Wishing for a Free-Range, Organic – Pony
I love Libby Spencer at Newshog. She’s one of my favorite bloggers. But, gah! She finds a story about how federal regulators, under the most dubious cover of law, are engaged in a seemingly systematic campaign to undermine direct small-farm/consumer commerce, including innovative share-purchase and coop systems while blowing off the regulation of large, corporate factory farms, and concludes
Libertarians keep telling me that the solution to this is to weaken government regulations. I don’t see how that will do anything but allow the corporations to more easily foist off bad food. If anything, the regulations probably need to be strengthened. More importantly they need to be enforced against the commercial facilities they were designed to oversee, not wrongly used to destroy privately owned competition.
“Need” is a heck of a word here. Sharks need to rescue babies who fall into the water from shipwrecks instead of eating them, so they can get the sort of good press dolphins enjoy. Good heavens. Three-quarters of a century of regulatory-state agriculture has left us with a system of subsidized corporate farms who deplete the soil, abuse animals and enjoy a coziness with state agents while the same state agents hassle independent operators and crusading eccentrics out of business. It’s as if, my man IOZ would say, there’s a pattern.
UPDATE: See also a revealing graph of where US agricultural subsidy dollars go. And the table at Wikipedia. Commenting on the picture, Ezra Klein writes
I wish the graphic gave you a sense of the numbers involved, but they’re in the high hundreds of billions.
This didn’t just all of a sudden happen. It’s nothing one can lay at the feet of George Bush. To the extent that there is such a thing as “the United States government,” this is the considered policy of said government confirmed and reconfirmed over decades.
If you believe that extensive government regulation and “support” of American agriculture is worth it, you believe that the state bigfooting small farmers on behalf of large ones is a cost worth the benefits managed agriculture delivers. But there’s no pretending that the cost is some odd thing that somehow happened and can be yanked out of the structure. It’s a load-bearing pillar of the regulatory state.
Comment by matthew hogan —
November 23, 2007 @ 8:56 pm
No, just that one increment more of right regulation by the right people and they will all behave. Sharks will rescue babies and all predictable patterns of human incentive will reconfigure.
Comment by Thoreau —
November 23, 2007 @ 9:11 pm
One could, of course, speculate that corporate behavior would be even worse in the absence of any regulation, and challenge us to argue otherwise.
Rather than having that debate yet again, we could pose a different question: Is there a way to change regulations on the margin such that organic farmers enjoy greater freedom to sell their products while large corporations thereby face greater competition? I dare say there probably is. This avoids the question “What sort of behavior would we see in the extreme case of ZERO regulation?” and shifts the discussion toward the more realistic case of incremental steps toward less regulation.
Comment by Joshua Holmes —
November 23, 2007 @ 9:35 pm
I don’t see how that will do anything but allow the corporations to more easily foist off bad food.
Because weakened regulations mean the corporations get dragged before state courts under suits sounding in tort. How well will those city slickers do after selling bad peanut butter to small-town Ohio?
Comment by foolishmortal —
November 23, 2007 @ 10:27 pm
It’s a load-bearing pillar of the regulatory state.
Word. The disproportionate representation of the rural among us and the yeoman farmer-homesteader-truck commercial myth has given us one hell of a a mess. However, this mess is impossible to change, absent a drastic revision of modern American politics. So, rather than bitch against the injustice of it all, the proper course of action is to try to ameliorate the damage. I’m agnostic as to whether more or less regulation is the answer, since either change would pale in comparison to the feds’ structural entanglement in the ag economy. What’s more important is that the level of regulation on big and small ag enterprises remains the same, so as to allow competition.
Comment by Jean —
November 23, 2007 @ 11:32 pm
Foolishmortal, you’re ignoring the transnational nature of agriculture. Even were the US market to be internally fair, as long as the US market receives subsidies, the overall market’ll be deeply distorted.
And, Joshua Holmes: That’s never happened in the past. I see no reason to hope it’ll happen in the future, especially under the (type of) government that’s given you Guantanamo Bay.
Comment by radish —
November 24, 2007 @ 12:40 am
As emphatically as I agree with that observation, I feel compelled to point out that the regulatory state is in turn a load bearing pillar for a lot of other things as well. You can’t expect uniform legal tender, organized militias, public education, emergency services, patents and copyrights, or any of umpty other things that practically everybody wants, without one.
