Food Inflation Jumps to 41-Year High
The prices of food purchased by American households were up by 10 percent in April, the biggest jump in since 1981.
The personal consumption expenditure price index for food consumed off-premises rose one percent compared with the prior month, a report released Friday by the Bureau of Economic Analysis showed.
The prices of fuel and related services were up 30 percent compared with April of last year. Compared with March, however, energy prices actually declined in April. In May, however, they have likely climbed again. The average price of gasoline hit a new record high of $4.60 a gallon on Thursday.
The rate of inflation as measured by the personal consumption expenditure price index over the past year slowed to 6.3 percent in April from a 40-year high of 6.6 percent in March. This was the first slow down in price increases in a year and a half.
Excluding food and energy, prices were up 4.9 percent compared with a year ago, down from 5.2 percent in March and 5.3 percent in February. The so-called core prices rose 0.3 percent compared with March, the third consecutive rise of three-tenths of a percentage point. Prices rose 0.4 percent in January and 0.5 percent month-over-month in each of December, November, and October.
The decline in year-over-year inflation partly reflects the extraordinarily high level of inflation hit over a year ago, when inflation rose to a level not seen since the financial crisis.
The personal consumption expenditure index is the Commerce Department’s inflation gauge. It is seen by Federal Reserve officials as more accurately measuring price stability than the more familiar Consumer Price Index compiled by the Department of Labor. Fed officials use it when forecasting inflation and their target of two percent average inflation over time is based on PCE prices. CPI sources data from consumers, while PCE sources from businesses. PCE tends to run a bit lower than CPI but usually moves in the same direction.
Baby Formula Crisis Turns Focus on Manufacturer Monopolies, Federal Policies
The ongoing shortage of baby formula is pulling back the curtain on the how government policies have led to certain manufacturers dominating the market, the harm from a slow-moving Food and Drug Administration (FDA), and federal regulations that stymy competition.
Case in point, Abbott had a 40 percent market share before it shut down months ago after a dangerous bacteria outbreak.
Abbott shut down its Michigan plant because of the outbreak, which resulted in the death of two infants and the recall of most of its products.
But Abbott’s fate and the formula supply crisis is linked not only to disease but also the federal government’s policy to force states to pick one baby formula supplier. And the FDA is not exactly pro-active in allowing the free market to thrive, according to Yahoo Finance:
Since 1989, federal law narrowed competition by requiring each U.S. state to choose a single company to supply formulas available to low-income families under the Special Supplemental Nutrition Program for Women, Infants, and Children, known as WIC. The program provides food for about half of all U.S.-born infants, and today has only three market participants, Abbott, Reckitt and Nestle.
In an interview with Yahoo Finance ahead of Wednesday’s [congressional] hearing, Rep. Cathy McMorris Rodgers (R-WA) expressed concern about consolidation and FDA “red tape” limiting new manufacturers from coming to market.
“There are companies — other manufacturers that have had to wait years to come to market because of FDA delays,” McMorris Rogers said, explaining that legislation she introduced last week would put the FDA on a deadline to respond to requests from new manufacturers.
In all, just a handful of manufacturers, including Abbott, control 90 percent of the baby formula supply in the United States, according to Yahoo.
Meanwhile, the Biden administration is addressing the problem by temporarily tweaking federal laws and import restrictions to try to get more product to consumers.
The US baby formula crisis and capitalism’s indifference to the lives of children
The baby formula crisis that is threatening the lives of infants across the US deepened this week as the out-of-stock rate for baby formula on store shelves surged to 70 percent for the week ending May 22. The shortage rate during the previous week was 45 percent, according to the retail tracking firm Datasembly.
The supply shortage is so severe that there are now reports in some areas of the country of mothers attempting to purchase breast milk online from anonymous and independent sources such as Facebook and Craigslist. Pediatric nutritionists are warning that such measures are potentially very harmful to children.
The crisis of powdered formula supplies, 90 percent of which are produced by four monopolies that dominate the US pediatric nutrition industry, is not a mistake or a product of unforeseen circumstances. It is the outcome of a society run by a ruling elite that, in its singular preoccupation with increasing its wealth, is totally indifferent to the lives and well-being of children.
There has been a combination of criminal negligence, corporate profiteering, stock market manipulation and government complicity that have resulted in the shortage of the essential food needed by infants and toddlers, especially those from poor and working-class families.
The supply shortage began almost immediately following the onset of the coronavirus pandemic in February 2020 when supply chains and transportation were disrupted internationally. During the initial days of the pandemic, families stockpiled the formula and emptied shelves. This was followed by a sharp fall in sales, and manufacturers cut back on production.
Now, with an uptick in births and a dramatic decline in breastfeeding rates among new mothers, demand has shot up again. The inability of the producers to adapt to fluctuations in demand is itself an expression of the anarchistic and unplanned nature of capitalist economics.
The primary cause of the recent surge in the shortage stems from the shutdown in February of the baby formula factory operated by Abbott Labs in Sturgis, Michigan, the largest in the US. The plant is responsible for 25 percent of the US supply and produces the popular brand names Similac, Alimentum and EleCare.
In February, the US Food and Drug Administration (FDA) forced Abbott Labs to recall products and shut down the Sturgis facility. This action was taken only after it became clear that the conditions in the plant were so unsanitary that the federal government agency, which has a long history of collaboration with the corporations in the food and drug industries, could no longer look the other way.
