decompressing the Wagner Food Policy Alliance event

Last night, I had a friendly conversation with the co-CEO of Whole Foods, Walter Robb, at NYU’s Wagner School of Public Service. Soon, I am told, there will be a podcast available, so those of you who were unable to attend can hear the conversation. The evening was set up through a personal contact, and so the tone was meant to be friendly but informative. I think it went well, overall. That said, I have a few thoughts I would like to share post-event.

Walter made a funny comment, which went something like this: the store is Whole Foods, not Holy Foods. That was his not-so-gentle reminder that they are a business, even if they don’t (as he claimed) consider their stockholders in the classical sense that relies on a business model of a public firm’s primary responsibility is the shareholder. There is an interesting and famous New York Times article on this topic, written by Milton Friedman in 1970.

The public face of Whole Foods is one of complete eco-friendliness. Five NYC Whole Foods people were on hand, and they were impressive (I just remember the names of two people: Carolyn – Columbus Circle Store manager, and Christina, who manages a region – I think it was the NY area). Christina described a new store opening in Brooklyn in 2013, and it sounded impressive: the goal is platinum LEED certification, and will be equipped with a rooftop greenhouse operated by Gotham Greens. Higher profits that will accrue to Whole Foods, for sure.

Here is my discomfort: these are all outwardly visible eco-friendly practices. People can see these, and of course, they may act as a “nudge” that quietly encourages people to spend more money in Whole Foods.

But what about the hidden parts of the food system? Environmental quality, for one; wages paid to workers in the food system, for two; and then, farmer income. Here are three specific examples from last night that make me a little queasy:

(1) When asked if we should buy “local from NY” or “organic from Mexico,” Walter’s answer was that this was hard. Let’s see what Katherine DiMatteo, formerly the ED of the Organic Trade Association has to say on this topic: “But if faced with a choice between organic produce from elsewhere and local, non-organic produce, I choose neither. I try to find products that are both local and organic.” Next, Walter commented that organic food was more nutrient dense than conventionally produced foods. My thoughts are that the science on this is not well established, and that people who resort to speaking of nutrient density are usually in the business of marketing organic food. The science tells us that main beneficiary of organic food systems is the ecosystem, and the future generations of people who will live on our planet: farming organically is less disruptive to the ecosystem, on almost every measure (for example: biodiversity, climate change, water and soil quality). Yes, of course, humanity benefits, but it is through an indirect measure, and not through the food we consume.

(2) Farmer income. Sigh. This line of conversation was very disturbing to me. Whole Foods described their meat labeling system, which ranks meat according to different characteristics. When I asked if the farmers who produced under this ranking system earned greater profits than conventional farmers (that is a goal of the food movement, after all), they described one farmer who was better off. I interpret this as: no, they don’t. Also, Walter’s discussion of current farm income made me feel that he thought this was a non-issue. It is true that right now, at this point in time, farm income is high, by historical standards. However, a resilient food system relies on farmers who are able earn a good living throughout their lives, and not just in the periods of high prices. Farm prices are cyclical, and history tells us that sooner or later, they are sure to decline from their current levels.

(3) The fair trade label. Wow wow wow. Let’s look at this more carefully. Walter’s main reason for supporting the new US fair trade label was that individual farmers needed to be fair trade certified, and not just farmer cooperatives. But let’s take a look at the role of farmer cooperatives: they exist to give farmers some bargaining strength when negotiating with big buyers (ahem, like Whole Foods and Starbucks). By banding together, farmer cooperatives can reduce costs of procuring inputs, as well as to negotiate better prices for their products by marketing as one entity. Lower input costs, higher sales price for farm products: together, that implies higher profits to the farmers in the cooperative. So this move – to certify farmers as well – sounds like a slippery slope that will slowly erode the ability of fair trade certified farms to receive higher prices. I will write more on this later, because it is fairly complex, but the basic idea is that outside opportunities put a lower bound on prices and wages (the reservation wage, in agency theory). Tell me how a small cocoa farmer in West Africa is going to be able to strike a better deal than a cooperative of cocoa farmers from the same area? Once the coops are broken into their individual units, they have lost their ability to negotiate fair price, and are reliant on the goodwill of the buyer (Whole Foods or Starbucks, for example).

To be clear, I am a supporter of Whole Foods. The store has been my primary source of food for 18 or more years. I own their stock. I find it fun to shop there – I love new food products.

But let’s also be clear about this. Whole Foods is a business and is really not able to (or really interested in) making deep changes to the aspects of the food system that will increase their costs and reduce their profits. They are a firm, a profit maximizing entity, and it is irrational for them to pay higher prices to suppliers if doing so results in lower profits. I expect Whole Foods to act this way, and do not hold anything against them for doing so.

For the type of change we seek from the food system, we need policy. Thus the link back to the Wagner School of Public Service, and the Wagner Food Policy Alliance.