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How Crony Capitalism Almost Destroyed a Small Vegan Business

in Business and Economy, Economic Liberty, Issues, Liberator Online, News You Can Use by Advocates HQ Comments are off

How Crony Capitalism Almost Destroyed a Small Vegan Business

This article was featured in our weekly newsletter, the Liberator Online. To receive it in your inbox, sign up here.

Crony capitalism, what many still believe to be actual capitalism, is everywhere. That’s why every aspect of modern life seems to be ruled by those who nurture a cozy relationship with government.

Even what you eat for breakfast is under their control.

PastaLast year, we learned that the American Egg Board, a group of egg producers supervised by the US Department of Agriculture (USDA), had used its influence and might to (try to) destroy a small company, the start-up Hampton Creek, which is behind Just Mayo.

The egg-less product became the target of the crony organization, which is funded by the mandatory fees members of the industry must pay, whether they are willing to be part of the organization or not. The USDA is in charge of overseeing the group’s budget and activities, making the AEB an arm of the state. So when the group’s president called the vegan Just Mayo a “crisis and major threat to the future of the egg product business” in an email and a USDA official suggested having Just Mayo’s labeling claims challenged with the US Food and Drug Administration, Hampton Creek was hit with a warning letter claiming that they had made unauthorized claims regarding their product, effectively “misleading” consumers by using the image of an egg on the label of a vegan item.

But the FDA move wasn’t enough. Later, the cartel group with direct ties to the US government moved to hire a lobbyist with the goal of making the grocery chain Whole Foods stop selling Just Mayo. While this step backfired, AEB ended up looking to another corporate ally to put an end to the competitor by convincing Unilever, the manufacturer of Hellman’s Mayonnaise, to file a lawsuit against Hampton Creek.

The lawsuit was later dropped.

A Freedom of Information Act request helped us learn more about this sordid pursuit against the small company just because of its competitive factor, giving us yet another great example of how government and special interests often work together to put an end to anything that makes them uncomfortable.

In a recent article for the Tenth Amendment Center, Mike Maharrey claimed that this episode in the recent history of food regulations shows the importance of fighting the federal government locally. After all, Maharrey wrote, “[t]he Constitution does not delegate the federal government any authority to regulate food safety.”

Despite the lack of legitimate authority, special interest groups like the American Egg Board continue to become involved with government, both local and federal. As they obtain privileges and special treatments that competitors do not enjoy, lobbyists work alongside lawmakers to solidify their clients’ position, oftentimes creating a scare regarding their competitors’ products that are sometimes powerful enough to nearly destroy small companies.

The result? Consumers end up having restricted access to variety, forcing the prices of commodities to go up.

Even if you’re not entirely positive the US Constitution should be followed at all times, you might agree that, if regulators and lawmakers do, indeed, have the health and safety of consumers in mind, they should be celebrating and welcoming new competitors in the food market, not fighting to keep the number steady. ​

Drug-Testing Industry Heavily Invested in Keeping Pot Illegal

in Consumer Protection, Drugs, Liberator Online, News You Can Use, Personal Liberty by Advocates HQ Comments are off

Drug-Testing Industry Heavily Invested in Keeping Pot Illegal

This article was featured in our weekly newsletter, the Liberator Online. To receive it in your inbox, sign up here.

The US government’s war on drugs has always counted with a great deal of support coming from a variety of special interest groups. Crony capitalism, it seems, is always to blame. But while libertarians have always known that, the media is just now realizing that there are more special interest groups involved with the drug war than they had previously thought.

TestToo bad mainstream news sources often misdiagnose the root of the problem.

According to an extensive ATTN article, the drug-testing industry is one of the most powerful opponents to weed legalization in America, along with the private prison industry, law enforcement, and big drug companies.

In the ATTN piece, the writer gives inside information on the history of cronyism involving the drug-testing industry and the US government. It also explains that several former DEA administrators are now part of nonprofits that advocate and actively lobby for drug-testing in Washington to remain relevant. The piece also explains that while federal agencies were bound by law to implement drug-testing programs in the 1980s due to the passage of the Drug Free Workplace Act, government agencies were the first to be hit with the government’s recommendations regarding drug-testing policies, thanks to an executive order issued by the President Ronald Reagan administration.

