I agree with Democrat William A. Galston’s observations in his Wall Street Journal column that the facts in the infant formula shortage constitute a prima facie case for bad governance which can (and should) be remedied:
In a modern society, citizens can’t possibly be aware of—let alone monitor—all the complex processes that affect their lives, so we ask government to do this on our behalf.
I’m going to interrupt Mr. Galston right there. A lot of those “complex processes” are created by the federal government. He goes on:
We grant government a substantial measure of discretionary authority, and in return we expect officials to scan the horizon for potentially harmful developments.
I’m sorry but I’m going to interrupt him again. In 1995 the Federal Register, the compendium of all federal regulations was about 1,300 pages in length. Now (a mere 27 years later) it’s more than 81,000 pages long. Not only is being aware of federal regulations beyond the ability of ordinary citizens, it’s beyond the ability of the very bureaucrats whom Mr. Galston thinks we can rely on. Continuing:
We cannot expect them to divine an imponderable future, but we do expect them to understand the reasonably foreseeable consequences of events—and of their response to them.
This brings us, first, to the Food and Drug Administration. On Oct. 21, 2021, the FDA received a report from a whistleblower who raised serious concerns about conditions at an Abbott Laboratory plant that produces infant formula. It took the agency about two months to interview the whistleblower, another month to inspect the plant, and more than two additional weeks until Abbott issued a recall notice and shut the plant. Members of Congress from both parties are raising tough questions about this dilatory pace.
The consequences of the plant shutdown were foreseeable. The infant formula market is highly concentrated, with two firms accounting for more than 80% of all domestic production. Abbott is the single largest producer, and the plant that shut down accounts for about 20% of the total. Common sense suggests that when you abruptly remove a fifth of supply from the market, shortages are inevitable.
Compounding the problem, foreign firms couldn’t fill the gap. Regulatory barriers and steep tariffs ensure that 98% of all infant formula consumed in the U.S. is produced in the U.S., which is good news for American producers but not for American consumers.
Another interruption. “Regulatory barriers and steep tariffs” aren’t the only reasons that foreign firms can’t “fill the gap”. Total capacity is another reason that doesn’t receive enough attention. The U. S. is a very big country—four times the size of Germany, five times the size of France, and almost ten times the size of Canada. We can’t expect other countries to be our backstops. Continuing:
I’m not the only one wondering why we have tariffs as high as 17.5% on formula produced in the European Union, or why our regulations exclude imports from countries whose food safety standards are at least as strict as our own.
Three months ago, most Americans were unaware of these facts about the infant formula industry, but it stretches credulity to believe that the White House wasn’t. When the Abbott plant shut down, alarm bells should have gone off at 1600 Pennsylvania Avenue, and planning should have begun to avert the inevitable shortages. Judging by the scramble of the past 10 days, whatever plans there were didn’t get very far.
If regulatory roadblocks had been softened in a timely manner, for example, the U.S. could have imported enough infant formula to mitigate the impact of the plant closing. Instead, the president has had to use the military to conduct an emergency airlift from overseas. If formula from the EU is safe for U.S. consumers today, it was safe three months ago—and probably three years ago.
You might recognize that point as one I’ve made here early on.
I also agree with all of his proposals for remediation:
This is also an opportunity to make other changes, starting with tariffs and regulations and extending to some unnecessary rigidities in the Women, Infants, and Children programs, which help cover the cost of formula for those who can’t afford it. The government should find a better balance between efficiency in normal operations and resilience in times of stress. More broadly, it is time to reconsider a longstanding proposal—backed by everyone from the Government Accountability Office to the Trump administration—to break up the FDA into two agencies, one dealing exclusively with food safety, the other with drugs. Numerous GAO reports have shown that the U.S. food safety system is fragmented across different departments and agencies with overlapping responsibilities and that a single food safety agency would improve effectiveness and efficiency of food safety regulation. The odds are that such an agency would have responded to the infant formula crisis more alertly than did the FDA.
There are lots of reasons for the enormous growth in federal regulations. Yes, the U. S. is a big country but it’s not 50 times bigger today than it was 27 years ago. One of the reasons is the use of personal computers and word processors. I’m not the first person to point it out but novels are longer today than they were a century ago (except for the occasional War and Peace) because it’s easier to produce longer works than it used to be. But another reason is the natural inclination of bureaucracies to extend their own mandates. Left to their own devices they will continue to expand without limit and Congress has been reluctant to impose enough limits on them. And, finally, there is a view abroad in the land, frequently on the part of those who know little about how governments actually work, that all problems can and should be solved by governments.
As to my second question once again, left to their own devices bureaucrats will not behave in a timely or responsible manner. Their objective, inevitably, will be to avoid responsibility and bold, decisive action is the opposite of that. In addition their is no downside risk to delay or just plain inaction.
We need serious civil service reform urgently. We need to amend shield laws or remove them entirely, only defending civil servants when they are operating explicitly within the law.
Finally, a modest proposal. Maybe we should abandon the age-old dictum ignorantia juris non excusat. Maybe it’s time for ignorance of the law to be a legitimate excuse.
