Product Safety: Government Versus Private Sector

By: George Noga – June 1, 2014
        Who keeps us safe? Surely it must be government without whose oversight private business rapaciously would seek profit without regard to consumer safety. It seems axiomatic that bureaucratic watchdogs are required to set standards, police markets, punish miscreants and look out for the public. After all, government employees are benevolent and dispassionate, whereas private industry is greedy, self interested and profit motivated. So, who do you trust?
“Who do you trust; benevolent bureaucrats or profit-hungry businessmen?”
        There is a 120 year old organization dedicated to product safety; it has 152 laboratories employing over 10,00 people, many of whom are scientists; its sole mission is to protect consumers. This organization has evaluated 90,000 products and bestowed its approval on over 20,000 types of products made by 70,000 different manufacturers. It has conducted 600,000 inspections benefitting 700 million consumers. Of course, I must be referring to the US Consumer Product Safety Commission, the Commerce Department and/or the Federal Trade Commission.
        Actually, the organization I just described is Underwriters Laboratories (“UL”), a privately owned and operated company which no one is forced to use. It thrives solely by dint of its impeccable reputation – because of which it is despised by liberals. Yes, greedy businessmen voluntarily seek the UL certification and, if necessary, go to great lengths to make their products conform to the highest safety standards. In fact, many government regulators (including several states) shamelessly copy the codes and standards established by UL.
        Another private organization held in high esteem by the public is Consumer Reports (“CR”), an independent, non-profit organization whose mission is to empower consumers to protect themselves. Founded 78 years ago it eschews advertising to remain free of all commercial pressure. CR is the most trusted independent testing organization in  the world and has an extensive network of test facilities and scientists. CR’s work has consistently preceded and outshown government, particularly with regard to seat belts, cigarettes, microwave ovens, water supply, child safety seats, kerosene heaters, door locks , lawnmowers and vehicle rollovers. CR is relied upon by 8 million consumers.
“Government standards don’t assure safety and safe products fail to pass.”
        Perhaps readers by this point will concede that UL and CR bring something to the table. But surely government is at the forefront of consumer protection. Wrong! Wrong! Wrong! Government sets standards which are tinctured by politics, often contradictory and come with tens of thousands of pages of esoteric regulations. They tend to stress hard-edged enforcement and create an adversarial atmosphere. Government is concerned with standards – not safety. Products that meet government standards aren’t necessarily safe while completely safe products can fail to meet standards.
         Because government is inherently political, it often harms consumers. A case in point affecting all of us is sugar. Outside the USA soft drinks are made with cane sugar, whereas here they are made with high fructose corn syrup – which tastes worse – much worse. This is true for one reason: Archer Daniels Midland lobbied (think $$$) Congress to pass draconian quotas on sugar imports. Surprise: ADM is a leading producer of corn syrup. In another example of government fecklessness, its touted Energy Star program is a fraud. Government leaves it up to manufacturers to self certify Energy Star compliance. Hmmm – I wonder how that would fly at Underwriters Laboratories?
“Okay so now who do you trust – the CPSC and FTC or UL and CR?”
       Many (particularly the young and liberal) are infatuated with government even though we constantly see where private sector decision making is far superior. Human nature dictates that decisions are reached on the basis of personal risks, rewards and incentives – true in both business and government. Business understands this and does a much better job of aligning business and personal objectives so that the correct decision is reached. Government decision making as informed and explained by public choice economics is: (1) based on personal interests and incentives; (2) short sighted; (3) political; (4) rife with perverse incentives and unintended consequences; (5) misaligned with the public interest; (6) favors groups over individuals; (7) slow to change; and (7) within a perverse culture that never will admit failure.
        Most Americans voluntarily do business with Apple, Disney, Wal-Mart, FedEx, UPS and countless others; they have come to admire the quality, value and customer service these companies display each and every day. Americans also are forced to interact with DMV, IRS, USPS and a myriad of other government agencies. Immediately following Hurricane Katrina, Wal-Mart had trucks  loaded with food and water ready to assist victims; within 24 hours Verizon had 95% of its cell phone service running. Government did nothing. Yet, despite their direct personal experiences, many Americans demonize business and worship government; they believe business creates oppression and government creates prosperity.
        Also despite all evidence to the contrary, many Americans distrust business to make safe products and falsely repose their trust in government. Who really has the consumers’ interests more at heart – a faceless bureaucrat behaving in accordance with the tenets of public choice economics or a businessman who will go to superhuman lengths to protect the integrity and value of his brand? I will choose the businessman every time because I know his interests, incentives (and disincentives) and decisions are much more closely aligned with my safety than that of the government puke.