A Visit From the Ghost of Christmas Future

[This article originally appeared on the blog of mises.ca, on December 29, 2012]

John C. Calhoun divided the citizenry of a country into tax payers and tax consumers. Ludwig con Mises concluded that the anti-capitalist society (socialist and interventionist) is one of everyone against everyone, since as a result of the lack of economic calculation there will always be a shortage of desired goods and services in this type of society. Since in an anti-capitalist society income gets redistributed, then, what one needs to be is a tax consumer.

Over the course of the past year or two, civil unrest has dominated the most indebted countries of the European Union. There, the tax consuming masses have repeatedly walked and vandalized the streets of their cities in order to force politicians to renege austerity measures. While all this was going on, the government of my native Republic of Macedonia kept assuring its own people that their country was far from any crisis. Yet, on Christmas Eve Macedonia joined other European countries when its first budget related protests took place (see photo to the right).

There is a twist to the Macedonian story and one that may be of use to us. The protest itself took place when police officers physically threw out members of the Opposition (a wide coalition led by the Social-democrats) for filibustering the vote on the 2013 Budget. However, as has become practice in Macedonia, every opposition protest has been met with a ruling party sanctioned (and paid-for) counter-protest. The photo shows two sets of demonstrators separated by a police cordon.

After the fall of Communism, Macedonia adopted a very liberal (in the classical sense) Constitution in 1991, which unlike that of, say Canada, sanctifies private property and the market economy. It follows that Macedonia should be in the company of Singapore and Hong Kong in terms of economic freedom and prosperity. It is not. Under Communism there was 100% employment (though as the line goes, nobody worked), so there was no need to keep track of the unemployment figures. Since Constitution, the unemployment rate has consistently hovered around 35%. The reason for this dissonance between theory and reality is the fact that private property has continually been trampled upon and the free market was never allowed to operate. Thus, the vast majority of jobs in Macedonia are provided by the government, while whatever private sector jobs are there, they are provided by crony capitalists. Political connectedness rules the day, because politics rules the economy.

The governments in charge between 1990 and 2006 (which comprise the current Opposition) more or less kept to the same policy of distributing welfare to the unemployed, in the form of food stamps, humanitarian assistance, and the like. The present Government which took power in 2006 has been employing the New Deal (FRD/Hitler) method of expanding the administration, heavy subsidization of agriculture and building monuments and sports arenas. A telling point as to how much the administration has grown in the past 6 years is the fact that there are now bureaucrats for whom there are no offices or bureaus. They are forced to spend their workdays (which mostly consist of glorifying the Government on Facebook and Twitter) in coffee shops and taverns!

Inevitably the government took to growing its money supply to finance all the falsified growth. Local economists inform that the M2 has nearly doubled between August 2006 and December 2012, going from 66 billion to 121 billion denars. The influx of new money provided for a period of false (yet moderate, nonetheless) prosperity. A detailed description of what went on in Macedonia is unnecessary to the present discussion. All we need to know here is that despite having its own currency, Macedonia’s reserve currency is the Euro, and that since its market economy was never allowed to operate, the country relies heavily on imports. Indeed, since the Government subsidizes tobacco farming, a disproportionate number of farmers grow it (and not enough of it either) and not market desired foodstuffs which have to be imported (the Government pays higher-than-market prices for tobacco, so it cannot turn a profit by exporting it); since the Government subsidizes the steel industry, manufacturers in other fields are discouraged to enter simply because they carry the tax load. Thus, the country really relies on foreign loans from the World Bank, the IMF and Eurobonds in order to make due.

As the vicious circle of debt driven inflation goes, you always need more debt. And, since Macedonia is no US of A, it cannot borrow quite as easily as the US does. There are still some rules in place for Macedonia: one being that it cannot receive its latest loan of roughly 250 million Euros without passing next year’s budget. This brings us to the point of our story: the budget related protests and counter-protests as a manifestation of the political means of running an economy over the market approach.

Having smelled a potential electoral win in seeing that the government is broke, the Opposition has moved to block the passing of the 2013 Budget in order to block the latest loan. Here is what might be an episode of a visitation from the Ghost of Christmas Future for us: pensioners, bureaucrats and other state employees gathered to protest the Opposition’s move, while its would-be bureaucrats met them on the other side of the police cordon in a fight of everyone against everyone for the booty of the public purse.

R.I.D.E. as an Ineffective Solution to Drunk Driving

[This post originally appeared on the blog of mises.ca, on December 22, 2012]

The traditional clamor of family gatherings, feasts and gift exchanges that accompany the Holiday Season have of late been augmented by local and regional police squads with the widespread application of R.I.D.E.  The “Reduce Impaired Driving Everywhere” (R.I.D.E.) program, which started in Etobicoke, Ontario in 1977 has grown, as all government programs tend, to mammoth proportions. In short, the program consists of local bulletproof clad police squads armed to their teeth, turning downtown areas and highway on-ramps into war zones with their cherrytops flashing as if the Soviets had just invaded, checking drivers for alcohol induced impairment. While the damages that result from drunk driving can be to private property, the “prevention” of injury to private property that is accomplished by R.I.D.E. is something of an exaggeration. For, it is one thing to prevent an imminent crime, it is completely another to label persons criminals for being in a broad statistical category that has a given statistical chance of committing an injury. In that respect, “drunk drivers” caught at a checkpoint are similar to persons who get arrested for possessing illegal drugs. R.I.D.E.’s aim is to catch “impaired” drivers who are clearly capable of driving safely—for if they were driving dangerously they would be easily noticeable on the road.

