Rx for Disaster

On Halloween, there are always some people looking to scare you. But in our seemingly never-ending election season, politicians have been trying to scare us for months about zombies who are going to kill the economy.

Who are these economic assassins? “Job-killing regulations.”

It’s an article of faith of many politicians and pundits that this phrase describes key culprits in our current economic malaise. If we could only get rid of them, the power of our economy could be gloriously unleashed.

According to these (mostly Republican) politicians and pundits, regulations act like sand in the machinery of our American economy. They are destructive weapons often used by those who “hate success” (or are advocates for the “nanny state”) to create unnecessary friction in the enterprises of our noble “job creators.” While regulations may appear to address problems, they aggravate the more important issue of creating jobs by tying the hands of our entrepreneurs.

OK, maybe I’m laying it on a little thick here. After all, not all businesses are against regulations in general. And other businesses aren’t necessarily opposed to all regulations. In some cases they actually advocate for regulations – especially when those regulations will have the effect of benefiting themselves.

For example, in the 1990s some of those companies providing New York State’s accident prevention classes proposed increased regulations on course providers – including a requirement that the courses be proven to actually have a positive effect on driver behavior. One catch: those regulations would only apply to new course providers. Current providers would have been grandfathered in. Good thing – as none of the current providers could have met the requirements of the proposed regulations. That’s one way of eliminating competition!

Nevertheless, the meme of “job-killing regulations” is alive these days. The fact that there don’t appear to be any facts behind such claims doesn’t seem to matter. Even the corporate media plays along with the claim.

All this raises a question: what would happen if conservatives and anti-regulation advocates got their wish, and all these “job-killing regulations” were eliminated? Would we achieve some kind of Free Market Paradise?

Well first off we have no factual basis for expecting the job market to noticeably improve. As I just noted, there don’t appear to be any facts behind the “job-killing regulations” claims.

On the other hand, there is a likelihood that without “job-killing regulations,” some jobs would become killers. As Jim White noted in his September, 2012 post:

Workers were suffocated or burnt alive at the Ali Enterprises garment factory in Karachi, which made ready-to-wear clothing for Western export, when a massive fire tore through the building during the evening shift on Tuesday.

Up to 600 people were working inside at the time, in a building that officials said was in poor condition without emergency exits, forcing dozens to jump from upper storeys to escape the flames, but trapping dozens in the basement where they perished.

But we don’t need to look to other countries for examples of this; we can look at our own history. The Triangle Shirtwaist Fire, which happened in New York City on March 25, 1911, killed 146 people in 18 minutes. The horror inspired by that event, as well as the dreadful and unsafe working conditions that led to it, inspired major changes to New York State’s labor laws and national standards for fire safety.

We don’t even have to look at history for examples of how eliminating “job-killing regulations” could prove deadly. We can look at today’s news.

Lately, there has been a continuing story about an outbreak of fungal meningitis that developed from steroidal injections of a drug compounded in a Massachusetts pharmacy. As ABC News reported:

The outbreak has been linked to contaminated vials of methylprednisolone acetate, an injectable steroid used to treat back and joint pain. Sealed vials of the steroid, made by the New England Compounding Center in Framingham, Mass., contained exserohilum rostratum, a fungus found in soil and plants.

It turns out that from a regulatory standpoint, compounding centers are treated like a typical local pharmacy, in which the pharmacist may occasionally create drug compounds as part of filling a prescription. However, NECC was compounding drugs on an industrial scale and shipping them around the country. So even though they were acting like a major drug company, this company wasn’t regulated like a regular drug manufacturer. As Kevin Outterson, director of the health law program at BostonUniversity, explained on the PBS News Hour:

Well, it’s a pharmacy. So, just like the CVS or Walgreens on your corner, it’s regulated first by the state, by whatever state it happens to be in. And the FDA is in charge of regulating drugs and drug manufacturing.

So, if Pfizer or Glaxo wants to produce a drug in China or Ireland or anywhere else in the world and sell it in the United States, that factory is under FDA regulation, very strict rules on how the — how sanitary it is, how careful they are preventing contamination.

But a compounding pharmacy, especially one that is industrial in scale, just doesn’t have that type of FDA regulation.

And why is this? Because Congress and the Supreme Court, apparently in an effort to limit “job-killing regulations,” restricted the authority of the Food & Drug Administration. As Outterson explains:

In 2002, the Supreme Court actually struck down a law that gave the FDA some authority in this area. It’s the Thompson vs. WesternStatesMedicalCenter case. And the Supreme Court said on First Amendment grounds that compounding pharmacies have the right to advertise their services.

And the FDA had taken the opposite position based on legislation from Congress in the 1990s. Congress held some hearings in 2003, but really nothing ever came of those hearings.

So we have a situation in which the FDA used to have more clear authority, but it was taken away by the Supreme Court.

So in this case we wound up with a few less “job-killing regulations” – but also a few dead patients. Hmmm.

Look, I think I have an idea of where Free Market advocates are coming from. They’re basically saying – though they might not use these terms – that the Market is an emergent phenomena. As Wikipedia explains:

The stock market (or any market for that matter) is an example of emergence on a grand scale. As a whole it precisely regulates the relative security prices of companies across the world, yet it has no leader; there is no one entity which controls the workings of the entire market. Agents, or investors, have knowledge of only a limited number of companies within their portfolio, and must follow the regulatory rules of the market and analyze the transactions individually or in large groupings.

The thing is that many people get distracted by the emerging/growth part of the equation – the “job creators,” for example. They don’t seem to recognize the other aspect of emergence – the context, or regulatory rules part of the equation.

Take an ecosystem, say a wetland. Its ingredients – the plants and animals that live within it – behave pretty much like a market. There’s no single leader, no King Beaver (for example) who controls what grows where and what each animal can or cannot do. Instead, every resident of the ecosystem has an influence on how the ecosystem develops.

But this ecosystem exists within a context – where in the world it is located, the local climate, even the other residents of the system. Everything about that context restricts, to one degree or another, what happens within that wetland. It maintains a balance among the ingredients of the system. As long as the system is balanced, nothing is immune to that context.

However, a change to that context will introduce instability into the system. If a predator that keeps the animal population in check disappears, or if a new and invasive species arrives that has no natural enemies to control it, the balance is lost and things will go haywire. Unless it regains a balance among all of its parts, it’s likely to fail.

A human society is an emergent system, much like that wetland. When it is healthy and in balance, everything within that society restricts – to one degree or another – what happens within that society. No one is or can be free to just do whatever he or she wants without having an effect on that society. The government is also an ingredient in that system, and in a democracy it is expected to represent the interests of the people.

Those who argue against any form of governmental regulation of businesses are basically seeking to destroy the balance of power within society.  They want to allow an elite few to do what they want without any restriction by other members of society. These others are apparently expected to just endure the actions of the few – even if it means dangerous working conditions or unsafe drugs and other products.

Such an arrangement by its very nature would be unbalanced and unsustainable. It’s unlikely that those on the losing end of this arrangement would put up with it for long. In the long run, blindly advocating for unregulated business practices is not just a terrible idea.

It’s a prescription for disaster.

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About Dave Higgins

I've been interested in current events since at least the mid 1960's, and in ideas from modern science since the early 1990's. My website Quantum Age, which has been online since 1996, presents a basic framework for applying ideas from modern science to today's world. In this blog I discuss current events in the context of that framework.
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