GONE, BABY,
GONE RANT
First, a definition
of regulatory capture (from Investopedia:
“Regulatory
capture is a theory associated with George Stigler, a Nobel laureate economist.
It is the process by which regulatory agencies eventually come to be dominated
by the very industries they were charged with regulating. Regulatory capture happens
when a regulatory agency, formed to act in the public interest, eventually acts
in ways that benefit the industry it is supposed to be regulating, rather than
the public.”
Consider the
following quote:
“For the first time since the creation of
these enormous corporate bodies, one of them has shown its power for mischief,
and has proved itself able to override and trample on law, custom, decency and
every restraint known to society without scruple, and as yet without check. The
belief is common in America that the day is at hand when corporations far
greater than the Eerie – swaying power such as never in the world’s history has
been trusted in the hands of mere private citizens, controlled by single men, after
having created a system of quiet but irresistible corruption – will ultimately
succeed in directing government itself. Under the American form of society,
there is now no authority capable of effective resistance.”
Part of a longer essay first published
in Westminster Review in 1870, the passage
was written by Henry Adams, son of President John Quincy Adams and grandson of
President John Adams. The “Eerie” mentioned here is the Eerie Railroad. The men
referred to in the piece are the 19th Century robber-barons,
Cornelius Vanderbilt, Jay Gould and Jim Fisk.
Although it appears that George Stigler’s
theory of regulatory capture arrived a bit late, one point remains to be
established. Stigler believed that regulatory capture was inevitable. I’ll cite
one example to illustrate Stigler’s thinking, the Environmental Protection Agency’s
mandate to enforce the Clean Air Act. The stakeholders here form a vast pool.
After all, every American breathes. But the interests of the average
stakeholder, many of whom don’t live in an urban center, are relatively small.
In addition, the average stakeholder’s life is consumed by the need to survive.
Stakeholders have jobs and families and all the obligations that come with
them. The various corporations that compose the fossil fuel industry, on the
other hand, not only have a larger individual stake in EPA rulings, they have
the means to influence government and the will to persist no matter how many
setbacks they encounter. In the end, according to Stigler, they must win.
Guess what? The future is now and it
ain’t pretty.
The Consumer Product Safety Commission
(CPSC) is now, thanks to Don the Con, headed by Acting Director Ann-Marie
Buerkle, a one-term House Member from New York. Buerkle is hard-core when it
comes to regulation. She voted to repeal Obamacare in 2010 and to defund
Planned Parenthood. Along the way, she attracted the support of the Tea Party and
Sarah Palin. As a regulator, she has consistently favored “market-based”
solutions that pile up profits for the entities she regulates. In 2011, Obama
appointed her, upon John Boehner’s recommendation, to be a delegate to the
U.N., a largely ceremonial position. From there, again by Obama. she was
appointed one of five commissioners at CPSC. Now, thanks to Trump’s victory,
she’s been promoted to Acting Director.
Why?
Why would Barack Obama nominate a Tea Party conservative to a position on a
regulatory board?
CPSC was created in 1972 as part of the
Consumer Product Safety Act, so I guess, if anyone’s to blame, it’s the ’72
Congress and Richard Nixon. The legislation specifies that of the five
commissioners on the board, only three can be from the same party. Thus, a
Republican vacancy during Obama’s tenure demanded a Republican replacement. Obama,
of course, would have chosen a less-extreme candidate if the choice had been up
to him. It wasn’t. When a Republican vacancy occurs, the appointment comes, by
tradition, from the Republican leadership in Congress. Buerkle was Mitch
McConnell’s choice. Obama might still have refused to appoint Buerkle, but it
seems there was also a vacancy on the Democratic side that Obama could not fill
without the cooperation of Mitch McConnell. (In fact, two CPSC commissioners
were later confirmed on the same day, Buerkle and Marietta Robinson, a
Democrat.)
Mitch
McConnell has been out front about his choices. He will
nominate the most extreme candidates he can find to the various commission and
agencies where they can “gum up the works”.
Welcome to Washington, boys and girls.
This is the way it works when the only entities paying close attention are the entities
to be regulated. I’ve drawn some of this material from a short article in Mother Jones, the only independent media
outlet, as far as I can tell, that covered Buerkle’s appointment. However, the
appointment was noted on a very dependent website, that of the Toy Industry
Association, the political arm of the toy industry, which is heavily regulated by
CPSC.
