This guest post was contributed by Lawrence B. Glickman, who teaches history at the University of South Carolina. He put the fight for the Consumer Financial Protection Agency in historical perspective in his previous post on this blog.
A recent ad taken out by the “The Center for Consumer Freedom” marks the latest assault by business lobbyists and conservatives on the idea of consumer protection. This organization’s motto — Promoting Personal Freedom and Protecting Consumer Choice — defines consumer freedom as “the right of adults and parents to choose how they live their lives, what they eat and drink, how they manage their finances, and how they enjoy themselves.”
Like other critics of consumer protection, this organization (“supported by over 100 companies,” according to its website) speaks in the name of freedom and depicts consumer protection as an assault not only on the liberty but on the intelligence of ordinary people. The ad begins with the following rhetorical question, “Are you too stupid…to make good personal decisions about foods and beverages”? Arguing against the “campaign to demonize soda” the advertisement blasts “food cops and politicians” for “attacking food and soda choices they don’t like.” Another of their ads warns about “Big Brother” in the “Big Apple” because New York City is considering taxes on junk foods and sugar-laden sodas. [The group’s print ads can be seen here.]
A nearly identical line of criticism is currently being deployed against President Obama’s proposed Consumer Financial Protection Agency. Richard Shelby, the Republican Senator from Alabama, finds the proposal “disturbing and somewhat offensive” because it relies on the “concept of the intellectually deficient consumer.” Jeb Hensarling, a Congressman from Texas, worries that “un-elected bureaucrats” might “decide if we can have a credit card.” Scott Garrett, his fellow Republican colleague from New Jersey, is worried about the “Orwellian, government-bureaucrat-knows-best mentality” evinced by the proposal.
Opponents of consumer protection have long spoken in the name of individual liberty. They have done so by misconstruing the nature of human agency and freedom in the modern world.
At least as far back as the Progressive era, many Americans noted that industrial society–in which consumers did not produce their own food and drink and often lived far from such sites of production–called for federal regulation and protection to insure that the food we bought was safe. This was the essence of the landmark 1906 Pure Food and Drugs Act and it was the meaning of presidential candidate Woodrow Wilson’s statement in 1912 that “freedom today is something more than being let alone. The program of a government of freedom must in these days be positive, not negative merely.” Wilson and other progressives–-including members of the Republican Party, such as Theodore Roosevelt–-recognized that extending freedom in the twentieth century required a federal government capable of regulating business. In Wilson’s view, federal regulation of the sort provided by the 1906 Pure Food law did not substantially restrict the freedom of individual Americans. It instead instilled confidence that the market for food and drugs would be stripped of poisonous and dangerous goods.
The freedom that is restricted by consumer protection laws is the freedom of businesses to sell dangerous or even poisonous goods. By preserving confidence in the marketplace, such regulations allow consumers the freedom to make choices, and therefore esteem the intelligence of the American people.
Of course, regulation can become excessive and Americans need to balance individual autonomy with federal protection. (So too can federal assistance go in the other direction: one of the reasons businesses ply Americans with unhealthy food is that subsidies to agribusiness make possible the cheap production of high fructose corn syrup. Thus, these defenders of the free market ignore the inconvenient fact that the playing field is not truly level.) The claims of business lobbyists that common sense regulation amounts to incipient totalitarianism, however, demonstrate their unwillingness to accept what has become over the last century a fundamental part of the social contract, and which makes tangible true freedom of choice.
By Lawrence Glickman
The Baseline Scenario 
“The Center for Consumer Freedom”—what a joke. These are probably the same people who are upset they can’t blow cigarette smoke in your face at your favorite restaurant anymore.
They also want to make sure there are plenty of vending machines at prime locations inside middle schools and high schools so your child can drink a soda pop in Math class. What would we do without those “consumer freedoms”?? It would be so “Orwellian” if your kid couldn’t rot his teeth on Pepsi while the teacher tries to teach him something useful for his future.
There is a difference between ‘consumer freedom’ and ‘a nation full of suckers.’ Given the recent Times article about what goes into our hamburger with regulation and inspection, can you imagine what the ingredient list would be without it or how hard we would have to work to figure out the next scam to avoid? Rules create playing fields that capitalists can play on and profit from.