Until recently, R.I.D.E. was practiced only on holiday weekends and the Christmas season, and it was somewhat reasonable: check-points were set for outbound traffic in the most heavily trafficked areas. In more recent times, the program has taken a completely idiotic turn, as check points on highway off-ramps have began to spring up on rather random nights; while the legal impairment limit has been reduced to an unreasonably low 0.05. If the objective of the program is to prevent impaired, unsafe driving, it is difficult to see the effectiveness of it when it purports to catch drivers who have already safely driven to and down the highway. Clearly, we cannot take the word of the Police on its face that its’ objective is to protect the public; rather a more sensible explanation for their action is that there is little more than a financial goal behind it, and a dose of behavior control.
Speaking to the St. Catharines Standard, concerning its latest sting O.P.P. Staff Sgt. Jan Idzenga expresses frustration with the public’s defiance of the law: “I don’t know what else we have to do to hammer this message home. I don’t think people understand the consequences.”
The Standard goes on to explain that:

The RIDE (Reduce Impaired Driving Everywhere) program is well-advertised in newspapers, on television and on the radio. Both the OPP and Niagara Regional Police often announce they’re running ride checks in advance. Yet, as Idzenga points out, “they’re still not getting the message.”
Friday night, the NRP checked the drivers of 600 cars at a roadside checkpoint in St. Catharines. Four people were arrested for blowing over the legal limit of a .08% blood alcohol level.

This, according to NRP Sgt. Darrin Forbes is still “pretty high.” In fact, “until we go out and catch no one drinking and driving out there, it will continue to be a concern,” he said. Police departments, of course, have the luxury of setting such lofty and impossible goals, since they have no financial constraints to hold them back. Thus, they don’t need to find effective ways of being useful to the public: they just need to look busy.

For its’ NRP Friday Night RIDE for December 14, the NRP reports that 600 vehicles were stopped, out of which 16 roadside sobriety tests were conducted (officers suspected drunkenness in these cases, or the drivers were naïve enough not to lie), these resulted in three 3-day license suspensions and 4 impaired driving charges. Statistically, 0.26% of those checked were suspicious enough to give sobriety tests to; out of which half proved to be in violation of the law. Yet, as trivial as these numbers seem, drunk drivers can often injure other people, and thus represent a problem to the protection of private property.

That said if safety were the true objective, it can be achieved much more cheaply and effectively than by police-state like measures. Rather than turning downtown areas and highways into war zones, the concerned city leaders ought to provide for the true problem at hand: the difficulty of getting around in cities. It is an undeniable truth that the sprawling nature of Canadian cities is a deliberate design to subsidize the car industry, which according to Keynesian doctrine is indispensible to economic wellbeing. As such, it is nearly impossible to get around by walking from place to place, especially in the late-fall to early-spring time of year.

To the great shock of busybodies, people are not stupid nor do they have desires to put their own lives in danger; they are just left with no choice. Indeed, the city owned transit system shuts down long before the bar curfew. In fact, before most people even make it out to the bars. At the same time the taxi licensing regime in place gives rise to a shortage of private providers of mass transportation. Licensed taxis are hard to come by, since there is a lack of inducement for them to put extra cars on the road (an understandable action on their part, since this capital investment will not be self-liquidating due to the lack of daytime business). Yet, much cheaper and equally reliable “gypsy cab” service providers have been a target of the law enforcement authorities for as long as I have lived in this province (12 years). For this reason, even if they do have cars available, one cannot know, since advertizing for them is a way of self-sabotage. There is on top, the stigmatization of illegal taxis, in that they could be staffed with potential rapists or thieves—borne from the indoctrination that what is not regulated is by default criminal. (To this point when the question is posed “What makes legal taxi drivers safe?” the answer is that “They have been checked.” Checked by whom? Illegal taxi companies have the same objective as legal ones: to turn a profit by providing a service.)

Therefore, if the goal is to improve safety and protect the local population from drunk driving, abolish this trauma inducing ugliness called R.I.D.E., which is easily circumnavigated by bypassing the “usual spots” anyway, and allow for a better late-night transportation system to develop. Rather than paying exorbitant overtime salaries to police officers and tying up their crime solving resources for babysitting activities, make provisions for something to the effect of late night, part-time taxi licenses; and extend the hours of certain city bus routes. Such a solution would not only increase safety, but it will provide additional incomes for people ready to render actual and desired services; while at the same time bar revenues are sure to go up as the necessity of the Designated Driver is rendered no more.

What Is and What Isn’t Privatized Garbage Collection

[This post appeared originally on the blog of mises.ca, on December 4, 2012]

With crony capitalists as its supposed champions, capitalism needs no enemies. They are plenty and easy to find in the political sphere, particularly among what these days passes as the Right. Thus, the job of true capitalists is to out the false friends of laissez-faire by refuting their fallacies. One representative of the false champions of the market economy is now-ousted Toronto Mayor Rob Ford. This fellow ran a campaign on the promise to cut government waste in Canada’s largest city—and won. Yet, this seems to be a promise too easy to make, and break, for two reasons. First, politicians usually buckle under the pressure of an impending election. They fear a loss of popularity which could mean a loss of their comfortable job. Second, a politician may not buckle, yet, he may simply not understand the mechanics of the market economy, or chooses not to.

While irrelevant to our purpose, in Ford’s case, in the opinion of this writer, it seems that the latter reason was the key to his ultimate failure to make a real impact in what is business as usual in Canadian politics. A defining moment in Ford’s early tenure was his battle against the garbage collector’s union. It was a fight that Ford ultimately won—but free market capitalism lost—by managing to outsource a part of the city’s collection services to private companies. It was a move described by both supporters and opponent of Ford’s as the “privatization” of garbage collection. But it wasn’t privatization; the handing over of garbage collection to private contractors was the cartelization of Toronto’s garbage collection. For, the City awarded a turn-key business to a company that had gone through the rigmarole of obtaining countless government licenses to operate in what is generally considered the lowest level of the economic pyramid, i.e. an entry level industry where very little capital investment is necessary if not for legal barriers. This was not an open tender to anyone who wished to put their services on offer; this was a contest with a pre-determined winner, picked out of a small group of entities which have satisfied the expensive demands of the laws they lobbied for. On top of that, the customers were not given a choice as to who they would personally deal with; they were forced into accepting the service provider that the City chose. That is to say, the customers had no choice as to who they pay for the service, regardless of who executes it.
In a piece defending Ford’s approach, the National Post would conclude that:

Critics of privatization have pointed to initial problems with the new collection service as evidence that the trade-off for the potential cost savings will be lower quality service. But by doing so, they have demonstrated precisely why they are wrong.
It is far easier to hold private contractors accountable for their service deficiencies than government departments. Furthermore, private contractors have to perform to the standard spelled out in their contract.

