Price of Productivity Gains

The S&P 500 companies reported very healthy profits for 2Q 2010. The Asia factor was common across all firms. In addition, many industrial/software companies saw gains from capital spending. In the absence of significant demand growth, capital expenditures are intended to drive productivity gains rather than an expansion of facilities to produce more with higher inputs. The 'productivity increase' investments will then enable the firms to meet the demand with lower labor costs, further dampening demand.

On the recent recall of a half billion eggs, a number of scientists and writers have weighed in with their views. The "productivity" driven industrialization of food production has given us the dozen eggs for under $2.00, but at what price?

Why Eggs Became a Salmonella Hazard - Room for Debate - NYTimes.com: "A half billion eggs have been recalled for possible salmonella infection, but the cause of the problem, at two giant farms in Iowa, has not yet been pinpointed, said Margaret Hamburg, the commissioner of the Food and Drug Administration..."

David Kirby on "The Looming Threat of Industrial Pig, Dairy and Poultry Farms on Humans and the Environment": "Something else we feed chickens that people don’t realize is beef products. And when those chickens eat that beef product, some of it falls into their litter. Well, we produce so much chicken litter in this country, because of these factory farms, and it is so rich in phosphorus and nitrogen, its land application uses are limited. So you have surplus chicken litter and nothing to do with it. What do they do with it? They feed it to cattle. So we feed beef cows chicken crap. That chicken litter often contains bits and byproducts of cattle. So we are actually feeding cattle to cattle, which is a risk factor for bovine spongiform encephalopathy, better known as mad cow disease. We actually feed cattle products to cattle in three different ways: chicken litter, restaurant scraps, and blood products on dairy farms. And all the mad cow cases in this country came from mega-dairies where, when that calf is born, they remove it from its mother immediately, because that mother’s milk is a commodity, it’s worth money, so instead they feed that calf a formula that includes bovine blood products, and again increasing the risk of mad cow disease."

Michael Pollan speaks on egg recall | Berkeleyside: "Local food expert Michael Pollan was on CNN Monday night explaining why no one should be surprised that 550 million eggs have been recalled because they may have been tainted by salmonella.

Salmonella in eggs can be linked back to the 1970s and 1980s when industrial farmers started crowding chickens together to streamline their growth, said Pollan, a professor at the UC Berkeley Graduate School of Journalism. Nowadays, there can be 10 chickens to a cage, which can add up to 1 million chickens in each henhouse.

When President Obama took office, he tried to create a single agency to oversee all food safety issues, said Pollan. The food industry strenuously fought that attempt. “Our food industry has fought to keep power divided and power divided is never strong,” Pollan told CNN’s Dr. Sanjay Gupta."