Food Safety: A Market Solution?
Schwennesen, Paul, Regulation
Food safety made the news in 2012 when salmonella outbreaks linked to tainted cantaloupes and mangos sickened nearly 400 Americans and caused three deaths. Usually, blame for such outbreaks is placed on menacing, profit-driven corporations. Too-lax food safety laws and underfunded, understaffed government food inspection agencies let them get away with murder. However, as a member of the U.S. meat industry, I want to suggest two other culprits: the United States' system of command-and-control food regulation and the public's trusting embrace of it.
In fairness, the command-and-control viewpoint isn't illogical. The American food supply is one of the safest in the world. We have access to an abundance of food (3,700 kilocalories per day) at very low prices, and food poisoning is exceedingly rare (a 0.0035 percent incidence rate, according to Centers for Disease Control data). A strict regulatory environment, it would seem, is the recipe for creating food we can trust, and a stricter one could only be an improvement.
But I submit that the current system fails to tap creative, market-based incentives to further improve food safety. As a result, we are settling for mediocrity--focusing on meeting government-established minimum safety levels. While this theory is not empirically defensible (no alternative U.S. food safety system is allowed to exist), if we consider the history of U.S. food regulation and its economic incentives, we'll find reasons to think that we can do better.
Background | Food safety in the United States is regulated by no fewer than 15 federal agencies and thousands of separate procedures at all levels of government. At the broadest level, food safety is the responsibility of two federal agencies, the U.S. Department of Agriculture (which oversees meat and poultry) and the Food and Drug Administration (which monitors packaged food and produce, as well as medications). The FDA owns the majority of regulatory oversight--covering roughly 85 percent of the U.S. food supply--at a cost of nearly $1 billion a year. The USDA (specifically the Food Safety Inspection Service) has a far more limited role, charging $1.2 billion to monitor the national meat supply.
Federal food safety oversight has existed for a very long time. Its apotheosis was Congress's passage of the Pure Food and DrugAct and Federal Meat Inspection Act in 1906, but the very first laws granting federal food inspection power were passed in 1891. Food safety, in living memory, has never been managed by anything other than a bureaucracy.
And that bureaucracy has expanded greatly in the intervening decades, right up to today. The FDA has announced sweeping implementation of new policies within the somewhat moldered Food Safety Modernization Act that was passed two years ago. The largest overhaul of food safety regulations in almost a century, the act proposes to tighten an allegedly too-lenient food inspection system. In addition to gaining a $1.4 billion appropriation and 5,000 new employees, the FDA hopes to mandate a series of structural business alterations--more than 50 regulations in all--that will "establish risk-based standards" to improve public health. How can one argue against that?
Consolidation | Well, one argument is that the new rules will likely continue the consolidation of the food industry, economically trample smaller food providers that can be the source of innovation, and promote regulatory capture--industry gaining control of the government agencies that supposedly oversee it. After all, this has happened before.
Around the turn of the 20th century, when the nation's first federal food laws and regulations began to appear, small meat packers were overjoyed (and lobbied heavily for their adoption) because they believed that federal oversight would break the back of the National Packing Company, the "Beef Trust" formed by giant meat packers Swift, Armour, and Morris. …