Some other suggestions.
– Be willing to make people accountable — Why has no one resigned or been fired in disgrace over the matter?
– Its not so much centralization in a company that’s the issue; but centralization of production in one plant. 20% of national production in one plant is a disaster in the making. If Abbot had spread out that production over 5 plants it would be a different story. It needs to be stressed; even with more companies in the market it can lead to the same issue, for example if there were 10 companies producing formula but all sharing the same plant it leads to the same problem. Example abound in other industries — IT (“public cloud”), newspapers (sharing the same newsprint factory), wireless (MVNO’s sharing the same underlying infrastructure).
– Be much more strict on online marketplaces reselling critical goods (perhaps a windfall tax is in order)
– Create a national stockpile
Their objective, inevitably, will be to avoid responsibility and bold, decisive action is the opposite of that. In addition their is no downside risk to delay or just plain inaction.
More importantly, there is great risk for bold, decisive action.
Few of the “best & brightest” become government bureaucrats, and in many cases, they know less about the regulations than the industry experts. To avoid fines, businesses need to know what the regulations are and what constitutes a violation.
One reason for regulation bloat is because some businesses do not adhere to the “spirit of the law”. So, more regulations are added to fill in the holes, and the Registry bloats.
To do that we need civil service reform. At this point only political appointees can be “held accountable” and they’re only a small minority of the total federal payroll.
Agreed on civil service reform.
But not even a single political appointee has been held accountable.
Not the FDA commissioner, not the Health Secretary, the deputy Health Secretary, nor anyone in the West Wing (including the WH Chief of Staff).
IMHO CO is correct in observing that diversification is a sound practice, not just in a financial portfolio, but generally. But let’s not lay it all on Abbot, forget the tradeoffs or think it unique.
The nation has adopted policies that make us vulnerable to rare earth metal and oil supply disruptions thanks to the enviro nuts. Computer chips anyone? I’m sure a few hours of thought could come up with quite a laundry list.
If you put your regulatory cap on and call for this diversification you need to understand that you are regulating into existence cost increases to consumers. And from everything I’ve read this situation did not need to become so dire. Exactly what are these regulators doing day to day? One might want to ask a question and pick a cost: regulations, and the attendant regulatory failure and product cost increases, or the product cost increases attendant to diversification of production. We seem to get both. Let the debate begin……
Regulatory policy is a recurrent topic here at this blog. As I always point out, some level of regulation is certainly necessary, but they inevitably run wild (as observed in other comments), and are often feckless, or designed to be manipulated for the gain of the politically favored. I stand unconvinced that good government or governance is anything other than a rare event.
In a spirit of even handedness, I will cite a contradictory environment, and one I know a lot about. Airline safety regulations.
Airline safety is imperfect, but quite effective. Airplanes don’t routinely fall out of the sky. Many of you may not know that the airplanes you fly are chock full of engineering material defects. It is dealt with primarily through redundancy. That’s easy. But in addition, known failure modes are directed, literally by design, to routine inspection points. Shorter: before you break, we will test you; we know what to monitor, and we will find it. Similar to a blood, liver panel or urine test. Airline safety regulators seem to have the ability to work with industry to come to sensible solutions. The most recent contradictory point, however, is with Boeing and the Max.
Other regulatory environments just do not seem to be as professional.
Can help but notice that you leave out Abbott as part of the problem. I am guessing they knew about the whistleblower. They had to know they would be inspected. The govt was slow so they had 2 months to prepare and clean up. They didnt. But its all the fault of the government.
Abbott wants to make profits. I am going to go out on a limb and assume the management of Abbott are not totally stupid. They had to know that having so much production in one place puts production at risk if there are problems. Yet they went ahead and centralized anyway, just like we see in other industries. Companies just arent going to prioritize (many companies anyway) long term capabilities at the cost of short term profits. Do we want govt to force them to do that?
Steve
Which is exactly why we shouldn’t want to grant companies monopolies. Competition increases the incentives for improvement.
I’m not defending Abbott—just pointing out the obvious. Who do we expect to enforce health and safety regulations on Abbott? I would like to think that companies do things just because they’re the right things to do but my experience tells me that is rare in large companies. At best they’re amoral, following their incentives. At worst they’re actively engaging in illegal or just barely legal actions to cut costs and reduce competition.
Don’t think Abbot is free of responsibility. I have commented on those lines, where is the FBI investigation?
Bureaucracies thrive on bureaucracy and red tape regulations. This
leads to bloated, inefficiencies in government practices. That’s why whenever I read or hear of a candidate seeking office, advocating for smaller government, my attention gravitates in their direction. As for the baby formula shortages, it’s just one of many products that will be in short supply. Fertilizer shortages, wheat products, diesel, eggs, coffee, etc. are all disappearing on the Biden supply chain escalator. Because of this president’s bad policies, nearsightedness, and lack of brain power he simply continues to blunder ahead, thinking all is well with the world, while human neediness and unreliable supply chains become ever more chaotic.