The Regulatory State — Behind the Myth

by Kevin Carson

A colleague at Center for a Stateless Society recently brought to my attention a story from late last year about unusually high concentrations of severe illness in the area surrounding a Crossett, Ark. paper mill. Members of eleven out of fifteen homes on Penn Road have died of cancer, and respiratory distress is common.

The local cluster of illness is controversial because the mill was owned by Georgia-Pacific, a subsidiary of Koch Industries. As a result of waste dumped in a local channel (near Penn Road) by the Georgia-Pacific mill, Crossett has one of the highest concentrations of carcinogens of any community in the United States. “Crossett crud” is the local name for the black scum on the surface of the channel, and the vapors which rise from it and drift across people’s yards.

Koch Industries’ “Koch Facts” website, in attempting to rebut the claims, repeatedly asserts that the Georgia-Pacific mill’s treatment of effluent “[meet] all limits required by our regulatory permits,” that “our emissions are permitted and monitored based on state and federal regulatory permits.” The plant is “in full compliance with the terms of the permit,” which the website describes as “protective of the river.”

This line of defense should come as no surprise. Richard Telofski, a leading consultant on combating what his corporate clientele calls “cybersmear,” advises corporations to “debunk” accusations of pollution and other malfeasance by stating that they are in full compliance with all federal and state regulatory standards.

Of course anyone familiar with the history of the regulatory state, as recounted by radical historians like the New Leftist Gabriel Kolko, will know that’s exactly what the regulations are there for. First of all, they provide an official seal of approval, much like the quality and safety codes of trade associations. But since, unlike with trade associations, individual firms are not allowed to defect from compliance with the regulatory regime, the regulations do not become an issue of cost competition between firms. The cost of compliance is borne across the entire industry, and passed on to consumers as a simple cost-plus markup.

Second, compliance with the regulatory standard — which is typically a dumbed-down least common denominator far, far below the standards of common law tort liability — serves as a safe harbor against civil litigation. The regulatory standard — which is, after all, based on (ahem) “sound science” — trumps any more stringent legal standard of liability. So long as a company’s emissions comply with the EPA’s limit on parts per billion of this or that toxic chemical, it doesn’t matter if the entire town has asthma and breaks out in painful lumps.

Finally, compliance with the regulatory standard can sometimes protect a company from even voluntary competition by other firms in an industry that choose to adhere to a more stringent standard of safety or quality. For example, Monsanto has successfully pursued court remedies in some jurisdictions against dairies and other food producers that advertise their products as free from Genetically Modified Organisms or recombinant Bovine Growth Hormone. And the big meat packers have won USDA sanctions against smaller packers that advertise their voluntary adherence to a more stringent inspection regime against “mad cow disease” than is required by law.

In all these cases, simply advertising one’s voluntary adherence to a more stringent standard than is required by government regulations is treated as “food libel” or “product disparagement.” That is, it implies that a competitor’s products that just meet the ordinary standard are inferior to one’s own, despite the competitor being in full compliance with legal reguirements (which — again — are based on “sound science”).

Despite the official mythology in the public school American history books — TR the Great Trustbuster, the Muckrakers, Upton Sinclair, and all the rest of it — the main function of the regulatory state is to protect the regulated industries.

6 thoughts on “The Regulatory State — Behind the Myth

  1. I remember asking Kevin (and his followers) how much they supported the Koch brothers – and I now have an answer. Keven and co are supporting the socialist smear campaign. No surprise there – the Black Flag people (whom Kevin openly supports) have been actively cooperating with the Red Flag Marxists in the Occupy movement (and the universities, and such things as the Chicago Teachers Union) for years.

    As for regulations – Milton Friedman (back in “Free To Choose” back in 1980) outlined what is basically a three stage process.

    At first regulations will be demanded by collectivists (of various sorts) then (and this is indeed a key step) producer interests will jump on the band wagan thinking “well if we can not beat them we can join them – and we can use these regulations to our advantage……”

    Then (the stage Kevin and co tend to miss out) the regulations get out of control – and everyone (even the established producer interests) lose.

    For example, government regulation of the railroads was first demanded by the various colectivists – but then some established Railroad people decided they could use regulations to enforce a cartel.

    As so the ICC (Interstate Commerce Commission – 1887 onwards) was used. If a railroad company wanted to charge lower fees (to attract more customers – by breaking the cartel) the ICC would be used to hit it.

    Anti trust regulations were used for the same purpose.