While correct in saying that it is easier to hold private contractors accountable for their services than government departments, this does not apply the same way to cartelized businesses as it does to businesses engaged in laissez-faire competition. Likewise, it does not mean that taxpayers are getting a free market level quality of service (relative to what they are paying). When private contractors which have been awarded government contracts (that is, government monopoly) fail to meet taxpayers’ expectations there is still the bureaucratic process that needs to follow in order for their complaints to be heard, and improvements in the service to be implemented. More so, the individual household has no recourse; it cannot take its business elsewhere. Thus, while it may be easier to hold these private contractors accountable relative to City employees, it is still infinitely harder to hold them as accountable as service providers in a perfectly free market.

The earnest privatization of garbage collection would happen when it is private entities that decide how to dispose of their garbage. If Toronto’s garbage collection was truly privatized, then the City of Toronto would have nothing to do with it. Each individual, household or business would make their own arrangements to dispose of their garbage. Here we anticipate the question, “But if the local government doesn’t take care of it, then who will collect the garbage?” To which the obvious answer is: the homeless, the unemployed or simply anyone who sees an entrepreneurial opportunity for profit. Say’s law holds true: At the present time there are numerous entities that provide garbage disposal services to businesses across Canada; similarly, there are countless persons who routinely go through people’s trash before the garbage collectors make their rounds. There are pallet, cardboard and plastic recycling companies, to name a few—often comprising of single operators, that seek out every single discard they can get their hands on. These companies provide customized services to each of their customers: in some cases receptacles (bins, compactors or trailers) are spotted at customers’ locations; in other instances pick-ups are provided on an as-needed basis (which can range from monthly collection, to several times per week)—and there are no limits as to how much garbage the customer can dispose of per collection. Similarly, there are grease and cooking oil companies that collect what is a nuisance for restaurants. There are tire recyclers, electronics recyclers and there are aluminum recyclers. And with the constant progress of technologies, every day brings new ways to reuse something that was garbage the day before, thereby commodifying yesterday’s trash.

There is no mystery as to why owners of local landfills and commercial garbage companies are often if not the wealthiest in their communities, then certainly among the richest and most powerful. There is proverbial gold in them hills of trash—and local monopolies are granted by authorities over them. This allows the Ministry of Environment licensed “landfills” to obtain a higher-than-market return on investment, since competition is limited or outlawed.  Exact numbers of how much of the garbage that gets generated annually ends up in the landfills, and how much of it gets recycled, are irrelevant to the current discussion. The point is that a great deal of what citizens pay a tax to dispose of, ends up being reused by landfill owners.  However, while in, say, the cardboard recycling industry the collector either performs the service for free or pays the entity disposing of their refuse; in the household garbage collection industry the collector gets paid to receive a commodity which he re-sells. Thus, garbage collectors get paid twice—something that would be impossible under an earnest regime of privatized garbage collection. Unlike landfills which already turn a profit from collection, independent recyclers (privatized garbage collectors) have a greater incentive to make every piece of trash re-sellable. Indeed, most of what ends up in the garbage is reusable, as long as it gets sorted properly: at the very least anything that is organic gets turned into decorative mulch or fertilizer. If the garbage collection market was allowed to function freely, then the likelihood is that as a result of competition among collectors, disposers would be able to make some money out of their garbage. It is the pattern that developed in all the above mentioned recycling industries.

As we can see, the outsourcing some or all of the City’s garbage collection to private cartels is a far cry from the true privatization of this service—something that should be kept in mind every time a politician makes a claim that they will “privatize” one thing or another.

A Lesson From Rob Ford’s Ousting

[This post originally appeared on the blog of mises.ca, on November 28, 2012]

Austro-libertarians, present company included, have a tendency to believe that they understand the political system—the State—better than the average person. This opinion stems from careful study of the theory and history of the State, broken down logically and with consistency that any “Austrian” undertakes in his becoming one. The “average person” doesn’t waste his time reading volumes written 50, 100 or 200 years ago. He has no clue as to who Frederic Claude Bastiat, Alert Jay Nock, or Herbert Spencer are, not to mention Lysander Spooner, Ludwig von Mises, F.A. Harper or Murray N. Rothbard. The writings of these gentlemen have summed up the nature of the State to be that of a monopoly of the physical violence over a given territory. Naturally, since the State is comprised of individuals who fill in various official spots by living off of the taxation of other people’s productive labors, it will tend to maintain the status quo at the very least—and perpetually push for an expansion of its influence as standard practice. Since “mainstream” individuals tend to call for or accept government intervention in the market as the solution to any perceived problem, Austro-libertarians conclude that adherents to the mainstream ideology of interventionism fail to recognize the true nature of the State as described above. Yet, the case could be made for the exact opposite: Austro-libertarians, perhaps out of naiveté, fail to see the practical nature of the State—the indiscriminate practitioner of force that has no qualms about destroying lives, and thus fail to heed the warning that they themselves loud; while mainstreamers recognize the State’s frequent use of its might and are careful not to rattle any cages.
 
