what does eva peron have to do with the rising cost of milk?

by Cynthia Flores

Published: April 18, 2008

First, another question: who was Eva Peron?

She was the wife of the president of Argentina and founded the Eva Peron Foundation on July 8, 1948; an agency whose mission was to administer relief to the millions of Argentines whom the economy had left behind. By 1950 her foundation managed over $200,000,000 worth of assets, many of which she seemed to single-handedly distribute to the needy. To say she was beloved by her people is an understatement. Her efforts were heroic, without precedent… and incredibly inefficient – but don’t tell that to the Argentines.

Faced with an economic crisis, she established a system that siphoned funds from the pockets of labor unions and industrialist and then in an amazing show of fortitude and public relations, she distributed them in large part by taking orders from citizens off the street. She maintained history’s most open-door policy in that the needy could wait in line outside her door and walk away from an interview with an order for any good or service imaginable: beds, dolls, dental work, homes and cash.

Her direct contact with the poor inspired the love and devotion of the entire nation and left many with the impression that she was saving the country from past injustices.

So why should we care? Well, because our economy is stalling, prices and unemployment are on the rise and it’s at times like these that the masses often look to someone or some policy to save them from the business cycle. Conditions are ripe for an Eva Peron-like character to swoop down on the economy and carry away the injustice.

But tax payer beware! In times of financial instability, it’s not always clear what these so-called economic saviors actually carry away.

Take milk for example. As the average cost of a gallon of milk reaches $3.80, we are a convincing argument away from more government intervention in the dairy market. I say “more” because the government already provides the dairy industry with millions of dollars in the form of subsidies, the idea being that such payments will increase supply and lower the price of milk for low-income consumers.

Now that sounds about right, doesn’t it? Why shouldn’t the government make sure that children in poverty-stricken areas have strong bones? But, of course, that is only the middle of the story.

The story begins with a tax. Money is taken out of a tax payer’s wallet and sent to a dairy farmer. But it’s not a dollar-for-dollar transfer. Subsidies have built-in inefficiencies that require the government to take more than $1 from the tax payer in order to provide at least $1 to the farmer.

If you don’t care about that net loss to society, so long as the child can pour milk on his Corn Flakes, then I’ll remind you that this story has an ending.

Having just paid my taxes I can tell you that there is a carpet installer somewhere who lost my business on April 15. You see, I just sent $3,449 to the federal government and an additional $573 to the state. Now, what I really wanted was Berber carpet in my dining room. But I only had $4,279 in my checking account. If I had the funds, I also would have paid someone to install a deck in my back yard. I’ve always wanted a deck – with a Jacuzzi!

You see, though the picture of an inner-city child chugging a glass of subsidized milk tugs at your heart strings, it only tells 1/3 of the story. Because that subsidized price comes with a cost, a cost that always exceeds the benefit – at least in nominal terms. But it’s more than that; when you lump the economic loss on that glass of milk in with all the other costs that government inefficiencies impose upon society, you can see that the net loss isn’t just to an abstract idea like “society.” The loss is incurred by real people: carpet installers, carpenters, Jacuzzi dealers and more.

People like Eva Peron, with the purest of intentions, often begin with the idea of a simple transfer of goods from the segment of society that is flush with resources, to that segment of society that is lacking. Unfortunately, the transfer that actually takes place is often from those who have little, to those same people - who now have less.

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