The Racket of Regulatory Capture

The Racket of Regulatory Capture
Robert F. Kennedy, Jr., nephew of former U.S. President John F. Kennedy, speaks to people gathered under the Victory Column in the city center to hear speeches during a protest against coronavirus-related restrictions and government policy, in Berlin, Germany, on Aug. 29, 2020. (Sean Gallup/Getty Images)
Jeffrey A. Tucker

Robert F. Kennedy Jr. never fails in interviews to bring up the problem of regulatory capture. He calls this merger of enterprise and government a kind of corporatism. That’s the older word for the ideology later called fascism. It’s the correct label.

He is to be commended for raising the problem, which is a massive drag on U.S. productivity and crying out for a solution.

Let’s consider some examples.

I have a friend who owns a small grocery with a butcher shop. They insist on selling grass-fed meat, which they get from Texas. It’s then sent to Vermont for processing and sent yet again to Connecticut for sales. For retail sales, it’s only possible to use a processing plant approved by the U.S. Department of Agriculture.

Such facilities are only a fraction of the services on the market. If you don’t use them, maybe you can sell your meat direct to the consumer, but you can’t sell via retail. In some states, you can’t sell it at all.

This, of course, is all in the name of safety, as it has been for a century. For a very long time, small farmers have been going nuts about the system. They are good at what they do and would be thrilled to have a market to make their business sustainable. But it’s made vastly more expensive or stopped entirely by the regulations.

Who precisely controls the approval process? As you might expect, the U.S. Department of Agriculture (USDA) mainly serves the interest of huge agribusiness and the most established industry players. These people use the regulatory system to reduce the competition they face in the free market. By excluding small and often healthier options from the sales options, they entrench their power and harm small farmers and ranchers.

Everyone in the industry knows about this problem. But most U.S. consumers have no clue. They go to the shops, grab their meat, and go without thinking about it. Most people have no idea that meat distribution in this country is wholly under the control of an industrial cartel. It’s a reality because of the huge influence that big business has over the regulatory state. Indeed, they are wholly merged.

This is just one small case in point. It might seem small but it affects the whole population. Our meat is mostly corn-fed. Our chickens are pumped up with drugs. As for sausage, let’s not go there. It’s also a major reason for the inhumane treatment of animals in this country. The big boys like it that way and make it a sport to exclude anyone from the market who has better ideas.

This has created a major problem in the United States. Everyone wants to get healthy these days but we have a very hard time finding healthy food that we can afford. The USDA is the No. 1 contributor to the problem. If they simply got out of the way, and if somehow the claws of private industry were extracted from the agency, we might see more fairness and rationality in the system overall.

How deep and wide is this problem?

Half of the Food and Drug Administration (FDA) budget comes from the pharmaceutical industry. The conspiracy is out in the open. When a manufacturer wants a product considered, it fires off a check for $1 million plus to the agency and the product moves to the front of the line. The FDA has every incentive to rubber-stamp high-priority drugs from well-heeled manufacturers such as Pfizer and Moderna.

On Oct. 5, 2021, two very high-level officials with real expertise on vaccines—Dr. Marion Gruber and Dr. Philip Krause—resigned in protest as they saw boosters sailing through the regulatory process without proper trials. They smelled a rat and left. This should have triggered the end of the vaccine and a major investigation of the FDA. Instead, the national media largely ignored the entire thing. These two experts made a principled decision. Sadly, not many people noticed or cared.

That’s because the conspiracy is out in the open. Everyone knows about it. No one does anything about it. American health suffers as a result. To put it plainly, this is immoral.

How deep do the problems go? Very.

The major influence of the policies of the Department of Labor are the labor unions, which is why so many of the agency’s policies discriminate against non-unionized workers, especially young people who are kept out of the market. The entire agency has dramatically reduced competition in the labor markets.

Reducing competition is what these agencies are all about, and they do it at the behest of the industrial cartels who use regulatory power to shore up their monopoly control.

So it is throughout the hundreds of agencies.

The Securities and Exchange Commission has a revolving door with Wall Street.

The Federal Reserve is the government arm of the private banking industry.

The Treasury Department represents the large bond dealers and always has.

The Department of Defense is thoroughly captured by the munitions manufacturers.

The Department of Transportation is dominated by the automakers.

The Federal Aviation Administration is captured by the major airlines.

The Department of Housing and Urban Development rules at the behest of major real-estate and construction companies.

The Federal Trade Commission is a tool easily manipulated by large industrial interests to keep competition at bay.

The Federal Communications Commission is wholly dominated by big media interests that use the power of government to exclude, punish, and censor alternative media.

The Environmental Protection Agency rules for the biggest polluters even as it pretends to be keeping the environment clean.

And I think by now we all know the truth about the Centers for Disease Control and Prevention. It’s a marketing agency for the vaccine makers and dominant pharmaceutical cartel.

And on it goes.

All told, this system constitutes not a free market but a corporatist structure more worthy of Mussolini’s Italy than the country that once embraced free enterprise. Once you look carefully at what’s really going on under the hood of the regulatory state, you can’t help but be stunned.

Why isn’t this more controversial in American politics? Few have any incentive to do anything about it. Concentrated interests benefit and the costs are dispersed throughout the population in ways that fleece unsuspecting consumers who themselves are powerless. Why should any politician take up the topic? Political campaigns are funded by the major industrial interests.

In this sense, Kennedy is to be commended for even making this an issue. His preferred solution is to clean up the agencies and he says he knows how to do it. I admit that I have my doubts that it’s possible. The trouble is that to be captured seems to be baked into the whole reason for the existence of all these agencies.

Have a look at Gabriel Kolko’s classic work on the Progressive Era, called “The Triumph of Conservatism.” What we find here is that the agencies themselves were mostly established by large business interests to stop the growth of competition in their industries. If this is true, it becomes difficult even to imagine what these agencies would do if not impose rules and enforcement on behalf of the dominant market players.

That’s true in health, food, transportation, drugs, the medical marketplace, communications, defense, and pretty much every area of life. The government at this point is a large behemoth that serves not the public interest but private interests.

A better solution is to dismantle them all. That’s the path to genuine free enterprise. That said, at least Kennedy is raising the issue.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
Jeffrey A. Tucker is the founder and president of the Brownstone Institute, and the author of many thousands of articles in the scholarly and popular press, as well as 10 books in five languages, most recently “Liberty or Lockdown.” He is also the editor of The Best of Mises. He writes a daily column on economics for The Epoch Times and speaks widely on the topics of economics, technology, social philosophy, and culture.
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