Regulation as a response to foreign commerce

Hi all,

So there was this problem in the early 1900s. The conditions in meat-packing plants tended to be pretty gross. See journalist/socialist Upton Sinclair's The Jungle for details. The federal government caught wind of this nastiness and sought to regulate it. How did the meat-packing industry respond? Well, some of the heavy hitters in the industry were suprisingly all for it. Why? Because they were missing out on a huge market over in Europe. Europe wouldn't trade with US meat-packers unless their facilities were subject to the proper federal government inspections.

So should the government regulate the industry as a response to European commerce?

Some stuff to keep in mind.

1. The little guys in the industry weren't going to avail themselves of European commerce, so regulation wouldn't benefit them in regard to the European market. One way around dealing with them is to make all and only the meat-packers who wanted to avail themselves of the European market pay the government for the regulation and have the regulation limited only to them. If this regulation were taken, would it be okay? Put otherwise, is voluntary and self-financing your government regulation okay? I'm leaning toward yes.

2. The big guys will get much bigger from benefiting from the European market, while the little guys will remain little and will subequently become more competitively disadvantaged when compared to the big guys. This part is more contentious. On the one hand, (a) Objectivists don't seem to consider economic harm a harm worthy of legal remedy. On the other, (b) Objectivists seem to recognize and oppose economic harm when it's the result of government intervention.

One way to try to honor these positions would be to force the big guys who are benefiting from the European market to compensate the little guys to the extent that the big guys' European market benefit economically harms the little guys. (Figuring out the amount of economic harm here would be very tricky, but for the sake of discussion, let's assume it's doable.) But I think Objectivists might still...object. They would oppose forcing the big guys to pay the little guys.

But I'm leaning toward yes on a forced compensation scheme as well. First, all the US meat-packers would benefit (or at least not get hurt) from this more than not, but also, I think (b) would better honored with such a scheme, even though (a) gets rather shortchanged. The economic harm results from government intervention and that should warrant legal remedy, even though economic harm normally shouldn't be worthy of legal remedy. If you're looking for a difference between government economic harm and other economic harm, other economic harm is generally the result of strict supply and demand. (Side issue: But what about the economic harm that befalls the European meat-packers?)

3. If you oppose regulation, particularly the regulation laid out in 1 and 2 (which is entirely different from what actually happened), then no US meat-packers will benefit as much as they would've.

Polite and thoughtful comments wanted.

Jordan

Post 1

Friday, September 9, 2005 - 6:25am

First, full disclosure: I've never read The Jungle and know almost nothing about the history of U.S. food regulation.

My initial reaction to your thoughtful questions is that the meat packers who favor regulation should self-regulate. The fact that they did not previously do so suggests that it was not economically efficient, or perhaps that they wanted to see first if they could persuade the government to spread the costs among beneficiaries and non-beneficiaries alike. In any event, assuming no government intervention, they would have self-regulated when and if doing so was efficient.

Supposing, however, that the European regulators would not accept self-regulation, then the U.S. packers who stood to benefit could have repackaged their self-regulatory scheme by (voluntarily) paying the government to regulate those who opt in. To be fair, the governmental regulatory scheme would have to be funded entirely by the packers' payments, not by coercive taxes. (In essence, the packers would be contracting with the government to act as their regulator.)

I guess it goes without saying that the European regulations meanwhile were forcing European consumers to pay more for meat than they needed to.

BTW -- this cracked me up: "But I think Objectivists might still...object."

Post 2

Friday, September 9, 2005 - 7:20am

Hey Jay,

Thanks for the response. Looks like you're cool with 1 from my post - the voluntary self-finance of government regulation. But how would you respond to 2, the more contentious bit that such government intervention would economically harm the meat-packers who choose not to opt in?

Jordan

Post 3

Friday, September 9, 2005 - 7:43am

Jordan -- That's not a harm that I would be worried about. The non-participating packers are always free to opt in and pay the price of doing so and reap the benefits of doing so. The key thing is that the government is not forcing them to pay to support the regulatory system.

I suppose the question would be tougher if the packers who initially opted in then refused to let other packers join their association and got an exclusive contract with the government for being regulated. Under that scenario, the packers who are locked out can never devise a competing system that would equal what the in-group has (government-provided regulation), yet the locked-out packers are nevertheless involuntarily making the in-group's system possible by supporting the government generally (through whatever voluntary financing schemes we may imagine). In effect, all packers support the government, yet only certain packers are able to get the government's "seal of approval."

Maybe libertarians get around this altogether by barring the government from providing any services other than certain enumerated ones, even if the services are fully paid for by those who voluntarily "hire" the government. I confess I don't know enough about libertarian theory.

Post 4

Friday, September 9, 2005 - 10:38am

By participating in some scheme to get an official governmental seal of approval in order to deal with people in other countries you are condoning and sanctioning the coercive governmental regulation in those countries. Instead of bowing to pressure from foreign governments, companies should offer the economic incentive of trade with individuals in other countries to get them to pressure their government to stop the regulation.

Post 5

Friday, September 9, 2005 - 11:00am

Rick,

So you'd have companies engage in some foreign civil disobedience, eh? Or are you going for all out black market commerce?

Jordan

Post 6

Friday, September 9, 2005 - 3:05pm

I can just see the title of a new thriller - "The Danneskjold Thread"... :-)

Post 7

Friday, September 9, 2005 - 3:10pm

Jordan:

That isn't what Rick said. He said:

" ...companies should offer the economic incentive of trade with individuals in other countries to get them to pressure their government to stop the regulation."

There is no hint of civil disobedience or black marketeering in his post. Pressuring the government is lobbying, not civil disobedience.

Methinks you're up to your old tricks.

Sam.

Post 8

Friday, September 9, 2005 - 3:36pm

Sam,

If the European individuals take the US meat-packers' economic incentives and buy the unregulated US meat products, then the European individuals will be breaking the law of their jurisdiction. The US meat-packers will be complicit in that unlawful conduct, which is why I asked whether Rick was going for civil disobedience or outright black marketeering. No tricks here.

Jordan

P.S. Robert - amusing.

(Edited by Jordan on 9/09, 3:37pm)

Post 9

Friday, September 9, 2005 - 3:47pm

Jordan,
Rick said:

... companies should offer the economic incentive of trade with individuals in other countries to get them to pressure their government to stop the regulation.

I read Rick as saying that the individuals in other countries would get their governments to stop the regulation before any sale takes place. In that case, no laws would be broken.
Thanks,
Glenn

Post 10

Friday, September 9, 2005 - 4:39pm

Glenn,

Oh, I see. So the US meat-packers would simply use economic incentives to induce the European individuals to petition their governments. I hadn't read Rick that way.

Thanks,
Jordan

Post 11

Friday, September 9, 2005 - 8:36pm

Jordan, note that I wrote "the economic incentive of trade." In other words, "If you want what I have to sell then get your government to back off."

Post 12

Friday, September 9, 2005 - 9:46pm

Well said, Rick.........

Post 13

Saturday, September 10, 2005 - 7:18am