Italy's cheesy socialism

December 11, 2:14 PMLibertarian ExaminerTrevor Bothwell

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With more and more Italians feeling the pinch amid a global economic crisis, what's the government's solution to rising food prices? Why, to keep prices from falling, of course!

With data showing a growing underclass and food lines now in most major cities, the Italian government has come up with a way to help the needy while propping up one of its iconic industries.

Agriculture Minister Luca Zaia has committed to buying 100,000 66-pound (30-kilogram) wheels each of Parmigiano Reggiano and the very similar Grana Padano cheese to donate to the needy.

Producers sought government help in the face of prices that have fallen some 25 percent over the past five years, said Giorgio Apostoli, who represents dairy farmers for the Coldiretti agriculture lobby. The producers faced pressure from distributors who offer sharp discounts on the grateable cheeses to lure shoppers into supermarkets.

For one thing, it's impossible for a government to "donate" to the needy. A donation is a voluntary transfer of property, whereas this ploy by the Italian government involves the forced redistribution of taxpayer wealth. This is a welfare program.

Moreover, instead of allowing free market forces of supply and demand to result in prices that would likely make these cheeses much more affordable for the so-called "needy" in the first place, the government's commitment to buy a guaranteed quantity only keeps prices from falling. So it's easy to see who the intended beneficiaries of this measure really are: dairy farmers and their lobbies.

Indeed, producers of Parmigiano Reggiano have been pleading with the government to "declare a state of crisis," bellyaching that wholesale prices have continued to fall as the costs of production have increased, which could cause up to 30 percent of producers to go out of business. "This is a prized product," claimed Giorgio Apostoli of farmers group Coldiretti, "there ought to be policies to safeguard those who produce it."

So there you have it. The sophisticates really shouldn't have to play by the same rules as everyone else. In fact, they're so special that consumers should even be forced to pay artificially high prices if paying less may mean being graced with the presence of fewer snobbish cheese manufacturers.

In a free market, prices aren't set by accident. They are a function of relative supply and demand conditions, and when supply of a good exceeds demand, prices fall (ceteris paribus). This is actually one saving grace of a recession.

However, some of the costs associated with making certain cheeses aren't derived by accident, either. Makers of Parmigiano Reggiano must adhere to strict standards and guidelines in order for their product to be considered "Parmigiano Reggiano." So whether these regulations are imposed by government or industry (or both), they are nevertheless costly. Whereas market prices are fluid, regulations are rigid. Therefore, when demand decreases and supply remains more or less constant, there is always the chance that these manufacturers won't be able to recoup the costs of production.

This new instability in the dairy industry also may be due to increased debt incurred by any number of businesses that chose to expand, restructure, or remodel during the economic boom, but which now simply cannot stay afloat given the current economic climate.

Whichever way you slice it, the plight of the cheese industry is hardly the problem of the taxpayer or the consumer.