Supply chain issues and a recent recall of a defective brand have caused baby formula shortages around the country. This is a severe crisis for millions of parents who can’t produce breast milk, use formula as a supplement, or whose babies have medical needs that require a specific type of formula.
Parents have been driving for several hours in search of stores where the shelves of baby formula aren’t empty. At least two babies have been hospitalized as a direct result of the shortage.
In response to prolonged pressure, yesterday the Joe Biden administration finally stepped up to invoke the Defense Production Act, requiring suppliers of ingredients to give preference to baby formula manufacturers over other customers, as well as flying in formula manufactured in other countries.
One step they haven’t been willing to consider, however, is to have the government simply manufacture baby formula itself.
Biden’s secretary of transportation, Pete Buttigieg, has argued that this kind of socialist experiment would be unacceptable — even to stop babies from starving to death. “Let’s be very clear,” Buttigieg told CBS, “This is a capitalist country. The government does not make baby formula, nor should it. Companies make baby formula.”
He’s overstating the radicalism of the idea of transferring an industry into public ownership as a response to market failure. Amtrak, for example, was formed as a public company in 1971 as a result of the failure of private rail companies and selective nationalization has been employed in other capitalist countries for decades.
But Buttigieg is right that capitalism has everything to do with the shortage. Under that system, even the health of babies is held hostage to the profit incentives of private companies. I’m in favor of moving beyond capitalism entirely and implementing a qualitatively more egalitarian and humane economic system — but even if you disagree with me about that, why is it important that baby formula of all things be manufactured according to strictly free-market principles?
The Public Option
Applying the Defense Production Act is an immensely positive step that may well be enough to solve the immediate shortage problem — though of course it does so precisely by violating the principles of capitalist economics cherished by Pete Buttigieg.
Even so, there’s a more fundamental reason to go beyond this workaround and start producing formula within the public sector. The moral case for establishing at least a public option in baby formula production mirrors the moral case for Medicare for All. No one should have to spend even a single moment thinking about how they’ll find the money to afford formula to keep their babies alive, just as no one should worry about how to pay for medical procedures or pharmaceutical drugs. All these things can and should be taken out of the market entirely.
Critics of socialism often worry that economic planning will create disconnects between production and the preferences of consumers. This was an important part of the socialist calculation debate in the early twentieth century, and it’s the kind of concern that leads many leftists to favor keeping the manufacture of certain consumer products in the hands of private companies — although those companies could be organized as worker cooperatives like Spain’s Mondragon rather than as hierarchical capitalist corporations.
But whatever you think of these complicated questions, none of that is relevant in the case of baby formula. Babies aren’t the kind of consumers who can most efficiently signal their complex preferences through the amount of money they’re willing to pay for slightly different brands of formula. They just need the right nutrients to keep them alive. In some cases, medical need dictates particular kinds of formula but that’s not a consumer preference that has to be detected from the subtle vibrations of price signals — it’s a matter of the law that can and should be paternalistically laid down by doctors.
Critics of nationalization might have various concerns about in-house technical expertise in the companies that currently manufacture formula. Would a public baby formula company be able to amass as much technical knowledge? And what about future research and development?
There’s no reason why, if some of the big existing private companies were nationalized to create the new public manufacturer, the federal government wouldn’t be able to offer competent managers and technical experts big enough salaries to entice them to stay. As to future innovation, the fact is that an astonishing amount of R&D already happens through the public sector. There’s no reason that public sector baby formula production would be an exception to this trend. And even with the bulk of production in public hands, any private upstart with a truly amazing idea might still find customers willing to pay.
Unlike private companies, though, a public baby formula manufacturer could offer formula to parents free at the point of service. The total size of the baby formula market in the United States was valued at about $363 million in 2019. That’s a drop in the bucket by the standards of government spending — to put it in perspective, simply having the government pick up that entire tab would require less than a 0.05 percent cut to the 2021 military budget of $801 billion. That’s an awfully small price to pay for ending the indignity and human suffering caused by treating baby formula of all things as a commodity.
Pete Buttigieg is right that the government manufacturing formula itself and providing it free of charge would violate the principles that currently govern our economy. It might be time to change those principles.