- The Maine Wire - https://www.themainewire.com -

How Augusta overcharges you for milk

To advocates of a limited public sector, there’s a lot to dislike about the scope of Maine state government. Billions of taxpayer dollars are doled out each year to fund corporate welfare, support ineffective social assistance programs and prop up a dysfunctional education system.

But few policies are as blatantly anti-competitive and harmful to consumers as the way milk production and prices are controlled in Maine. While the markets for most goods and services are relatively open to the free influences of supply and demand, our dairy industry is so tightly overseen by bureaucrats that a farmer could be prosecuted for cutting his price for a gallon of milk.

That’s right, a quasi-government agency — the Maine Milk Commission — sets minimum prices for milk in Maine, one of only a handful of states still enforcing price controls on dairy products. We’ve been doing so since the 1930s. These policies are rooted in the noble goal of helping small farmers weather price volatility by guaranteeing them a minimum income stream.

But putting aside the fact that small Maine dairy farmers have been decimated despite these price controls, the Maine Milk Commission distorts the market and deprives consumers of the benefits of unbridled competition between producers.

True, the free market isn’t always pretty. Longtime family restaurants go under because their patrons now prefer fast food franchises. An expert wooden boat craftsman shutters his shop because fiberglass and carbon fiber materials are revolutionizing the boatbuilding business. And small dairy farms might cave to big producers who are able to provide consumers with milk at a lower cost.

The individual stories of loss and turmoil are heart-wrenching, but in the long-run government intervention to prop up failing businesses does a lot more harm than good. The temptation to use government power to coddle a vulnerable industry can quickly lead to further encroachment into the private market, all in the name of fairness or protection from harsh economic realities. Invariably, consumers or taxpayers (or both) foot the bill.

Opening the dairy market to competition would surely lead to more farm closures in Maine as inefficient operations got priced out of the market. There is little doubt about that. This is partly due to inherent economies of scale in the dairy industry, allowing larger operations to generate milk at a much lower average cost. But one thing’s for sure: The price of a gallon of milk or a quart of yogurt would drop, and farmers would be rewarded for investing in better production and distribution methods.

That is the experience of the other states (and countries) that have shifted from a command-and-control, government-run dairy sector to a market-driven system. And it’s what happened in 1981, when Maine’s minimum milk prices were briefly repealed and free enterprise forces swept through the dairy industry, causing retail prices to fall dramatically.

Policymakers have shown little appetite to reform these inefficient policies. Partly, it’s because price supports for dairy products clearly benefit farmers, especially small ones. And who doesn’t like farmers?

But just because the costs of the subsidies are diffuse doesn’t mean they don’t exist.