Blog 37. Peanut butter: commercial failure or regulatory success?

Regulation reduces freedom?

Industry and its political spokespersons rarely miss an opportunity to state that regulation costs jobs, money, and freedom.  Well, ‘way back in Blog 9, I agreed that regulation (when done right) reduces freedom—the freedom to do harm.  Furthermore, I acknowledge that regulation often increases the cost of doing business—but for a reason.  It’s always cheaper to throw your garbage into the street than to pay for disposal; it’s cheaper for a power plant to dump smoke into the air than to install scrubbers; it’s cheaper to make smog-producing cars than to put a catalytic converter on every vehicle.  And it’s cheaper to make toxic food than pure food.  Keeping the air, the water, or the food clean costs money.  Would you rather pay less and be sick?

Regulating peanut butter.

A newspaper column of 11-12-2013 bears a headline that complains, “Sun sets on N.M. success story.”  According to the story, New Mexico’s peanuts are tastier than the goobers from Georgia.  With peanuts from 130 farmers, a plant in southern N.M. had been making 6,000 pounds of peanut butter per hour for big-name retailers.  In 2009, the federal Food and Drug Administration (FDA) found problems at the plant, leaving it up to the company to fix the problems.  According to the story, three years later the FDA and the Center for Disease Control tracked the sickness of 41 people in 20 states back to the plant, which ultimately recalled some 300 products.  In November of 2012, the FDA found salmonella in the plant, along with unclean equipment and improper operations.

According to the story, the FDA revoked the company’s operating certificate without a court hearing, .  Hey, isn’t that why regulatory agencies issue revocable permits, so a full court trial does not drag on while bad things continue?  After accepting public money to develop a cleanup plan, the company ultimately declared bankruptcy.  Those people whose livelihood depends on the plant may feel the FDA’s action was excessive, but on the other hand, shouldn’t a food processor clean up in less than three years after a warning?

Triumph or tragedy?

This is a tragedy for the retailers who need the peanut butter, for the farmers who grow the peanuts, and for the plant workers who need jobs—but it’s a triumph of regulation.  If you’ve ever had severe food poisoning, you appreciate that triumph.  The FDA issued about 550 warning letters between January first and November fifteenth of 2013.  More tragedies coming?  Is this excessive?  Would you rather be sick?

I often see the argument that the feds are oppressive or zealous, and therefore regulation (if any) should be done at the local level.  Logically, for a purely local issue, the regulation should be local.  However, local regulation is subject to local politics, which often means interference by large money.  For this reason, regulation must usually be applied by a higher authority.  The state must regulate cities and counties; the feds must regulate the environment of the states and the nation.  In this peanut case, the state agency reportedly found no problems at the plant.  That’s local regulation.