To be sure, the reluctance of the inhabitants of states of the former Soviet bloc to step up and criticize the established system of their countries never surprised me due to the publicly known secret of the diligence of the ideological police. There, advice to not provoke calamity onto oneself through criticism is predictable, if not disheartening. Yet, getting the same or similar advice in a beacon of democracy, such as Canada ought to be outrageous, right? Here freedom (of speech and ideas) reigns supreme, does it not? In our great democratic society, we are told, the commonweal trumps ideology. Therefore, Austro-libertarian criticisms of the political system ought to be celebrated as offerings for a higher quality of life. In practice, not only is Austro-libertarian thought shunned, it appears that those who make even the smallest of efforts to benefit the public through the use of less interventionist policies are now open targets for political assassinations.
It may or may not be the case with other writers in Austro-libertarian and Anarcho-capitalist circles, but this writer has experienced more than one instance of worry expressed by a friend or loved one about the “dangerous” contents of his works published on this website. In a beautiful embodiment of Basitat’s “what is seen and what is not seen” lesson, these people understand that bad things will happen to them if they attempt to change the system; but fail to realize that even worse things happen when they don’t. Sure, they might get admitted to post-graduate studies, or get a job with an established crony corporation, or never provoke a CRA audit upon themselves. But in doing so, they support the theft through regulation, inflation and taxation—the three pillars of interventionism—which ultimately bring about a lower standard of living than otherwise possible for themselves by forcing business to move away, stifling innovation, dictating behavior and destroying capital.

While not “Austrian” in his economics, or libertarian in his politics, Toronto Mayor Rob Ford in his time in office—which seems to have come to an abrupt end half-way in his term due to a judge’s decision—at least was willing to cut down some of the Public Sector in Canada’s largest city. His solution to garbage removal, for instance, though not fully market-based (more on this in my next post), did upset the public union’s monopoly over this essential service, and sent a threatening signal to other unions that their racketeering reign might be coming to a close. Similarly, Ford went after the police and firefighting unions in trying to cut the increases to their annual budgets, and tried to reduce the number of libraries under the city’s proprietorship. Realistically, these attempts at cutting the excesses of Toronto’s government are as miniscule relative to the real solutions needed, as is Ford’s offence compared to the scandals of politicians of all spheres that come to the public light on a daily basis. Yet, if his policies proved successful, then the public acceptance of interventionism—as embodied through unionism, public education, public media, even universal health care—may quickly erode, leaving thousands of “civil servants” without the above market (Discounted Marginal Value Product) incomes they have come accustomed to. This is very dangerous business.

Unsurprisingly then, Rob Ford’s publically expressed desire (whether genuine or not) to cut down on the Public Sector made him the target of every Public Institution under the sky. His time in office was marked by the savage attacks on his personal life by the publicly owned Canadian Broadcasting Corporation, more than anything he did or failed to do. It comes as no surprise then, that he is being ousted out of office as a result of an inquiry conducted by a public official, a so-called Integrity Commissioner, and a judgment reached by a publically appointed judge. In a statement that could not be more wrong, Mr. Ford has declared this outcome to be the result of “left-wing” politics, when really his ousting is the result of interventionist politics. All politicians break the code of integrity in their jurisdiction. “Right wing” Toronto Sun lists a bevy of provincial Liberal indiscretions with public money that trump Ford’s conflict of interest by a thousand times. On the other hand, who can forget federal Conservative Minister Bev Oda’s royal treatments on the public tab. All that either the “left” or the “right” have to say is, “at least we are not as bad as the other guys.” Despite the “right’s” protestations, Ford is as guilty of the crime of abusing power as any of the others. Yet, in no case did a judge oust a single “civil servant” out of their job. Ford brought the shadow of a threat to the interventionist status quo and is now paying the price for it through a career assassination of the first kind.

Ultimately, there is a lesson here to be learned for all those who seek to change the status quo. Mr. Ford is guilty of the transgression he was accused of, regardless of its paltriness. More so, he is guilty of not staying true to the principles he supposedly espouses: those of the impossible dream of responsible government. So, the lesson is that if one decides to go against the grain, he must be in practice what he claims in his rhetoric; otherwise the great machine that is the Establishment (by this I mean not some secret society of ultra-rich people, but the bureaucrats, elected representatives, publicly funded media, union workers, crony capitalists, etc.) will grind you up in a heartbeat. In this respect, Texas Congressman Ron Paul remains the unchallenged standard bearer.

An Analysis Of The Effects Of Prohibition Of Tobacco By Excessive Taxation

The following paper was prepared for and presented at the Toronto Austrian Scholars’ Conference, November 9-10, 2012. I would like to think that it is a work in progress. As such, I am looking forward to comments, as well as directions to further explore the issue. Here, I would like to take the opportunity to thank Redmond Weissenberger for the fantastic job in organizing the event.


When societies grow opulent life becomes more precious to the living. People have a good reason to want to live longer lives as more of the promises of Paradise become Earthly. As a result, the ever growing body of evidence of the harmful effects of tobacco products to human health has, not surprisingly, been met with alarm. Cigarettes, the most common tobacco product, have been discovered to not only cause harm to the direct user, but also to bystanders, as a result of so-called second-hand smoke. In response, anti-tobacco advocates and governments have lead a three-decade long charge which has seen smoking in most public places turn from familiar sight to a thing of the past. Likewise, tobacco advertizing and the selling of tobacco products to minors have become outright outlawed in North America and the European Union (EU). Further, the EU has exerted pressure on candidates for membership to adopt its laws regarding tobacco advertizing and smoking in public places. As these measures failed at their stated goal on the one hand; and as governments grew in need of more revenues to pay for social programs on the other hand, a new approach was introduced in the War on Smoking: Prohibition-By-Taxation. While anti-tobacco activists have the best of intentions in mind, through an application of analysis of the economics of prohibition, this paper will demonstrate that prohibition-by-taxation is an unwise course of action since it encourages organized crime in the form of smuggling, fails to curb people’s tobacco consumption habits, and adversely impacts low income communities. For these reasons government efforts to dissuade people from consuming tobacco ought to be abandoned. Despite the author’s awareness of dissenting arguments concerning the actual harmfulness of tobacco products, this view will be completely ignored, for the express purpose of analyzing the effectiveness of prohibition-by-taxation.

While prohibitions of goods and services come about from a desire for social engineering, their failures come about as a result of the unclear understanding of the nature of the economics of prohibition. Austrian economist Mark Thornton, in his definitive study on the subject explains that “[d]espite the heated debate little progress has been made toward a theoretical understanding of prohibition. Economists and other social scientists have spent much more effort on empirical investigations and cost-benefit analyses than on theory” (Thornton 71).  He goes on to summarize the nature of prohibition.

