How U.S. sugar protectionism may sour Halloween and Christmas

Carl Sandburg’s hog butcher, wheat stacker, city of the big shoulders — was once America’s candy capital, catering to the nation’s sweet tooth. Today it is less so because the federal government interferes with candy’s most important ingredient.

With Halloween on the horizon and Christmas close behind, sugar import quotas might produce shortages of candy corn and candy canes. Another story of industrial policy gone sour.

The Wall Street Journal — headline: “Candy Makers Wrestle With Sugar Shortage” — reports that Spangler Candy of Bryan, Ohio, has had to decline some Halloween candy orders and might be unable to produce its usual 250 million candy canes. An executive of Atkinson Candy in Lufkin, Texas, says that had his company not found a 12th supplier after 11 had said their sugar supplies were exhausted, “We would’ve been going to Costco” for sugar. For tons of it?

To the surprise of no realist, the government’s central planners are probably surprised by this. Sugar supplies are tight and prices are high worldwide, but matters are made worse for U.S. manufacturers and consumers by import restrictions.

Limiting sugar imports transfers wealth from 335 million Americans who consume sugar and products containing it, to, primarily, about 4,000 producers of beet and cane sugar. Federal policy essentially guarantees 85% of the U.S. sugar market to domestic producers, and minimum prices for beet and cane sugar. And import quotas make the U.S. price of sugar two to three times the world market price, a boon to U.S. confectioners’ foreign competitors.

The survival — probable immortality — of sugar import quotas is a crystalline illustration of the phenomenon that explains much of what the federal government does, but especially the protectionism component of industrial policy. The phenomenon is: dispersed costs and concentrated benefits.

Suppose, very conservatively, that the cost of import quotas to consumers (estimated to range from $2.4 to $4 billion) is $3 billion. Divide $3 billion by those 335 million U.S. sugar consumers: The cost per person is about $9, which is barely noticeable. But divide $3 billion by about 4,000 sugar producers, and the windfall per grower is $750,000, a powerful incentives to cultivate Congress as assiduously as they cultivate their crops.

A 2006 Commerce Department study concluded that for every job in sugar production that was saved by protectionism, nearly three were lost in the confectionary industry. And the cost to the economy of each job saved was $826,000 in 2002 dollars ($1.4 million today). Bad politics? No. In “The Individualists:

Radicals, Reactionaries, and the Struggle for the Soul of Libertarianism,” a survey of libertarianism published in April, John Tomasi and Matt Zwolinski cite economist David Friedman’s explanation of the political efficacy of the government’s redistributionist money-shuffles:

“A hundred people sit in a circle, each with his pocket full of pennies. A politician walks around the outside of the circle, taking a penny from each person. No one minds; who cares about a penny? When he has gotten all the way around the circle, the politician throws fifty cents down in front of one person, who is overjoyed at the unexpected windfall. The process is repeated, ending with a different person. After a hundred rounds everyone is a hundred cents poorer, fifty cents richer, and happy.”

Chicago factories that made Brach’s, Fannie May and Mars candies have been shuttered. Canada, however, can celebrate U.S. sugar irrationality. LifeSavers decamped to Canada in 2002, where sugar (99% of Life Savers) can be bought at the world price. Mars Inc. and Tootsie Roll Industries Inc. also have Canadian operations.

The Necco candy factory in Thibodaux, Louisiana, is empty: The company has gone bust. The Cato Institute’s Gabriella Beaumont-Smith notes the hollow building sits between two sugar refineries that are protected — subsidized — by the sugar segment of federal industrial policy.