The Hidden Economics of Food - Part 12: The Factory Farm

The Sunday Dinner

A generation or two ago, chicken was expensive. Families ate it on Sundays or special occasions. “A chicken in every pot” was an aspirational promise, not everyday reality.

Today, chicken is the world’s most-consumed meat. It’s cheap enough for daily eating across much of the world. Global chicken consumption has grown roughly tenfold since 1960.

How did luxury become commodity?

Supply and Demand

The usual story emphasizes supply:

• Breeding: Chickens were bred to grow faster and larger

• Feed efficiency: Modern chickens convert feed to meat more efficiently

• Factory farming: Concentrated operations reduced costs

• Integration: Companies controlled breeding, growing, processing, and distribution

These are real. Chicken production became vastly more efficient.

But supply-side changes only matter if there’s demand. Efficient production of goods nobody can afford doesn’t help anyone.

Cheap chicken required not just efficient production but also customers who could buy it.

The Demand Side

Chicken became mass consumption food because:

Rising Wages

After World War II, rich countries saw sustained wage growth. Working and middle-class families had more money. They could afford meat that was previously beyond reach.

This wasn’t automatic. It required:

• Labor unions that bargained for higher wages

• Full employment policies that kept workers scarce

• Minimum wages that set floors

• Social policies that reduced precarity

Purchasing power was created by policy, not just market forces.

Reduced Inequality

During the mid-20th century, inequality fell dramatically in rich countries. The share of income going to the top declined. The share going to workers increased.

This mattered for demand:

• Rich people save much of their income

• Middle and working-class people spend most of their income

• Redistribution toward spenders increases total demand

Reduced inequality meant more purchasing power for mass-market goods—including chicken.

Mass Production Economics

The logic is circular but powerful:

1. Higher wages create demand for chicken

2. Demand enables mass production

3. Mass production lowers costs

4. Lower costs make chicken affordable to more people

5. More demand enables even larger scale

This virtuous cycle requires starting the demand engine. Without purchasing power, mass production never becomes viable.

The Ford Model

Henry Ford famously paid his workers above-market wages. One reason: so they could afford to buy the cars they made.

This wasn’t charity. It was economic logic:

• If workers can’t afford the product, there’s no mass market

• Without a mass market, you can’t achieve mass production scale

• Without scale, costs stay high

• High costs mean no mass market

Ford understood that demand creates its own supply (the opposite of Say’s Law, which claims supply creates demand).

This insight has been repeatedly forgotten and rediscovered.

Inequality Kills Demand

When income concentrates at the top:

The Rich Can’t Spend It All

Billionaires consume more than ordinary people—but not proportionally more. Someone with 10,000 times average income doesn’t eat 10,000 times as much chicken.

Concentrated wealth means much purchasing power sits idle—invested rather than spent.

Investment Doesn’t Help Without Demand

Investment creates productive capacity. But capacity is useless without demand for what it produces.

If the rich invest in chicken farms but workers can’t afford chicken, you get overproduction and bankruptcies—not growth.

Debt Is an Unstable Substitute

When wages stagnate but people want to consume, they borrow. This creates demand temporarily.

But debt-fueled consumption is fragile. When borrowing stops, consumption crashes. The 2008 financial crisis was partly this pattern.

Wages are sustainable purchasing power. Debt is borrowed time.

The Latin American Lesson

Latin America demonstrates what inequality does to development.

High Inequality

Latin American countries have persistently high inequality—among the highest in the world. Land ownership is concentrated. Income is concentrated. Opportunity is limited.

Weak Domestic Markets

With concentrated income, domestic markets are thin. The rich buy imported luxuries. The poor can barely afford necessities. There’s no large middle-class market for mass-produced goods.

Export Dependence

Without domestic demand, countries depend on exports—often commodities. This creates vulnerability to global price swings and doesn’t develop diverse industrial capacity.

The Contrast

Compare to East Asia. Countries like South Korea and Taiwan:

• Had land reform that reduced rural inequality

• Invested in mass education

• Maintained relatively compressed wage structures

• Developed strong domestic markets

These countries grew faster and more sustainably than Latin American counterparts.

Redistribution as Growth Policy

If demand matters, redistribution can be growth policy:

Wages vs. Profits

When workers get a larger share of income:

• They spend more

• Demand increases

• Capacity utilization rises

• Investment becomes profitable

The standard story reverses this—profits drive investment drive growth. But investment only makes sense if there’s demand for what’s produced.

Public Spending

Government spending on services and transfers puts money in the hands of spenders:

• Teachers, nurses, and social workers spend their salaries

• Transfer payments go to people who spend them

• Public investment creates demand for construction

This is why austerity during recessions is counterproductive—it removes demand exactly when demand is scarce.

Public Services

Universal public services—healthcare, education, childcare—effectively increase wages by reducing necessary expenses. Money not spent on healthcare can buy chicken.

The Equality Efficiency Trade-off?

Economists often assume a trade-off between equality and efficiency:

• Redistribution distorts incentives

• High taxes reduce effort

• Welfare creates dependency

Therefore, we must choose: growth or fairness.

But this framing ignores demand:

• Redistribution to spenders increases demand

• Higher wages increase productivity (Henry Ford again)

• Public services reduce costs for businesses (healthy, educated workers)

The relationship between equality and growth is complicated, not simply negative. Many of the world’s richest countries (Scandinavian, Germanic) are also the most equal.

Chicken’s Lesson

Chicken became affordable because:

Supply: Production became more efficient

Demand: Workers could afford to buy it

Both were necessary. Efficient production without purchasing power produces bankruptcy, not growth. Purchasing power without efficient production produces inflation.

The mid-20th century had both: rising productivity AND rising wages. The result was mass prosperity.

Recent decades have seen efficient production continue but wages stagnate. The result: debt, precarity, and political instability.

What Changes?

If demand matters:

Wage policy is growth policy

Minimum wages, union rights, and full employment aren’t just distributional concerns—they create the demand that makes production worthwhile.

Public investment works

Government spending isn’t just a cost. It’s demand creation that enables private production.

Equality and growth aren’t opposed

Excessive inequality kills demand. Moderate redistribution can stimulate growth while being fairer.

The chicken test

When ordinary families can afford chicken daily, the economy is working. When they can’t—despite efficient production—something is broken on the demand side.

The Protein of Prosperity

Every cheap chicken dinner is a small miracle of coordination:

• Breeding science that took generations to develop

• Supply chains spanning continents

• Processing technology that handles millions of birds

• Distribution networks reaching every neighborhood

But also:

• Wages high enough to afford it

• Jobs available to earn those wages

• Social systems that maintain purchasing power

The chicken on your plate is supply AND demand. Efficiency AND equity. Production AND purchasing power.

Cheap protein for everyone is what development looks like. Getting there requires both sides of the equation.