Prohibition is designed to curtail the production, exchange, and consumption of a good with the ultimate goal of extinguishing it. While prohibition is an unusual and extreme form of government intervention, its effects can be analyzed within the framework of other interventionist polices such as taxation or regulation. Penalties such as fines, confiscation of assets, and jail terms are established to discourage activity in the market. Enforcement of prohibition requires the use of resources to make the penalties effective in discouraging these activities. The diversion of existing enforcement facilities may involve some savings but does not eliminate the need for additional resources. The amount of resources devoted to the enforcement of prohibition will (with a given penalty structure) determine the degree of risk placed on market participants and therefore the effects prohibition will have on production and consumption (Thornton 73).

Prohibition is an example of government interventionism, which is in itself the antithesis of a free market. “Interventionism is an alternative form of economic organization to capitalism or socialism, a form that involves governmental control or direction of resources that were private property” (Thornton, 79). Government planners see prohibition-by-taxation as an incentive based approach to behavior control. While correct in their assumption that consumers respond to incentives and disincentives on the demand side, legislators and orthodox economists neglect to consider the supply side of the issue. By contrast,

[t]he Austrian, or market-process, approach to economic analysis … best exemplified in the works of Mises ([1929] 1977, [1936] 1951, 1922, [1949] 1977), F. A. Hayek (1937, 1945), and Israel M. Kirzner (1973, 1985) … begins with the truism that human action is purposeful and aimed at enhancing individual utility amid uncertainty and imperfect knowledge. Economic development occurs through exchange, learning, entrepreneurship, innovation, and the evolution of institutions. The market economy generates solutions to social problems; for example, the introduction (or evolution) of money reduces the transaction costs of exchange. The generation of such solutions is a discovery process because it requires alertness to opportunities and interaction between numerous individuals over time. The market-process approach employs a multidimensional view of competition, whereas orthodox economists often rely on simplifying assumptions, such as homogeneous products. The market process approach reminds us that goods are subjectively evaluated by individuals, who base their evaluations on many features of products (Thornton 77).

It is of utmost importance to remember that the goal of excise taxes is to artificially increase the retail price of the product targeted. Depending on the elasticity of the product’s demand, there will be two most likely results in response:

1) If the demand for the product is highly elastic, then consumers are likely to turn to substitute products and abandon the targeted product. However, if the demand for the product was highly elastic to begin with, targeted excise taxation would not be necessary, as consumers could easily be persuaded to turn to substitute goods; and
2) If the demand for the product is highly inelastic, then the artificially increased retail price on the legal market creates opportunities for alternative—“black”—market activities. Tobacco products, due to their perceived addictive nature, tend to fall under the category of goods with highly inelastic demand.

The artificially inflated price leaves room for profits sufficient enough to cover the additional costs involved in smuggling, as well as to pay for the risk involved in undertaking an illegal enterprise. In such a manner the government invites what it labels as “criminal elements,” smugglers, to set up an alternative market in order to satisfy the demand for tobacco products. “The elimination or control of a particular economic activity produces profit opportunities that previously did not exist. These profit opportunities will likely disrupt the plans of bureaus and undercut the pursuits of regulators and government policymakers. The severity of the intervention will determine the extent of these new (black market) profit opportunities” (Thornton 82). In the case of prohibition-by-taxation of cigarettes, the government sets the minimum legal price. Thornton calls this approach the Wholly Superfluous Discovery Method. “[T]he wholly superfluous discovery process is particularly relevant to prohibition. The profit opportunities created by prohibition will result in new methods of production, transportation, inventory, distribution, and marketing,” inducing sellers to stay a step ahead of law enforcement (Thornton 82). One method often used by smugglers to stay in business is corruption of the law enforcement and judicial systems by means of bribery (Thornton 83).
To be sure, high excise taxes have failed to reduce smoking. According to Hudgins, when Canada introduced a large increase in tobacco taxation in 1991, the estimated profits that stood to be made by smugglers were at $1 billion (not adjusted for inflation) (Hudgins 4). As a result, while previously only 0.02% of all purchased cigarettes were estimated to be bought illegally, after the introduction of the new tax the percentage of illegal cigarettes sold rose to an estimated 25 (Hudgins 3). According to Lee “[i]t was widely reported that smuggled cigarettes made up 30-50% of the Canadian market. Taxable cigarette sales nose-dived as taxes rose during the mid- 1980s and early 1990s” (Lee 2). Similarly, immediately after the introduction of city and state taxes on cigarettes in New York, “local newspapers reported a ‘flood’ of cigarette smuggling into NYC and a rise in illegal street sales of untaxed cigarettes, particularly in low-income neighborhoods. Popular brands, it was reported, could be bought on the streets from bootleggers for as little as $5.00 per pack” at a time when legal retail prices of cigarettes averaged $7.50-$8.00 per pack (Shelley, Cantrell et al. 1). The unwanted effects of smuggling are compounded since people are able to purchase cigarettes at lower prices than the authorities would like them to pay; tax revenues are lost to smuggled products, while more law enforcement personnel is retained in order to combat smuggling; and honest businesses are faced with unfair competition in the shape of those who choose to circumnavigate the law.

