Regulatory Capture is Killing Us, and We Are Two Steps Away from the Totalitarian Fascist Regulatory States of America

From the EPA to the FDA, the massive influence of corporations on the agencies tasked with regulating them has proven to be a deadly experiment in American-Style Fascism.

When the airline industry has a disaster, it goes under review by the National Transportation Safety Board. When corporations dump a toxic brew of chemicals into ground surface waters, they are supposed to answer to the EPA. When drug companies’ products - drugs and vaccines - cause more health problems than they prevent or cure, they are supposed to be subject to recall by the FDA.

When regulatory agencies become dominated by the corporations they are supposed to control, that agency has been captured by the industry. The public interest becomes a lower priority than the bidding of the will of the industry, and the industry flourishes - most of the time at the cost of human health.

Examples exist from agencies tasked with regulating finances, the airline industry, the chemical industry, the petroleum industry, the defense industry, and, of course, the pharmaceutical industry. Those who understand the specific details of regulatory capture eventually develop the position that a captured agency is worse than no agency at all, because via their influence, corporations can begin to wield the administrative power of the executive branch of government, which is more efficient and less expensive than buying political influence.

Both of the major political parties in the US are guilty of allowing the foxes to run the henhouse; wholescale change in policy at the EPA occurs every time the White House changes hands. Trump’s two EPA Chiefs, Scott Pruitt and Andrew Wheeler were stellar examples. Pruitt was a lobbyist for the fossil fuel industry (which produces thousands of chemicals), and Wheeler, well, just click the link on his name.

The combined effect of Pruitt’s and Wheeler’s rollbacks on EPA policy enforcement and moves to allow polluting industries to regulate themselves were black and white examples of changes in policy against the evidence provided by Science.

A further consequence of this has been what I call the politicization of fact, examples of which we have seen with environmental toxins, safe food, and vaccine safety. This requires the willful dismissal of the importance of the search for truth, which comes with an abject disregard for rational inquiry, empiricism and the balanced view of Science, and is intolerable to any card-carrying Scientist.

Examples of specific mechanisms (and symptoms) of regulatory capture include:

• The Blind Eye - Failure to investigate or levy penalties for violations. 

• Golden Parachute - High-paid jobs for regulators following success in weakening regulatory power while in office. Examples include former FDA commissioner Scott Gottlieb, and former CDC Director Julie Gerberding, both of whom are high-paid executives (Gottlieb, Pfizer; Gerberding, Merck). Gottlieb has continued to appear on national mainstream news outlets during COVID-19, wielding carry-over authority via the title “Former FDA Commissioner.”

• The Revolving Door - Placing former corporate leaders in positions of regulatory authority, often Directorships (Biden’s current nominee for FDA Chief, Robert Califf, was, according to Wikipedia, “a paid consultant for Merck Sharp & Dohme, Johnson & Johnson, GlaxoSmithKline, AstraZeneca, and Eli Lilly per ProPublica from 2009 to 2013). The largest consulting payment was $87,500 by Johnson & Johnson in 2012, and ‘most of funds for travel or consulting under $5,000,’  which has been called ‘minimal for a physician of his stature.’ From 2013-2014 he was paid a total of $52,796, the highest amount was $6,450 from Merck Sharp & Dohme, followed by Amgen, F. Hoffmann-La Roche AG, Janssen Pharmaceuticals, Daiichi Sankyo, Sanofi-Aventis, Bristol-Myers Squibb and AstraZeneca. He was the Director of Portola Pharmaceuticals, Inc. from July 2012 to January 26, 2015. An advisor of Proventys, Inc., Chairman of the medical advisory board of Regado Biosciences, Inc. and has been a member of the medical advisory board since June 2, 2009, and a member of the clinical advisory board of Corgentech Inc. Forbes wrote that his close ties to the drug industry were the reason for him not being nominated for the FDA Commissioner position in 2009.”

• Facilitation of Opportunity - An example from oil and gas drilling occurred when the US Minerals Management Service (MMS) agency, which supervised offshore oil drilling, facilitated new projects for the private sector and mismanaged penalties for the BP Oil Spill (DOL Report on the Wayback Machine; the original link is a 404).

