I have often seen/heard libertarian minded people (like myself) criticized and demonized, because of the common misonception that we need government to manage all sorts of aspects of life to keep us safe. I hear things like:
"Libertarians want to abolish the Food and Drug Administration, and all our food will be poisoned!"
"Libertarians want to abolish the Department of Education and our children won't be educated!"
"Libertarians want to abolish the Department of Energy, and this will drive gas prices through the roof.!"
These are all ridiculous claims, and they are largely untrue.
We have educated children without a government bureaucracy, and we have developed a sprawling petroleum industry without the Department of Energy. There are ways to keep people safe without government agencies, and the corruption and inefficiency that come with them.
Don't assume that just because the government writes a law or founds a new bureaucracy with a nice buzzword attached, it's a good thing.
How/why the Progressive Era is misunderstood:
In school, we are taught that the "Progressive Era" (that is the late 19th, early 20th century) was this great time when government stepped in to protect us from the "Evil Robber Barons", the "monopolies", "dangerous working conditions", and "poisoned food".
This is a myth.
I have read about this typical version of the story, as well as read several books and watched videos that have offered a very rendition. This is a good one:
The historian Gabriel Kolko, presents the Progressive Era in a very different light from what was described above. The book is very well sourced, documenting correspondence between businesspeople and government officials from senators to the Presidents themselves. Kolko talks about the development of crony capitalism or as he calls it "political capitalism".
I should emphasize what the word "conservatism" means here. "Laissez faire" (or "let to do" in French. It means a hands off approach. In this context, it means that the government doesn't involve itself in the economy.) was considered a newer approach to the economy at the time. Lots of government interference in business was actually reminscent of the older way of doing things, by way of the British mercantalism system. The author is trying to demonstrate how people went back to the old ways, rather than allowing a "laissez faire" economy to operate. That's what the title of the book means: The older mercantilism principles won the ideological battle.
(For those who don't know what mercantilism is, it's basically where the government sponsors a series of businesses using tax payer dollars, and gets a kickback from it. It was believed that it was the most efficient economic system at the time.)
Here's the gist of Kolko's narrative:
The 19th century saw the greatest economic expansion in the history of mankind. Many became wealthy during this era, but they still weren't satisfied. Due to intense competition and constantly changing consumer tastes, the moneyed elite (Like JP Morgan) worried about their status, and wanted to find a way to ensure it. They manipulated the government to those ends.
Some examples of this:
The Federal Reserve was founded because the Wall Street banks were struggling with competition from new banks out West. They wanted to cement their control over the banking system, so they prevailed upon President Woodrow Wilson to sign it into law. It was founded to "maintain the value of the dollar, and balance out the business cycle." In reality, it gave Wall Street a cartel style control over the banking system. (My blog about the Federal Reserve has a more in depth explanation, if you want to know more.)
Teddy Roosevelt appointed the quack chemist Harvey Washington Wiley, to regulate food via the Pure Food and Drug Act of 1906. Although we want pure food and drugs, this was perhaps not the best way to do it. It was done for political expediency, and to enhance the power of big business.
Wiley launched all sorts of bizarre campaigns against different foodstuffs:
- Wiley outlawed ketchup made with additives. This shut down his friend Henry Heinz's competitors, giving Heinz a near monopoly on the business. He brought other ketchup companies to trial at the Supreme Court, claiming that they were serving rancid products. The Court ultimately concluded that there was no risk.
- Wiley pushed to outlaw watered down whiskey to benefit producers of straight whiskey, and tried to convince the public that watered whiskey was unhealthy. Absolutely nuts.
-He tried to outlaw margarine. (To satisfy producers of butter, that were threatened by this new product).
-He tried to outlaw glucose. (Being made from corn, it took business away from the sugar cane industry. The corn industry back then was nowhere near as powerful as it is today.)
- Wiley attacked Coca Cola, due to a near superstitious fear, that the company would add caffeine to other items so that people would become addicted to them.
There was no huge outcry from the public, for any of these regulations. Food borne illnesses existed as they do today, but not on a huge scale as we are lead to believe. Freezing, canning, and and the early stages of refrigeration were emerging at this time, allowing for food to be kept longer. This was the era of Louis Pasteur (If you can't tell by the name, he was the man responsible for killing bacteria in milk using heat. It's called "pasteurization".) when pathogens were beginning to become understood. Many diseases were wiped out entirely, due to recent advances in medicine.
Roosevelt ultimately became disillusioned with Wiley and his wacky campaign. However the legislation lived on, eventually becoming the full fledged Food and Drug Administration.
The truth about Upton Sinclair and "The Jungle":
We are taught that the conditions in the meat packing industry were highly unsanitary at the time. The socialist Upton Sinclair wrote a book called the "The Jungle" which described the horrific conditions in slaughterhouse and meat packing plants. (In the book, Sinclair talks about people falling into meat grinders and getting ground up with the meat, and served to the public.) Thanks to him, we have clean slaughterhouses today.