    For example, the Union Pacific people failed in their efforts to force J.J. Hill out of business with bullets and bombs (as the Great Northern people just shot back at them) – so they used the Anti Trust law against Mr Hill.

    However, then the third stage kicks in………..

    Certainly by the 1960s government regulations were not helping the established railroad companies any more – on the contrary they were destroying them with such things as price controls.

    It is the same story over and over again.

    For example the Doctors union (unions love government regulations – to help enforce their guild like restrictions) loved government regulations at first.

    But eventurally the government regulations get so out of control that everyone (even the Doctors unioin people) are hurt by them.

    In the end the government is not under the control of “the capitalists” – it is in fact a monster (that is not under the control of anyone).

    Presently in the United States most companies (most business enterprises) are being hit by thousands of pages of out of control government regulations.

    And most American companies are being hit by the highest company taxation (Federal and State combined in the world).

    What are Kevin Carson and Sean Gabb doing to help those companies?

    Oh I forgot – they believe the Marxist myth that the state is controlled by the “capitalists” so the regulations are mostly for the benefit of the companies (i.e. ignoring the fact that most business enterpises are being hit by them).

    And taxation?

    They (Carson, Gabb, othersuch) just look at loopholes and other such – ignoring the fact that most companies are being hit very hard by taxation.

    So the bottom line is that they are doing nothing to help most business enterprises (i.e. most people) against collectivism.

    In fact Carson, Gabb and co are part of the problem – not part of the solution.

    Karl Popper point.

    To refute the above all that would need to be shown is the following things.

    Carson and co denouncing (not supporting) the Occupy movement. Denouncing (not supporting) “Social Justice” and so on, Supporting (not smearing) wealth creators such as the Koch brothers.

    But I do not expect to see these things happening any time soon.

  2. Well, I think what’s kind of depressing about Kevin’s “hate list” is it is so predictable; all the same people that the Left hate so routinely that they’ve become a cliche. It’s basically just anything by Naomi Klein with “Libertarian” written on in crayon.

    As I’ve often said, Kevin doesn’t really object to the State on Libertarian grounds at all. He only hates it because, in his worldview, it supports his real enemy, capitalism- and by that I mean capitalism as meaning “free markets”. His definition of a “freed market” is not a free market, or a market at all. At least he’s predictable and consistent, so there’s little point in running through why he’s wrong, again. However, this is worth pointing out-

    Members of eleven out of fifteen homes on Penn Road have died of cancer, and respiratory distress is common.

    I have no idea whether or not this paper mill is making local residents ill. It may well be. We know that pollution can do that. However, the above statistic is pretty much classic junk statistics. It sounds impressive, because the figure given, “11 out of 15” makes one immediately think of that fraction- 11/15, which is nearly 75%. That’s a high figure. But the human mind is very bad at arithmetic and statistics. We evolved to jump to conclusions for good survival reasons; because a primitive hominid cannot afford to do a double blind trial to explore the scientific validity of the statement, “tigers eat people”. So, we see one tiger eat a person, we presume that all tigers do. That’s a good survival strategy. It makes us lousy at judging risk by gut feeling in an arithmetically reliable sense. Thus, honest statistics, suitably presented, can be powerfully misleading.

    Firstly, we tend to think that statistics aren’t clumpy. If we are told that 1 in 3 of the population get cancer, our gut feeling is that 1 in 3 of our friends will get cancer, but in fact statistics are clumpy; one person may have very few friends with cancer, while another may find that half or more get it at some point. That’s why before you can declare an epidemiological cluster, you need to prove some sort of cause and effect. An apparent cluster itself proves nothing; but activists love to simply presume that it does.

    Secondly, there may be another variable in operation. It may be something obvious, such as the people in the cluster smoke more tobacco than the average, or something more subtle.

    Thirdly, and most importantly, is the figure itself. It describes households, not individuals. The cancer rate in our society is about 1 in 3; about a third of us will get it at some point in our lives. If each household has three or more members, one would expect, on a non-clumpy (ideally smooth) distribution for each family to suffer one cancer case. In the real world, it may be higher or lower than that. But what this tells us is that on that statistic alone, there is nothing unusual. I myself know very few families who have not been touched by cancer. My mother (in Northampton, England) died of it (her fourth separate tumour, she was very unlucky despite having lived a life of healthy virtue). Her sister, who lived most of her life far away in Canada, also died of cancer. My own sister has had breast cancer. Both my paternal grandparents died of it. My ex’s twin sister died of it at the terribly young age of 33 (she’d only just had her second child, it was a tragedy). A close friend’s father died of it. My sister met an old friend for dinner last week (got together via Facebook) and she told me yesterday his father had died of it. The list could go on and on, and anyone else could make a similar list. 11 out of 15 households really means nothing at all.