This is what I don’t get about libertarianism. If you’re opposed to a regulatory state then how come you’re not opposed to corporate charters? Corporate charters don’t protect property rights — they selectively extend them. They don’t represent a contract between private parties, they represent a contract between the state and a private party. They alter the legal status of individuals who have entered into such a contract. You’re not so naive as to suggest that the state gets nothing in return, are you?
And yet, libertarians (typically) don’t object to corporate charters for exactly the same reasons that liberals don’t object to a regulatory state — both help to achieve economies of scale. Corporations and limited liability have benefits, and you’re willing to pay the price of those benefits. Even though their existence will inevitably undermine the market forces on which you would have society rely in the absence of, er, explicit regulation. You can see how this might seem different in degree but not in kind from new-deal liberalism, right? You just trust corporations more than you trust the state, while liberals trust the state more than they trust corporations. That’s like how some people trust their heart and others trust their brain…
Well then how come that didn’t used to happen before peanut butter was regulated?
We seem to have forgotten all about it, but “bad peanut butter in small-town Ohio” was a serious problem within living memory, and that’s how we arrived at the place we’re at. Upton Sinclair, y’all. Hell, thalidomide for that matter. People don’t just start regulating things for no reason, but when they do have a reason there’s no stopping them. If Georgians are selling bad peanut butter to Ohioans, then angry Ohioans and those Georgians who sell good peanut butter will eventually (after a lot of people die in horrifying agony) band together and start regulating peanut butter, as sure as the sun rises in the East.
Comment by TGGP —
November 24, 2007 @ 1:41 am
Personally, I’m undecided on incorporation, but there are some libertarians who defend it as compatible with a free society without government interference.
Link
Among the libertarians opposed to incorporation is fundamentalist Christian author of “The Irrational Atheist” Vox Day.
Comment by TGGP —
November 24, 2007 @ 1:46 am
That was perhaps not the best link since he doesn’t go right out and say corporations are inherently unlibertarian, which he states here.
Comment by Lawrence Krubner —
November 24, 2007 @ 2:19 am
“Foolishmortal, you’re ignoring the transnational nature of agriculture. Even were the US market to be internally fair, as long as the US market receives subsidies, the overall market’ll be deeply distorted.”
Right. It seems like the regulations don’t matter, since they don’t have much effect overseas. What matters is the amount of cash that the Federal government doles out. The Federal government can’t pass a law that bans small organic farms in Chile (well, for the most part). But Federal money can dry up any market for the produce of small farms in Chile.
Comment by bryan —
November 24, 2007 @ 4:32 am
“Three-quarters of a century of regulatory-state agriculture has left us with a system of subsidized corporate farms who deplete the soil, abuse animals and enjoy a coziness with state agents while the same state agents hassle independent operators and crusading eccentrics out of business. It’s as if, my man IOZ would say, there’s a pattern.”
Well, I live in Denmark. I would be very interested to here more about how this regulation of agriculture must invariably lead to corruption and the hassling of independent operators and crusading eccentrics.
(note: the above, if manifested as a skyscraper, would collapse under the weight of its own sarcasm)
Comment by Avedon —
November 24, 2007 @ 7:22 am
You just trust corporations more than you trust the state, while liberals trust the state more than they trust corporations.
Nah, we don’t trust either one – we want to pit them against each other. Conservative government wants them to act in concert against us.
Comment by Libby —
November 24, 2007 @ 9:21 am
Hey Jim, thanks for the link and the kind words. I love you too.
I updated my post in response to this, so I won’t repeat it all here but for the record, I’m against agricultural subsidies. As far as I can see it’s just one more corporate welfare program. And I’m not blaming Bush for what’s wrong with the system, but I am blaming him for appointing industry cronies to head all our oversight agencies, which led to this sort of uneven enforcement that favors corporate interests.
And I agree with Avedon, who as usual summed up in two sentences what it takes me ten paragraphs to say.
Comment by IOZ —
November 24, 2007 @ 10:31 am
Hey, I’m against corporate charters, fool. In fact, whatever it is, I’m against it, no matter who you are or who commenced it. I’m against it.
