Corporate Social Responsibility as Barrier to Entry

When you see Big Business getting into bed with Big NGOs to get Big Government to pass a law, alarm bells have to start going off. Case in point, from Walter Olson:

Surprisingly or otherwise, some big business groups like the Grocery Manufacturers of America have allied with consistent Big Government advocacy groups like the Consumer Federation of America and Center for Science in the Public Interest to push S. 510, the food safety bill pending before the Senate (which might win consideration in the lame-duck session).

How socially responsible of the GMA to join hands with food cops like CSPI, right? Corporate social responsibility at its finest, right?

Wrong.

The GMA may talk the socially responsible game, but what they're really doing is creating barriers to entry. Back to Olson's post:

In a post at Cato at Liberty recently, I cited writer Barry Estabrook, an ardent critic of the food industry (“Politics of the Plate“), writing at The Atlantic, who says the bill could “make things worse”:

You needn’t go along completely with Estabrook’s dim view of industrialized agriculture to realize he’s right in one of his central contentions: “the proposed rules would disproportionately impose costs upon” small producers, including traditional, low-tech and organic farmers and foodmakers selling to neighbors and local markets. Even those with flawless safety records or selling low-risk types of foodstuff could be capsized by new paperwork and regulatory burdens that larger operations will be able to absorb as a cost of doing business.

It’s true that S. 510 includes language not in earlier drafts that nods toward the idea of tiering regulatory burdens. But as the Farm and Ranch Freedom Alliance notes (background), most of the small-producer-friendly changes are left to FDA discretion, so it really depends on how much you trust that process.

Being "socially responsible" often has costs. Often those costs don't scale. As a result, they tend to be borne disproportionately by small and medium size businesses. Which is why big business loves it when government mandates some purportedly socially responsible law. It creates barriers to entry making it tough for new competitors to succeed.

One of the interesting questions about the Tea Party movement is whether it will become a critique of bigness in general--taking on the Big NGOs and Big Business, as well as Big Government.

Comments

[David Welker]

Is this story of your even plausible? Are big companies REALLY that concerned about new entrants who do not even have the financing to properly comply with food safety regulations? That sounds awfully speculative.

On the other hand, big food companies do notice a big drop in sales for an extended period of time whenever there is there is a disease outbreak related to unsafe food.

Really Professor Bainbridge, I know you are a conservative. But are you REALLY against regulations improving food safety? Back in the day, we used to have reasonable conservatives who support commonsense protections, like in the area of food safety.

I really think the right has gone totally nuts if you are a "moderate" conservative and yet want to bash food safety regulations. No wonder conservatives and liberals cannot find anything to compromise on. Your side is totally nuts.

[tim fox]

Another classic Baptist and bootlegger

[Mariano-Florentino Cuellar]

"When you see Big Business getting into bed with Big NGOs to get Big Government to pass a law, alarm bells have to start going off." -- It's hard to see either S.510 or its companion measure in the House, H.R. 2749 as an example of "Big Business getting into bed with Big NGOs." Both reflect a considerable amount of compromise among not only representatives of larger corporations and consumer groups, but also representatives of farmers, lawmakers representing rural states, and organizations interested in public health such as Pew. I don't see anything in the post (or the Cato one, for that matter) persuasively showing that the larger companies supporting this bill care more about barriers to entry than about limiting the substantial economic impact of poorly-targeted food recalls that end up unnecessarily tainting huge segments of the food industry (e.g., spinach producers). Those recalls are so costly, in no small measure, because of how long it takes to pinpoint the source of contamination.

I can't tell from the post whether the concern over the bill is the stepped-up inspection schedule, the provisions making it more difficult for a company to keep on selling certain foods while shielding adverse test results, or something else. What I can say is that the bill is co-sponsored by eight Republicans in the Senate, and that the somewhat more expansive version in the House passed with over 50 Republican votes.

Thanks for posting about this.

[WhiskeyJim]

http://theintelhub.com/2010/09/14/georgia-man-fined-5000-for-growing-vegetables/

For the Tea Party movement to succeed, it must take on big business. It remains to be seen how universally they have internalized that.

[Paul Zrimsek]

Those commonsense conservatives in the Good Old Days passed up all sorts of chances to enact S. 501. Perhaps its commonsensicality was less obvious to them than it is to David Welker.