With the food world’s eyes on farm policy, is the real action at Treasury?
Food-politics blogs and listservs are blowing up with speculation about whom Obama will tap as USDA chief. I’ve weighed in myself here and here. (Update: House Ag Committee chair Colin Peterson, tipped as a top contender for the USDA spot, says he’s not interested. Evidently, he calculates that his current post is the more powerful one).
But I’m starting to think the real action has already happened — with Obama’s recently announced economics team. Our food system is intimately intertwined with the broader economy; reforming it will require new ways of thinking about economics. And Obama has delivered a team representing warmed-over versions of old and discredited ideas.
According to the USDA, the food and fiber system generates about $1.2 trillion in economic activity each year, about 12 percent of total GDP.
That means there are massive vested interests embedded in the system — and hundreds of billions of dollars invested in the infrastructure need to grow, process, and retail environmentally damaging, unhealthy food.
Any serious food reform will mean taking on those interests — large, powerful companies like grain trader/processors Archer Daniels Midland and Cargill, industrial meat giants like Smithfield and Tyson, and huge retailers like Wal-Mart and McDonald’s.
What’s more, the overall economy arguably runs on cheap food. Median wages have been stagnant and/or declining for 35 years. According to University of Massachusetts economist Robert Pollin’s Contours of Descent: The Economic Consequences of Clinton, Bush, and Greenspan, real hourly wages peaked at $15.73 in 1973 and by 2000 stood at $14.15 (in 2001 dollars). Under Bush II, real wages eroded still further.
In such circumstances, cheap food becomes an important social salve. Imagine the unrest that might have occurred if food prices had risen steadily while wages stagnated.
Instead, of course, food expenditures as a percentage of disposable income dropped steadily (until the biofuel boom that started in 2006), pushed down by the growing monopsony power of the few big firms who buy, process, and retail the great bulk of our food.
To put it crudely, Wal-Mart’s laser-like focus on "every day low prices" — achieved by squeezing suppliers (e.g., farmers) and workers alike — meant that even Wal-Mart employees could afford to eat every day.
For me, it’s impossible to imagine a new food system without a new economy — one that views food not as a cheap source of calories for a low-wage workforce, but rather as a tool for building health and wealth within communities.
Models abound. One is Hardwick, Vermont, a once-dying town that has built a vibrant economy around sustainable food. I met Tom Stearns, whose company High Mowing Seeds is an anchor of Hardwick’s economy, at Slow Food’s Terra Madre conference last month.
He told me that while the national economy plunges into recession and sheds jobs, Hardwick continues adding jobs at a robust clip.
Rather than seriously consider such models, what has the Obama team done? They’ve essentially handed the economic levers over to the folks who ran the show during the Clinton years.
Like Clinton, Obama is hanging his economic policy on the wisdom of Robert Rubin, Clinton’s Treasury chief and current director and senior counselor of bank giant Citigroup.
Given Citi’s ignominious recent slide into a $300 billion taxpayer-backed black hole, it would have been a bit much to name Rubin to a top economics post. (For the record, Citi has shed something like 80 percent of its value since Rubin signed on to its leadership team after exiting Clinton’s Treasury Department in 1999.)
Rather than tap Rubin, Obama has turned to Rubin’s proteges. Here is the New York Times:
It is testament to former Treasury Secretary Robert E. Rubin’s star power among many Democrats that as President-elect Barack Obama fills out his economic team, a virtual Rubin constellation is taking shape.
The president-elect’s choices for his top economic advisers — Timothy F. Geithner as Treasury secretary, Lawrence H. Summers as senior White House economics adviser and Peter R. Orszag as budget director — are past protÃ©gÃ©s of Mr. Rubin, who held two of those jobs under President Bill Clinton. Even the headhunters for Mr. Obama have Rubin ties: Michael Froman, Mr. Rubin’s chief of staff in the Treasury Department who followed him to Citigroup, and James S. Rubin, Mr. Rubin’s son.
Can someone explain this to me? I can’t figure out why Rubinomics isn’t considered a joke. Rubin has been at or near the top of Citigroup’s leadership hierarchy since 1999 — watching idly while the bank charged into the very "toxic assets" now fouling up the entire global economy: derivatives, mortgage-backed securities, sub-prime mortgages, etc.
Indeed, Citi likely wouldn’t exist in its current form, nor have jumped willy-nilly into the derivatives market, were it not for Rubin’s hard work at Treasury.
According to a recent New York Times article, Rubin mounted "fierce opposition" to regulating derivatives markets, even after an Commodity Futures Trading Commission official testified to Congress that opaque derivatives trading could "threaten our regulated markets or, indeed, our economy without any federal agency knowing about it."
Rubin and his ally, then Fed chief Alan Greenspan, won the political battle; derivatives trading took place without transparency or government oversight. But the CFTC official was vindicated in the end.
As Treasury chief, Rubin also watched while Citigroup violated the spirit of Glass-Steagall Act, which prohibited taxpayer-insured deposit banks from entering the investment-banking and insurance businesses. Under his watch, then Citibank snapped up Wall Street titan Smith Barney and insurance behemoth Travelers. From those moves emerged Citigroup — an institution deemed too big to fail. Rubin also famously championed the Gramm-Leach-Bliley Act, which drove a stake into what was left of Glass-Steagall. Clinton signed it just before Rubin left office. Before long, Rubin was holding court from Citigroup corner office.
So what can we expect from these Rubin proteges, Geithner and Summers? New visions for an economy that truly revalues food, or just a new jolt of Rubinism?
The answer to that question, and not the new USDA chief, will likely dictate the fate of our food system in the next decade.