More Job Destruction Courtesy of Washington, D.C.

Jim Bacon logging in from Wilkesboro, N.C…. People in the hill country of North Carolina may be forgiven if they don’t believe that the recession is over. Omtron USA, a poultry processing plant, is shutting down its Townsends’ Crestwoods Farms division, eliminating 680 jobs in Siler City and 476 more in Mocksville, reports the Winston-Salem Journal today. That announcement comes on the heels of news that unemployment in the Winston-Salem metropolitan region remained stuck right around 10.0% in May.

The poultry industry, which has a big presence in the Shenandoah Valley and the Eastern Shore here in Virginia, is hurting right now. Pilgrim’s Pride has announced its intention to close a poultry processing plant in Dallas in September, killing another 1,000 jobs. Google “poultry layoffs” and you will find more stories of a similar nature.

To some people, the loss of jobs for blue-collar jobs like these represents a failure of the free-market economy that can be fixed only by government intervention such as tariffs, government stimulus spending or the imposition of higher tax rates on greedy “millionaires and billionaires” who “aren’t paying their fair share.” Such commentary is blind to the real causes of job destruction, which in many cases can be traced to some other government intervention designed to solve some other problem.

In the case of the poultry industry, the primary culprit is the rising price of corn, the food source for chicken, which has shot from $3.41 per barrel in June last year to $6.58 in June this year. That added $1 million a month to the Mocksville plant’s operating expenses. And why has the price of corn shot so high? Rising global demand spurred, in part, by the voracious demand for corn as a feedstock for ethanol. In other words, North Carolina poultry workers are among the victims of the rent-seeking ethanol industry which uses its clout in Washington to create a market for a fuel that cannot compete with gasoline without government support and consumes so much energy in production that environmentalists deem a detriment in the campaign against greenhouse gas emissions.

In an interesting twist, the two North Carolina plants would have closed earlier this year were it not for the intervention of Ukrainian billionaire Oleg Bakhmatyuk, who purchased the business out of bankruptcy and spent $10 million on plant upgrades. Bakhmatyuk had hoped to import corn from the Ukraine at less than half the price paid in the U.S. but regulatory changes there eliminated the price differential. Bakhmatyuk’s entrepreneurial gamble failed, but you can be sure that if it had paid off, someone would be attacking him for his profits and his greed.

If we want to jump-start the American economy and reduce the “wealth gap,” much of it caused by rampant unemployment, a good place to start would be to stop bestowing subsidies, tax credits and market preferences upon politically connected corporate interests like the ethanol lobby and stop talk of foisting higher taxes upon risk-taking millionaires and billionaires.

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18 responses to “More Job Destruction Courtesy of Washington, D.C.”

  1. Come on. you can do better than that. The ethanol equation is complicated but just because environmental groups say it is an environmental, energy, and economic negative doesn’t make it so.

    There are many reasons for job losses in the industrial chicken industry: regulations on chicken poop, restrictions on immigrant hiring, a shift to local production, among others. I know several people who now grow and slaugheter their own chickens,and movements have sprung up to ease up zoning restrictions on chickens as well.

    As for the environmentalists, they have become the Tea Party of engineering and energy realities. They don’t want oils drilling, don’t want imports,and don’t want the one thing we can reasonably do to displace oil usage.

    Yes, it might be an energy negative compared tousing oil. It might even be an energy negative comapared to using oil imported from halfway around the world, and still be an economic plus. For example, the day may come when we use coal fired oil well pumps to extract oil, and burn more BTU’s in coal than we get in oil. And still make money at it, because coal is so much cheaper and oil has higher energy density, and it is more portable.

    The radical environmentalists (as opposed to economic environmentalists like myself) are opposed to everything that is not gotten through the use of nonobtainium.

    Don’t like oil drilling, and dont want the only domestic alternative either. Don’t want wind turbines that kill bats and birds, and definitely do not wnat them on the ridgelines where the wind is (but they can be seen).

    Don’t want massive solar plants in the desert where the sun is, and don’t want power lines from the ridgelines or the desert to where they think everyone but themselves should live.

