Monday, September 9, 2013

Paul Schwennesen: Food safety: A market solution

  The FDA is trumpeting, with unseemly giddiness, sweeping implementation of new rules within the now thoroughly moldered food-safety bill, passed two long years ago. Like any dish served past its prime, this one smells a bit off.

  As a producer in the ascendant food renaissance (defined by a sudden respect for all things small and local) I’ve noticed a curious double incongruity: First, the clamoring for “safe,” centrally managed food rules leads unerringly to the sort of consolidated, industrially processed foods many of the clamorers so despise in the first place. Second, enacting more-stringent safety regulations actually reduces the incentive for truly excellent food-safety standards.

  First things first…. Food safety in the United States is regulated by no fewer than 15 federal agencies and thousands of separate governing procedures. More rules, in accordance with the principle of regulatory capture, often lead to fewer players and larger, more-centralized food conglomerates. That is the nature of things. By way of corroboration, the food industry has “cautiously applauded” the latest rules proposals, a sure sign that big business sees government bureaucracy as a helpful barrier to competitive entry. Philip Armour, the great Gilded Age meatpacking industrialist, was always quick to pronounce support for additional government safety regulations: they always improved his bottom line.

  Today, the Grocery Manufacturers Association (GMA) is chiming in, telling us, “Consumers expect industry and government to work together to provide Americans and consumers around the world with the safest possible products.” Mr. Armour couldn’t have said it better himself. As a card-carrying consumer myself, I vehemently demur. I expect industry alone to provide safe food; government should police industry when it lies, steals, or cheats. We don’t want the two “working together,” unless, that is, we greatly desire further consolidation in the food industry.

  In 1970, for instance, the top five beef companies controlled about a quarter of overall market share; today the top four command more than 80 percent. Regulatory accretion over this period has, not coincidentally, also increased. The reasons for that are complex, but Patrick Boyle, of the American Meat Institute makes a revealing comment:

       If you ask the CEOs of the four largest beef companies, one concern that they have is the upstart companies that are coming into the business, the small regional new entries that are coming into the beef industry, who one day may have the agility, the acumen, and the competitive instincts to achieve the market share levels that the larger companies have today.

  Advertising the intense regulatory environment of an industry is a time-honored deterrent to would-be upstarts. As increasing administrative restrictions enter the arena, a number of small-scale food producers proportionally bow out.

  But isn’t food safety such a pressing concern, a threat to public health so grave that we can’t be bothered with this kind of corporate fratricide? Perhaps. Statistics that “thousands die every year” do not help us grapple with the magnitude of the alleged threat. They do, however, contribute to the passage of legislation such as the duly enacted Food Safety Modernization Act. And that is where we have to be careful.

  Let’s try some perspective: According to the Centers for Disease Control, the estimated number of deaths caused by food-borne illness numbers around 3,000 a year. Before we send in the Marines, let’s consider that the same data show us that more people die by intentionally strangling themselves each year. Or that more than eight times that number die each year by accidentally falling off things. Moreover, 70 percent of those food-borne illnesses (and presumably deaths) result from poor food-handling procedures during preparation at home or in restaurants, not from poor food-production practices. The number of people we’re attempting to save with this kind of legislation, ironically enough, is significantly lower than the number of people who die each year from malnutrition (known affectionately in our business as “starving”). If we were really interested in saving lives, logic might dictate, we would make sure that this supposedly dangerous food was going to people who needed to eat it!

Keeping food safe

  So is there a paradox here? If we agree that even one death from food-borne illness is too many (and it is), then how can we squeeze out that lingering menace without artificially exacerbating the very problem we are trying to solve?

  I wax heretical here but let me offer a counter-solution: Allow small food companies (which I assume we’d like to see more of) to select whether they want to be regulated under the new rules (estimated to cost as much as $30,000 a year) or to opt for adding an “Unregulated” notice to their label. Yes, allow them to swim in a laissez-faire pond, relying only on well-informed customer feedback. Companies would have access to, but not be bureaucratically held to, the latest techniques for proper food handling and customers would quickly determine who does things well and who does not (and not, by the way, by getting sick; consumers are smarter than that). In effect, we would tap the latent power of markets to manage food safety instead of the blunt instrument wielded by administrators. Contrary to popular myth, markets are very good at giving us what we want, even if those things are intangibles such as clean air or safe food. I predict that food safety in the unregulated sector would quickly surpass the regulated sector as innovation and competition are unleashed.

  Imagine for a moment what the food world would look like if we made food safety a competitive advantage. Imagine, if you will, a Volvo of the food world vying for an “ultra-safe” reputation. A small company could demonstrate (through third-party quality assurance, a sophisticated testing regime, or something not yet thought of) that its product was measurably safer than its competition’s. Corporate self-interest would be instantly harnessed toward the greater public good. Imagine a continual striving for the next-higher grade on a “Good Housekeeping Seal of Approval” or an “AAA” rating from Quality Assurance International. Instead of aiming simply for the “Inspected — Passed” stamp of the current regime, companies would be competing to be the best they could possibly be.

  Regulations are good for imposing minimums, but not at creating excellence. Since our food-safety “problem” is clearly in the vanishing margins, excellence is called for. That can really be attained only when incentives are structured to push our producers (and consumers) to go the extra mile to make food as safe as it can possibly be.

  The FDA’s proposed rules, while appearing to be timely and necessary, are in fact counterproductive. The New York Times, meanwhile, reports that they “can serve as a role model [sic] for what can be achieved when the private and public sectors work together to achieve a common goal.”

  Indeed, and I don’t expect to be impressed.

  About the author: Paul Schwennesen is a southern Arizona rancher who raises, processes, and directly markets all-natural, grass-fed beef. He can be reached at

  This article was published by The Future of FreedomFoundation.

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