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My uncle and my mother have a long-standing (and enormously frustrating) argument which is useful to revisit because it reflects a circle which the rest of the nation is trapped in. My uncle always says “The government is corrupt and wishes to control the market in unfair ways! We need to diminish the role of government so that people are free to pursue business opportunities and live a life of super-awesome freedom!” My mother says, “business concerns subaltern the government in ways which individuals are ill-equipped to understand or to counter.”  Then there is eristic back-and-forth about the market versus the state. Sometimes this is followed by interesting talk of K-Street lobbyists, environmental regulations, defense contracts, monopolies, and what have you. However, in the current political age it is more usually devolves completely (indeed, I am not even sure they are talking to each other in the era of Trump).

The argument frustrates me because I am not sure it should be an argument.  My uncle is narrowly right: the government is indeed unresponsive to obvious and pressing societal needs…but only because it has been captured by special moneyed interests with deeeeeeeeeeeeeep pockets.  The forces of monopoly and market capture are equipped with an infinite ocean of dark money, a bunch of anonymous Caimen Island LLCs (or is it supposed to be Cayman?), and armies of Ivy League lobbyists & attorneys.  They can easily spend all day, every day writing complicated legislation and explaining it to their favorite legislators (who also take campaign money and aid from the same anonymous backers).

I suppose another way to say this is: I agree with my mother. The government has been subject to regulatory capture at just about every level. Small businesses or individuals look to it for succor against the depredations or excesses of big business. Yet when the regulations come out, they are revealed to favor large corporations or influential insiders. This is often accomplished with rules which sound outwardly appealing but are actually fiendishly designed to destroy small competitors or diminish the common good.

I can already feel some of the audience getting bored or frustrated with this abstruse language so let me provide a couple of examples.  Back when I was a toymaker (circa 2007), the world’s largest toy companies were making unsafe toys in China.  Mattel and Learning Curve were particularly at fault.  These giants pressured their Chinese suppliers to make toys ever more cheaply and then turned a blind eye as to how this was accomplished (with lots of lead paint, as it turns out).  When the big companies were caught selling lead toys, my business partner and I thought the scandal would help smaller companies like us.

How wrong we were! The large toy companies blamed the Chinese manufacturers (who were doing what they were told to do) and then came forward with their own proposed consumer protection legislation.  Not only did the new rules mandate that each factory-run of toys would be extensively tested for lead and other hazardous materials, but the legislation also immediately phased out certain plasticizing chemicals.  This “industry-supported” legislation became the backbone of the consumer product safety act of 2008 and it was ruinous to small companies.   Fully testing a factory-run of toys cost about $15,000.00.  For Mattel a factory run is millions of units and $15k was negligible.  For small companies, a factory run was much smaller and $15k was most of the profit margin.  Additionally, the legislation allowed no time to sell through existing toys made with the old plasticizing compound.  The big companies knew the legislation was coming (having written it) and they used a different (although equally problematic) chemical.  Small companies were prohibited from selling their products.  Child safety advocates were delighted with the new rules.  The big toy companies used a scandal they created through unsafe acts to drive small companies under and to claim the (undeserved) moral high ground.

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My mother worked for the Department of Defense doing environmental clean-up and restoration and she saw different sorts of tactics.   The DOD used to have vast tracts of land under its control.  Often this was desirable land.

Real estate developers (or their dupes) would show up and say “The Defense Department is polluting such-and-such beautiful coastal rain forest!  They need to clean it up at full taxpayer expense!” As soon as this was done (at enormous cost), the base would be decommissioned.  The land would be turned over to cronies and crooked developers who would cut down the forest and sell the timber.  Then they would build shoddy (yet expensive) subdivisions and a tacky resort.  There would thereafter be no rainforest, polluted or otherwise.

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Vieques Island Resort, Puerto Rico

These private sector tricks can be understood and explained, but it takes time, resources and clever people.  Additionally the monopolists and insiders are running their own splashy PR campaigns which are perfectly tailored to appeal to voters and non-specialists who don’t necessarily have the time, bandwidth, or inclination to understand all of the complicated details of what is going on.

The current presidential administration is such a naked smash-and-grab by private interests that some of these tactics aren’t even necessary anymore. Yet regulatory capture is always out there–it is a form of corruption which we all need to guard against.  I suppose what frustrates me about my uncle’s argument is that it rewards the real malefactors (the vested interests) by blaming the government.  The government should represent all of us, but it is made into a sad puppet by clever oligarchs.  They are the true malefactors!

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