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.