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Originally published in Blogspot 07/12/2012

     Abstract arguments over the role of government in the marketplace are meaningless unless they apply to the realities of actual life. Listening to the endless babble from the talking heads of television media, and the unrestrained torrent of written words in the print and electronic media brought back to me the memory of an experience in my own life which clearly illustrates the real meaning of all those words.

     Many years ago, I worked in a privately owned chicken processing plant in a mid-western state. The plant purchased slaughtered fowl and processed them for further processing into consumer products. We cooked, de-boned, cubed and flash froze chicken used in a wide variety of food products. We also boned and froze fresh, raw chicken for sale to other manufacturers.

     The plant was under the supervision of the USDA, and had on-site, full-time inspectors. For the most part, the confrontations between the company inspectors, of which I was one, and the USDA inspectors were few and trivial. My job was, as defined by my boss, to make sure that everything was done correctly, so that the government inspectors would have nothing to do.In that capacity, I witnessed a clash between the free market and government regulations which has stayed with me to this day.

     Invariably, our raw material came from slaughter houses cleaned and boxed in refrigerated trucks.  That changed one day, when a truck arrived and began unloading sealed 55 gallon drums. From my experience, only offal was packed in drums and sold for non-food applications. Suddenly, we were receiving drums of something. I went to the loading dock, as was my job, but was told by the owner, whom I had never before seen on the loading dock, not to get involved. He was there, with his managers and supervisors, as were the government inspectors, to personally oversee the arrival of whatever was in those drums.

     Rather than leave, I stood back and watched the events unfolding. It became clear that the owner had hoped to bring in this shipment without inspectors present, but they had noticed the delivery and came to do their duty. The owner was determined to bring whatever was in the drums into the plant, and the government inspectors were equally determined to prevent it.

     The discussion between the owner and the chief USDA inspector centered on the fitness for processing and consumption of whatever was packed in those drums.  At last, a compromise was reached. The owner ordered one of the workers to open a drum, one selected by the chief inspector, to examine its contents. The worker unlocked the seal of the drum and pulled off the lid. Inside were cleaned, raw chickens, but what emanated from the drum was a stench strong enough to nearly take my breath away 20 feet distant from the drum. The plant owner, without flinching, walked over to the drum, bent over it, took a deep sniff and bellowed “Cook it”! The chief inspector, grimacing from the smell, stated that if they took that material into the plant he would shut the place down.

     In the end, the drum was re-sealed and the shipment loaded back on the truck. The owner, with his retinue of managers and supervisors, left the area. The plant stayed open and the inspectors went off to make their reports.

     I realize, now, the significance of this scene.

     Clearly, the plant owner had seen an opportunity to make a handsome profit by buying and processing inferior, read rotten, chickens. Having paid well below the market price for fresh killed chickens, he had hoped to cook, bone and freeze the chickens before anyone caught on.  If the product was processed and shipped quickly enough, he might have gotten away with it, at least at first.

     Would the free-market have controlled this obvious attempt by the owner to buy offal at a low price, cook it (which would likely eliminate the smell) and sell it for a handsome profit to a minor customer or one that would not care? Perhaps. The theory holds that the sale of inferior products would cause the company to lose customers, to get a bad reputation, perhaps, to go out of business. That might have happened, however, only after people who ate the rotten chicken got sick or died. The market would correct itself, but the price would be the life and health of people who would have eaten that garbage.

     Government regulation corrected the problem before that happened. The correction was generated by regulation interfering with the free market and no one had to get sick, or die, to solve the problem.

Does the market work? Maybe, but consider what it would have taken to produce a “positive” outcome. Consider, also, that regulation might have also saved the owner from himself. What seemed good from a narrow market perspective (i. e.,  take a risk, buy low, sell high and hope to get away with it) could have destroyed the company.

     That balance between the market and regulation may have saved both the people who would have eaten the trash and the company that would have sold it.

     Sorry, Mr. Reagan, the Government was the solution.

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Comment Preferences

  •  Only a Tiny Free Market In Which Businesses (3+ / 0-)
    Recommended by:
    Mannie, Redfire, radical simplicity

    are on the scale of individuals, where the community sees and knows all the market activities, and cultural pressures & norms are able to regulate behavior.

    In other words basically nothing more advanced than a primitive agricultural society.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Thu May 23, 2013 at 10:30:20 AM PDT

  •  The "free market" is either the place (1+ / 0-)
    Recommended by:

    where free goods are taken to be sold at a profit for the middlemen, or it is the place where "mark" are fleeced.
    By dividing the arena of trade and exchange into producers and consumers, economists have discounted or eliminated from consideration the vast horde of middlemen, who profit, like highwaymen of old, by taking a "cut" for themselves and either churning or impeding the movement of stuff. Rarely are they facilitators, anymore. Add to these interlopers the whole class of virtual predators, the financial managers and engineers, and it becomes obvious that producers and consumers are at a distinct disadvantage.
    One consequence is that much more is produced than anyone actually needs. Volume is important to minimize the size of the "cut" from any one good. Services are denigrated because the "take" is harder to capture. Also, products are easier to "shrink" not only in size, but in serviceable life. In many instances shelf-life has come represent the time during which a product looks good enough to sell without being obviously ready for the landfill.
    If one believes, as do I, that economic profit is primarily derived from avoiding waste, then our landfills and mountains of garbage are clear evidence that our economy is failing.
    Binary thinkers like opposites, but, for some reason, the obvious evidence of economic failure in our dumps doesn't register. Perhaps it's just a matter of "out of sight, out of mind." Odors, one suspects, don't make the same kind of impression.

    We organize governments to deliver services and prevent abuse.

    by hannah on Thu May 23, 2013 at 10:52:24 AM PDT

  •  China is a good example of an under-regulated (1+ / 0-)
    Recommended by:

    market for food products. That's why you have these endless stream of horror stories involving melanine laced milk, honey mixed with corn syrup, fake eggs, contaminated frozen dumplings, hormone injected pork, etc etc. It's gotten so bad that party officials have their own organic farms.

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