Dispatches from the Corporate State

The NY Times has a fairly ugly story, though hardly unique, of a project to restore water flow to the Everglades turning into a corporate welfare project for United States Sugar.   The short story is that in a time when United States Sugar was in desperate financial straights and when real estate prices in Florida were tumbling, the Florida government treated USS like it had all the power, rolling over to paying above-market prices and letting USS pick and choose the land parcels to be purchased.  The story did not mention much about it, but there is a second large sugar producer in the area who it strikes me could have been played off against USS to get the best deal.

Remember that the US Sugar operation likely exists only because of sugar tariffs and import quotas that raise the price of sugar in the US well above the world norm.  So consumers are paying extra, and drinking soft drinks with crappy HFCS, so that US Sugar can screw up the Everglades and get bailed out by taxpayers.   Readers will understand it is the purest coincidence that US Sugar's attorney is chief of staff to the state's governor.

From running my recreation privatization blog, I know that there are many folks who will ascribe this to a failure of private enterprise and an excess of corporate speech and money in politics.   But to my mind this is a great example of why election and speech limits don't have any utility.  This is all back room lobbying, cronyism, and quid pro quo politics that doesn't show up in any monetary ledger, and thus are not and have never been subject to any limits.  As I wrote here:

when the stakes of government are so high, money and influence never goes away.  Just as in any economy, when you ban money, a barter economy arises.  So if we ban large campaign spending, then the quid pro quo becomes grass roots efforts and voter mobilization.  Groups like the UAW become more powerful (we are seeing that already).  They are trading their member's votes for influence.  Connected companies like GE are doing the same thing, trading their support for legislation that is generally hostile to commerce for specific clauses in said legislation that exempts GE and/or makes the laws even more punishing on their competition.  The problem with all this activity is it is hard to see and totally unaccountable "” at least with advertisements we see people out in the open with their agendas.

The other obvious point is that no private entity would ever allow themselves to get rolled so badly by US Sugar.  They would have sense USS's weakness and broken its knees in the negotiation.  One US Sugar manager even says as much:

For its board members, Mr. Crist's overture was appealing in part because they figured a government purchase would be far more lucrative than a private deal.

"It wasn't another company coming in and bottom-fishing you," Mr. Wade said. "They knew it would be for fair-market appraisals."

Over at my privatization blog, I wrote about a deal in Chicago where the government made four or five huge mistakes in issuing a private contract that a private company (or at least one that is not going to go bankrupt) would never make.  So of course the problems are blamed on privatization.

  • L Nettles

    USS was built during the Depression by Charles Stuart Mott taking advantage of the low market, with money he made at General Motors. Now if the government during Depression had bailed out those sugar producers and farmers before they were taken over by Mott, USS would not have existed. Now USS and GM are both getting bailed out.

  • Pat Moffitt

    This is classic rent seeking. The subsidized rent seeker may the most abusive and the cash flow allowed by the quid pro quo transfer payments makes them especially powerful. Most subsidized industries charge their members a fee that goes into a PAC used to protect the subsidy.

    Another example - the commercial fishing industry is allocated 98% of the marine fishery resource and for this the Public is expected to make continuing transfer payments. The marine fishery resource is enjoyed by 32 million Americans, the sport fishery generates twice the revenues compared to the commercial fishery (despite the 2% allocation), more jobs and produces billions in sport federal and state tax revenues. How much does the commercial fishing industry pay in taxes- well the best guess is they are a net drain. The 1999 Federal Investment Task Force that tried to answer this question for Congress reported there was so much money running through so many departments with so little paper work they couldn't begin to estimate-- but they thought it was substantial. It was actually illegal until 2005 for any government agency to try and find out. If you think this hyperbole see below:

    Administration's Reauthorization of the Magnuson-Stevens Act - 2005
    New version posted 12/02/2005 includes corrections to the Lacey Act provisions)
    ON page 6 of the Data and Science overview:
    "In particular, this amendment eliminates current language in the Act that precludes the Secretary from collecting commercial or financial information regarding fishing operations or fish processing operations."

    The Secretary is the Secretary of Commerce. And it is not surprising that no-one has yet tried to find out how much we are giving the commercial fishing interests.

  • ElamBend

    This quote is great:
    “It wasn’t another company coming in and bottom-fishing you,” Mr. Wade said. “They knew it would be for fair-market appraisals.”

    Somehow I think his definition of 'fair-market appraisal' is different than mine or any other rational real estate professional. Double-speak at it's finest.

  • IgotBupkis

    Yeah, as a resident of Florida, I'm not much of a fan of Crist. He's one of those ersatz RINOs we got so much of in the "Oughts". Let's hope the TP movement can do something about that. I might have to vote for him for senator, but I hope not.

    As far as any of this being failures of privatization, that's obvious crap. The sugar tariffs are garbage, and should be eliminated -- not only to they contribute to the Everglades issues, the fact that the area isn't really well suited to sugar cane production is more than obviously an excess abuse of governmental power. Another thing "come the revolution" -- some kind of structural component that resists this kind of favorable abuse.

  • http://herdgadfly.blogspot.com/ gadfly

    Warren:

    Damn those those spell checkers --- I think you meant "financial straits" as in navigating through a narrow, dangerous waterway.

  • Noumenon

    I'm fascinated that L Nettles turned up with that little United States Sugar history. How many people reading the web know that?