The Guardian: Baby formula crisis: Abbott enriched shareholders as factory needed repairs, records show

May 20, 2022 Media

A deadly bacteria outbreak in baby formula and an ongoing formula shortage stem from issues some economists characterize as “rot” in the nation’s economic system: prioritization of shareholder wealth and consolidation.

The embattled baby formula producer Abbott used windfall profits to enrich investors instead of replacing failing equipment that was likely injecting the dangerous bacteria into its infant nutritional products, financial records and whistleblower documents show.

Companies like Abbott are “using every product as a personal ATM” by cutting corners to maximize profits, said Moe Tkacik, a senior fellow at the American Economic Liberties Project.

In the short term, Joe Biden has invoked the Defense Production Act to speed production of infant formula and authorized flights to import supply from overseas, while the FDA approved a deal with Abbott to bring the Sturgis plant back online within several weeks.

But long-term solutions will require more bold steps, Tkacik said, like a ban on buybacks and restrictions on dividends. She acknowledged such ideas are dismissed as “socialistic”, but noted buybacks were illegal until 1982 because they were considered a form of manipulation. Annual buyback program expenditures among S&P 500 companies are often exceeding research and development or other investment, Tkacik said.