• Rent-Seeking - When individual companies try to get a larger slice of a market’s total wealth without creating any additional wealth for that market. Pfizer recently met with the Biden administration directly, avoiding having to go through FDA’s regulatory process on COVID-19 vaccine boosters, a move that led to the resignation of two top FDA officials, who are now writing op-eds.

• Ignoring Science - Cherry-picking studies that support a policy position, but ignoring sometimes thousands of studies that fail to support a favored policy. The most recent example is the dismissal of the evidence in support of early use of Ivermectin, for which over 1,400 studies show benefit.

• Controlling the Narrative - Given their national standing, agency leadership often have the ability to misdirect the public’s focus from an issue of real concern to one that is either of not real concern, or to an issue that is so politicized that no progress in meaningful discourse can be achieved. A good example of this is the substitution of concern over chemicals to climate change. By far, most of the toxic chemicals of concern in our air, food and water are by-products of the petroleum industry – yet they receive little attention by the press compared to “climate change”. Another example is the substitution of the issue of vaccine safety to efficacy; the justification of the risk based on the perceived benefits thwarts inquiries into why vaccines have not been made safer after decades of accumulated evidence of their risk of harm.

• Self-Regulation (turning regulatory responsibility over to industry) - One example is the National Transportation Safety Board’s (NTSB) allowing self-certification by airlines, NYTimes); another is that CDC and FDA used and considered non-peer-reviewed press releases from vaccine makers like Moderna and Pfizer on the safety & efficacy of their COVID-19 vaccine products. Early releases by both Moderna and Pfizer failed to carry the required “Forward-Looking Statements,” and yet SEC has not investigated, also providing an example of failure to investigate.

• Agency Weakening - By reducing its budget, demoralizing people in key positions and failing to fill positions vacated by retirement and resignations, industry agents can reduce the effectiveness of the regulatory agencies they operate.

• Federal “Non-Profits” and Funded Applications - The CDC Foundation receives over $25M per year from vaccine makers, and the FDA receives most of their funding from application fees for drug reviews.

Regulatory capture can occur at the State level as well; for example, the fracking industry in Pennsylvania (see POA's "Fracking and the Revolving Door in Pennsylvania").

Captured agencies can develop unbridled power. CDC Director Rochelle Walensky, for example, recently issued a rule that property owners could not demand rent from tenants due to COVID-19. Her authority to do this does not exist anywhere on paper - it simply exists because no one pushed back on her power grab. If any agency should have intervened, it should have been HUD - who could have proposed rent insurance, or brokered rent payment plans via an innovative progressive program that sought balance on the issue. Backed by an insurance program, the program could be re-paid collectively over decades via renters’ and rentees’ fees (paid via their tax withholdings and filings) - and property owners who rent with mortgages could have been given non-foreclosure protection.

This type of buffering is moderate Keynesian: the government is there to help during times of crisis, and hands-off when things are going well. This type of dynamic thinking is not possible when capture leads to politicization, because politicians end up answering to very wealthy stakeholders. Complex systems thinkers are needed, and profit motive over-simplifies dynamics.

Walensky’s power grab is a prelude to a future in which administrative power so vastly outstrips representative government that we will, or perhaps already live, in the Regulatory States of America. If totalitarianism comes to the United States, it will come from an Administrator. It will be preceded by an emergency, and powers like the power seized by Walensky will be assumed. Even now, the Administrative State is not at all different from the Administrative Soviet government. We increasingly live by decree of administrative rule, and this is intolerable to any Constitutionalist, regardless of political affiliation.

While most Americans are keenly aware of the imbalance of interests, they may not be aware that our founders were very much aware of the undue influence of special interests on policies and the near inevitability of the abuse of government that occurs when those who make rules are the same as those who enforce them.

Mike Lee captured this early awareness and how protection against it was embodied in how the federal government was structured in his article, “Fighting Regulatory Capture in the 21st Century”:

“The status-quo arrangement of incentives and power within the modern administrative state has made regulatory capture all but inevitable. The American Constitution was written by men who, as James Madison wrote in Federalist No. 10, understood that “[t]he latent causes of faction are . . . sown in the nature of man.” So the Constitution establishes a system that divides government power and makes lawmakers dependent on the people, in order to make it as difficult as possible ‘for the mischiefs of faction’ to systematically redirect the law away from the common good.”