Comment by radish —
November 24, 2007 @ 11:47 am
What a, er, unique voice. He’s right about corporations being inherently anti-libertarian though. What I wonder is why we don’t hear more about that from libertarians who aren’t opposed to universal suffrage, gay marriage or abortion, and who don’t believe that hetero marriage must be grounded in religious duty.
I guess this is why liberals think libertarians are naive, and libertarians think liberals are naive. You’re saying that you want the sheep to pit two packs of wolves against each other? How long, on average, before the wolves figure out that they’re being played?
Yes, fool, but you’re an anarchist, not a libertarian. You can call yourself a libertarian if you want, but the truth is plain to anyone who reads your blog (or your comment, for that matter
.
Comment by Joshua Holmes —
November 24, 2007 @ 4:49 pm
The corporation is just a simplification of a possible joint-stock company. Under the law of tort, we don’t hold people responsible unless they have both the power and the duty to stop or control a harm. Corporation law is pretty similar.
Suppose I create a partnership to sell widgets. I don’t have enough capital to start the business, so I take on another partner. However, this partner says he will involve himself only in land acquisition deals, but not in any other aspect of the company. We sign an agreement saying so. I go out and hire a widget delivery guy who’s a rip-snorting drunk, who gets in an accident and kills someone. Am I liable? Sure. Is my partner? I don’t think so beyond the amount he involved himself in the company. Here, he had no control over the hiring and firing of delivery guys. Of course, he had control over where to invest, and he should be held liable for that involvement.
The corporation is just a shorthand for this arrangement. Most shareholders have very little power over the actual decision of the company: the shareholders elect directors, who in turn appoint officers, who in turn actually run the company. The shareholder is only liable to the extent of his or her involvement: the investment.
When shareholders have actual control over the company, courts “pierce the veil”, holding the shareholder completely or wholly liable.
Complex? Sure. But I see nothing unlibertarian about it, and it’s certainly possible to have similar relations among anarchist legal systems.
Comment by jdmckay —
November 24, 2007 @ 5:19 pm
I’m not so sure this (small farmer’s rights) is a good example from which to build libertarian and contrarian arguments. Producing unpasteurized cider is not w/out risk, regardless of producer’s good intentions. The Odwalla incident (late 90’s?) comes immediately to mind.
Which is not to say BushCo regulators aren’t harassing these folks for the wrong reasons… in fact, given W’s track record, I’d bet they are.
Which all, more or less, returns to my primary notion regarding “libertarianism free market” mantras… which is, there’s too many crooks on the street, so we need regs.
They embrace fraud, disregard harm done & have no commitment to public contracts. They refuse to acknowledge, much less correct, the failures of their system in action… frequently, they just lie about ‘em. They like to talk about “building wealth”, but make no distinction between doing so by adding value as opposed to stealing. Ca. Energy Crisis/Enron, privatizing roads & water… soooo many examples.
Comment by Jim Henley —
November 24, 2007 @ 5:26 pm
jdmckay: 1) Do you recognize the massive gulf between “unpasteurized cider is not without risk” and “the government must therefore intervene forcibly to prevent its voluntary consumption by willing customers?”
2) Do you support the sort of pleasure-drug prohibition this country has enforced for not quite a century now. I have to assume that if the government should prevent the sale of unpasteurized cider to willing, informed buyers because it entails “risk,” even though unpasteurized cider is also a source of enormous pleasure for those who drink it, that the government should also prevent the sale of marijuana, cocaine, ecstacy and so on, which are by most standards riskier than unpasteurized cider, if also a source of enormous pleasure for those who consume them.
Comment by jdmckay —
November 24, 2007 @ 6:07 pm
I regard a long, maturing western public contract (until BushCo) whereby buyers of goods can rely on the good’s safety given available knowledge. If I buy a bolt for the rear suspension of my car stamped w/required ANSI spec, I want to know said bolt meets that spec. F:ex, imported chinese bolts frequently do not meet their stamped spec. Or in other words, such a bolt used in a car’s suspension system may result in your last experience on earth being seeing that system in your rear view mirror on the freeway.
On your 2nd point, unpasturized cider is not prohibited. Rather, regulation’s intent is to certify the process & product safe. That BushCo has politicized even this issue, picking on small, good-will rural productions, makes this even more of a poor example for debate IMO.