    • Ian B – I agree with you about junk statistics. In general, Kevin is far too trusting of these things.

      And I sympathise with your losses. They are unusual, and they seem to support the belief that cancer is largely genetic, whatever local trigger may bring it on. My own family, for example, on both sides, has had no cancer deaths anyone can remember. In the past century, my lot have died mostly from heart attacks and enemy action.

      However, Kevin’s general point about regulation stands on other grounds. It isn’t a straightforward matter – and, every so often, the special interests do end up getting stuffed. I attended a number of meetings with tobacco industry representatives when Chris Tame was Director of FOREST. All of the senior managers I met were strongly in favour of the complex regulations Chris and I were supposed to denounce. I soon realised what was going on, and ghosted a long memo for Chris on the danger involved. It was ignored.

      Then again, perhaps it was rightly ignored, bearing in mind the personal interest of the managers involved. Collectively, they were riding their industry into the ground. But, assuming they wanted an easy ride for their own time in office, it was rational behaviour.

      I’m going off subject here – but I’ve often wondered to what extent the greater corporatisation of American business enabled the early steps over there to alcohol prohibition. In this country, the licensed interest was made up, till after the Great War at the earliest, of small family concerns. They incorporated mostly to get the benefits of limited liability. The owners saw their personal interest as identical to that of the industry as a whole, and threw money at the LAPDL and to keep the Tory Party on side. We never got prohibition.

      The sociology of big business is an interesting, if depressing, subject.

  3. The cig/booze/fast food industries still have a lot of cash. They could tell the state to stuff their regulations and that they won’t obey. That alone would cause a lot of trouble for the polit/bureaucratic goons. They can froth at the mouth with outrage but lots of people are sick of the state full stop and resistence would give those people a rallying point. The state can send their costumed thugs of course but that would be a very unpopular move (in fact those industries could hire enough “personel” to impede plod quite effectively–it would of course escalate and ultimately the companies would have to back down or raise their standard for civil war). The sheer fact that a wealthy, high-profile group had said NO would count for a lot. Enough people standing up to say NO is what TPTB fear.

  4. Sean good to see a (partial) break with not Kit – I was not execting that. The Koch brothers have made a lot of enemies over the years (both Democrats and RINOs) so if they could be hammered – they would be.

    The First World War was indeed a big boost for limited liability firms, as it was for the decline of indivdually and family owned business enterprises.

    Tax law is a big thing – for example when Henry Ford bought every share in the Ford Motor Company (so he owned it 100% – and did not have worry about arseholes sueing him over this or that business judgement) he still kept it a company – and not just for limited liability reasons. Income Tax (especially in the 1930s) was vastly higher than Corporation Tax – so if the Ford Motor Company had just been Mr Henry Ford it would have been bankrupted by the income tax.

    These days things have gone into reverse (at least in the United States).

    The regulations on corporations are even more harsh than they are on individually owned business enterprises (something Kevin just does not see). And the tax on corporations is higher (yes higher) than the tax on individuals.

    So someone setting up a new business would be well adivised not to incorporate – although that does mean personal bankruptcy if the business goes down.

    It is a risk worth taking (there is no imprisonment for debt any more) to get the lower taxes and less horrific regulations.

    Mr Ecks I do not expect to see what you suggest – but it would be nice.

    Very nice indeed.

  5. One straw in the wind…..

    The people behind the private city project on Honduras (by the way – good luck with that, Honduras is not the stable country it was back in the 1930s) said (when asked) that they would base its legal system on “the legal system of Texas” “Texan law” (although there would be more freedom of contract – their position on the demented “war on drugs”, which kills so many people in Honduras, is not known to me).

    They are not from Texas – they just say that various business people (and would-be business people) are familar with Texas law.

    See the point?

    They said “Texas” not “the United States” or “American law”. And it is not a State and Federal thing – as the private city will not be subject to Hondurian law (although I would not put too much trust in that promise).

    People are already starting to think in a post United States context.

    So the tax and regulation policy of the United States may not matter in a few years.

    Sadly I can not see the modern law of England and Wales being a possible export to other parts of the world – but there we go.

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