    And forget about the massive geoengineering projects that will be necessary to store natural energy to meet the real demand. never mind the real best alternative which isn;t even on the horizon: localized gas fired cogen plants that can use the waste heat for heating and air conditioning, and powered by enormous natural gas reseves available through new fracking technology.

    There is NOTHING that will satisfy these people, so using them as a source for compalints against ethanol production provides no new insformation.

    The idea that the wealth gap is caused by rampant unemployment is a huge guffaw, enormous. The wealth gap is caused by the fact that the people who make a lot of money have increased their earnings far faster than people who make small or average earnings. The people who make no earnings make almost no difference in this.

    By my calculations, if we keep increasing the disparity at the present rate, the wealthy will earn substantially all the income, 20 years from now. At present, the darwiniand economists say, so what, the poor are richer than ever. That might still be true 20 years from now, and they might still have substantially zero percent of the pie.

    We see it already, it is no longer PC to call the wealthy rich. Now we call them the “job creators”. This is a total joke. I make stuff I sell, and I hire people to help me do it. But I knw lots of people far richer than I am that do none of the sort. Even CEOs are makeing money by buying machinery and laying off workers.

    We used to have crab pickers, now we have crab picking machines. We used to have chicken pluckers, now we have machines. We do not have ashortage of chickens: I can still buy a chicken cheaper than I can grow one. Except for the fact they taste better, I think my friends that grow chickens are nuts. Unless they enjoy the chickens.

    But, as long as we do not have a shorthage of chickens, who cares who gets laid off? You can buy a pound of chicken for less than you can buy a pound of gasoline. And the gasoline makes less GHG.

    What does that tell you about wher we need to hire people?

  2. When the ethanol project started, environmentalists loved it. Now that it means people in other countries may starve, not so much.

    Of course, if we decide to use our other natural resources, like natural gas or desert solar, people who now drill oil in other countries will be out of work and starving. That is the whole idea of energy independence, isn’t it?

  3. larryg Avatar

    corn feeds cattle also so I’m thinking there is probably more to this story. There is absolutely no shortage of chicken in the grocery stores these days and it still is a reasonable buy compared to pork or beef.

    The sad tale of Siler City is being repeated across the south as these one-industry towns are hammered when their one industry closes.

  4. gretamcdowell Avatar

    Unemployment numbers are comprised of those that are in the job market for the past 30 days. It does not include those that have not been in the job market in the last 30 days: people who have given up looking; those that have gone off unemployment because it has run out. One solution to unemployment is “High Speed University” check it out

  5. Peter Galuszka Avatar
    Peter Galuszka

    Golly gee gosh Jim,
    Ain’t Aunt Bea from Siler City, home of the annual hog callin’ contest.
    And if you want to save some Tar Heel jobs, stop your bitching about taxin’ the rich. They’ll do just fine, rain or shine.
    Our Tar Heel brothers and sisters might want to take a gander over the border towards Henry County, where IKEA workers just unionized. They ain’t takin’ no Swedish shit. They don’t hand it out in Sweden. No way. Why here?
    So let’s get some organizing going and maybe those threatened poultry workers can get some muscle against them rent-seeking, ethanol fat-cats. BTW, I hear ethanol really messes up the plastic gas tank on your bass buster. Does mine.

    Peter Galuszka

  6. larryg Avatar

    One thing you see…when you take a month-long auto trip to “see America” is the vast, vast, VAST amount of acreage that is under cultivation- and much of it in corn – and wheat and hay – even in places like Eastern Washington and Oregon that get 14 inches of rain a year but have snow-melt fed rivers all over the place.

    but… it’s just plain dumb to take 1.1 gallons of gasoline/diesel to create 1 gallon of ethanol… you consume MORE resources… LIKE MORE CORN… for no good reason….other than a “feel good” one.

    there is also a VAST amount of acreage that is NO LONGER cultivated that COULD be for something like switchgrass or equivalent and that’s what we ought to do.

    We should encourage ethanol production but ban the use of corn and require a positive fuel conversion ratio.

  7. Vast acreage:
    One of my favorite photos is one of a wheat thrashers being pulled by 20 mules. Mowing a single swath across a wheat field that extends as as far and wide as you can see. Behind it, to the right is another reaper, pulled by twenty es. And another and another and another.

