This Sugar Substitute May Not Be So Sweet

(I am co-authoring this post with Dr. Reginald Sheeply, Professor of Economics at Scotland University)

Last summer I vacationed in Hershey, Pennsylvania home of the world famous Hershey Chocolate Company. And while my family was fascinated by all the chocolate, I was fascinated by the company’s marketing, quality control standards and deep commitment to American manufacturing.  I was also inspired by the story of Milton Hershey who finally was a huge success in the candy industry after several devastating failures. 

We ended our day at “Chocolate World” with a visit to one of the largest candy stores in the world.  We are all “kids” in that candy store.  There must be a hundred different types of chocolate in addition to other candies sold by Hershey.

After hearing numerous times during the day about the commitment to domestic manufacturing, I looked at the label on a package of Jolly Ranchers (a brand acquired by Hershey in 1996) and saw the words “Made in Canada”!  What in the name of Milton Hershey is going on here?

It all has to do with the economic “Law of Unintended Consequences” which states that actions by individuals and especially governments often result in unanticipated effects.  

In the 1980’s some congressman convinced his colleagues to enact high tariffs on imported sugar to preserve the jobs of domestic sugar beet farmers.  I believe he accomplished this very difficult feat for one of the following reasons:

A.     He was a very skilled congressman

B.     Many other congressmen owed him a big favor

C.     He had compromising photos of the Speaker of the          House and a farm animal.

Dr. Sheeply, what do think about this if it was in fact reason “C”?

“That’s baaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaad”

This sugar tariff which is still in effect has resulted in the following:

Higher Sugar Prices

Sugar prices are much higher than they should be.  It is in effect a tax on sugar that is estimated to have cost U.S. consumers around $2.5 billion in 2009.  A sugar tax?  Where have you heard that before?  Oh that’s right; the British enacted the Sugar Act on the American colonies in 1764.  It was one of the taxes that led to the Revolutionary War.  I guess back then we got upset, now we just blindly pay it.

Dr. Sheeply, what is your opinion of high sugar prices?

“They’re baaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaad”

Unintended Job Results

The high sugar tariff is preserving the jobs of sugar beet farmers; however the unintended consequences have been significant.  Products that use high amounts of sugar, Jolly Ranchers("hard candy") for example, cannot be competitively manufactured in the U.S. so every one of those jobs moved to Canada or Mexico.  It is difficult to measure the exact impact on jobs, but it very well could be a net job loss.

In addition, it puts every domestic manufacturer that uses sugar in its products (like Hershey chocolate) at a competitive disadvantage against imported products and limits export sales.  Sugar prices are very important to chocolate manufacturers.  Ironically two of Milton Hershey early business failures were caused when sugar prices spiked.  The Hershey Company survived because Milton solved the problem by growing his own sugar in Cuba.  Milton Hershey would despise the sugar tariff.

Dr. Sheeply, what do you think about losing jobs due to high sugar prices?

“That’s baaaaaaaaaaaaaaaaaaaaaaaaad”

A Questionable Substitute

Because sugar prices were so high, Coca-Cola and Pepsi started using a new sugar substitute called High Fructose Corn Syrup (HFCS).  This sweeter is derived from corn using a special manufacturing process.  There would be no market for this product if sugar was available at the free market price.

The problem here is that several credible medical studies have found there are possible health concerns in how HFCS is processed by the human body.  This impact is much more prominent in men than it is in women.

Of course the corn farmers and HFCS producers have run television and radio advertisements promoting the naturalness and wholesomeness of the product.  Remember these are the same people who think that burning corn as fuel in our cars is a great idea.

So who are you going to believe: medical scientists who are trying to keep us healthy and have no financial interest in the research findings or people who are making billions of dollars off the product?

I don’t know the answer, but it is a moot point with me.  You see this one is personal.  I have two health conditions that I am currently taking herbs and vitamins to control.  The medical studies say the main two health concerns with HFCS are the two conditions I have.  I am the canary in the coal mine on this one.  If the studies are accurate, HFCS will kill me before it kills you.  So I obviously try to limit my HFCS consumption as much as possible.  People always laugh at my McDonald’s meal of Quarter Pounder, large fries and Diet Coke.

Dr. Sheeply, what do you think about HFCS?

“It’s baaaaaaaaaaaaaaaaaaaaaaaaaaaaaaad”

Therefore policies by my own government may be “poisoning” me and my government is making me pay more to do this.  It’s enough to make someone a Ron Paul supporter.

Dr. Sheeply, what did you think of working with me on this blog post?

“It was baaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaad”