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How the State Created Fast Food ❧ Current Affairs

How the State Created Fast Food ❧ Current Affairs from @curaffairs
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In response to hundreds of fast-food workers’ strikes and protests over the last seven years, fast-food executives have emerged as some of the most reliable defenders of government apathy toward the working poor.

When California raised its minimum wage in 2016, following a series of fast-food worker protests, former McDonald’s CEO Ed Rensi called it an attempt to subvert “economic reality” and compared the unions that backed the move to the Soviet central planners of old. Andy Puzder, CEO of the parent company of Hardee’s and Carl’s Jr., joined in to make his own impassioned plea against a change. “This is the problem with Bernie Sanders and Hillary Clinton and progressives who push very hard to raise the minimum wage,” he said. “Does it really help if Sally makes $3 more an hour if Suzie has no job?”1 (President Trump later nominated Puzder to lead the U.S. Department of Labor, but Puzder eventually withdrew himself from consideration due to lack of GOP support.)

In the United States, about 197,000 fast food restaurants employ about two percent of the workforce.2Fast-food workers are systematically underpaid and suffer disproportionately from a lack of universal healthcare: 87% of American fast-food workers do not have employer-provided health benefits—more than twice the rate of the general population—and at least 20% live below the poverty line.

We often think of these statistics as the consequence of the shrinking of Western governments, a scaling back of the state à la Ronald Reagan’s assertion that “government is the problem.” But the same governments which started, in the late 1960s, slashing health and welfare programs that maintained a standard of living for the working poor, and then accelerated their cuts in the 1980s, simultaneously expanded their powers to help business. The shift was anything but coincidental: as scholars like Philip Mirowski and Quinn Slobodian have written, the prevailing political philosophy of the time—what critics call “neoliberalism”—advocates for a strong state, one that expands the domain of the market at every opportunity. As Mirowski writes, the foremost political goal of neoliberals “is not to destroy the state, but to take control of it, and to redefine its structure and function, in order to create and maintain the market-friendly culture.”

“Contrary to the dichotomies and rigidities that characterized classical liberalism with regard to its proposed firewalls between economics and politics,” Mirowski goes on to say, “neoliberalism has to be understood as a flexible and pragmatic response to the previous crisis of capitalism (viz., the Great Depression) with a clear vision of what needed to be opposed by all means: a planned economy and a vibrant welfare state.”3

The result is a government that is simultaneously everywhere and nowhere, attentive to the moneymakers’ every need and neglectful of everyone else’s. In response to any cry for help from the working poor, defenders of the status quo could always make the same refrain: the government can’t help you. Helping you isn’t the government’s problem.

So what can fast food tell us about the evolving role of the state in a capitalist society, in America and around the world? A great deal, it turns out: as well as being a through-line in many of the world’s health and environmental problems, the fast food industry is a showcase of the entire market-centric state’s biggest hypocrisies.


Fast food is as global as capitalism itself, as the industry’s biggest players now earn most of their profits outside the United States. McDonald’s entered the Caribbean and Latin America via Puerto Rico in 1967 and Costa Rica in 1970, and Asia, via Hong Kong, in 1975. In 1971, KFC became the first foreign fast food chain in Africa, opening a restaurant in apartheid South Africa. KFC now operates in 24 countries across the continent, having added Rwanda to the list in 2020, and Sudan, Gabon, Senegal, and Madagascar the year before.

Raw materials are essential to the industry’s success, and every place it goes, the industry depends on state intervention to ensure steady supplies. In developing countries, fast food has been both a beneficiary and a proponent of both industrial agriculture and liberalized trade agreements which make it cheaper to buy goods from the far side of the world than from up the road. Every chain now dabbles in protein alternatives to meat. (The McAloo Tikki burger has been a bestseller in India since it was introduced in the late 1990s.) But meat remains the industry’s primary offering to the public, and tracing meat production reveals a vast system upon which the fast food industry rests. From farmers who grow corn and soy, to factory farms that buy those crops and feed it to chickens and cows, to slaughterhouses that turn those animals into meat, to franchise-owned restaurants that fry that meat and serve it to customers, the stages of making a McPicanha in Brazil or a Colonel Burger in Kenya are remarkably similar. The world’s biggest fast food companies, like McDonald’s and Yum! Brands (the parent company of KFC, Taco Bell, and Pizza Hut), lie at the center of an immense web of trade and finance, most of which is utterly invisible to the typical customer, and all of which depends on government support.

Because of—not despite—consistent government intervention in the industry, we might call fast food the quintessential neoliberal cuisine. Tracking how the world’s public institutions have lined up to aid the industry’s expansion, while at the same time having rolled back their support for the people they are responsible for protecting, can help us understand how one of the most destructive ideologies of our time has shaped our world.

But to start, let’s consider the most obvious component of the entire fast food web: the restaurants—specifically, the restaurants in inner-city America.


The Restaurants

Fast food as we know it began in the 1950s, with the arrival of McDonald’s in America’s suburbs. Even then, the industry owed its success to the government, with its expansion across suburbia predicated on the new highways of a postwar infrastructure boom. But after a decade, those cradles of white consumerism had become saturated, so the industry went looking for new frontiers in America’s inner cities. This would be the first step of the industry’s eventual world takeover. It could not have been a more opportune time: mass unrest was afflicting the inner-city neighborhoods of Los Angeles, New York, Philadelphia and other cities in the early 1960s, and the federal government was becoming more interested in the social and economic conditions which had preceded the violence.

Washington interlocutors quickly identified joblessness and poverty as root causes of the decade’s unrest. “Unemployment of human resources,” the author of an influential 1965 study wrote in a memo to the White House that year, “is leading to hopelessness, anti-social anger, and violence.” As the historian Chin Jou writes in her 2017 book, Supersizing Urban America: How Inner Cities got Fast Food with Government Help, this viewpoint dovetailed with a prevailing and paternalistic attitude toward the urban poor that was common among both policymakers and business leaders of the time. At a conference in 1968, for instance, Robert M. Rosenberg, president of Dunkin’ Donuts, Inc. said that by owning a business, “the minority entrepreneur” could undergo “a radical change—a change in values, a change in the educational opportunities he set up for himself and his family, and in the responsibility he showed for his community.”

“The implication,” Jou writes, “was that fostering such community paragons would form a bulwark against future urban unrest.”

In 1964, the U.S. Small Business Administration (SBA) launched the Equal Opportunity Loan program to provide money to small businesses in economically distressed (and overwhelmingly Black) urban areas. As technically-independent business owners, fast food franchisees, or the people and companies who owned the actual restaurants, qualified easily. (Decades after the program first began, they still do.)

But the SBA’s assistance wasn’t a mere loophole exploited by a handful of franchisees. It was a campaign to provide start-up funds to fast food entrepreneurs. In the 1970s, the agency issued 215 separate low-interest loan guarantees worth $32 million (equivalent to $157 million in 2021) to McDonald’s franchisees alone. For entrepreneurs moving into difficult new terrain, the support was foundational to their success.

Why did the federal government help out? As Jou explains, federal officials believed that owning a business had become a complicated affair requiring a range of skills, so it was unrealistic to expect Black people with limited education to start businesses from scratch. As part of a franchise system, a new entrepreneur could benefit from the parent corporation’s marketing campaigns, employee training manuals, and supply chains. Like a football team dependent on its star quarterback, the government’s response to endemic joblessness and poverty amounted to giving the private enterprise the ball and letting it run.4

Neoliberalism was still a fringe ideology at the time the SBA’s fast food lending program began. But after another period of national unrest following the assassination of Martin Luther King, Jr. in 1968, Congress started to scale back the federal anti-poverty effort, and with it, the belief embedded in America’s social agenda since Franklin Roosevelt, that government could help poor people at all. What remained of federal poverty alleviation programs eventually folded under the umbrella of criminal justice.

One can see in the SBA’s fast food lending scheme a prototype for a new kind of government. As the government’s role in helping the poor diminished, business emerged as the new savior almost by default. Government became less of a service provider and more of a facilitator for the private sector. In that schema, a large corporation like McDonald’s could be the government’s partner, if not its master.


The Corporations

Just as the SBA tied the recovery of inner-city America to the success of fast food franchisees, beginning in the 1980s, state governments began to tie their employees’ retirements to the publicly-traded corporations which ruled the industry.

Fast food companies, unlike the restaurants themselves, are predominantly white-collar affairs. Their primary function is to coordinate the disparate tasks that go into running a restaurant chain—like supply, marketing, and lobbying the government for more permissive advertising regulations and a low minimum wage—while staying as far removed as possible from the tedious work of frying chicken and flipping burgers.

Officially, franchisees and fast food companies are in the same business. But while franchisees offer a whole menu of products, their corporate masters offer essentially one: capital stock, the instrument which allows investors to make a corporation’s financial success their own. And these days, some of the largest stockholders are government entities.

In the United States, a multitude of government-controlled pension schemes invest the retirement savings of nearly twenty million state and local employees, from college professors to prison guards. Historically, most of that capital was bound to the world of government and corporate bonds, where a low but guaranteed rate of return made for relatively safe investments. But as neoliberal ideas began to register in sweeping policies, state governments changed their rules, allowing public pensions to shift more money into the higher-risk world of stocks. Pensions would help underwrite the stock market with trillions of dollars in investments, and in exchange, the stock market would float the pensions.

Today, virtually every public pension fund in the U.S. invests in stocks, and most of the big ones invest in fast food. California’s Public Employee Retirement System (CalPERS) and its sister fund for teachers (CalSTRS) are the two largest pension schemes in the United States. Together, they hold more than a billion dollars in the stocks and bonds of McDonald’s, Yum! Brands, and their larger, publicly-traded franchisees in Asia and Latin America. Both funds are government entities, wholly-controlled by the state of California.5The New York State Common Retirement Fund, the third largest pension fund in the United States, has more than $450 million invested in Yum! and McDonald’s. The State of Wisconsin Investment Board, the government agency behind the eighth largest pension fund in the country, has around $94 million invested in the same companies.

Though American pension funds rank among the industry’s largest and most loyal backers, public pension investment in fast food is an international phenomenon. Perhaps no government is more deeply involved than Malaysia’s. Through a collaboration between a public pension fund and a state-owned investment group, the government is the majority shareholder of QSR Brands, a nominally private company which is the exclusive Yum! franchisee in Malaysia, Singapore, Brunei, and (with a local partner) Cambodia. But beyond owning more than 1,300 KFCs and Pizza Huts, QSR Brands is also the restaurants’ supplier. Through its poultry abattoirs, an industrial bakery, sauce plant, and commissary, it provides nearly all the food its restaurants need, from chicken, to pizza dough, to coleslaw.

Even ostensibly “ethical” pension funds have made huge bets on fast food. Norway’s sovereign wealth fund, Norges Bank Investment Management, has around $1.7 billion currently invested in McDonald’s—slightly more than one percent of the company’s stock—making it the company’s seventh-largest shareholder. ABP, the largest pension fund in the Netherlands and the fifth-largest in the world, has nearly $600 million invested in the company, and more than $100 million in Yum! Brands and Yum China. Pick a U.S.-invested government fund anywhere in the world, and you’re likely to recognize at least one fast food brand on their list of holdings.6

With so many corporations to invest in, what makes fast food so appealing? About six thousand companies currently trade their stock in the United States. Most are very small, very risky, or so slow-growing that their share prices rise little with each passing year. Small players, like the ones who get their stock tips from Reddit, are free to invest in any of them: they’re using their own money, so the risks are theirs to take. But pension funds, like other institutional investors, have fewer options. Since they manage other people’s money, they have to avoid too many risky bets. At the same time, they can’t be so risk averse that the money doesn’t grow over time. And since they’re investing huge sums of capital, they tend to prefer the large companies that can absorb them.

When you add up the criteria, the number of companies that might even interest pension fund managers is far less than 6,000, but fast food companies are among those that qualify.

We might understand fast food’s appeal to investors in the same way we understand its appeal to customers. For new customers, especially in developing countries where foreign brands are scarce, the allure of fast food comes from partaking in a global phenomenon, the chance to eat the same food in Lusaka, Zambia that one eats in Johannesburg, South Africa, or, for that matter, in Tokyo or Tel Aviv. For people who grew up on the stuff, like most customers in the United States, fast food is passé, the daily bread of working people too busy and too tired to eat anywhere but in their car. But the quality that thrills rising middle-class consumers in Africa and bores health-conscious commuters in America is exactly the one most enticing to investors: fast food is ubiquitous, or, in the parlance of the business school graduate, it “operates at scale.” Better yet, it’s growing, converting new people into “customers” and new countries into “markets” daily.

And, since the industry is dominated by companies whose equities (stocks) and debts (bonds) are readily available on dollar-denominated exchanges, investors can easily buy those assets and partake in the industry’s success. It’s for this reason that any organization investing a billion dollars or more on someone else’s behalf would be hard pressed to avoid putting at least some of it in a company like Yum! Brands or McDonald’s. It’s also why the holdings lists of the largest private asset managers (like BlackRock), public pension funds (like CalSTRS), and endowments (like the Gates Foundation Trust, the technically-separate investment group that underwrites the Gates Foundation) largely resemble each other and almost universally register investments in fast food.


If you’re like me, perhaps you see a twinkle of possibility here. Sure, BlackRock doesn’t care about anything but profits, but a pension fund like CalSTRS is an instrument of the state. It represents teachers—teachers!—and it manages more capital than most Wall Street firms, so why doesn’t it stand up for the public at large and hold the corporations it invests in to account?

There and again, pension funds do take a stand against corporate wrongdoing, like pollution, corruption, or human rights violations. But decades of dependence on corporate success have made them the corporate world’s collaborators. At times they act as critical friends of their corporate investees, but never as adversaries. Like other institutional investors, public pension funds summarize their responsibilities with a two-word phrase: “fiduciary duty,” a legal term which means they’re bound to put the interests of beneficiaries above any other moral obligation. Of course, pensioners have a lot of interests: clean air or a more equal society. “Fiduciary duty” covers none of that. In practice, the one thing that matters above all for a pension fund is the share price. While many funds have a code of ethics, “fiduciary duty” generally subordinates everything listed on the code to the cause of maximizing the value of the fund’s investments. Funds can (and sometimes do) criticize the corporations they invest in, but never so much that their voice alone would make the companies’ share prices fall, or even dip.

In becoming dependent on corporations’ success, the pension funds have allied with them against the public. When Fight For 15 activists stormed McDonald’s’ headquarters in 2014, outraged that the company’s leading executives made millions while so many of its workers struggled to survive, CalSTRS sided with McDonald’s, calling their pay scheme “quite reasonable.” When an international consortium of unions called on Norges Bank Investment Management and ABP to pressure McDonald’s to do more to bring down rates of sexual harassment among its workers, the Norwegians dismissed the grievance on technical grounds and questioned why the unions would ask them for help at all.


The Suppliers

When detractors talk about fast food, they often talk about how it’s predictable. Everywhere you go, the same logos, the same experience, the same food. But to fans, the consistency of fast food isn’t one of its flaws but one of its major appeals. And as it expands into new regions, the industry extends those qualities throughout the agricultural systems upon which it relies. In turn, those systems extend their own reach into new frontiers.

The dry landscape of South America’s Gran Chaco, one of the most biologically diverse regions in the world, is an especially dismal example. According to one 2014 paper, the region was losing natural vegetation at a rate of about 2.5 acres per minute. Most of what has replaced it is soy—a single crop, planted in rows and harvested by machines, most of which is exported, primarily to Asia. Vast areas, nearly untouched by humans a generation ago, now resemble the carefully managed agro-industrial farmlands of Iowa or Illinois. Conversion has led to such a dire collapse in genetic diversity in the Gran Chaco that scientists estimate that if it were left completely untouched, the region would still need between 300 and 3,000 years to recover.

