Biden cabinet member Pete Buttigieg says that the free market is to blame for the critical baby formula shortage in the US. The socialist Jacobin Magazine says he’s just a capitalist ideologue who won’t let the government take over production. What’s really going on?

In an interview with CBS News journalist Margaret Brennan, Pete Buttigieg, the youngest member of president Joe Biden’s cabinet, was at pains to explain that the severe baby formula shortage in the US was not the government’s fault.

‘[L]et’s be very clear,’ he said. ‘This is a capitalist country. The government does not make baby formula, nor should it. Companies make formula. And one of those companies, a company which, by the way, seems to have 40% market share, messed up and is unable to confirm that a plant, a major plant, is safe and free of contamination.’

In the US, Abbott Nutrition, a division of Abbott Laboratories which produces the Similac brand, appears to have the largest market share in infant formula, accounting for about a third of the market in 2016. (Old and approximate numbers, I know, but the best I could find.)

‘Shared monopoly’

According to Buttigieg, four companies make about 90% of the formula in the US. He agreed with Brennan that this constitutes an ‘oligopoly’. An oligopoly, according to Investopedia, is ‘a market structure with a small number of firms, none of which can keep the others from having significant influence’.

He went on to describe it as ‘a series of monopolies that have added up into enormous market concentration’, which is a complete contradiction in terms. You cannot have ‘a series of monopolies’ in a single product. Either it’s a monopoly, or it isn’t. This isn’t. In fact, there are as many as 15 key market players in the baby formula business, selling more than 50 different baby formulas, so it isn’t even an oligopoly.

Perhaps we shouldn’t blame Buttigieg for his economic illiteracy. He probably reads the same news we all do, such as this Fortune magazine article, which bemoans ‘a shared monopoly, with only a few manufacturers controlling nearly all supply’.

The very notion of a ‘shared monopoly’ contradicts the definition of ‘monopoly’. The Fortune article credits Abbott with a 43% market share, but its numbers are five years older than the estimate from 2016 I found.

Grave issue

Buttigieg’s recognition that government should not be making baby formula is heartening for a young Democrat. However, the socialist Jacobin magazine, somewhat ironically, took grave issue with his attempt to blame the free market.

Its writer, Branko Marcetic, was spot on with his view that, ‘At heart, this is just a lazy bit of political ass-covering. In reality, the Biden administration has a great deal of responsibility for what happened.’

He went on to explain, correctly, that the first whistleblower report about food safety issues at a major Abbott plant was submitted to the Food and Drug Administration (FDA) in October 2021. The agency took until December to interview the whistleblower, and only inspected the plant in January. Although there is some doubt whether the contamination issues it found were related to two reported infant deaths last year, it forced Abbott to recall its baby formula in February. Its final report to the company came in the second half of March 2022. As a consequence, the facility remains shuttered while the company rectifies the issues raised by the FDA.

In blaming the government, it isn’t often that Jacobin magazine and Reason magazine agree with each other. However, they take very different lines. ‘Save us from the free market ideologues,’ Jacobin implores, arguing that Buttigieg was wrong to insist that the government should not make baby formula.

Too little or too much

In Jacobin’s socialist view, the complaint is that the government did too little, and should produce baby formula itself. ‘Even in capitalist societies, there has been a widely held principle that certain things are so critical to the functioning of life and the economy, they shouldn’t be left to the whims of unaccountable private actors looking to get rich at any cost but be put under some kind of democratic control and their revenues allowed to be recycled for the common good.’

(You can’t ‘get rich at any cost’, by the way. If your costs exceed your revenues, you won’t get rich.)

Of course, Reason would take the opposite view: that certain things are too important to be left to the whims and inefficiencies and corrupt machinations of government.

Reason’s Robby Soave says that the shortage is the FDA’s fault, but not because it took six months to act. He argues that the FDA could approve European baby formula imports, which could alleviate the shortage, but that it refuses to do so.

Some US consumers, according to a New York Times (NYT) article published long before the current shortage, are already buying European baby formula, even though it is illegal to do so. In their view the imported product is of higher quality.

Eric Boehm, also at Reason, writes that the shortage is made worse by protectionist policies that aim to make the US more self-reliant and less dependent on imports of all kinds.

The NYT says that: ‘[B]aby formula is one of the most tightly regulated food products in the US, with the FDA dictating the nutrients and vitamins, and setting strict rules about how formula is produced, packaged, and labeled.’

In addition, the US government, in the form of the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), is the largest customer for baby formula, serving a whopping 53% of all infants born in the United States.

Free market? What free market?

In a free market, it would be easy for competitors to step into the breach when a single manufacturing plant goes down. Failing that, it would be easy to stop the gap with imported products.

That neither are possible appears to be entirely the fault of the US government. So Jacobin magazine is correct, but for the wrong reason. It isn’t that the US government has done too little, but that it is doing far too much.

Image by tung256 from Pixabay

The views of the writer are not necessarily the views of the Daily Friend or the IRR

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Ivo Vegter is a freelance journalist, columnist and speaker who loves debunking myths and misconceptions, and addresses topics from the perspective of individual liberty and free markets. Follow him on Twitter, @IvoVegter.