Volatility

November 4, 2009

Anti-Competition Judo

Recently in the news:
 

For 35 years, William John Woods has made wooden toys for children. Each one of the 2,000 or so he makes each year passes through his hands at his shop in Ogunquit, Maine, and no child, he said, has ever been hurt by one of his small boats, cars, helicopters or rattles.

But now he and others like him — makers of small toys and owners of toy resale shops and boutique stores — say their livelihood is being threatened by federal legislation enacted in the last year to protect children from toxic toys through more extensive testing. Big toymakers, including those whose tainted imports from China led to the recall of 45 million toys and spurred Congress to take action, have more resources and are able to comply with the new law’s requirements.

 
One of the results of America’s consumer debt binge was a massive market in cheap, shoddy toys mass-produced by big corporations. Each year $22 billion worth are imported from overseas. As always with globalization, they are manufactured under unregulated conditions by near-slave labor. It’s a feature, not a bug, of globalism that there are few or no environmental or safety standards for these products.
 
So inevitably there was a toy safety crisis involving lead-painted Chinese imports. And in the typical American way, solving the real structural problem (big globalized producers with zero responsibilities and complete incentives to externalize all costs) was off the table.
 
Instead they groped for an ad hoc kludge “regulation”, and the result was 2008’s Consumer Product Safety Improvement Act. While it’s too early to tell if the thing will work the way system activists hope intended for it to work, we can already see its real function from the point of view of those who crafted it.
 

The law, the Consumer Product Safety Improvement Act, was overwhelmingly passed by Congress in August 2008. For the first time, it set out mandatory safety standards for products used by children under the age of 12 and required toy manufacturers to test their products to prove that they were safe.

New regulations will not go into effect until February, but many of the big toy companies are not waiting — they are already testing toys in their labs, which have been certified by the Consumer Product Safety Commission, or through third parties….

Small toymakers and sellers are particularly irked by the fact that the new law allows large toy manufacturers, like Mattel, to conduct their product safety tests in their own labs, which must be certified by the federal government, while handicrafters would have to use third-party labs.

“They’re the ones who got us into this mess, and they can do their testing on their own,” said Jill Chuckas, secretary of the Handmade Toy Alliance and owner of Crafty Baby in Stamford, Conn….

“This is absurd,” said Mr. Woods, whose toys are made of maple, walnut and cherry and finished with walnut oil and beeswax from a local apiary. He estimates it would cost him $30,000 — a figure he calculated from having to pay $400 in required tests for each of the 80 or so different items he produces — to show that they are not toxic.

“I use beeswax,” Mr. Woods said. “The law was targeted at large toymakers using lead. There was no exclusion for benign products.”

 
Since we currently live in a feudal, not a capitalist, system, we can be sure that every regulation will seek to enhance the power of big producers toward monopoly, and to preserve and intensify existing monopolies.
 
Since this is also the age of permanent man-made disaster, and since every disaster (like the Chinese leaded toys) will conjure its call for a “new law”, it follows that every piece of disaster legislation will be subject to disaster capitalist lobbying judo.
 
The goal in every case is to set the new regulations and compliance fees/taxes in such a way that they’re a major, perhaps insurmountable, barrier for small market players and would-be small entrants, while being at worst a minor nuisance to the entrenched big outfits.
 
Another recent system disaster was salmonella in peanut butter. This and other food-borne illnesses brought on a gaggle of proposed new laws, which ended up epitomized in HR2749, which passed the House last summer and whose Senate version is pending.
 
Here too the disaster is caused by industrial production, and real reform would break up the ag rackets and decentralize the food production and distribution system. (Not to mention how coming energy transformations will require us to decentralize and defossilize the agricultural system whether we want to or not.)
 
So what was on the mind of this bill’s crafters?
 

The bill imposes burdensome requirements while not specifically targeting the industrial food system and food imports, where the real food safety problems lie. Small farms and local food processors are part of the solution to food safety, yet HR 2749 takes a one-size-fits-all approach subjecting local producers to the same regulations as industrial firms. The bill gives FDA much more power than it has had in the past while making the agency less accountable for its actions.

The bill would impose annual registration fees of $500 on all facilities holding, processing, or manufacturing food and require that such facilities also engaged in the transport or packing of food maintain pedigrees of the origin and previous distribution history of the food…..

The bill was amended shortly before it was voted on to exempt on-farm processors who sell more than half of their product by value directly to consumers or who process grain for sale to other farms. A small family farm could lose their exempt status if they for example make jams or syrup to sell and do not produce all of the ingredients themselves. They would then be required to register annually and be subject to random, unannounced inspections where they would be required to produce detailed records of their business…

Even facilities that only engage in intrastate commerce would be regulated under this bill(infringing on state sovereignty). Current law only allows federal inspection of factories, warehouses, or establishments of firms that engage in interstate commerce.

Under this bill individuals that fail to register a facility, misbrand a product, and are not conducting a hazard analysis or filling out required paper work can face up to 10 years in prison and $100,000 in fines, this could include the family farm that was not aware they fell under the these regulations. Also each day during which a violation continues shall be considered a separate offense.

By imposing the same standards, fees, and penalties on small producers, that historically are not the sources of food borne illness, as large multinational corporations puts the small producer at a disadvantage.