“The modern administrative state flips this theory on its head, consolidates power, and assumes that good intentions will always overcome ‘the latent causes of faction.’ This upending of our constitutional order was not accidental, and it did not happen overnight. Over the course of the 20th century, Congress steadily surrendered its constitutional powers and responsibilities to the executive branch. And, since that period, this trend has only accelerated.”

Milton Friedman was of the opinion that regulation always shifts to capture, leading to increasingly one-side benefits: 

“Government regulation is always undertaken to benefit consumers. It is always undertaken under pressure from the producer – and it ends up having the opposite effect. This is the law of unintended consequences – the law that is intended to benefit consumers will end up benefiting producers.”

Totalitarianism is Two Steps Away

There are apologists who even feign to argue the benefits of regulatory capture; these amount to a semantic game to platform justifications or to redirect attention from individual steps in the march to tyranny toward insincere (or ignorant) belief in the ability of industries to “self-regulate.” Private Public Partnerships (P3) exist when the government funds projects over an extended period of time, underwriting development costs that then become proprietary to private interests. The P3 program has re-made much of the biological and biomedical research so thoroughly that the point where industry ends and government begins can hardly be found. They are bundled together as tightly as Mussolini’s Fascist ideal; the only missing piece is the military, and a charismatic leader (or committee). We are two steps away from totalitarianism.

The undue influence of industry on regulatory agencies, individual regulators, or politicians who influence regulatory policy positions is killing American citizens. There are plenty of examples, and no excuses. We need firm consequences for violations of the public trust; instead, we have hidden economic incentives and outright fraud tolerated by agencies tasked with protecting public safety

If we do not enact these wholescale reforms, other industries will learn from Pharma’s stunning success in their total take-over of CDC and now, with Biden’s new nominee, the FDA.

Those looking to me for solutions need only look in the mirror. It’s up to every one of us to get our politicians out of industry’s back pocket, to cut the ties that bind. This will require major reform; undoing campaign finance reform and disallowing corporate funding of campaigns would be a place to start. Requiring annual review of violations of existing restrictions on the mechanisms of regulatory capture with individual penalties to regulators for violations would be another good idea. Ending direct-to-consumer marketing by Pharma would create (again) a free and independent press in the United States. Banning personal financial interests by government employees in the projects they fund or regulate would seem to be a necessary step. Giving a larger part of the responsibility pie to elected officials might then actually help. 

Oddly, this initiative was backed by Elizabeth Warren, who is firmly and completely influenced by Pharma on the issue of vaccines. 

It is noteworthy that the entry on Wikipedia page for Regulatory Capture has a section for the FDA, which is blank:

NB: The entire focus of environmental concerns on climate change is a good example of controlling the narrative; whether climate change is global warming or not has nothing to do with the billions of tons of toxins dumped into our water, air and soil, fed to or injected into the animals we eat, sprayed on the crops we feed our children and ourselves, and present on the products we buy and sell - yet those issues are given insufficient play time.

That’s why I created the course “Environmental Toxicology: Ecosystem and Human Health” at IPAK-EDU, which is currently winding down for the fall semester 2021. The course will run live annually from Sept-Dec.  See other courses with open enrollment at the IPAK-EDU website.

Related:

Lee - Fighting Regulatory Capture in the 21st Century https://www.theregreview.org/2016/06/16/lee-fighting-regulatory-capture-in-the-21st-century/

https://www.nytimes.com/2017/10/21/us/trump-epa-chemicals-regulations.html

https://medium.com/@dsaintgermain/the-boeing-debacle-is-the-latest-example-of-regulatory-capture-2a8e138a9c8b

(Book) Preventing Regulatory Capture: Special Interest Influence and How to Limit It http://tobinproject.org/books-papers/preventing-capture

https://www.cnbc.com/2018/07/06/scott-pruitts-epa-successor-has-long-history-with-coal-companies.html

Think the FDA Is Looking Out for Your Health? History Tells a Different Story.  https://childrenshealthdefense.org/defender/fda-regulatory-capture-revolving-door-jobs/

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