If Only We Could Be Protected From the Disease of Rent-Seeking

by Don Boudreaux on July 14, 2016

in Antitrust, Crony Capitalism, Food and Drink, History, Regulation, Seen and Unseen

A pioneering and still-important paper on the history of antitrust legislation in the United States is Gary Libecap’s April 1992 Economic Inquiry article, “The Rise of the Chicago Packers and the Origins of Meat Inspection and Antitrust.”  As its title suggests, this article reports a connection between interest-group lobbying for meat inspection and interest-group lobbying for antitrust legislation.

I’m re-reading this article for a talk that I’ll soon give on the history of U.S. antitrust regulation – a history that is nowhere near as pretty or as heroic as popular mythology makes it out to be.  But antitrust is not the focus of this blog post.  Instead, I quote this passage from page 251 [citation and footnote omitted]:

Although there is no evidence of a major health problem for [late 19th-century American] consumers of domestic beef, the debate over the incidence of cattle diseases and charges that the Chicago packers slaughtered diseased animals for human consumption gave credence to allegations by foreign competitors that American livestock and meat products were unwholesome.  At the same time there was a bitter controversy over allegations of trichinosis in American pork that brought restrictions on American pork imports in Germany, France, Belgium, and other European countries.  The Bureau of Animal Industry countered that trichinosis was rare in the United States and more associated with European than American hogs due to differences in what hogs were fed in the U.S.  Pork also generally was cooked in the United States prior to consumption.  Protection of local hog producers from American competition appears to have been a motivation for German restrictions.

Producers too often shamelessly use whatever excuses are at hand to justify their prodding the state to prevent consumers from patronizing rival producers.  Trumped-up health ‘concerns’ are a prominent set of easy excuses when the good in question is food or drink.  “Those foods offered by our rivals are likely to kill or injure our beloved consumers!” cry rent-seeking producers, feigning an overriding concern for the health of the public.  “For the health of our citizens, our rival producers must be stopped from selling their foul foods in our market!”  Conveniently, of course, when such restrictions are implemented the favored producers no longer must compete as vigorously for consumers’ patronage.  (Question: What does diminished competition do to producers’ incentives to maintain the safety of the foods they sell to the public?)

Anyway, here’s a history lesson: today’s expressed concerns about the safety of genetically modified foods and the calls for governments to restrict consumers’ freedom to buy these foods are, in their essence, nothing new.  In the late-19th century similar ‘concerns’ over the safety of American beef and pork were used by some beef and pork producers to sic state restriction on rival beef and pork producers.  European ranchers and farmers, disliking the competition from American ranchers and farmers, played the safety card as means of securing protection from their American rivals.  Likewise within the U.S.: local butchers and local slaughterhouses throughout the U.S. played the same safety card as a means of securing protection from the upstart and wildly successful Chicago meatpackers such as Swift and Armour.  That this safety card was illegitimate – that is, that charges of unsafe beef and pork were unwarranted – doesn’t matter if enough people believe the charges.  The widely believed myth of dangerous foods enables the state to protect powerful producers from competition.

Cronyism and rent-seeking are nothing new.  But they are perhaps becoming more widespread as the scope of state involvement in private affairs expands.


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