Abolition of tobacco consumption through the employment of excise taxation is failing to extinguish the activity, exactly like the outright prohibition of alcohol failed to produce the desired goal during the 1920s.  One fallacy of the anti-tobacco advocates’ view is evident in the opinion of Merriman—a proponent of prohibition-by-taxation—who assumes that smuggled cigarettes cannot be obtained in convenient locations (Merriman 2). Merriman’s approach is typical of the orthodox economists’ method where purposeful human action is not acknowledged as the driving economic force. Practice shows that the inconveniences of increased prices and having to seek out sources of cheaper than legal cigarettes do little to deter smokers from their habit. Perhaps no better proof of the fallacy of Merriman’s assumption can be found than the Government of Ontario’s billboard campaign “Don’t Be Fooled! Illegal smokes come in baggies… and packs.” This recent campaign is an open admission of the failure of the Government of Ontario’s policies regarding smoking, as well as a rebuke of the assumption that illegal cigarettes cannot be purchased with little or no inconvenience to consumers, or their awareness of the illegal nature of the product they are buying. In a display of further ignorance of reality, Merriman assumes that “[c]onsumers may even fear embarrassment or legal penalties if they are detected buying smuggled cigarettes” (Merriman 2). He is proven wrong by a number of sources, as for instance: 1) as the Government of Ontario’s billboard campaign admits, some illegal cigarettes are undistinguishable from legal cigarettes, and consumers need not know that they are purchasing smuggled cigarettes; and 2) a study conducted by Shelley, Cantrell et al., discovers the “$5 Man” freely walking the streets of Harlem, accepted as a folk hero:

Most smokers were aware of a recent expansion in the illegal cigarette market in Harlem, which they observed corresponded with the cigarette tax increase. The $5 man was the commonly used term for a highly visible network of bootleggers who appeared after the tax increase throughout the community on street corners, in busy shopping areas, outside subway entrances, and in apartment buildings. Most smokers admitted buying cigarettes from the $5 man rather than stores as a way of avoiding higher taxes (Shelley, Cantrell, et al. 3).

Luccasen III, Coats et al., find that in the UK while “overall duty paid sales of hand rolling tobacco (HRT) have fallen by almost 50%, overall consumption of HRT has more than doubled” (Luccasen III, Coats et al. 2). Similarly, they find that middle and high school students in Turkey are able to easily buy smuggled cigarettes (Luccasen III, Coats et al. 2). In fact, Canada began a temporary about turn in policy when it was discovered that the number of teen smokers was actually rising due to smuggling activities (Lee 3); perhaps because smugglers do not check ID’s. Again we see a result quite the opposite of the target set by government planners. It can easily be observed that neither the increased prices, nor the inconvenience of buying smuggled cigarettes play and effective role in turning people away from consuming tobacco products in general, and cigarettes in particular.
To be sure, it is the lowest income communities that suffer the most from the increasing prices of cigarettes, as well as from the crime of smuggling. Luccassen, Coates et al. find that “the incentive to buy cheaper ‘illegal’ tobacco/cigarettes is greater for poorer households as tobacco products consume a larger proportion of their disposable incomes” (Luccassen, Coates et al. 2). At the same time it is those poorer households that smoke more regularly. Shelley, Cantrell et al. find that the inhabitants of low income Harlem, NY need cigarettes to help them cope with the stresses of their everyday lives (Shelley, Cantrell et al. 7). The same study concludes that the disparities in smoking prevalence by socioeconomic status are widening, as “[a]dults living below the poverty line have higher smoking rates (29.0% vs. 20.6%) and are less likely to quit successfully compared with those living at or above the poverty line” (Shelley, Cantrell, et al. 1). Thornton (71-72) lists a number of arguments that proponents make in favor of prohibition. We shall discuss some of them in turn:

“1. Expenditures formerly made on prohibited goods would be put to better use on items such as life insurance, food, shelter, and savings.” This argument neglects the relative elasticity of the demand of the good in question. As can be seen from the studies cited, consumers will pay higher prices for cigarettes rather than spend the money they would have otherwise spent on cigarettes on other goods or services.From Shelley, Cantrell, et al. (6) we learn that “[m]ost smokers said that regardless of price, they would find a way to purchase cigarettes, legally or illegally, because they were addicted and unable to quit. But they acknowledged that the rising price of cigarettes was leading to potentially detrimental tradeoffs for those smokers who were unable to quit: ‘They would exchange their food stamps to get that [cigarettes].’ (Female smoker, 25-49 years)” With low income individuals the extra money spent on cigarettes is that much more likely to be money that would be otherwise spent on general welfare of the individual.

“3. Consumption of prohibited products causes harm to the health of the consumer. Illness reduces time on the job, increases the demands on health-care facilities, and increases the cost of government-provided health care.” This argument neglects the fact that personal pleasure is the most desired good and that individuals tend to value it more highly than what seems rational to intellectuals, legislators and planners. Furthermore, the availability of third-party healthcare seems only to be an inducement to unhealthy behavior.

“4. Addiction, compulsive behavior, and habits are problems beyond individual control and must therefore be placed in the control of the state.” Governments across the world have been fighting one form of addiction or another for the better part of the last one hundred years with little or no success. Practice has proven this argument wrong, as prohibition of a good tends to make it more potent and thus more difficult to control by its user.

“5. Use of certain products causes violence and criminality in individuals who otherwise would not indulge in such behavior. Prohibitions help reduce crime, corruption, and social vices.” Contrary to this argument, history shows that prohibitions give rise to organized crime. There is no better example that the rise of the Mafia in the US during Prohibition. The lure of crime is more likely to be found attractive among the lower income members of society, thus increasing their chances to become incarcerated. These individuals perhaps could find better income employment if tobacco products were not pushed outside the realm of legality, since this would mean a higher demand on the job market. It is not difficult to see that the poor suffer doubly by the measures that are introduced with the intent of improving the quality of their lives.

“7. Use of certain products is infectious and would quickly spread to all socioeconomic groups, possibly leading to the addiction of substantial segments of the population.” This argument is another manifestation of the overgeneralization of orthodox economists. People are seen as bulk masses unable to make personal decisions for themselves.

“8. Use of these drugs is unnecessary and has no beneficial social function.” Value is subjective, thus what is a “beneficial social function” cannot be defined in any objective way. As noted by Shelley, Cantrell, et al., low-income earners use cigarettes as a means to cope with stress, thus finding social benefit in them.

“10. Given a properly established policy with appropriate penalties and adequate resources, potential users will be discouraged from experimenting, and current users will be isolated or forced to abandon their habits. In the long run, then, prohibition can virtually abolish the product from the market.” The “$5 Man” found in the study conducted by Shelley, Cantrell, et al. rebukes this argument. The high exposure and visibility of the “$5 Man” makes him an easy target for arrest.