“Urine tests,” the article explains “didn’t become a common workplace practice in the U.S. until the 1980s,” which is when the Reagan administration began requiring federal government employees to be tested. This statement implies that the entire drug-testing industry may have not had as much influence as it does now if not for a string of orders and regulations that require organizations to use their services.

To Jason Williamson, a senior staff attorney at the American Civil Liberties Union’s Criminal Law Reform Project, “passing or failing a drug test has no bearing on whether or not they’re going to be impaired at the job two weeks later.” This “piece of the puzzle,” Williamson told Attn.com, is huge, and a major reason why “drug-testing companies don’t need or want to talk about” the real implications of their services.

According to a 1985 study shared by the Drug and Alcohol Testing Industry Association, airline pilots using flight simulators after smoking marijuana showed signs of impairment 24 hours “after usage.” But in a more recent government-sponsored study from 1989, researchers found that the psychoactive effects of cannabis use “wore off after one to four hours.” Proving that the largest drug-testing industry trade group in the country might have been helping these firms do business with countless organizations and government agencies without addressing the problems brought up by pro-marijuana legalization activists.

A quick search on the Center for Responsive Politics website shows that, to this day, organizations associated with DATIA such as Quest Diagnostics are actively—and heavily—involved with Washington politics.

According to a 2012 Reason piece, another organization known as the Drugs of Abuse Testing Coalition spent thousands lobbying for “Medicare reimbursement … and payment rates for qualitative drug screen testing.”

Targeting crony capitalism and its negative consequences, even when the subject is the drug war, could help us clear away the fog, giving advocates access to the real roots of the government’s ineffective drug war and how to solve the problem.

Aluminum Industry Wants Tax Deal, but Nobody Wants to Cut the Red Tape

in Economic Liberty, Economics, Liberator Online, News You Can Use, Taxes by Alice Salles Comments are off

Aluminum Industry Wants Tax Deal, but Nobody Wants to Cut the Red Tape

This article was featured in our weekly newsletter, the Liberator Online. To receive it in your inbox, sign up here.

Many think of crony capitalism as the source of all problems we face as a nation. They are not entirely wrong.

Take the domestic aluminum industry for instance. Despite the taxpayer investment, producers are losing their share of the market. Without freedom to compete, members of the industry take part in political games, using their influence with state governments and Washington politicians to beg for privileges that no other aluminum producers enjoy. The result? Major trouble for the consumer, employer, and worker.

Aluminum

In America, there are three companies that produce primary aluminum. Alcoa is the largest producer, operating multiple primary plants in New York, Washington, Indiana, and Texas.

In early November 2015, Alcoa announced that it would have to permanently close its Massena West smelter in New York. At the time, town supervisor Joe Gray said that the jobs Alcoa would take away if the smelter closed would be “next to impossible to replace,” considering the aluminum giant has been the major employer in the region for quite some time.

By late November, however, a deal was reached and the upstate New York smelting plant was saved. What happened? New York Governor Andrew Cuomo unveiled a $69 million incentive package that benefited Alcoa. At least 600 jobs were saved.

The plan was backed by Cuomo and Sen. Charles Schumer (D-NY), who made the announcement at the Alcoa plant in Massena. As union bosses celebrated the special relationship between the New York government and industry leaders, the incentives weren’t widely criticized, mainly because tax incentives aren’t seen as handouts by many. Instead, people often believe that tax incentives are good.

During the announcement event, Cuomo claimed that the incentives plan “is the state’s way of stepping up.” Yet none of those present were able to criticize the existing red tape that makes it so hard for companies to function in America in the first place.

If the cost of doing business in the country was not an obstacle, more competitors would fill up the gap, and cheap aluminum coming from China would have a hard time staying relevant. Instead of working to remove red tape and help all entrepreneurs and existing businesses to flourish, the state decided to give one group access to privileges that others in the same industry simply do not enjoy.