But then BushCo’s current undercover-as-possible effort to allow media consolidation has libertarian greements, despite well chronicled undesirable results… undesirable to the public, that is. No doubt ClearChannel & Rupert desire such results, otherwise they wouldn’t have paid BushCo to produce ‘em!!!
That being said, I reiterate that IMO this incident is poor example for the case being made… on both sides. And FWIW, I press fresh juice every morning.
Your connection between illegal drugs (”source of enormous pleasure”) and unpasturized cider is ridiculous. The cider is good for you… or are you saying cocaine is too? I say let’s get the story straight on W’s war-on-ter’a, then we can get bak to war on drugs.
So whatabout the “Enron” experiment. Or Indiana’s privatized roads. These real world examples are what attract my attention. If the Libertarian “thinkers” can get these things sorted out to my satisfaction, I’ll be happy to take up the legalization of drugs thingie.
Comment by TGGP —
November 24, 2007 @ 8:30 pm
Vox Day is indeed a strange character (I’m an atheist myself and sometimes I suspect he’s really one of us but just playing a joke). However, not all of those positions you mentioned are so sui generis. Bryan Caplan opposes universal suffrage, James T. Kennedy opposes gay marriage and Chip Smith opposes abortion. All of them are non-believers.
I’m not an anarchist, but I think Brian Dougherty puts forth a good case in Radicals for Capitalism that the libertarian movement was dominated by anarchists in its early days, so excluding them from the label is a bit silly.
Comment by Mike P —
November 24, 2007 @ 10:42 pm
(from the link to “Ezra’)
From the same Wiki link Ezra uses… Total – $8.022 billion
(missed it by that much…
Comment by radish —
November 24, 2007 @ 11:40 pm
No and yes, because the existence of the corporation circumvents the process of determining (via tort) whether your partner was in fact able and obligated to stop or control the harm in question.
Consider what happens without a corporation. Your company gets sued. Your partner goes into court and claims that his contract with you means that the plaintiff isn’t allowed to sue him. Does it work? Heck no. You’re a private party. You can’t just go around indemnifying people. It’s so nonsensical I’m giggling just thinking about it.
With a corporation though, the picture changes dramatically. Now you and your partner have a contract with the state in which the state limits his (and your) liability with respect to hypothetical future plaintiffs. Can you decline that contract? Sure, by not incorporating. Can the hypothetical plaintiffs decline? Not unless they opt out of the legal context altogether. They are bound by the terms of your contract with the state, even though they are not in the picture unless something goes wrong.
Thus the state enters into a contract on behalf of potential plaintiffs and stakeholders, stating (roughly) that in exchange for the use of your partner’s capital the community will indemnify him. This is the “shorthand” to which you refer, and the benefit to the community is efficiency. Limited liability allows capital to be used more efficiently. Theoretically, it lifts all the boats, even if they don’t all rise by the same amount.
Now consider a community regulation requiring widget delivery drivers to be screened for a history of DUI. That’s also just more efficient shorthand. In this case for a contract that would otherwise have to be made explicit between you and the potential plaintiffs in the community, clarifying what is required in in order for you to be allowed to deliver widgets within the community.
Only now it’s you and your partner who are bound by a contract that you didn’t have an opportunity to decline. It was entered into on your behalf by the state; the only way you can decline is to not deliver widgets in the community. And this also improves economic efficiency. Instead of waiting for enough people to get run over so that you can’t find any more partners, it’s just shorthand for the market pressure that would (in theory) eventually discourage you from hiring drunks to deliver widgets.
So why is the shorthand that protects your partner from your irresponsibilty okay, but the shorthand that protects the community from your irresponsibility not okay? If a corporation is merely a simplification of a joint holding then why is it necessary to limit liability?
I appreciate that, and I acknowledge that you seem to be in the majority. What I find counterintuitive is that if the state is “shorthanding” your contractual relationships you would seem to be halfway to serfdom anyway. By the time your partner relies on a contract with the state in order to shield him from liability for the company’s actions, we’re not talking about a free market anymore, and regulation is a matter of “how much” and “who” rather than “whether.”
Comment by Frank —
November 25, 2007 @ 5:47 am
Jim- If you get back down here I think you should front page #21 and your reply to it. I’d bet lots of people who come here would be interested.
Comment by Joshua Holmes —
November 25, 2007 @ 12:13 pm
Consider what happens without a corporation. Your company gets sued. Your partner goes into court and claims that his contract with you means that the plaintiff isn’t allowed to sue him. Does it work? Heck no.