Soy can make tofu, or meat substitutes. More commonly it’s combined with corn to feed chickens, pigs, and cows, and to make oil to fry their meat in. To the technocrats and financiers behind the industrial agricultural system, whatever form the soy ultimately takes isn’t any more important than the multitude of problems that accompany its production and distribution around the world. At its root, the kind of agriculture practiced in the Gran Chaco, the Cerrado, the Pampas, and the other ecologically critical biomes where soy fields proliferate is about extraction, or turning nature into capital. The same is true further up the chain of production, in Poland, Shandong province, China, and other places where factory farms and slaughterhouses turn much of that soy into meat, largely to supply the fast food industry.7


While it’s possible to find chicken and beef almost anywhere in the world, finding meat that adheres to the standards of Yum! Brands or McDonald’s and in the quantities they demand is no easy task. As the industry extends its reach into the developing countries where it sees the most opportunity, it needs suppliers that can support it just as readily as the suppliers in the countries where it already has operated for decades. Franchisees can usually import meat, and often do from major exporting countries like Brazil, but ever-shifting trade restrictions necessitate a local supply, if only as a backup plan.

The trouble is that meat producers in those regions often lack the capital and technical knowledge required to become McDonald’s or Yum! suppliers. Fortunately for them, one public agency is offering assistance. In the last two decades, the International Finance Corporation (IFC), the private sector lending arm of the World Bank Group, has invested tens of millions of dollars in meat companies in developing countries. Poultry has been a major focus area in recent years, and the bank has invested in rising producers in Africa, Eastern Europe, and the Middle East. Many of these companies happen to be KFC suppliers.

As it does for all its clients, the IFC has provided these companies with a cornucopia of assistance—not just loans, but also technical advice and connections to other banks. IFC support also confers legitimacy to a project, as applicants have to pass a mandatory human rights and environmental evaluation process which, once completed, functions like a Good Housekeeping Seal which the company can add to its list of accolades when seeking out additional investors.8

Even without a declared strategy of financing fast food suppliers, it’s easy to see how the IFC aligns itself with the industry. According to one recent declaration, when financing agribusiness, the IFC looks for companies that support “efficient food systems” which “drive economic development.” Descriptions of the ideal clients shift with the latest development fads, but the IFC generally favors companies that utilize imported technology and operate at scale. When entering a new country, fast food companies look for suppliers that can offer a consistent product to a large and growing number of restaurants. Not surprisingly, they tend to pick ones that utilize imported technology and operate at scale. In developing countries, where industrial operations (like meat production) are often dominated by a few wealthy families, the menu of companies that meet this standard tends to be limited, so whether or not they coordinate their efforts intentionally, the IFC and fast food companies are often destined to choose the same companies to partner with.

Put another way, the IFC has a certain worldview. Fast food just happens to fit perfectly within it.


Publicly funded but technically independent of a single government’s authority and not subject to clear accountability, multilateral institutions like the IFC excel at channeling the will of a clique of wealthy governments, creating the illusion of broad consensus. Accordingly, they can justify their approach as service to “the market,” as if the market were a mystic entity that exists outside the realm of politics.

The foreign aid agencies of wealthy nations also heap assistance onto meat companies that have the potential to become fast food suppliers. A few even solicit the industry’s advice on new schemes. At a steakhouse in Washington, D.C. in 2011, Raj Shah, then the head of the U.S. Agency for International Development (USAID), convened a group of business leaders, including the chief lobbyist for Yum! Brands, to discuss a new agricultural development program in Africa. Later that year, Shah personally invited Yum!’s CEO to speak at a “Partnership Forum” in Washington to discuss the company’s benefits to food security in Africa. (He ultimately did not.) At the same conference, Shah delivered his own speech, titled “Embracing Enlightened Capitalism.”

“In order to meaningfully address poverty in developing countries,” he said in that address, “we have to help companies find profit opportunities, not photo opportunities.”

When I was in Ghana some years later, I spent hours talking with consultants for USAID and USDA who were attempting to rebuild the local poultry industry so that it could better compete with a tide of cheaper Brazilian imports. They were rarely the first to broach the subject, but when I asked about KFC, they became visibly excited. As the leader of one group told me, the possibility of becoming a KFC supplier was the carrot he lured poultry companies with when they needed encouragement as their profits diminished in the face of free trade agreements the U.S. government insisted upon.

