Can We Housebreak Capitalism?

This year marks the centennial of Upton Sinclair's The Jungle and it's sobering to imagine how that exposé of working conditions in Chicago's meatpacking plants might fare before the Bush administration's Office of Management and Budget (OMB), the contemporary gatekeeper for proposed regulations.

The lightly fictionalized novel's most grisly passage showed workers slipping, falling, and being rendered into “Durham's Pure Leaf Lard.” Within a year, Congress passed the Pure Food and Drugs and Meat Inspection acts, thus creating the nation's first health and safety regulatory agency, the Food and Drug Administration (FDA).

Things would go much differently today. The OMB would first demand a risk assessment weighing the odds that a worker might actually fall into a vat of lard. Then it would commission a cost-benefit analysis to determine if the projected earnings from the “quality-adjusted life years” remaining for those few unfortunates exceeded the employer costs of eliminating the hazard. Then, turning to Sinclair's allegations that turn-of-the-century cooks were unwitting cannibals, the agency might conclude it was “junk science” after reviewing two studies from university professors funded by the meatpackers' trade association that failed to turn up traces of human DNA in the lard. And in the end, nothing would be done.

Indeed, nothing is being done to curb what are still appalling conditions at the nation's meatpacking plants, where mostly immigrant workers lose limbs, suffer from repetitive stress disorders, and get fired if they try to organize. Meanwhile, their surrounding communities are poisoned by the uncontrolled wastes of industrial animal farming. The Dickensian conditions in many of the semi-rural towns that house meatpacking plants recently prompted Human Rights Watch to issue a report claiming that the U.S. government “is failing to meet its obligations under international human rights standards.”

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The sad fact is that American regulation right now is at a nadir. At various points over the past century, free markets left to their own devices produced colossal failures -- monopolies and price gouging, impoverished and injured workers, excessive competition and widespread business bankruptcies, tainted and dangerous products, and a despoiled environment. And each time, the American people turned to the guiding hand of government to correct the antisocial abuses of the unfettered market. Over time there developed a broad consensus -- including among the wiser heads within the business community -- that government had a crucial role as mediator and protector when big business imposed conditions detrimental to the general welfare.

But over the past three decades, the business community has rebelled. Business leaders who saw the need for prudent government regulation were pushed off the political stage, replaced by Republican ideologues with sensibilities like their Gilded Age forebears'. Under the current Bush administration, these forces have achieved a near-total triumph.

The consequences have been dire. Each week brings new reports about utility plants spewing unacceptably high levels of mercury, a potent neurotoxin that is especially dangerous to fetuses and the young; mutual-fund managers, who control a growing share of the nation's retirement-savings pool, engaging in special “after hours” deals with favored clients; drug companies obscuring data that show the risks of their latest blockbuster drugs while charging exorbitant prices based on patent monopoly terms extended by a pliant Congress.

Those rules that survived have gone essentially unenforced. According to a report released last May by the Center for American Progress and OMB Watch, FDA complaints about misleading drug promotions plummeted by almost 80 percent in George W. Bush's first term, worker-safety fines decreased by 25 percent, and Agriculture Department officials ignored repeated warnings about tainted meat at a turkey-processing plant whose products eventually killed eight and sickened more than 50. Knight Ridder last fall published a scorecard on the Bush administration's first-term environmental record. The result? Superfund cleanups decreased by 52 percent, consumption warnings regarding fish caught in rivers nearly doubled, beach closings were up 26 percent, and civil citations to polluters fell 57 percent.

This has happened in part because the Bush administration named industry lawyers and lobbyists, wholesale, to top regulatory positions. But it has been facilitated by an array of right-wing think tanks, professional consultants, and university-based mandarins. Corporations and think tanks like The Heritage Foundation, the Hoover Institution, the American Enterprise Institute, the Cato Institute, and the new kid on the block, the Koch Industries-funded Mercatus Center, have made deregulating the economy one of their primary goals. Flush with corporate cash, they fund hundreds of scholars and academics, many of whom have devoted their careers to undermining a single area of regulatory activity. (For more on industry's pursuit of its agenda on campus, see the recent book Universities in the Marketplace by former Harvard President Derek Bok, and University, Inc. by journalist Jennifer Washburn, excerpted in the February 2005 issue of the Prospect.)