But as Alcoa enjoys the $30 million it got from the New York incentive package, things continue to look bad for the aluminum producers and its employees. Except now, the issue is not New York, it’s Indiana.

According to IndyStar.com, southwestern Indiana residents are now concerned that the Alcoa smelter in their state will shut down, shedding 600 jobs in the process. Early in January 2016, Alcoa announced it would be closing its Warrick Operations smelter by the end of March. This is a “major economic event,” said Warrick County Chamber of Commerce director Shari Sherman. But to Alcoa, the shutdown makes sense because the Indiana facility is not “competitive.” Meaning the cost of keeping it open is a burden.

The facility has been operating in Indiana for the past 55 years. As the smelter closes, multiple families brace for the impact. As workers struggle, so do companies that are finding it much harder to compete. The issue? They have a hard time covering the costs of doing business in America.

If workers and consumers are serious about seeing fewer job losses in their states and more prosperity, they’d be urging lawmakers to cut the red tape, not backroom deals.

Two Phrases That Unmask Crony Capitalism and Corporate Welfare

in Communicating Liberty, Liberator Online, One Minute Liberty Tip by Sharon Harris Comments are off

(From the One-Minute Liberty Tip section in Volume 20, No. 12 of the Liberator Online. Subscribe here!)

Chris Rufer is founder of The Morning Star Company, which employs approximately 2,500 people in food processing and agribusiness. He’s also an Advocates Board member.

Last week Chris had an excellent opinion piece published in the New York Times, explaining why the federally run Export-Import Bank is a rip-off and boondoggle that should be shut down.

The article is entitled “End This Corporate Welfare.” There’s a brief excerpt from it in this issue’s They Said It column, and you can read the full article here.

Chris does a great job of making this seemingly obscure and esoteric issue clear, interesting and important to the average reader.

One phrase in particular jumped out at me. Describing how corporate welfare works, Chris writes: “It’s private gain at the expense of public pain.”

That’s a great phrase! I love the populist feel of it, and how it makes the injustice of such things as the Export-Import Bank instantly clear. “Private gain at the expense of public pain” can be used to describe all kinds of corporate welfare and crony capitalism boondoggles: professional sports subsidies, licensing laws that protect politically connected businesses from competition, taxes on imported goods… and many more.

I also like another phrase Chris used. He notes that the Import-Export Bank gives huge private businesses taxpayer-backed loans, guarantees and insurance.

The results: “When a company profits from the bank’s support, it pockets the money. If it defaults, taxpayers’ pockets get picked.”

That, too, is a clever and catchy way to describe the essential unfairness of corporate welfare, how it protects politically connected companies from the risks and consequences of their actions — at the expense of the rest of us.

Consider adding these two phrases to your liberty communication vocabulary.

“House of Cards” Is Alive and Real in Maryland

in Liberator Online by James W. Harris Comments are off

(From the Intellectual Ammunition section in Volume 19, No. 6 of the Liberator Online. Subscribe here!)

And you thought Netflix’s “House of Cards” was just Frank Underwood - House of Cardsfiction. Reports the Washington Post:

“A few weeks before Season 2 of ‘House of Cards’ debuted online, the show’s production company sent Maryland Gov. Martin O’Malley a letter with this warning: Give us millions more dollars in tax credits, or we will ‘break down our stage, sets and offices and set up in another state.’

“A similar letter went to the speaker of the House of Delegates, Michael E. Busch (D-Anne Arundel), whose wife, Cynthia, briefly appeared in an episode of the Netflix series about an unscrupulous politician — played by Kevin Spacey — who manipulates, threatens and kills to achieve revenge and power.”

Wow! You’ve got to wonder if Frank Underwood himself co-signed those letters.

But then the non-fiction bad guys struck back — with an Underwood-style threat to seize the company’s property if they stopped filming.

No kidding. The Maryland House of Delegates quickly drew up and passed legislation requiring the state to use eminent domain to buy or condemn property owned by a film company that has claimed more than $10 million in state tax credits — if said company stops filming. (Wonder if they had anyone specific in mind?)

Cato’s David Boaz sums it up just right: “It’s hard to imagine a better example of rent-seeking, crony capitalism, and conspiracy between the rich, the famous, and the powerful against the unorganized taxpayers. A perfect House of Cards story.”