The conversation needs to be elevated a few notches above the typical “freedom vs security” spiel.
We can start with freedom, but we can’t ignore information problems (it’s one thing to choose to eat unhealthy food, it’s quite another to be unaware of the substances in your food and their effects), externalities (smoke by yourself in your basement until your lungs fall out, but the moment you do it in public you are affecting other people), and disparities in bargaining power (when there is only one supplier of a particular good, you can expect consumers to get the short end of the stick with regard to information, safety, etc. such that the concept of choice becomes irrelevant).
“Liberty just means the freedom to exploit any weakness you may find”
Croak!
This is what, on the net, we call concern trolling.
Where would we be without the freedom to skydive without a parachute? (Incidentally, I wonder how many of these Republicans support the freedom to smoke a joint? Or do they attack recreational drug choices they don’t like and then go home and have a beer? Do they believe Carl Sagan was too stupid to make good personal decisions about recreational drugs?)
But the CFPA isn’t even about that — it’s about the freedom to be conned. It’s about the freedom to buy a product labeled “pork sausage” which is in fact made of dog. Who stands up for *that* freedom?
I disagree if the Gov was effective at protecting us from harmful products (as they claim), that lady should never have become sick (from hamburger), or others from potential exposure to HIV / HEP from used IV bags (heard that one today). I think Gov does a good job masking the inherent risk in a system, but in the end risk exists.
Also, The author undermines his argument by using the line “Of course, regulation can become excessive” to excuse a lot of problems with the current system.
If the Gov wants to warn me of the potential risks a product may have and then allow me to make the choice then that would be a service (provide they didn’t try to modify my behavior through taxes or regulation).
Nanny states and busy bodies want you to do exactly as they say and have no problem punishing those that don’t. That maybe fine for you now but there maybe things you want or need later you’ll have to go out of country to get because the Gov thinks its too risky for you to handle.
How about the TATA Nano. Now that the Gov owns US car firms it may say that a small cheap car from TATA is unsafe in the US. Even though the thing has great gas millage and is affordable for poor folks.
That just hurts poor folks who can’t afford to find alternatives or use power to get what they want.
The Center for Consumer Freedom?
Sounds like a Communist front to me.
;)
George, the government used to be much better at that job, before 30 years of “deregulation.” But that’s all right. Obviously, the answer to the problems of deregulation is…more deregulation. Croak!
All I’m saying is if the gov can be captured by an industry how much faith do you have in what they say is safe.
Remember the whole British beef problem we had a while back. We had all sorts of members of parliament saying that it was totally safe. I’d rather have the option to listen or not listen and then make up my mind not one Gov authority telling me.
Lets invent a system that has competing ratings agencies and allow then to battle it out.
people subscribe to Consumer reports to get info on product safety all the time couldn’t we have just more of those?
george: “Lets invent a system that has competing ratings agencies and allow then to battle it out.”
Lessee, when did we last try that idea?
;)
Hey I’m not saying its perfect but Gov doesn’t ensure lolly pops and unicorns either.
I’ll tell you from all these bubbles I’m less trusting of any agency having control over what I can and can’t choose from. I really don’t think there is any way to eliminate these run ups and collapses.
You know the Center for Consumer Freedom are basically libertarians for hire, right? They usually go to bat on behalf of the people that pay them.
Check out this USA Today piece on its founder, Rick Berman: http://www.usatoday.com/money/companies/2006-07-31-lobbyist-usat_x.htm
A longtime labor union official calls him Dr. Evil. The director of a consumer group says he’s “sleazy” and “sophomoric.” And a liberal newspaper columnist wrote that the tobacco, booze and gun lobbyists portrayed in the movie Thank You for Smoking were a “pale imitation of the reality of the Beltway’s most outrageous advocate.”
Even in this mudslinging city, it’s hard to find a guy who provokes the sort of wrath Richard Berman does.
Berman, hired by businesses, fights efforts such as further restricting drinking and driving, mandating healthier foods and raising the minimum wage. The former labor relations lawyer argues that many of the restrictions reduce our ability to make our own choices.
