Cane Sugar, Crony Capitalism, And the Result of a Lack of Competition
How Government Regulation Hurts Innovation
Just a few days ago, one of the most brutal failings of capitalism was, at the very least, addressed. Coca-Cola decided that it would stop using high-fructose corn syrup as a sweetener in its American product and would instead use cane sugar, as it does in all other international recipes. On the surface, this might appear to be a simple victory of the grandest nature, devoid of any deeper meaning. But when one takes a look behind the veil, to dive into the policy that created this reversion in the first place, a darker truth emerges. This story is one of regulation and the twist is contingent on the fact that many people assume that government intervention solely serves to help the government and hurt private businesses.
In reality, lobbyists, typically in the form of firms, use the government as a way to create barriers to entry to their specific market of interest, thus drastically reducing competition and ensuring their ability to receive profits. One of the best examples of this can be seen with the locomotive industry in the United States. Have you ever wondered why it is that the US has far fewer viable trains than Europe? Or why does the US have such a strong reliance on its extensive road system? It isn’t purely because of culture. In 1897, the locomotive industry in the United States had a net investment of $10.6 billion, which in today’s terms is about $411 billion. [1] The GDP at the time, though it wasn’t precisely measured, was somewhere between $18 and $20 billion, which in today’s dollars provides us with something in the ballpark of $697.2 to 813.3 billion. [2] This means that in 1897 railroads were worth approximately 50% of the United States’ GDP. In contrast, the railroad industry in 2025 is worth $71.8 billion, and the GDP in the US is projected to be $29.5 trillion. [3][4][5] In 2025, railroads are only .023% of the economy. So, what happened? How could this king of industry have fallen so far?
Well, as it turns out, a great deal of this came as a result of how the railroads interacted with the government. By engaging in fraud, bribing officials, and acting in less than savory ways, railroad companies fought for the ability to become a monopoly, and as a result, capture a greater percentage of the market. [6] This, in economics, is known as rent-seeking behavior and acts in direct opposition to competition. By increasing barriers to entry, either through immense economic cost or legal influence, a firm can guarantee some degree of profit without worrying about other firms innovating and taking their market share.
An even simpler case of this happening could be seen in the case of setting a minimum price for a market. Suppose you are a manufacturer of cars. For the sake of this example, assume you are one of five or six in the United States. Given that cars are a necessary good, and used by most people, the price you set is relatively unimportant to the quantity of your sales. This property is known as the elasticity of demand for a good, and in this case, it would be relatively low. However, people still value low prices for their cars. This means that if one firm sets incredibly high prices, the others would have an incentive to set lower prices and capture the high price firm’s market share. So, if all of the firms get together and convince Congress that they need the lowest possible price of their cars to be $20,000, when in reality something like $10,000 would be optimal for the market, they will achieve a much larger degree of profit without engaging in legally collusive behavior. In this case, the government has helped the producer increase profit while hurting the consumer and shifting the market off the equilibrium price.
To the consumer, this is a total nightmare. Consumers rely heavily on the course correction that competition offers. Without it, people would have far less of a say in the market, and large corporations would be able to make decisions without the interest of the consumer in mind. In this unfortunate reality, the government has given the corporations nearly all bargaining power, leaving the consumers to make do with a situation that could have easily been avoided.
Which brings us back to Coca-Cola, one of the largest drink companies in the world. Coca-Cola, actually, did not engage with the government in a practice that resulted in American recipes using high-fructose corn syrup. They have little incentive to do something like that, other than to cut costs. This gives us reason to believe that, for some reason, the cost of using sugar in the United States is higher than it is in other countries where cane sugar is used. And just like that, we’ve stumbled across our culprit. Big sugar, the modern-day boogeyman of soda, is uncovered, and we are left to stare at the leviathan that is its corruption.
As it turns out, this horrific evolution of Coca-Cola in the United States is a direct result of sugar companies lobbying for minimum prices. According to a study done by researchers at Iowa State University, this practice “costs consumers about $3.5 billion each year.” [7] With this in mind, it seemed for a long time that the United States was doomed to consume this inferior product, paying exorbitant amounts to import Coke from Mexico, where cane sugar was still used. But from a new Truth from President Trump, we see that they’ve finally decided to stop this practice and revert to using cane sugar.
This leaves us with an important question, then. How are they making this happen? Have the Sugar Barons lost their hold on Washington, or is the president simply forcing the company to reduce profit? It seems that as we move forward and hear more details, we will learn more about this change, but at the time, we are only able to speculate.
Sources:
Kirkland, Edward C. Industry Comes of Age: Business, Labor, and Public Policy, 1860-1897. 1961. Internet Archive, archive.org/details/industrycomesofa0000unse_i1v9.
Johnston, Louis, and Samuel H. Williamson. "Construction of Annual GDP, 1790-1928." MeasuringWorth, 2023, www.measuringworth.com/datasets/usgdp/constructiongdp.php.
"United States Rail Freight Transport Market Size, Growth & Share Analysis 2030." Mordor Intelligence, 26 June 2025, www.mordorintelligence.com/industry-reports/united-states-rail-freight-transport-market.
Board of Governors of the Federal Reserve System. Summary of Economic Projections: June 12, 2025. 18 June 2025, https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250618.pdf.
The World Bank. GDP (Current US$) – United States. World Bank Data, https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=US.
Klein, Christopher. "How the Gilded Age's Top 1 Percent Thrived on Corruption." History.com, A&E Television Networks, www.history.com/articles/gilded-age-corruption-corporate-wealth.
Loyola, Mario. "Sugar Shakedown: How Politicians Conspire with the Sugar Lobby to Defraud America's Families." The Heritage Foundation, https://www.heritage.org/agriculture/report/sugar-shakedown-how-politicians-conspire-the-sugar-lobby-defraud-americas.
Are you opposed to price controls,or just price floors?