Unfortunately, zillion-dollar tax money handouts to wealthy film companies are common practice in most states. All in the interest of creating jobs and stimulating the economy, of course.

In case anyone wants to know, the Tax Foundation reports that film tax incentives “are a net loss to states, and there are plenty of studies demonstrating this” and “every independent study has found that film tax credits lose revenue.”

Not that politicians care. Hey, it’s not their money.

FREE Libertarian E-Book: The Morality of Capitalism

in Economic Liberty, Liberator Online by James W. Harris Comments are off

(From the Intellectual Ammunition section in Volume 19, No. 4 of the Liberator Online. Subscribe here!)

In recent issues we’ve reviewed and recommended two outstanding free e-books available through Students For Liberty (SFL): After the Welfare State and Why Liberty.

Now we’re pleased to suggest one more great SFL title to add to your ebook library.

The Morality of Capitalism: What Your Professors Won’t Tell You combines the writings of renowned economists, philosophers, historians, policy experts, and entrepreneurs from around the world to make the case that not only do free markets “deliver the goods,” but that true free market capitalism is a just and moral system.

It is clear and highly readable, suitable for students and non-students alike, for newcomers to free enterprise and libertarianism as well as longtime libertarians.

As SFL notes:

“As students for liberty, we are well-versed in defending the free market. Our opponents on campus constantly claim that markets are unfair, that capitalism is exploitative, that competition is inhumane, and that government control and redistribution are the solution to society’s problems. Every day we struggle to explain that a free society that embraces free exchange is the only way to create wealth, peace, and prosperity for all.

“Most people acknowledge, if only begrudgingly, that capitalism does produce considerable wealth and material well-being. But many feel torn between material prosperity on the one hand and living a moral life on the other. The self-interested pursuit of profit that is characteristic of a capitalistic system just doesn’t feel right to them.

“The task before us, then — if we wish to actualize the truly free social system that is laissez-faire capitalism — is to provide and defend its moral justification. We must convince fellow students that capitalism is not just the most efficient system, but a virtuous one as well.”

The Morality of Capitalism: What Your Professors Won’t Tell You makes that case, powerfully and convincingly.

Students For Liberty has distributed over 100,000 copies to students around the world since it was first made available.

You can learn more about The Morality of Capitalism: What Your Professors Won’t Tell here.

Download it as a FREE PDF ebook here.

Here’s the table of contents: 

Introduction: The Morality of Capitalism by Tom G. Palmer
The History of a Word
Free-Market Capitalism vs. Crony Capitalism

Section I: The Virtues of Entrepreneurial Capitalism

  • Interview with an Entrepreneur featuring John Mackey (Whole Foods CEO)
  • Liberty and Dignity Explain the Modern World by Deirdre N. McCloskey
  • Competition and Cooperation by David Boaz
  • For-Profit Medicine and the Compassion Motive by Tom G. Palmer

Section II: Voluntary Interaction and Self-Interest

  • The Paradox of Morality by Mao Yushi (Translated by Jude Blanchette)
  • The Moral Logic of Equality and Inequality in Market Society by Leonid V. Nikonov
  • Adam Smith and the Myth of Greed by Tom G. Palmer
  • Ayn Rand and Capitalism: The Moral Revolution by David Kelley

Section III: The Production and Distribution of Wealth

  • The Market Economy and the Distribution of Wealth by Ludwig Lachmann
  • Political and Economic Freedoms Together Spawn Humanity’s Miracles by Temba A. Nolutshungu

Section IV: Globalizing Capitalism

  • Global Capitalism and Justice by June Arunga
  • Human Betterment through Globalization by Vernon Smith
  • The Culture of Liberty by Mario Vargas Llosa
  • A Little Further Reading for Fun and Profit (and Better School Papers) by Tom G. Palmer

The Morality of Capitalism: What Your Professors Won’t Tell You is published by SFL and the Atlas Network. We highly recommend it.

Student groups note: SFL offers a limited number of hard copies at no cost to student groups. You can learn more about that here.