These corporate-sponsored academics and academic centers, like the Harvard Center for Risk Analysis, promote scholars who minimize the risks of corporate practices and argue that regulation will impose costs on business that far outweigh the benefits to society. For example, the American Enterprise Institute–Brookings Institution Joint Center for Regulatory Studies, which is funded by, among others, the Olin and Smith Richardson foundations and the U.S. Chamber of Commerce, recently published a Web site paper examining the impact of the 1990 Americans with Disability Act on small- and medium-sized retailers. After 63 pages of densely packed equations and charts, the author concluded that somewhere between 1.4 percent and 2.3 percent of such firms were wiped out by the law, and the paper found no employment gains for the disabled. (This stands in stark contrast to a recent paper published by the National Bureau of Economic Research -- not a hotbed of radicalism -- that showed the law had no effect on employment, while many observers say there has been a dramatic increase in employment among young people with severe disabilities.)

This small army, in thrall to an ideology of free-market fundamentalism and almost always on a corporate payroll, has waged a 30 Years War against government regulation of all types. It's in the past four years, though, that this small coterie and its Republican allies have managed an across-the-board assault on the gains of previous eras. They have gotten away with this attack in large part because of the tremendous regulatory successes of earlier reform eras: The public that demanded these changes in the first place takes them so much for granted that it rarely gives a thought to the hidden hand of government behind them -- or to the possibility that it might disappear.

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There have been three great eras of reform, each of which pushed government regulation into previously uncharted territory after glaring abuses were exposed. The populists and Progressive Era reformers curbed the untrammeled power of the nation's first monopolies and tapped popular outrage over issues like predatory pricing and tainted meat to build new institutions like the FDA and the Federal Trade Commission. The calamities of the Great Depression ended forever (except among free-market dogmatists in some university economics departments and at right-wing think tanks) the idea that securities and labor markets or banking and utility companies could survive in a state of pure competition.

The anti-war and civil-rights movements of the 1960s and early '70s set the tone for the third great wave of regulatory reform. The publication of Rachel Carson's Silent Spring in 1962 and Ralph Nader's Unsafe at Any Speed in 1965 helped identify the unfinished agenda of earlier reform eras: protecting workers on the job, consumers in the marketplace, and the environment around us. The laws that produced the Occupational Safety and Health Administration (OSHA), the Environmental Protection Agency (EPA), and the Consumer Product Safety Commission in that era recognized that corporations, left to their own devices, usually refused to pay the social costs of their production processes.

What would it take to bring on a new era of reform today? We already have identified the big issues: a sustainable environment, a fair economy, a transparent and well-policed marketplace. And the regulatory machinery, even after three decades of incessant attack that eroded its core competencies, is still in place. What's needed -- and what progressives have had such a hard time rousing -- is the public's political will to counter the corporate deregulation machine.

There's a real paradox behind the public's seeming disinterest in pushing for regulation. If you poll voters on whether they support more or less red tape on business, the average American, bombarded almost daily with a message that an overbearing government costs jobs, says less. But when something goes wrong, the public response is the same as ever: The government should protect us. The drug industry, for example, defends its price gouging by claiming it needs the money for research. Yet as the drug-industry scandals have come into view, it's clear that the public doesn't buy that argument. A Kaiser Family Foundation poll released in February showed that 81 percent of the public rejected the money-for-research argument, while 65 percent favored more government regulation of prices and 73 percent wanted the right to buy cheaper drugs from Canada. Similarly, in the wake of Enron and other corporate accounting scandals, the press and the public immediately rejected the ideological braying for less regulation; on the contrary, it was public outrage that led Congress to pass new laws like the Sarbanes-Oxley Act, which demanded accurate books and brought accountants under direct regulation.

Still, progressives have several problems capitalizing on this public support for their agenda. First, while the public endorses regulation, it also seems to believe heartily that government is already doing a good job. Despite many stories about the FDA's failure to protect the public from dangerous drugs like Vioxx, an overhyped and overadvertised pain pill that increased the risk of heart attacks, the Kaiser poll in February found that 77 percent of the public still believed the agency was doing a good job.