This wasn't reality.
Sinclair was a failing fiction writer. He was frustrated with the literary world, and was determined to succeed. He decided to become a "muckraker"
(The "muckrakers" were the equivalent of the tabloids like "The National Enquirer" of their day. They wrote not to protect the public, but to make money by stirring up controversy through sensationalism.)
Sinclair was turned down by six different publishers for his book. The seventh one agreed because he realized that they could make good money off the sensationalism.
The book was a best seller, and it's content caused a widespread panic. This caused meat sales to drop by half. Roosevelt, for the sake of preserving his reputation and appeasing the public hysteria, passed the Federal Meat Inspection Act, in addition to the Pure Food and Drug Act.
Some believe that Roosevelt had a personal vendetta against the meat industry, from having been poisoned by improperly handled meat when he was a soldier during the Spanish American war.
Roosevelt has been usually portrayed as being in line with Sinclair's vision, but in reality despised him, and called him a "crackpot". He believed that Sinclair exaggerated, and in some cases, flat out lied.
These new regulations benefitted the big competitors, because they were able to invest in new machinery and improved facilities. Many of their smaller competitors went bankrupt. Robert L. Rabin of the Stanford Law review wrote:
"The large meat packers, well aware of the ill-will on all sides and cognizant of their comparative advantages over smaller competitors in complying with federal regulation, did not fight comprehensive regulation."
The truth about the Anti-Trust laws
We are taught about the "Sherman Anti-Trust Act" and how it saved American consumers by outlawing "dangerous monopolies". The real story is, of course more sinister.
The Sherman Anti-Trust Act was originally written for three main purposes:
1)To outlaw labor unions, which were gaining power. They were seen as a threat to big business. This was later changed with the "Clayton Anti-Trust Act" signed into law by Roosevelt's successor Woodrow Wilson. He most likely wanted it because it benefited his union constituents.
2) Sour grapes competitors couldn't compete with businessmen like John D. Rockefeller, so they pushed for its passing.. We are told that he had a monopoly on oil, but it's not true. When his company was broken up, he had about 300 competitors. Many of those companies ganged up on him, and used the power of that State to beat him, rather than by outperforming him in the market.
3) The government protected American businesses from foreign competition by enacting very high tariffs. For those that don't know, a tariff is a tax on imports. It's a way for the government to collect money, but also to discourage people from buying foreign goods. This enables local businesses to raise their prices higher than the usually would.
For example, I have the choice between a pair of shoes made here, and a pair of shoes from Britain. The shoes from here cost $50, and the shoes from Britain cost $40. The government imposes a 50% tariff, in order to benefit the American shoe company that finances certain politicians. The shoes from Britain would now cost $60, giving the American producer an advantage that he wouldn't have had otherwise.
It's ultimately just an extra cost to the consumers, and the only ones that benefit are the protected businesses. The government wanted to come across as being on the side of the consumers, so this Anti-Trust legislation gave off that impression.
The New York Times was originally for the act, but later renounced their claim. They said:
"That so called anti-Trust law was passed to deceive the people and make the way for the enactment of this... law relating to the tariff. It was projected in order that the party organs might say to the opponents of tariff extortion and protected combinations, 'Behold! We have attacked the Trusts. The Republican party is the enemy of all such rings.'"
There has never been an actual monopoly without government intervention. Some businesses tried to band together to control an industry, but it didn't work.
As Kolko does a great job of explaining in his book, there was a business merger movement in the very early 20th century, but it failed.
A few reasons that mergers didn't last:
- Lots of different leaders coming together, means lots of different ideas for what direction to take a company in. This is bound to fall apart.
- Not all companies had equal share in the merger, so this created resentment and division.
- It was hard to run a nation wide company in those days, since travel and communication was much harder.
- Some of the companies that tried to merge already were struggling, and this just weakened the company overall. The stronger companies didn't want to be dragged down, so they pulled out.
Empowering big business by way of government:
With the expansive new bureaucracy, this enabled businesses to influence the market as they saw fit. The danger of corruption has always been there, but became worse as government expanded.
Since the people regulating the industries had previous loyalties upon taking government positions, this gave the people in the industries that were being regulated, additional power. This is known as "regulatory capture"
A quick example:
Who typically runs the Food and Drug Administration? Usually a physician, and it's staff is made up of former employees of major companies.
Let's just say for the purpose of this example, it's Johnson and Johnson.
Once the people in charge are regulating the industry, they can do things that will benefit their previous employer, and hurts their competitors.