I spent months researching that project, and one of the most interesting things about it was how little Yum! Brands was involved. The company’s supply chain scouts traveled to Ghana frequently, but their involvement in the project was limited to a few meetings. And yet, to hear the U.S. contractors describe it, KFC’s handful of restaurants in the country would be a guiding light for this nation’s poultry producers, and its corn and soy farmers behind them. It was an ideal to aspire to, the zenith of modern agriculture. The whole plan depended on keeping the cost of chicken feed low, and so the greatest burdens fell on the smallest farmers. If they just bought the most expensive seeds and turned over more of their land to feed crops, like corn and soy, the U.S. contractors said, the farmers could sell their crops to the poultry companies up the road. The poultry companies would raise their chickens for less, and KFC would buy their chicken locally instead of importing it. Everyone would be connected to the virtuous cycle, and everyone would make money. What no one wanted to talk about was what would happen to either the poultry producers or the soy farmers if, despite their efforts, KFC kept importing their chicken anyway.


One standard critique of neoliberal policies in international development is that they are a form of “neo-colonialism.” Critics typically highlight the one-sided nature of neoliberal policies at the World Bank and the International Monetary Fund, which have forced poor countries into a state of dependence, maximizing exports of a single crop or mineral while opening their borders to a deluge of cheap imports of everything else. But just as colonial rule necessitated local collaborators, so, too, does the neoliberal order. Just as rising middle classes in poor countries take to fast food as a symbol of their newfound status, the governments in those countries want to attract fast food and its underlying “job-creating” machinery.

One operation in West Africa is revealing. In 2005, as the Zimbabwean government was forcing white farmers out of the country as part of Robert Mugabe’s “land reform” program, the president of Nigeria saw an opportunity. Wanting to take advantage of the exiled farmers’ international connections and technical expertise, he began offering them land in Kwara State. In a region where few farmers could get assistance of any kind, the local governor provided millions of dollars in loans to the newcomers, worked the phones to fight the bureaucracy, and even dispatched the riot squad to suppress protesters.

Among the farmers who took up the offer were four men who combined their 1,000-hectare plots for a total area two-thirds the size of Manhattan. The year they moved in, they formed a company, Valentine Farms, to raise poultry.

Seven years later, Country Bird, a South African poultry producer and IFC client, bought Valentine Farms. One of Country Bird’s first moves was to introduce a training scheme to “assist and develop indigenous farmers”—the ones living on Valentine’s land, who had lived there before Valentine arrived and would and continue to live there after—“with commercial farming techniques.” As Country Bird’s executive director explained in 2013, the “indigenous farmers” wouldn’t just live on the company’s land. They would grow soy for Valentine’s chickens.

By the end of 2016, Valentine planned to raise a quarter million birds every week. Country Bird had lined up some buyers for it, as well: the rising number of KFCs a few hours south in Lagos.


Rendering Neoliberalism Visible

In his 1962 book Capitalism and Freedom, one of the seminal documents of the neoliberal movement, Milton Friedman laid out his disagreement with one of the most widely circulated quotations of the day. The message behind John F. Kennedy’s line, “Ask not what your country can do for you—ask what you can do for your country,” was fundamentally wrong, he wrote. “The free man will ask neither what his country can do for him nor what he can do for his country. He will ask rather ‘What can I and my compatriots do through government’ to help us discharge our individual responsibilities, to achieve our several goals and purposes, and above all, to protect our freedom?”

Since its early days growing along U.S. interstates, the fast food industry has thrived by asking how it can grow larger “through government.” But just as fast food has found ways to leverage government to its benefit, the world’s public institutions have also looked for ways to help it. There is a shared worldview between the industry and its allies in the public halls of power. Together, they tend to work as a single entity, sweeping aside the needs of the many while making every effort to uplift the needs of capital.

The blurred line between business and the state is one of the hallmarks of neoliberalism. Despite proponents’ claims that they’re defenders of a distinct thing called “the market,” the truest form of a neoliberal society is one where market, state, and society converge. In their vision, state agencies like the SBA, public pension funds, and the IFC—which shower corporations and their ancillaries with public funds—are behaving exactly as they are supposed to. Neoliberalism’s omnipresence has made it hard to recognize—we are fish swimming in its waters, unaware that there might be something else out there. Challenging the notion that “there is no alternative,” as Margaret Thatcher said when promoting the United Kingdom’s march into the abyss, first requires us to see how this ideology has shaped our world.

Look closely: the answers are right there at the bottom of your lunch bag.



Originally posted by Current Affairs on 2022-01-25 05:41:55

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