US Formula Shortage Illustrates Monopolization Crisis

If you are a parent looking for baby formula in the United States, you might be out of luck. A persistent shortage has cut off close to 40% of baby formula supplies in the country.

Babies lack nutrition. Grocery stores are rationing supplies. Parents are looking everywhere and are sometimes still unable to find formula. According to Dr. Ann Kellans of the University of Virginia, the crisis is even exacerbating racial disparities.

Multiple reasons are cited, stemming from supply chain disruptions caused by COVID-19 to a recall of baby formula by the country’s largest producer. But at its heart, this is a story of monopolization and profiteering in the U.S. economy.

The baby formula industry is just one of many to have had its supply chain throttled in the U.S. lately. Companies are raising prices for all kinds of products. The markets for many industries are extremely consolidated.

Inflation rates in the U.S. have been growing at almost 10% on a year-by-year basis. While the pandemic affected supply chains and caused prices to rise in many cities, those rates are still much more pronounced than in many other countries. According to a study of 46 countries, the Pew Research Center found that inflation in the U.S. was the third highest in the world.

The reason? The American economy is consolidated into monopolies without much competition, and profiteering companies are taking advantage by raising prices to pad already massive profit margins.

According to the Open Markets Institute, “Nearly every marketplace in America is vastly more consolidated than a generation ago … In close to 40 metropolitan areas across America, Walmart sells more than half of all groceries. Amazon, meanwhile, dominates e-commerce in general, and many specific lines of business.”

Consolidation of almost every industry in the hands of market leaders has increased since the early 2000s. Baby formula is no different. One company, Abbott Laboratories, controls 50% of the market. So when Abbott had to close one of its production facilities because of a recall after two babies died, the supply of baby formula declined by almost the same size in some states.

Monopolies and virtual monopolies are not created just because some companies provide better quality products and services. For example, in the baby formula industry, the U.S. government provided an exclusive contract to Abbott Labs for most of the formula distributed through WIC, the federal food benefits program.

That kind of deal is essentially the government handing out welfare to a private company rather than to needy individuals. Favoritism of particular corporations is rampant when the government gives out contracts and makes rules to favor big business.

The U.S. also has protectionist policies that make it hard to import formula. Tariffs of 17.5% are applied to imports from Canada, and there is also an import quota of 40,480 metric tons. The Trump administration railed against international trade, but trade sure is useful when you need something.

While trade restrictions are only a small reason for the shortage of formula, they have caused a much bigger problem in other fields. Lumber prices have nearly doubled since 2020. Steel products cost 25% more overall. Carpeting prices have skyrocketed by 150% since 2018. No wonder it is hard for Americans to afford a home.

It’s not President Biden’s fault the pandemic made it more difficult to get products into ports. But it is his fault that American tariffs made it much, much harder. It is Donald Trump’s fault he imposed massive tariffs on Americans, and it is Biden’s fault he hasn’t gotten rid of them.

Now companies are taking advantage of already existing problems in the supply chain and inflation to raise prices even higher just to maintain profits. According to the Economic Policy Institute, a whopping 54% of price hikes since 2020 are the result of corporations increasing the amount of revenue directed to profits for ownership. Only 8% of increases were caused by labor costs.

Most Americans don’t have to buy baby formula, but the next time we buy a plane ticket, a home, a book, shampoo, packaged food, or just about anything, we must pay more because the government hasn’t stopped – and in some cases encourages – large-scale monopolization and price gouging.