Truth in Labeling

The Pure Food and Drugs Act of 1906 is today remembered as one of the highlights of Progressive reform. In an urbanizing and industrializing era when Americans no longer lived near the sources of their food and in which unregulated patent medicine promised miraculous cures, this law offered an assurance of safety that consumers, no matter how vigilant, could not provide on their own.

It would be hard to imagine a more welcome assertion of federal power. Yet in 1904 as the Congress considered pure-food legislation, Nelson Aldrich, a senator from Rhode Island, complained bitterly about the bill. "Is there anything in the existing condition that makes it the duty of Congress to put the liberty of the United States in jeopardy?" the Republican lawmaker asked. "Are we going to take up the question as to what a man shall eat and what a man shall drink and put him under severe penalties if he is eating or drinking something different from what the chemists at the Department of Agriculture think desirable?"

Sen. Aldrich's more than 100-year-old comments sound strangely familiar. Aldrich's claims that consumer-protection laws would undermine the freedom of ordinary Americans and that government officials charged with enforcing such laws would overreach in dangerous ways have remained central elements of the opposition to many proposals in the last century. Indeed, replace the word "chemists" with "bureaucrats" and you have two contemporary Republican talking points against President Barack Obama's proposed Consumer Financial Protection Agency (CFPA).

Echoing Aldrich, opponents of consumer protection have claimed the mantle of individual liberty. Like Aldrich they have done so by misconstruing the nature of human agency and freedom in the modern world. Sure, Americans were "free" to buy rotten meat and harmful drugs before the passage of the landmark 1906 legislation. But what sort of "freedom" is this? And on whose behalf did it operate? Federal regulation did not substantially restrict the freedom of ordinary Americans. It instead restricted the freedom to sell poisonous drugs and dangerous foods and thereby instilled confidence in the marketplace.

The Pure Food and Drugs Act was not an isolated controversy. Although measures taken in the 1960s and 1970s, such as creating the Consumer Product Safety Commission and passing the Truth in Lending Act and the Fair Labeling and Packaging Act, are today uncontroversial and popular, critics opposed them for simultaneously restricting individual freedom and expanding the government into areas that were properly personal. They have also argued that such laws do not sufficiently esteem the intelligence of the American people. As the business journalist Louis Ruckeyser wrote in 1978, they assume "that the shopper is a dumb bunny incapable of finding the supermarket exit without a taxpayer-supported Big Brother looming overhead."

The CFPA is designed to end what the president has called "failure of ... government to provide adequate oversight" by monitoring banking transactions, including mortgages, credit cards, and checking and savings accounts. In predicting the restriction of individual liberty, opponents of the CFPA, supported by banking-industry lobbyists and the U.S. Chamber of Commerce, are drawing on an old playbook. Richard Shelby, the Republican senator from Alabama, finds the proposal "disturbing and somewhat offensive" because it relies on the "concept of the intellectually deficient consumer." Jeb Hensarling, a congressman from Texas, maintains that "unelected bureaucrats" might "decide if we can have a credit card." Scott Garrett, his fellow Republican colleague from New Jersey, worries about the "Orwellian, government-bureaucrat-knows-best mentality" evinced by the proposal.

What the opponents miss is exactly what Aldrich failed to note: Markets work effectively when the people have confidence that they are transparent and well regulated. Proponents of consumer protection have spent the better part of a century making this case by highlighting that freedom of choice is meaningless without effective government regulation. In the area of consumer protection, then, the government provides a defense against unfreedom. As the Kansas City Times editorialized in 1964 in favor of "truth in packaging" legislation that was being roundly criticized by business lobbyists, "If the marketplace is to function on the basis of free enterprise, the consumer must know what he is getting. If he does not know, a superior product can lose out to one that is inferior. That is hardly in the best tradition of capitalism."

It does not impugn the intelligence of ordinary people to insist that sometimes government intervention is necessary to promote fairness in the marketplace. As President Obama has recently noted, "The danger of too much government is matched by the perils of too little; that without the leavening hand of wise policy, markets can crash, monopolies can stifle competition, the vulnerable can be exploited." The history of consumer protection in the last century provides ample proof of this claim.

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