Even as I write this, Scott Pruitt is
being confirmed as head of the Environmental Protection Agency (EPA). As
Attorney General of Oklahoma, Pruitt wrote a three-page letter to the EPA. His
complaint? That the EPA was vastly overestimating the pollution generated by
new gas wells. But the letter, as it turned out, wasn’t composed by Pruitt. It
was written by lawyers from Devon Energy, an Oklahoma gas and oil company.
According
to Pruitt, global warming is a matter of opinion among scientists and there is
no evidence to support the belief that fracking causes water pollution.
Further, the quality of the air we breathe and the water we drink should be regulated
by the states, not the federal government.
Pruitt
has sued the EPA thirteen times on behalf of the fossil fuel industry.
Andrew Puzder, nominated for Labor
Secretary, has withdrawn his name. But his record speaks for itself, and for
Trump’s intentions. Hardees’ employees have filed thirty-three separate actions,
charging the company with a variety of infractions, including failure to pay
wages, failure to pay overtime and sexual harassment. All told, sixty percent
of Hardee’s and Carl’s Jr. restaurants have had at least one labor violation
filed against them. Perhaps resenting these assaults on his integrity, Puzder
advocates replacing workers with robots. They “never show up late, there’s
never a slip and fall, or an age, sex or racial discrimination case.”
Confirmed as the Secretary of Health and
Human Services, Tom Price’s rejection of the Affordable Care Act is on the
record, as is his desire to transform Medicare into a voucher system (that
might, or might not, cover the cost of an insurance policy) and to replace traditional
Medicaid with block grants to the states. Price’s office, of course, is charged
with implementing the very programs he wishes to destroy. Make no mistake here,
Price is utterly cold-blooded, just like the man who nominated him. If Don the
Con really wanted to preserve Social Security and Medicaid - as he promised -
he wouldn’t have nominated Tom Price, an obscure Attorney General from
Oklahoma.
Here’s an interesting question. Given
the fiduciary obligation of corporate managers to maximize profit for the
shareholders, what insurance company would be willing to sell a policy to an
octogenarian? How ‘bout a sick octogenarian? How ‘bout a terminal octogenarian?
Medicare was created, in part, because nobody wanted to sell insurance policies
to the elderly at a price the elderly could afford.
Betsy DeVos is now our Secretary of the
Department of Education. Back in Michigan, DeVos engineered a takeover of
public education by for-profit charter schools. A grand experiment, for sure,
but one that, if DeVos intended to prove that charter school provide a better
education, failed.
The Detroit
Free Press, on January 16, 2017, described the end result of this
experiment.
“Wasteful
spending and double-dipping. Board members, school founders and employees
steering lucrative deals to themselves or insiders. Schools allowed to operate
for years despite poor academic records. No state standards for who operates
charter schools or how to oversee them.”
The
charter school experiment in Michigan was heavily funded by Betsy DeVos, the
billionaire daughter of a super-rich family who never spent a minute in public
schools. She revealed her ignorance of even the most basic educational issues
at her confirmation hearings, but was confirmed anyway. As Secretary of
Education, even if she cannot destroy the public-school system and replace it with
for-profit charter schools, she can use regulatory powers to degrade and defame
the system. And the Michigan experiment has definitely been a failure.
Thirty-eight percent of the State’s rated charter schools fell below the
twenty-fifth percentile in performance. Only 23% of public school were
similarly rated. So, why appoint her? An estimate of total spending on public
education, K-12, published by the National Center for Education Statistics, exceeded
$600,000,000. If for-profit schools manage to skim off a quarter of the total,
charter schools will form a $150,000,000 per year industry. Betsy DeVos will do
her best to make that happen, whether or not charter schools outperform public
schools.
Trump’s nominee for Secretary of the
Interior, Ryan Zinke, is Montana’s sole House Member. As Secretary, he will be
responsible for overseeing the tens of millions of federally owned acres
scattered about the fifty states. But this is a man who hopes to eliminate his
own job. Zinke wants to turn federal land, including the National Parks, over to
the states, there to be used for whatever purposes state governments see fit.
Until then, he plans to satisfy himself with opening federal lands to
exploitation by grazing, logging and mining interests.
I could go on, but I think the point is
made. Don the Con has appointed the most reactionary candidates he can locate
to head the various federal agencies. Regulatory capture is almost complete. I
say almost because the civil servants who staff these agencies, and who still
believe in their core missions, seem ready to oppose the slaughter. Let’s hope
they can hang on until Trump implodes. But even if they succeed and the
agencies are not completely destroyed, of one thing we can all be certain. The
regulated industries will still be out there, still pursuing regulatory
capture. They will never give up. They have too much at stake.