Second, it has historically taken financial crises and public-health disasters to bring these natural instincts to the fore, and even then the mood is fleeting. Shortly after the terrible events of September 11, a Gallup Poll showed that nearly eight out of 10 Americans favored a federal mandate for energy-efficient automobile designs. A clear majority favored investment in alternative energy sources. Less than half supported oil and gas exploration in the Arctic National Wildlife Refuge. Yet as the crisis of 2001 abated, the public lost its enthusiasm for a more proactive energy policy. It is more than three years later and nothing has been done on automobile efficiency, investment in alternatives is being reduced (other than the speculative hydrogen-vehicle program), and arctic oil drilling recently passed the Senate and appears headed for victory.

Finally, progressives have a structural problem as well. Because the benefits of regulation are spread over the entire population, progressives have no natural collective voice beyond the understaffed and poorly funded public-interest community that monitors the regulatory process. These are countered by corporate special interests and scofflaws, who are well financed, well organized, and well placed in the corridors of power through an army of lawyers, lobbyists, and strategic campaign contributions. Because this political power usually operates behind the scenes, progressives are hard put to stir up public will to counter corporate efforts.

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Still, there are growing signs that the corporate community has finally overreached. A 10-year crusade for speedier drug approvals amid unchecked price gouging and lax safety monitoring has turned public opinion solidly against the drug industry. The chemical industry's successful campaign to avoid improving safety around its plants is a national scandal waiting to explode. The dawning realization that there will be no end to the low-intensity war in the Middle East will bring into bold relief this administration's failure to use emission standards to wean the nation from foreign oil, which requires a regulatory framework that weans the nation from its dependence on oil itself.

Issues like these will present progressives with golden opportunities to rebuild public awareness about the role of government in restraining antisocial corporate activity. The Center for Progressive Regulation, in its recently published “A New Progressive Agenda for Public Health and the Environment,” laid out some of the ideas that must reach the public: that cost-benefit analysis is fatally flawed because it places a greater value on economic efficiency than on human life, health, and the environment; that a wealthy society can afford to install state-of-the-art pollution controls, which will create jobs as they clean up the environment; that the principle of “first do not harm” should be applied to companies introducing new chemicals into the environment.

Too often, Democrats and public-interest groups get caught up in turning the latest example of market failure into an outrage or a scandal, good for the evening news or political talking points. This is a strategic error. If we're going to have a socially responsible economy, every incident of regulatory failure should be turned into a teachable moment to educate the public about the need for strong government oversight. The Republicans never hesitate to blame “big government” or “regulation” when some overzealous OSHA inspector picks an unworthy nit. But do you ever hear the Democrats blame “deregulation” or shout, “They pulled the cops off the beat!” when an unsafe drug gets exposed? Progressives need to remind the public of the most enduring lesson of the past: that the central government, through the prudent exercise of its regulatory powers, plays an indispensable role in a well-functioning market economy. Despite claims from deregulation ideologues that public protections cost jobs and hamper economic growth, each new wave of regulation has, in fact, led to more jobs and improved the nation's standard of living.

In addition, progressives need to recruit a new generation of scholars and experts to engage in the hand-to-hand combat of regulatory warfare. For the most part, this means fighting for more government funding for scientists and economists who are willing to remain independent of corporate largesse, and then insisting that they have a place at the table where decisions get made. But it also requires smarter progressive philanthropy. Washington is filled with advocates stumbling over one another to unearth the outrage du jour. But 30 years into the corporate war on regulation, there still is no progressive regulatory think tank filled with economists and scientists dedicated to going toe to toe with the deregulation machine.

In the news business, where I used to work for a major daily, regulatory issues were always seen as a backwater. Yet what's at stake in the day-to-day decisions at agencies like the FDA, the EPA, the Securities and Exchange Commission, and others is nothing less than the definition of social progress. For conservatives, social progress is measured largely by one variable -- economic growth -- a perspective that has impoverished American life for far too long. Progressives have a different, and better, view, one that, if properly communicated, can command support from the vast majority of the American people. Of course we're for economic growth. But for progressives, social progress must also be measured by the quality of life that a growing economy provides. And on that score -- whether measured by job or retirement security, health care, the environment, financial markets, or product safety -- the deregulated economy left in the wake of the 30 Years War is failing miserably.

Merrill Goozner, a Washington-based writer, is a Prospect contributing editor.

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