During congressional testimony Wednesday, FDA Commissioner Dr. Robert Califf said the agency’s inspection of the Sturgis operations that began on January 31 revealed conditions that were “shocking” and “egregiously unsanitary.”
Dr. Califf told the Subcommittee on Oversight and Investigations of the House Energy and Commerce Committee that the “totality of evidence” obtained during the inspection caused the FDA to conclude that infant formulas manufactured at this plant “were produced under insanitary conditions.” He added that the formula “may be contaminated” with bacteria that is known to be fatal in infants.
Among the unsanitary conditions uncovered at the Sturgis factory were that multiple swab samples “later tested positive for the bacteria Cronobacter sakazakii,” cracks in the spray dryers used in the manufacturing process are “an issue related to previous foodborne illness outbreak in powdered infant formula” and water leaks and condensation that are known risk factors for deadly bacteria were found “in areas where dry powdered formula was produced.”
Califf also reported leaks in the roof, standing water in the factory and two instances in the past, based on internal company documents, when finished baby formula was known to have “environmental contamination with Cronobacter sakazakii.” The FDA commissioner claimed that these poisoned batches, which were produced by Abbott Labs in 2019 and 2020, had been destroyed by the company.
The FDA inspection was motivated in part by the fact that four infants, who had been fed nutrition products from the Sturgis factory, had been hospitalized between September and December 2021 with Cronobacter infection. Cronobacter sakazakii is a serious foodborne pathogen that can cause “severe, life-threatening infections,” including sepsis and meningitis as well as bowel damage. Two of the children died from their infections.
The agency was also belatedly responding to a report by a whistleblower who in October 2021 disclosed details about the dilapidated conditions at the Michigan factory. The whistleblower also highlighted the retaliatory policy of company management and its firing of employees who objected to the failure to follow FDA requirements, falsification of records, releasing untested products onto retail shelves and failure of antiquated equipment at the Sturgis facility.
Abbott Laboratories is a $200 billion global corporation that produces medical devices and health care products and was founded in 1888. The multinational has profited enormously over the past two years from its pandemic-related COVID testing products, while its less profitable pediatric nutritionals operations have been starved of resources.
Meanwhile, the company—whose Executive Chairman Miles D. White earned $27 million and CEO and President Robert Ford earned $25 million in 2021—has rewarded its investors with billions of dollars in quarterly stock buybacks while the bacterial contamination of its baby formula products was well-known. In December 2021, after the FDA had notified Abbott Labs of a planned inspection of its Sturgis facility, the company announced a $5 billion stock repurchase authorization.
Throughout the bacterial contamination crisis, Abbott Labs has claimed there is no proof that its products have caused infants to become sick and die from life-threatening infections. The company has also maintained that the allegations in the 34-page whistleblower report are untrue.
The belligerence of Abbott Labs in the face of facts that it has acted in a criminally negligent manner has been bolstered by the FDA and the US Justice Department, which signed a consent decree with the corporation on May 16. This agreement guarantees that Abbott Labs will not be prosecuted or held responsible for the bacterial contamination of its baby formula products, in exchange for restarting its manufacturing operations at the Sturgis plant.
The fact that millions of families are now desperately searching for baby formula on empty store shelves and forced to make life and death decisions to feed their infants is proof that the corporations and the government do not care about what happens to the lives of millions of children. This fact was confirmed in the recent comment by President Biden’s Transportation Secretary Pete Buttigieg who washed his hands of the crisis, saying, “The government does not make baby formula, nor should it. Companies make formula.”
“Let’s be very clear,” Buttigieg said, “this is a capitalist country.” Precisely. While Buttigieg made this statement to justify a position that the government should do nothing, the entire crisis condemns the social and economic system that the Biden administration and the entire state apparatus defend.
The formula shortage—coming in the midst of a massive surge in prices throughout the world and an ongoing pandemic that has already killed more than one million people in the United States—is another demonstration of the urgent necessity for the socialist reorganization of society.
Baby formula production and distribution—and other essential products and services required to sustain the lives of millions and billions of people on the earth—must be taken out of the hands of the financial parasites who own them. The working class must transform these resources into public property and operate them based on social need and not profit.
Summers: Government Policies Have Made Formula Situation Worse
During an interview aired on Friday’s edition of Bloomberg’s “Wall Street Week,” Harvard Professor, economist, Director of the National Economic Council under President Barack Obama, and Treasury Secretary under President Bill Clinton Larry Summers stated that if state governments had better procurement rules, “we would be in a better position, with respect to infant formula today.” And criticized the high tariffs on infant formula.
Summers said, “We should be pushing for vigorous competition. Probably the single most important instrument the government has for promoting competition in key industries is maintaining open markets, in which foreign companies have access to U.S. markets and can compete with U.S. producers, and which, in return for that, U.S. producers get more access to foreign markets. Trade liberalization is central to having competition in the economy, and it should be at the front of any kind of competition policy. If we had not had 17.5% tariffs on infant formula, we would be in a much better position, with respect to that issue today. If governments had more sensible procurement policies, with respect to infant formula at the state level, we would be in a better position, with respect to infant formula today. So, yes, I applaud the administration’s emphasis on competition policy. But that means we’ve got to respect all competitors who can help American households.”
Follow Ian Hanchett on Twitter @IanHanchett
No comments:
Post a Comment