers keep moo-ving the goal posts of the definition, follow the mother’s milk of politics.
This ongoing column seeks a catchier phrase to describe the act of grand larceny currently known as rent-seeking. Send your nominations to letters@washpost.com.