Op/Ed: DEREGULATION’S SHORT TERM BENEFITS

John Munsell

November 11, 2008

The free-wheeling, heady hegemony flaunted by America since the fall of the iron curtain is now spiraling downward, with the bottom ill defined. Whereas America perceived itself to be the unchallenged global power economically, politically and militarily in the early 90’s, no such false bravado or optimism is seen today. What can we learn from this? What kinds of corrective actions should we consider?

These are difficult questions, with no easy panacea. Just like all success stories, victory comes one small and uncomfortable step at a time. My intention with this article is to challenge Americans to focus in on one cause of our current economic malaise, and question if a change is in order.

My attempt to boil down the cause of our woes into one concise sentence invariably zeroes in on deregulation, which certainly has not been a four-letter word for three decades. Deregulation was heralded as the ultimate tool in America’s arsenal of corporate/regulatory weapons to perpetuate this nation’s global transcendence. Unencumbered from counterproductive government oversight and restrictive regulations, America would blossom as the premier paragon of deregulated capitalism.

The airline industry had historically been vibrant, employing thousands while providing us affordable and convenient transportation. The best way seen to energize the airline industry and ensure its profitability into the future was to deregulate it. Admittedly, soaring oil prices have clipped the wings of our airlines. However, long before jet fuel prices soared these last two years, our domestic airline industry suffered dismally, revealing that deregulation was not the panacea once envisioned.

Following the deregulation of the banking and investment sectors in the late 1990’s, the party began. The Wall Street explosion benefitted not only corporate America, but also the common American citizen who learned to invest and ride the rocket up. The calamitous free fall on Wall Street is yet the latest example of to-be-expected consequences of abuses typically accompanying government-endorsed deregulation. When there is a buck to be made, ingenious humans always concoct a variety of questionable schemes, derivatives being but one example. A front page article in the October 24, 2008 Wall Street Journal was entitled “Greenspan Admits Errors To Hostile House Panel”. The article goes on to state “Mr. Greenspan said he made a mistake in his hands-off regulatory philosophy, which many now blame in part for sparking the global economic troubles”. While Mr. Greenspan had been praised for many years for his judicious maneuvering of America’s financial system through a maze of domestic and global economic storms, his decisions were based on deregulating the industry, providing short term fixes for which the globe is currently suffering the inevitable hangover.

A separate and remarkable statement in this WSJ article was “SEC Commission Chairman Christopher Cox, himself a longtime free-market Republican, said he supported merging his agency with the Commodity Futures Trading Commission, creating a beefed up supercop to police certain previously unregulated financial products”. Ronald Reagan would roll over in his grave at this rebellious modern-day Republican. The fact that this free-market Republican has the audacity to admit that the financial industry requires hands on regulation attests to a growing realization that a hands off laissez faire mentality has long term downsides in the financial sector.

The next deregulated industry which will hit the front page is the meat industry, whose largest members have been set free to operate under greatly diminished USDA oversight, with full endorsement by the agency. In 1995, USDA mandated that all federal plants develop their own Hazard Analysis Critical Control Point (HACCP) Plans because the agency, by its own public admission, would resort to a “Hands Off” role under this allegedly “science based” HACCP methodology.

USDA also publicly stated that under HACCP, the industry would have to police itself, as the agency would no longer police the industry. Furthermore, USDA stated that it would disband its previous command and control authority upon HACCP’s advent. Makes sense: how can an agency which has voluntarily bequeathed its police authority over to the now-deregulated industry ethically utilize command and control? And, USDA had previously promised to maintain a “Hands Off” deregulated role in meat non-inspection. The industry’s largest plants introduced HACCP on January 26, 1998.

True to its word, USDA immediately demurred to a “Hands Off” non-involvement role at these big packers. In stark contrast, USDA has tremendously increased its scrutiny at small plants. These plants lack the political clout and financial wherewithal to engage the agency in protracted litigation when faced with fabricated charges from an agency which chooses to fully utilize police powers, but only at small plants.

Interestingly, increased scrutiny at small plants is not focused on production lines, but almost exclusively focused on paper flow which is frequently totally divorced from food safety.

Of course, at the biggest plants no major problems are even detected with paper flow. HACCP was initially justified as a food safety measure: originally described as a pathogen chase, HACCP has degenerated into a paper chase, but again, only at the small plants.

The high number of E.coli recalls and outbreaks in 2007 & 2008 reveal that the “scientific basis” on which HACCP was built actually emanates from political science, not legitimate science. The large plants have political clout; small plants do not, which is their major sin.

The method by which USDA defines E.coli as an adulterant is a case study in point to reveal the biased and unscientific basis of current meat non-inspection. If E.coli is found in ground beef or boneless trimmings destined for grinding, the bacteria is declared to be an adulterant and USDA declares the meat to be adulterated. However, if E.coli is a surface contaminant on intact pieces of meat (at the large slaughter plants) from which steaks and roasts are later processed at secondary processing plants, the intact meat is not considered to be adulterated, but is wholesome and labeled “USDA Inspected and Passed”. So, when downstream local meat markets or small processing plants purchase vacuum-packed intact beef cuts which are surface contaminated with E.coli from their large slaughter plant sources, processes the meat and E.coli bacteria are detected in the final product, then the small secondary processor is fully liable for the presence of the bacteria. This is all made possible by the USDA’s intentional “Hands Off” non-inspection at the large slaughter facilities. “Science based” deregulation allows all liability to go downstream with the previously adulterated meat.

Similar to SEC Chairman Christopher Cox, I have always been a Reagan-era deregulated hands off junkie. Furthermore, I owned a USDA-inspected meat packing plant for 34 years, and was initially swept up in HACCP’s deregulated euphoria authored and mandated by USDA. Like Mr. Cox, I only recognized reality after disaster reared its ugly head. HACCP is an unmitigated disaster, guaranteed to serve up numerous future outbreaks and recalls. While USDA and their closest ally, the big packers, trump science with political science, public health continues to be imperiled, victimized small plants continue to close their doors, and families are devastated while watching their loved ones dissipate from bloody diarrhea and incessant vomiting. Not a pretty sight, but neither is the HACCP Hoax.

About the author:

John Munsell currently manages the Foundation for Accountability in Regulatory Enforcement (FARE), and works full time at Miles Community College coordinating its Biofuels Curriculum.