Sunday, March 11, 2012

Meat Packing and Corporate Welfare

In the theme of my last post, I offer another instance where what on the surface seems to be a case of anti-corporate government policy, turns out to serve Big Business by keeping competitors out of their industry. We are indoctrinated that Rotten Capitalists will do anything for a buck, therefore, when it comes to our food it has to be marked with the Government's stamp of approval. Enter the Food and Drug Administration (USA) and the Canadian Food Inspection Agency--two of the most powerful and overreaching agencies in North America. How did they come to be?
The mainstream record of history regarding meatpacking holds that the meatpacking industry was unregulated before the passage of the Federal Meat Inspection Act, which resulted in unsanitary conditions placing the public at risk of disease. Upton Sinclair's The Jungle increased awareness of the terrible conditions in the meatpacking industry and the awakened public urged a revolted Theodore Roosevelt to pass meat inspection legislation. The large meatpackers were against the legislation and did not support the actions of Congress. Indeed, the Neill-Reynolds report confirmed the disgusting picture of the meatpacking facilities and sealed the nail in the coffin, reaffirming the need for regulation and the inability of the free market to regulate itself. (Source)
The meatpackers, however, were not all that unhappy:
The big packers were actually enthusiastically in favor of the regulation. At a government meeting with the large packers, the packers responded to the regulatory proposition with loud applause and praised as a "a wise law" which must be enforced universally and uniformly.
The packers had lobbied for regulation of the industry for decades.The book by Sinclair gave them an opportunity to get their bill passed through the Congress at last. There were a few reasons for the meatpackers to want government regulation:
1) Government inspection increases operating costs - Though this seems counter-productive, imposing a large fixed cost on competitors is advantageous to big businesses, because it establishes market barriers that prevent new players from entering the market, thus helping the large trusts gain a larger market share (perhaps this was in retaliation against antitrust claims made by smaller, local meatpackers against the trust, which were proven false as well). The imposition of a fixed cost is significant because entry into the market had in fact been relatively easy without many barriers.
2) Stamp of approval to overcome European embargo of meat - Europe had begun passing protectionist bans on American meat under the guise of "diseased meat." The large packers were troubled by this, as they did not want to lose the foreign markets. To circumvent this measure and combat claims of the European governments, the meatpackers wanted a government stamp of approval that would signal safe meat and hence tear down European barriers to meat importation from America. (Emphasis added) (Source)
I haven't pinned the reason yet, but it seems that it is a combination of ignorance of how free competition works, socialist indoctrination in schools and the overwhelming propaganda in the media by the Government-Industrial Complex that people can't look at the issue in a rational light. There is a simple question that a person needs to pose: Would I buy food from a source that I don't trust? Communities got along just fine with their local butchers and corner store grocers for quite a while before the Government got their sticky fingers into it. People frequented the shops of those who provided sanitary products, and became acquainted with their owners. It's how communities were built. Person-to-person relationships become unnecessary when we look for the FDA's or CFIA's stamp instead of building relationships with our food suppliers. This is no coincidence. Tight knit communities are the bane of Big Government's existence. People's loyalties to family, church, or local organization cut into Government's ability to draw support for its schemes, which naturally revolve around graft , kickbacks and generally unearned profits for those close to the ruling circles.

Despite a hundred year-long involvement, Government supervision of food producers has not stamped out instances of the most common food poisoning causing bacteria, such as Salmonella, Listeria, E.coli O157, Campylobacter or Clostridium perfringens. A major reason why this is so, is the lack of open competition. To be sure, the limited number of players on the market at present have the safety net of the de facto cartel to keep them safe in case of a major failure. Case in point was the Maple Leaf Food's listeriosis outbreak of 2008 when despite the grand scale of the outbreak, Maple Leaf was able to restore itself on the market, because the competition did not have the capacity to sweep in and punish them for the slip up.* The lack of capacity among the competition was a direct result of the entry barriers imposed on newcomers in the industry: your local butcher or pig farmer can't pay the licensing fees and figure out the administrative labyrinth to get Big Brother's stamp of approval. For similar reasons--time lag and cost to approve additional facilities--Maple Leaf's big-time competitors could not ramp up production enough to drive them out of the market.

Deregulation is not the dirty word it has come to be. Next time you hear someone calling for more regulation to industry, ask yourself who stands to benefit from it, because you, the consumer, sure as hell won't. In the particular case of the food industry the lack of competition due to regulation allows the existing suppliers to keep prices higher and quality is allowed to be kept lower than it would be in perfectly free competition.

*Some would argue here that Maple Leaf's employees would have been the victims here, since they would have been left jobless. There are two things to consider: (1) The competitor moving in to replace MLF would need to hire experienced personnel, and the persons who lost their jobs would have an advantage over other candidates. (2) The listeriosis outbreak was their fault. Perhaps no-one's in particular, but the fault of the collective body of MLF's employees. Therefore, them being kept out of the food supply industry may be a service to the community. In a free market those people are sure to be re-hired somewhere else.


  1. Hah! You've happened to stumble upon my humble article pulling together research on meatpacking. I'm glad I could help!

    Just curious: were you linked to it by anyone on Reddit or on the Mises forums?

    1. HAHA, great minds think alike, right! I found the article through

  2. Also, epic coincidence - my Reddit username is "ReasonThusLiberty"


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