Are you too stupid to spend all of your time testing each and every piece of your food for the top 20,000 potential contaminants. Are you? Are you?
The top 100 companies who want to con you?
And they are the people who install TVs in classrooms to make sure kids get their RDA of soda pop advertising.
I deeply resent that the Nannystate deprives me of my absolute consumer freedom to choose food with a giant dose of extra carcinogens, heavy metals, and agent orange (my personal favorite breakfast drink)!
Nannystates, Unicorns, Lollypops and Busybodies. I love it!
well you get that with POT. your not able to legally use it because some gov officials think your not able to handle it.
once you empower then it could your next fav thing that becomes to risky and either they’ll overburden it with guidelines or just ban it.
>I disagree if the Gov was effective at protecting us from harmful products (as they claim), that lady should never have become sick (from hamburger)
This sort of comment demonstrates a typical lack of knowledge of recent history and of how the conservative agenda has eviscerated our public institutions through “funding starvation” over the last twenty five years.
It is a well known fact that FDA inspection of meat processing facilities is completely inadequate, and that is due to inadequate funding, and that is due, from year after year of not approving the budget requests, in full, for these agencies by a congress and set of presidents that have followed the mantra of “no new taxes” and that “Government is bad”. It parallels conservative efforts to destroy our public schools by first, progressively defunding them, then starting a voucher system, then declaring the public school system “broke”.
The business sector and the banking sector in particular is facing an uphill battle.
After driving our economy to the brink of disaster and having to be bailed out by the taxpayers… I don’t think anyone believes that the “banking industry” knows what’s best anymore.
I’m all for stiffer regulations on banks to protect consumers. I don’t care if banks want to drag themselves into the mud. I just want to make sure they can’t drag the rest of us down with them like they did this time
would you really buy a car where the heater, and A/C are options? or windshield wipers? even in India TATA knows they will not be selling that many of the lowest priced car. while there is risk in the system are arguing that just let the buyer beware? which in the end means the buyer doesn’t buy any more. they are either dead, or sick, or to poor to buy any more? and I suppose we really don’t need the police or the fire departments either right? after all they are just ‘masking’ risk.
Well wait if we go on the premise that the gov can be captured by an industry (I thought that was the baseline scenario) doesn’t that mean that its regulatory agencies are controllable too, and if they can be compromised what real good do they serve?
Maybe they can use the new regulations to bar new competitive products big companies don’t want to produce.
george: “I’ll tell you from all these bubbles I’m less trusting of any agency having control over what I can and can’t choose from.”
How do you think these bubbles happened? Deregulation played a major role.
“I really don’t think there is any way to eliminate these run ups and collapses.”
There is probably no way to eliminate them entirely, given human fallibility. However, we got off to a good start after the Great Depression, with regulations that prevented financial crises in the U. S. for 50 years. Remember, these things have been happening for only a few hundred years, and we still have a lot to learn about controlling them. Also, we still tend to take a political approach to systemic stability, rather than an engineering approach.
george: “Well wait if we go on the premise that the gov can be captured by an industry (I thought that was the baseline scenario) doesn’t that mean that its regulatory agencies are controllable too, and if they can be compromised what real good do they serve?”
Life and society are not so simple. There are still people with backbone. If government regulators are capturable, so are private entities. That fact is not an argument against government regulation. History tells us that things change. At some point, people are not going to take it anymore. They will not stand for regulation of the sort provided by Blackie and Greenspan.
I thought we resolved this issue in 1906.
We need a balanced system of regulation and free enterprise. It is never perfect and it needs to be watched all the time, but it is the best system for consumer protection.
More important the money in politics; ad money, campaign money,hired think- tank money, skews the system permanently toward the right and deregulation.
We need some limits on political money to get back to some equality for consumers.
I hope the Supreme Court majority (5-4) doesn’t further undermine the potential for equity for consumers.
Philosophically, I am deeply suspicious of the concept of positive liberty. Consider Isaiah Berlin’s classic dichotomy:
http://www.cooperativeindividualism.org/berlin-isaiah_concepts-of-liberty.html
(Two Concepts of Liberty / Positive vs. Negative).