Nor should it. My argument is not that the other partner should never be held liable, only that his liability ought to be limited to the amount he controls. In your example, after being sued, the other partner would present the contract that he and I signed, and he would give testimony that he was only involved in land acquisition management. If the court accepts his argument, his liability would then be limited to his involvement in the drunk driving incident: his investment in the partnership.
Now you and your partner have a contract with the state in which the state limits his (and your) liability with respect to hypothetical future plaintiffs.
This is only true if the shareholders are not involved (or only peripherally involved) in the decisions of the business. If the shareholders are involved in actual day-to-day management, courts will not respect the corporate form. The suit will proceed directly against the shareholder. This is called “piercing the veil”.
Comment by radish —
November 25, 2007 @ 8:12 pm
So what? If your shareholder enters court with a presumption of indemnity then the market has already been regulated, by any reasonable definition. Would he have invested in your company if his exposure could exceed his investment? Maybe, but then he would have to take the time and effort to decide whether he wanted to expose himself to the additional risk. It’s only because he’s indemnified that he can afford not to give a shit whether the company hires drunks. All he has to do is look the other way.
It doesn’t matter whether anybody actually gets run over. The presumption of indemnity is what distorts the market, because it’s granted by the state but it constrains the actions of potential plaintiffs. It doesn’t have to be a guarantee — all it has to do is affect your shareholder’s risk. Artificially reducing the level of diligence required from him distorts the market just as surely as artificially reducing the level of diligence required from the rest of the community (e.g. by requiring your company to screen its delivery drivers).
It’s fine to say that some kinds of regulation are good, and others bad, but the fact is that they all distort the market. The question is whether you oppose distorting the market on principle or as a matter of degree and kind.
Comment by quasibill —
November 26, 2007 @ 3:06 pm
radish (and others),
If you want a nice L—-O—N—G diatribe against corporations (as they exist today) based upon libertarian principles, kevin carson (he’s on the sidebar here as “mutualist blog”) has a long post that effectively counters all the pro-corporate arguments on ethical (legal) and economic grounds. It’s well worth the time it takes to read.
Comment by Cheerful Iconoclast —
November 27, 2007 @ 2:32 pm
I think that Ms. Spencer needs to read a primer on public choice theory. She seems to think that this sort of thing happens because ‘bad people” take over, due to Evil Bush, etc. But the theory of regulatory capture tells us why “bad people” almost inevitably take over.
I read the Article in The Nation that she linked to, and I have to say it was a bit weird — almost like I was reading Reason or something. It was the same narrative — plucky small business type going up against overbearing regulator. Oddly enough, it struck me that if you are the sort of person who believes in government regulation generally, then the anecdotes in the article ought not be particularly persuasive. The guy doesn’t want his cattle tested for bovine tuberculosis? What’s up with that?
Comment by Nicholas Weininger —
November 29, 2007 @ 10:24 am
Yeah, limitation of third-party liability (people who never entered into any contract w/the corporation suing its owners for the torts perpetrated on them by said owners’ agents) is, IMHO, objectionable and unlibertarian and should not exist, for pretty much the reasons radish lays out.
However, a couple of things are worth noting here:
1. The corporate form provides other benefits: perpetuity and second-party liability limitation (if you loan the corporation money and it goes bankrupt you can’t recover your principal out of the personal assets of the stockholders). These are considerably useful too, and they’re not affected by radish’s objections. So one question is how much of the efficiency benefit of the corporation comes from these and how much from limited third-party liability. Kevin Carson would agree with radish that third-party liability limitation is big, and this is the heart of his anticorporatism. I’m not so sure.
2. in the absence of statutory 3rd-party liability limitation, people entering into passive business partnerships would want liability insurance to hedge against their exposure. Providers of such insurance would probably demand as a condition of the insurance (or as a factor in the pricing of the insurance) that the corporations follow best practices that reduced their risk of being sued, much as other sorts of insurers require you do safety-maximizing stuff to be cheaply insurable. These requirements would likely often be quite similar to some of the state regulations now imposed on corporations. Whether on net they would be more efficient is an interesting question, but it’s at least plausible that they might be, and then you’d get the benefits of regulation without the downsides to freedom.