If Johnson and Johnson wants to sell a new anti-inflammatory drug that has some bad side effects such as internal bleeding, the people in charge at the FDA have the ability to let it slip through the radar. They are benefiting their old employers, and doing it under the guise of " regulating safety for the public good".
Then if say, a J and J competitor like Pfizer, produces a drug that is more effective and doesn't have the same side effects, they can block the drug's approval, and ultimately distribution. Since they are in charge of the regulatory bureau, they can come up with all sorts of reasons as to why it can't pass. Reality of course, is that they are just using the power of the government for personal ends.
Who will regulate the regulators?
Conclusion on the Progressive Era:
So as you can see, much of the legislation and bureaucracy that was put in place during the "Progressive Era" was enacted in order to satisfy big business, and the reputations of the politicians that they supported.
I realize that at first that this comes across as unorthodox to the average person; many people believe that the government enacts laws and policies for "the public good". A person that goes against this mantra can across as odd, naive, and dangerous.
I would argue the opposite. An expansive regulatory state just empowers big business at the expense of the little guys. The start up fees and permits required, just make it harder for someone to get a business up and running.
If you think about it, the government has a monopoly on regulation. As with any monopoly, the lack of competition leads to waste, fraud, and corruption.
This doesn't mean that there aren't way to keep people safe, and still have a free society. I have a few ideas that I believe would also minimize corruption, regulate better than government does, allow for a reduction of taxes, and create jobs.
Pure Food and Drugs (My way!):
So how do we maintain, or even improve the safety of our food and drugs without the FDA?
Here's what I would suggest:
Private insurance agencies would develop, that would hire experts in various industries.
For example, an agency in charge of approving drugs would hire doctors, pharmacists, etc.
There could be private agencies in charge of inspecting restaurants, that could be staffed by former chefs, health inspectors, and others that know the business.
The agency would offer to approve a restaurant/drug for a fee. The doctors, pharmacists, and whoever else would visit the company, run their own tests based on what they know, and approve the drug/restaurant.
Wouldn't this be more expensive?
No, because competition in the market would drive the price down, as is the case for anything else. If someone offers to approve a drug for $5,000, somebody else with a similar background can swoop in and approve it for $4,500. Numerous agencies would compete with one another for a "race to the bottom". It would be like any other type of insurance.
The agencies would be motivated by profit of course, but also by the desire to do a good job, or else they would go under. Just like any poorly run business should.
The FDA isn't going out of business any time soon.
Wouldn't the agencies be bought off like the FDA, and allow for poor quality products?
No, and here's why:
Once the agency agrees to approve the drug/restaurant, they would issue a certificate of approval, listing their name and creditentials, and that everything is up to par. The document could be displayed, similar to a diploma in a doctor's office, or an award plaque in a restaurant.
Their fate is now tied to the business. If a person gets poisoned by the food/drug, the business that produced it and the person that approved it are now equally responsible. The victim can then take legal action against the two.
This motivates the inspectors to do a thorough job, because their reputation and financial well being are now on the line. Someone gets sick because a bad drug/dirty kitchen, they could lose it all. This is an incentive to be thorough, and not cut corners.
There are definitely restaurants open now, that shouldn't be in my view, in spite of government regulation. I had a friend that worked at a place that had rats, roaches, and the health inspector told him not to drink the water there! Yet, somehow the place stayed open.
Try suing the FDA if you get sick from a bad drug. They're not even that thorough. Do you know how many supplements I have taken that have said "This statement has not been approved by FDA"? I lost count a long time ago.
Since there would be numerous inspectors/agencies, they would be able to do a much more thorough screening than the FDA does. Whereas some drugs are now backed up from being released for a decade, this system would allow for the availability of more drugs and higher quality. Different experts could bring different levels of knowledge to bear, and give a more comprehensive analysis of a drug before it hits the market.
I often think about what kind of anti-cancer drugs and health supplements we are missing out on right now.
Would this inspection be mandatory?
No, it would be up to the discretion of the company, but this would be a bad choice on their part. They would have to prove to a customer that they are trustworthy.
If customers see that a drug/food hasn't been approved, they will most likely stay away. This an incentive for the business to get their act together. Under this system, it would be easier for a little guy to do it.
Texas and North Carolina have embraced what are called "Cottage Food laws". A person can produce baked goods in their own home, if they get an inspection of the house. The person also has to take a "food handler's course", which only costs $20. This is a great system for those that don't have the money to rent out a bakery, but want to get a business up and running. Texas reports having opened around 1,000 small bakeries after this was enacted. If the small business owner does well, they can save, hire more workers, and rent out their own bakery when they can afford to.
Conclusion:
Theses are just a few ideas on how to better regulate.
I will write other blogs about specific industries (like Energy and Education) and laws, but I think that this is a good stopping place for now.
Thank you for reading! Check back soon for more!
-STK