Of course, I am also deeply suspicious of the concept of negative liberty too, and most other moral concepts. Thus, my chief response to those who oppose government intervention is not a deeply moral argument about positive liberty, but a simple offer:
Any bank that does not wish to suffer under consumer protection laws can give up all FDIC insurance and other legal protections (like the doctrine of federal pre-emption which protects them against torts). Also, the SEC will have no authority to act against them (at all, ever), to investigate fraud (ever), and the government will have no authority (at all) to review their books. Likewise, any investors in said company cannot benefit from limited liability through incorporation – any and all investors in the bank are considered joint owners. They cannot borrow money from the Fed, or from other banks that are backed by FDIC. Treasury has no power to enforce reserve or capital ratios of any kind.
I should like to see how many banks accept this offer.
————
I continue to be amused at Dick Shelby’s hypocrisy. In ShelbyWorld, Jesus despised gays but thought usury was a grand thing.
If Banks can’t drag us down, then what’s the fun of that?
I’d accept the offer, and make all the “investors” companies with limited liability. Then they could run it like BCCI.
Ahhh, so that’s your big gripe.
Poppymalarky. A planned economy, with all industry nationalized, run by a new generation of administrators that we grow ourselves (we being “not the establishment”) and who are thoroughly vetted, will eliminate bubbles. Or, if people are just too damn greedy and childlike to rid themselves of their capitalism, then an alternative system, similar to this one superficially, but with very high floors and low ceilings for wealth and income.
The answer to the problem of a vastly overcomplicated and inhumane machine is not more and more layers and engineering and controls. It’s a systemic problem that needs to be approached in a fundamental, systemic way, imvho.
There is very little merit in the argument that adults should be allowed to do as they please because they are adults. If that is the case, then why have rules on seat belts or even speed limits.
Surely, adults know that seat belts are for their own good, and there really shouldn’t be any laws forcing them to wear a belt, right?
I love that.
Would allowing me to opt out of soc sec be kinda like that (on a personal level)?
I think if you see all people as = you should allow them to make choices like that.
if not why not fine me for not using the hand rail on the stairs or walking around with my shoes untied
when I was in collage I had an escort that had no blower. It was cold but it was what I could aford at the time and it got me to class and work.
I’d say yea let people have some more choices.
yea but I see it as really hard to capture a whole set of companies without the help of a powerful Gov.
Oligopolies really do rely on Gov protection (like we have now). If your Gov can’t set all the rules it allows people to get around the system and get what they need / want.
The government has an obligation to protect the citizens of this country and that includes protecting them from the predations of big business and those that Theodore Roosevelt labeled the “wealthy criminal class.” I submit the following sentence as proof (some of you might recognize it): “We the people of the United States, in order to form a more perfect Union, establish justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”
What defense does a solitary man have against crooked businessmen? Nothing but law. When law is in the hands of and at the mercy of big business, then the common man has no chance what-so-ever. It seems to me that Senator Shelby and Congressmen Hensarling and Garrett have obviously chosen to side with the people that pad their pockets with big campain contributions. I know that Senator Shelby is not above using taxpayer money to promote business and institutions in his home state (he is known in certain circles as the new king of pork.) It’s only when that government proposes protecting the average American that he feels the need to step forward and speak out. Shame on him.
You can’t opt out of social security because you owe that as a debt to those who came before you and established the rules and orgainzations that you participate in and benefit from. If you would like to strike out to North Dakota and take up sheep herding or substance farming than no one will care if you enroll in social security or not. If you work in the city for a company and drive on public streets and live in a house with electricity then you signed up for the whole deal. Now PAY!
“any investors in said company cannot benefit from limited liability through incorporation”
This is meant to be recursive.
——
but separately, I strongly suspect that without the regulatory apparatus to guarantee/reassure investors, even the whiff of fraud would incite a bank run. In other words, imagine there were two classes of banks: 1) The government validates and guarantees. 2) The government explicitly rejects that it has in any way validated or guaranteed the bank… How long do you suppose the latter bank will successfully be able to operate, sell bonds, attract depositors, etc?
