The attrition of dairy farms in Vermont is continuing as farmers conclude they can no longer milk cows at a loss. It is always a sad day when the auctioneer shows up to sell off the animals and equipment. But a variety of economic pressures ó the low price of milk, the high cost of grain and fuel ó has combined to bear down hard on farmers.
Thatís why it was astonishing to read a report in The New York Times several weeks ago about the multimillion-dollar payouts enjoyed by businessmen who engineered a near monopoly of milk under the banner of Dean Foods. It is a tale that helps explain not just the struggles of Vermontís dairy farmers, but also the growing divergence between the interests of the 1 percent and those of the 99 percent.
The Times story describes the meteoric rise of Gregg L. Engles, the CEO who turned Dean Foods into the largest milk handler in the nation. According to a pair of lawsuits, he did it by conspiring with executives of a dairy farmer cooperative to suppress the price paid to farmers. The beneficiaries of this scheme included Engles, who has made $156 million over the past 10 years. But there were others.
The lawsuits, one of them filed in Vermont, allege that Dean Foods entered into an anti-competitive agreement with Dairy Farmers of America to keep the prices paid to farmers low. Dean was able to use the money it saved to gobble up other companies, including Garelick Farms, Land O Lakes and Horizon Organic.
A few others became enormously rich. Gary Hanman, at one time CEO of DFA, made $31.6 million over seven years. A business partner of Hanmanís was paid $100 million for his share in milk plants acquired by Deanís predecessor and DFA. He had paid only $6.9 million two years before. Meanwhile, Deanís monopoly had not gone unnoticed by dairy farmers, who filed antitrust suits in Tennessee and Vermont.
Itís easy to see why they did. Itís hard to square the rock bottom prices paid to farmers with the sky-high earnings enjoyed by a few executives. What is the economic or social utility of funneling huge paychecks to a few executives who manage buyouts that enlarge their power while forcing small dairy operations out of business? Republicans view people making millions of dollars as job creators, but it appears that those who forged a milk monopoly in the Southeast and Northeast were job destroyers.
The jobs they were destroying existed on the farms driven out of business because officials at DFA and Dean Foods were more interested in big paydays for themselves rather than in the interest of dairy farmers. Consolidation has also eliminated numerous small milk handlers throughout the area.
The manipulation of markets and the consolidation of businesses involved in the Dean Foods case are emblematic of the woes that have afflicted the broader U.S. economy. In banking, telecommunications, health care and other industries, officials at the top have been able to reap unconscionable paychecks that in an earlier era would have been viewed as embarrassingly greedy. That is how an anything-goes mentality, justified in the name of laissez-faire economics, has siphoned the nationís wealth upward.
On the farm itís easy to see. From the acreage in Pawlet or Addison or Fairfax comes the corn or the hay. Farm families working long hours turn those crops into milk by maintaining dairy herds that require continuous care and attention. It is hard work, but it yields a valuable product.
It is a product they have to sell quickly, and they have always been at a disadvantage in negotiating a favorable price. They formed cooperatives to improve their power in the marketplace. But in the suits against DFA, they are alleging that the co-op in league with Dean agreed to circumvent market forces by settling on an artificially low price that would enhance the margin enjoyed by Dean executives and shareholders and officials of the co-op.
It will be a long and continuing struggle to redress the harm that reckless and greedy business people have done to the economy. Once a dairy farm goes out, itís hard to bring it back. You canít just go and seize the yacht of a Dean Foods executive and divide the proceeds among dairy farmers.
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