On the other hand, anti-tobacco activists claim that the percentage of smokers is declining. This claim is difficult to prove, as no reliable empirical data exists. At the same time it is estimated that the absolute number of smokes in North America has remained largely unchanged for the past 40 years. Shelley, Cantrell, et al. (1) give a perfect example of how unreliable data on diminishing smoking habits is. In one instance they cite that “data from the 2003 NYC Department of Health and Mental Hygiene’s Community Health Survey (CHS), a telephone-based survey of 10,000 NYC residents indicated an unprecedented 11% decrease in smoking prevalence that corresponded with the tax increases. Smoking rates fell from 21.6% in 2002 to 19.2% in 2003.” Despite the CHS’s claim of an 11% decrease in smoking, the year-on-year rate between 2002 and 2003 remains within the standard margin of error. Another example in the same study tell us that “[a]lthough smoking in the United States has declined, in part because of effective statewide tobacco control programs and policies, disparities in smoking prevalence by socioeconomic status appear to be widening.” Additionally, it is impossible to know whether the percentage of smokers is declining as a result of government intervention or due to shifting attitudes among consumers—or simply that it appears to be declining as a result of an increase in the sales of untraceable illegal cigarettes.

However, a far stronger case for anti-tobacco legislation is made on the grounds that it tobacco related illnesses increase the costs of socialized healthcare. The nature of third-party healthcare coverage is outside the scope of this paper, however, at this point it should be noted that third-party provided medical care encourages less personal responsibility on behalf of individuals. Likewise, the quality of smuggled cigarettes is not put under the same scrutiny by consumers as that of legal tobacco products. A major flaw in the Wholly Superfluous Approach is particularly detrimental to healthcare, as “[t]he product, its quality, and attributes will experience tremendous change moving from a competitive market environment to one dominated by prohibition. These changes should of course be attributed to intervention, not to the market. Cave and Reuter (1988) found that entrepreneurs (smugglers) learn from experience; such increased knowledge can result in lower prices even during periods of increased enforcement efforts” (Thornton 82). Economies of scale encourage higher potency (Thornton 93), while lack of advertizing and transparency encourage diminishing qualities of products.

[P]rohibition establishes a wholly superfluous discovery process with respect to the potency of illegal [products]. Black market entrepreneurs are spurred on by artificial, prohibition-created profit opportunities in a similar fashion to entrepreneurs in a legal market responding to profit opportunities. At one level, the entrepreneur supplies a profit-maximizing quantity of the product, in both legal and illegal markets. On another level, the profit motive prompts entrepreneurs to alter production techniques, product quality, and the product itself. Market forces lead to certain industry standards.… In prohibited markets, however, consumers face fewer choices at any time, but severe product variability over time (Thornton 89).

Another point to be made against government intervention against tobacco products is related to the fact that governments which have anti-smoking policies in place also have subsidy programs in place to compensate tobacco farmers for loss of revenue. One such program, administered by Agriculture Canada was the Tobacco Transition Program which cost taxpayers $284 million. The intent of the program was to encourage tobacco farmers to switch crops by way of having the Federal Government buy out their crops. The program turned out to be a failure, as Mann reports that

[t]obacco quota holders who agreed to leave the industry were paid $1.05 per pound for quota. … But some farmers who took money to leave the industry then switched their land and equipment to relatives who continued growing tobacco under the new licensing system.

In conclusion, the detrimental side effects of prohibition-by-taxation legislation are obvious, while the effectiveness of these polices remain dubious at best. Anti-tobacco policies come about due to misconceptions of the market’s ability to solve social problems (although rent seeking is typically required for prohibitions to be enacted). Bureaucracies established by prohibition are inherently inefficient and unable to discover the knowledge required to solve social problems. Prohibition also suppresses the market’s ability to solve social problems, so that little or no progress is made while prohibitions are in effect. And finally, prohibitions create profit opportunities which add to the problems prohibition is intended to solve (Thornton 83).

As already noted, prohibition is an example of government interventionism, which is in itself the antithesis of a free market. The market allows consumers to decide how to spend their incomes. Anti-tobacco advocates neglect the fact that not all individuals have the same wants and goals in life. Tobacco products have been accepted to be detrimental to human health since the 1960s, yet remain among the most popular goods on any market. This must mean that consumers value the immediate pleasure of a cigarette far more than their long term health.

Works Cited
Hudgins, Edward L. “Memo To The Mafia: Smuggle Cigarettes.” Regulation 21.2 (1998): 49-55.
Lee, Dwight R. “The Government’s Crusade Against Tobacco: Can It Ultimately Succeed?” USA Today Magazine 126.2636 (1998): 16-19.
Luccasen III, R. Andrew; Coats, R. Morris; Karaham, G. “Cigarette Smuggling Mitigates The Public Health Benefits Of Cigarette Taxes.” Applied Economic Letters 12.12 (2005): 769-773
Mann, Susan. 24 Nov. 2011 <http://www.betterfarming.com/online-news/audit-takes-aim-tobacco-buyout-4672>
Merriman, David. “Cigarette Smuggling Does Not Reduce The Public Health Benefits Of Cigarette Taxes.” Applied Economic Letters 9.8 (2002): 493-496
Shelley, Donna; Cantrell, M. Jennifer; Moon-Howard, Joyce; Ramjohn, Destiny Q; VanDevanter, Nancy. “The $5 Man: The Underground Response To A Large Cigarette Tax Increase In New York City.” American Journal Of Public Health 97.8 (2007): 1483-1496.
Thornton, Mark. The Economics Of Prohibition. Salt Lake City: University of Utah Press, (1991).