The main goal of big business in America is to establish consumer dependency under motto of “freedom to choose”. On the other hand big businesses overtook small family business denying local consumer from choosing local products and having access to information about the products they are purchasing and consuming. Big corporations own overwhelmingly the resources no living room for local and small family businesses and dictating what we buy, eat and drinking since they have already certain that consumers are dependent on their product and have no other choices. Big business in the United States and other parts of the world created successfully consumer dependency on corporations and source of endless profit making. The big businesses are getting bigger and untraceable. To make capitalism to work for both consumers and producers, the production technique should be break down into small scale. People want to have local capitalists not big businesses such as transnational corporations. Local market capitalism is the way to go by enhancing local farms and industrialists. Cities should consider promoting city farms by redirecting resources from inefficient uses to efficient uses. For example, there are significant lands set aside for Golf Course that used by very few population in the city. It would be productive if it used for local farm that produces vegetables and fruits where consumers and producers have access information about each other and their needs. Healthy food comes from local farms; it is fresh and in harmony with the body of the consumers since both the product of local environment. Local capitalism should be promoted for sustainable co-existence. Therefore, democratic government has a responsibility to act in the interest of its citizens and curtail the interest of special interest groups.
It would need to be recursive world-wide then.
Until their ponzi scheme is exposed and they flee the country?
Love what you said…..Let’s dismantle Wal-mart, a culprit in the demise of local sustainable co-existence. The brands (choices) of products are slimming down in favor of “great value” shelf space for “like” products. Love to know their true blue ingredients.
Chris I am conservative, and most conservatives even most Republicans with a semi conservative mind would support the legalization of marijuana, because it is LOGICAL.
Two Voices Blog Crazy
What is consumer freedom? How about freedom from obesity, diabetes, cancer and heart disease. According to a Toronto Star newpaper article Food reform will be hard to digest:
Agribusiness (subsidized corn and soy bean farming) has created a glut of junk foods, fast foods and super-sized meals in the North American diet. Furthermore,
– the medical costs of obesity have nearly doubled in the past decade
– the cost of obesity-related treatment has skyrocketed to an annual average of $147 billion
– an estimated annual $116 billion is spent treating diabetes.
– hundreds of billions more is spent annually on treatment of cardiovascular disease and cancer related to the Western diet
– researchers at Johns Hopkins project that by 2015 (just six years away) three-quarters of Americans will be overweight or obese
– a shocking 26 per cent of U.S. children entering kindergarten are overweight or obese, according to the Center for Children’s Health Innovation
The Toronto Star article also says, if American health reform forces insurers to “take all comers,” the health insurance industry will join the effort to reform the food industry, in order to bring down medical costs.
Many products we take for granted entail risks that must be managed for basic safety, but it is not reasonable to expect a layperson to evaluate these risks and the methods used to mitigate them. For example, a few of the nasty things a hot water heater could do if not properly designed are:
– Start a fire in the basement.
– Release natural gas causing an explosion.
– Release carbon monoxide killing people as they sleep.
– Overheat water causing scalding.
– Further overheat water producing super-heated steam at the faucet and large burns.
All of these things have happened. None of them were effectively corrected prior to being addressed by code requirements. Few of these effects and the strategies used to mitigate them could be effectively evaluated by most of those who purchase the products.
Unless we turn everyone in to engineers, most people will not be able to evaluate the safety of a simple water heater.
Unless we turn everyone into financial experts, most people will not be able to evaluate the safety of all but the simplest financial products.
Under these conditions buyer beware is unworkable. Society as a whole must take some responsibility.
Savvy individuals should be allowed to take risks not appropriate to others, but some facility to ensure they are competent to evaluate the risks and that they won’t cause undo collateral damage to bystanders is called for. Otherwise we’re just socializing risk.
William F. Buckley long maintained that drug legalization was a lesser evil than the drug war.
That’s fine, but how do you keep regulators from being captured by the industry they are regulating. It’s happened with the pharmaceutical industry. It’s happened with banking. It must be happening in many other sectors.
I’m not saying no regulation. I’m simply asking how do you keep regulators honest, doing what they ought to be doing?