There are no provision in the bill to protect farmers if the FDA makes a mistake and destroys a crop that turns out to not be the source of a problem.

 
There’s strong evidence that the swine fu arose at a Smithfield facility in Mexico. This was only a prelude. Factory farms are veritable bioweapons factories, and inevitably they’ll serve as vector for a superbug that will kill millions. It’s just a matter of time. These lawmakers, corporate execs, shareholders, and lobbyists will become mass murderers when that pandemic arises.
 

Many of the problems with food borne illness could be solved simply by good enforcement of the regulations we already have and educating individuals on proper handling of raw foods and cooking techniques. H.R.2749 would be harmful to America’s small agri-businesses and have little benefit to food safety.

 
Anyone who really cares about disease arising from our food system would regard it as critical that we break up the CAFOs immediately. That this bill not only does not do that, but helps further entrench them while assaulting small producers, clearly displays the unserious, corrupt, and treasonous nature of our existing legislative cadre (and the naivete of many activists).
(Also puts the “war on terror”, and the alleged need to relinquish all our liberties for a cheap, fraudulent sense of “security” into perspective, doesn’t it?)
 
So this what we must consider when we ponder proposed bank regulations like the resolution authority scheme. The very notion that in a crash there would ever be the political will to tax anybody to bail out a stricken bank is absurd on its face. We know today’s politics don’t work that way.
 
But in addition to that we must be suspicious of the anti-competitive tendency of every piece of legislation today. Too Big To Fail has already generated tremendous disaster monopoly opportunities for the TBTFs.
 
Now this thing proposes to tax every entity with $10 billion in assets to bail out insolvent structures with hundreds of billions. Granted, $10 billion is a lot of money in absolute terms, but relative to the system it’s not all that much. (When CIT, with $80 billion in assets, was not bailed out, many theorized that that number may be under the TBTF floor.) It’s in the bag that if a measly $11 billion bank was going under, nobody would bail it out. Yet under this proposal it would be taxed to prop up the likes of Citi.
 
This is perhaps part of the reason the small banks have exhibited such lethargy in the face of the bailout and all calls for reform. They may have a fatalistic damned-if-you-do, damned-if-you-don’t attitude regarding how any regulation is likely to redound to the rackets’ benefit and their detriment. (Baseline Scenario did several posts analyzing this possibility, including a discussion of the contribution of a particularly perceptive commenter. 🙂 )
 

These homegrown toymakers are banding together to portray themselves as victims of bureaucrats and consumer advocates, and have started letter-writing campaigns to Congress.

The Handmade Toy Alliance, which has a section of its Web site titled “Countdown to Extinction,” sponsored a march on Washington last April and continues to buttonhole members of Congress. Still others have hired the Washington lobbying firm of Rudy Giuliani.

 
For now it looks like all people can do. Of course under these conditions all the self-portrayal and letter-writing in the world can do nothing by itself. But when you hire Giuliani’s firm, that’s your bona fides that you played the real game and paid your protection money. It’s not enough to get you what you want, but it can at least get you into the room where you can then crawl and beg.
 
It’s not good having to live in the real world these days…
 

Thrift shops and used-toy stores have also joined the fight. Thrift stores say they have had to clear their stores of old toys and children’s clothes out of concern that some items might not be safe. Children’s books made before 1985, for example, contain lead in their ink.

“It’s been devastating for us,” said Kitty Boyce, owner of the Kid’s Closet in Rochester, Ill., who has emptied her shop of much of her children’s merchandise and is selling adult items instead. “For us, there will be no bottom line this year.”

Adele R. Meyer, executive director of the National Association of Resale and Thrift Shops, based in St. Clair Shores, Mich., said much of the new law made little sense. “People are taking away all items for children 12 and under,’ she said.

“But how many 8-, 9- and 10-year-olds are going to be eating books?”

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3 Comments

  1. Excellent job. The SEC engineered a similar result twenty years ago, when they closed down the penny stock market. It then became essentially impossible for a small company to raise money publicly. What happened was the fraudsters migrated upward to crank out larger deals, while honest entrepreneurs looking for a million or two had nowhere to go. Regulation works this way across the board. Big companies love regulation because, first, they can afford it and, second, they can capture it. Of course what we need instead of regulation is enforcement of civil and criminal laws against fraud.

    This ‘regulatory’ society is a legacy of the New Deal. It was a failure then too, but was bailed out by the Second War. Ayn Rand was right about this, too. The older I get the smarter she was.

    Comment by jake chase — November 4, 2009 @ 12:53 pm

  2. Thanks, Jake. Yes, they certainly have things set up the way they want them for now. I wonder how far off the next, bigger crash is, and what will be its proximate cause.

    If I had to bet I’d say when oil prices exceed $100 again, sometime within the next five years. I’ve been meaning to write a post about Peter Pogany’s findings on that score, how unfailingly correlated oil spikes are with recessions.

    Of course the real question is, will the people just roll over again next time. Are they that terminally demoralized.

    Comment by Russ — November 4, 2009 @ 6:38 pm

  3. […] food bill. I’ve written before about the House bill from last year (for example here and here), which systematically seeks to destroy small food producers by imposing a one-size-fits-all regime […]

    Pingback by Food For Thought: We Can Have Food And Thought, Or Else Neither « Volatility — August 25, 2010 @ 5:52 am


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