    Six 20 mule teams stretching off into the distance, such that the last team is barely discernable. Between the six of them they are barely making a dent in the vast expanse ofs wheat.

    Now, if you think using diesel is a bad way to harvest, just try maintaining 120 mules that eat whether they are working or not.

  8. Galuzka is correct. The rich will do just fine, even if we steal another 20% from them. These job creators are not getting rich by creating jobs. They are getting rich by buying machines.

    The unemployment figures are widely understood to be hugely understated, because they do not include those that have given up or those that are underemployed. They also do not account for those that have two jobs, like myself.

    If we eliminate the waste of unnecessary jobs, and spread the rest evenly, with some rational differencees for actual ability, then we would suddenly find that the end of work is upon us.

    Most of us will be as valuable as those teams of mules that we retired in the 30’s and 40s.

  9. we have VAST . …. AVAILABLE acreage for … switchgrass, wind, solar, etc…

    the question is – is there MORE profit in that – than the other “crops” and the answer is no.

    as long as we subsidize crops and ethanol.. we interfere with the market forces that would exploit the vast areas of land – once under cultivation – but no longer.

    We passed MANY large wind turbines in Eastern Oregon..and also along the Columbia River but wind power cannot compete with the govt subsidized electricity form the dozens of dams on the Columbia Watershed.

    and that’s a BIG problem when Uncle Sam builds those Dams and sells the power NOT for what it cost to build/maintain those dams but for bargain basement prices that undercut solar/wind…. of which there are VAST, VAST opportunities in the west with millions of acres of unused land – save for the irrigated land – again sold by the government at less than the cost of providing it.

  10. Well, I could do a lot more if I could get health insurance and if the county would allow me to do anything other than farming.

    For every bad subsidy we pay for we have many more negative subsidies That we impose without paying for.

  11. Larry has a wrong view of these things. One cannot justify government actions on the same basis as corporate actions. The time scales are hugely different. Corporations work by the quarter and governments by the quarter century.

    Not taking the full life cycle costs into account is one reason antigovernment Darwinian economic conservatives miss the boat.

  12. WordPress is a mess. It is even worse than blogger. Groveton, I see an opportunity.

  13. Colorado uses 40 acres per cow. Virginia uses 4 acres per cow.

    We should move NOVA to Colorado where land is cheap( and worthless) and grow cows in Virginia.

    If you buy larry’s Argument.

  14. There are vast opportunities right here in fauquier county, based on tens of thousands of acres of unused land.

  15. Groveton Avatar

    I am sure there is something going on but I wonder if it’s really a drop in the demand for chicken cause by high grain prices:

    In 2010, chicken was the only meat to experience a gain in pounds shipped. Maybe things changed in the first half of 2011.

  16. Peter Galuszka Avatar
    Peter Galuszka

    On second reading, “More Job Destruction Courtesy of Washington ,D.C.” I realize that Mr. Bacon could n0t resist his usually slip into Fox New Mode. Always blame Washington whether it deserves it or not. Since the plans to save the chicken plant were killed by UKRAINIAN trade issues why not print this more accurate headline:

    “More Job Destruction, Courtesy of Kiev.”


  17. the question is – is there MORE profit in that – than the other “crops” and the answer is no.

    But there is not only profit to consider. For example, if ethnol production or fracked natural gas production allows us to reduce our military presence in other ocuntries, to protect our naional interests, then that is a savngs that does not show up in the profit and loss column.

  18. ” One cannot justify government actions on the same basis as corporate actions. The time scales are hugely different. Corporations work by the quarter and governments by the quarter century.”

    you might need to better explain that one.

    But govt subsidies are the root of all financial evil… in 95% of the cases

    We should not be subsidizing ethanol that literally eats our seed corn.

    If we want to “encourage” this kind of thing, it should be wind turbines. solar, switchgrass, sugar beets on land that is NOT used for EXISTING productive activities or in the case of turbines can be used for both activities.

    Ethanol is an example of what is wrong with our country – spending money we don’t have on things that are adversely affecting other things.

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