Kerby Anderson

Why are food prices so high, especially in places where there are few or no grocery stores? Phillip Longman tackles that economic problem in his article “Everyday High Prices.”

He begins with a story of the only supermarket serving an Indian reservation in South Dakota. It looks like any other grocery store with clean floors and well-stocked shelves and an abundance of fruits and vegetables. Those in the community face extreme poverty. They don’t own cars, and the nearest grocery store is nearly 40 miles away.

The first problem is affordability. The grocery store must pay higher wholesale prices that are often nearly double what Walmart pays. The store must pass much of that cost on to their customers. The second problem is shortages. When there is a national shortage of critical items like baby formula, they are the hardest hit. Most customers face longer waits and often must do without.

The economic word for this type of market is “monopsony.” This occurs when big buyers dominate a market and have the power to coerce sellers into giving them a discount along with concessions smaller competitors cannot get.

Back in the 1930s, President Franklin D. Roosevelt signed landmark legislation to address this economic concern. But lax enforcement of it and other antitrust laws are the reason for our current situation.

Small grocery stores often pay more than the going rate. One economist calls this the “waterbed effect.” Suppliers like Procter & Gamble will attempt to recoup lost revenue due to concessions made to Walmart by charging weaker buyers even more.

There are solutions, including enforcement of an existing law. But the first step is to recognize what is happening to the poor in communities with few or no grocery stores.