Capitalist Secrets: Laissez-Faire Fosters Safe Food and Drugs
Under laissez-faire capitalism, there are no regulatory agencies controlling the food that grocery stores and restaurants can sell or the drugs that pharmaceutical companies can offer. But the result is not a flood of dangerous food and drugs. Far from it.
First of all, the government does play a crucial role when it comes to food and drugs. A capitalist government punishes force and fraud. If a restaurant negligently serves you tainted meat, or a drug company sells you snake oil disguised as cancer medication, the government will step in to protect your rights.
Second, the market provides powerful incentives for safety and quality. On a free market, where caveat emptor rules, consumers place a high value on reputation. What that means is that companies that have established themselves as reliable and trustworthy reap higher profits. Just think: Are you more likely to buy lunch from McDonald’s, with its proven track record of safe and tasty food—or from Marie’s Discount Beef Joint, which just opened last week?
Third, there are all sorts of ways that consumers in a laissez-faire society can check on the safety and quality of businesses.
They can, for example, read reviews at websites such as Angie’s List or Zagat.
They can turn to private certification agencies, which would independently verify the safety and quality of businesses. A new restaurant might hire Food Inspectors Incorporated to check out its kitchen, and Food Inspectors would stake its reputation (and bottom line) on the reliability of its assessments.
Insurance companies, too, would play a role here, just as they do today. Before agreeing to insure a given business against liability for tainted food or medicine, an insurance company would insist on inspections, oversight, and specific policies and procedures to encourage safety and quality.
(If you’re wondering about Upton Sinclair’s The Jungle, which claimed to describe the stomach-turning conditions of Chicago meat packing factories during the early nineteenth century, I recommend you check out this article.)
Under laissez-faire capitalism, the profit motive drives businessmen to pay careful attention to issues of safety and quality, while a rights-protecting government polices force and fraud. That—not some politically motivated bureaucrat—is what actually ensures our welfare.
4 Comments to “Capitalist Secrets: Laissez-Faire Fosters Safe Food and Drugs”
How would this work in developing countries, where a lot of the food is sold informally, and there are no immediate means to apply such regulations when people are no longer afraid of risking food poisoning.
It is sad and unfortunate, but I think there is no application for this in a situation in which a country has no free-market or government protection by law, and most importantly, people are -as you suggest- not afraid of risking food poisoning. If the people are not concerned with food poisoning, what can one do? Make them more afraid? They either have a good reason not to worry about food poisoning, or they are in denial. In any case, it is for them to decide how they scrutinize their food quality. The solution for a developing country is, probably, to adopt Capitalism.
The current system in which all consumer products (or nearly all) are regulated by the government makes people complacent; that is very true. And that’s exactly the problem. One of the reason why my grandfather (age 76) is a far smarter consumer than the average modern consumer (asks more questions to vendors, haggles etc) is because he grew up in a time when it was largely the consumer’s responsibility to prevent himself from getting ripped off. He had to learn all about all kinds of things he liked collecting and how to tell the fraud copycats from the authentic pieces. Smart consumers are rare these days - people that actually research the product before buying it. People just assume the nanny state will always be there all the time. . .even when it is subsidizing and officially approving collective disasters such as the FDA corporate approval of pesticides that kill bees en-masse. This is a dangerous mentality because these regulatory governmental organizations primarily serve special interests, something Ayn Rand was quite well aware of. There is no collective interest. People have to be reinforced (aka no government regulation) for making smart consumer habits. . .by making such research worth their time. This approach can benefit people according to individual need and specialty, and with the help of private organizations, everything can be made transparent (as well as competition between businesses).
And btw, this is a great article.
The problem with developing countries is that they are still “developing” because they lack a solid, predictable and objective legal system. As a citizen and resident of one such country, I can tell you that one is afraid of the legal system. So unless this gets reformed and the laws are streamlined, Laissez-Faire does not have a chance of being inplemented and it´s benefits reaped.