On the State Enterprise of Creating Bullies

[This article originally appeared on the mises.ca blog on October 16, 2012]

It’s a funny culture we live in. I’m at a loss for words to otherwise describe the regular bouts of collective hysteria that follow the deaths of strangers. To the best of my knowledge this came about around a decade ago, when MSN’s Instant Messenger was all the rage. I recall the “collective mourning” of my friends for a missing Western Ontario girl when her corpse was found. The phenomenon baffled me then as it does today in the case of Amanda Todd—the Vancouver teen who committed suicide as a result of having been “cyber-bullied.” It’s not that I don’t care about lives being lost, it’s the nature of the responses of the “mourners” that gets me: teary eyed vigils, Facebook posts, and of course the inevitable calls for authorities to “do something about it.” It all ends a week or two later, when a new tragedy occurs somewhere far from home, and the circus repeats itself.

Perhaps because I grew up being bullied, I never saw bullying to be the sort of out of hand problem that it is being touted to be. I just saw it as an exercise in character building. As someone who was fully ostracized by the society I lived in as a result of my family being declared enemies of the state (due to my parents’ “unimpeded commercial cooperation” with enterprises from abroad), it’s sometimes too easy for me to prescribe a dose of “get over it” to the bullied. Getting a shaking over your lunch money is one thing, but it’s a wholly different ball of wax when the State is orchestrating your demise. Of course, each person being a unique unit means that everybody’s tolerances for abuse are different. That given, what is to be said about rookie NDP MP Dany Morin’s (Chicoutimi-Le Fjord) proposal for a “national anti-bullying strategy”?

Morin says that “his own experiences from being bullied as a teen show the ‘scars are permanent’ and something must be done.” This may be so, but how is his proposal of non-partisan legislation supposed to end bullying? By declaring it illegal? Murder is illegal, yet it happens. So is theft, but it fails to stop Government, the Bank of Canada and street peddlers, among others, from doing it. While Canada’s parliamentarians ponder how to solve yet another problem beyond their ability to solve, it seems abundantly clear that they will not turn to Mises’ conclusions from A Critique of Interventionism as a guide.

Rather than composing more meaningless legislation, perhaps Mr. Morin and other believers in the myth of Government as the solution to every problem ought to consider Government’s role in producing poorly brought up citizens; for, bullying is precisely a problem of domestic upbringing. A good domestic upbringing requires a stabile family and parents (or grandparents) to spend many hours with their young. The “women’s revolution” which started in the late 1950s has meant that the concept of the stay at home parent has come to be a figment of the past. Not that it would matter anyway, as government regulation keeps lowering the age at which children must be handed over for social conditioning.

Truth be told, the profession of motherhood has been killed not as a result of women’s loose morals or desires to be free from the “shackles of parenthood”—that natural instinct present in practically every female of any species. Rather, despite the great forward strides that Western societies have made toward increased prosperity, Government has made it increasingly difficult for the populace to make ends meet. In 1987 Robert Batemarco wrote:

Over the past two decades, economists have observed and become professionally concerned with falling rates of economic growth. To many young people today trying to establish homes and raise families, that concern is not merely professional. Despite their greater investment in education than any previous generation and despite the extent to which two-earner households have become the norm, this generation, by all indications, is likely to be the first in US history not even to maintain, let alone improve upon, the standard of living enjoyed by their parents.

The trend has not changed 25 years hence. Why? The welfare state has grown larger, meaning that the workforce participation rate has dropped (indeed, this is how the unemployment rate has dropped of late, despite no earnest economic upswing)—in spite of higher eligibility rates! Indeed, improved technology has rendered many formerly considered “disabled” or “invalids” employable; yet more Westerners today collect some sort of government assistance which induces them to shy away from earning their keep. Half-literate single teenage girls are encouraged to breed for the reward of a social assistance cheque. Increasing effective taxation rates, including BoC targeted inflation of “2-3% annually,” unnecessary safety regulations, crony environmental and zoning laws, etc., have pushed businesses away from Western countries, thus reducing the potential to grow prosperity. Yet, Government keeps coming up with means to keep families from spending time together: be it through easy money for “upgraded” education or housing (so that the young can move out of their familial home); or through imprisoning citizens for hours or days at a time in some license granting bureau; or through the inducement of earning an income by manning said bureaus, to give but a few examples.

All this is only the tip of the proverbial iceberg, since, the ultimate problem concerning bullying is the fact that bullies tend have no concept of private property—a consequence of the educational system, to be sure. In order for Government to make its looting of the public palatable, it must condition its victims to accept its bullying as a socially necessary deed. Thus, notions of private property must be abolished, and the kernels of bullying implanted in the souls of the next generation.

E.coli Breakout In AB: Another Failure of the Corporate Welfare State

[This article originally appeared on the mises.ca blog on October 1, 2012]

As sure as the seasons change every year, so comes news of bacterial contamination in one CFIA-monitored processing plant or another. This time around the blanks are filled by “E.coli infested meat products” and “XL Foods, from Alberta.” The average person is daily indoctrinated by notions that Rotten Capitalists will do anything for a buck. Thus, conventional wisdom says that governments need to intervene and protect the gullible public from predatory corporations. So, 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 (USA), 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)

According to the Canadian Press: “E.coli bacteria was first detected at the XL plant in Brooks, Alta. on Sept. 4, but it wasn’t until three weeks later that the CFIA suspended the plant’s operating license until measures are implemented to ensure its products are safe.” In the meanwhile “the Canadian Food Inspection Agency made dozens of additions on Sunday to its list of possibly contaminated beef products which came from an Alberta plant.” So, the publically funded agency whose task we are told is to prevent the sale of possibly contaminated food to the taxpaying public allowed product to flow out of a plant where a bacterial outbreak was occurring. So much for Government looking out for the public. Having all it can do, the CFIA has resorted to depending on the free market to soften their blunder: it “has made the list of stores and products affected by the potential E.coli contamination so long that consumers are now advised to inquire at the point of purchase whether the beef they’re buying came from XL Foods.” [Emphasis added]

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 ensure 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.
According to CP, former Finance Minister, Liberal MP Ralph Goodale has unsurprisingly “blamed the E.coli scare on changes to the meat inspection system introduced by the Harper Conservatives.”

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.
This latest episode of food contamination in a government supervised plant proves yet again the point that when Big Brother watches over the public, he does it strictly for his own benefit, not the public’s.

*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.