They’re Not Here to Protect You: When Regulators are in Bed with the Industry
The US Federal Government hasn’t been acting for the primary benefit of the public for decades. Regulatory capture is one of the main forms of corruption today and has been slowly eroding away at our democracy for ages.
Regulatory capture refers to the power corporations wield over government policymaking.
What Is Regulatory Capture and How Does It Hurt Society
At its core, regulatory capture is the notion that a regulatory body set up to protect citizens and safeguard the public interest may be protecting corporate interests instead.
It occurs when regulatory agencies tasked with overseeing industries become too closely aligned with the interests of those industries, at the expense of everyone else.
This can happen in many ways, from regulators aligning incentives and goals with those of companies they are meant to regulate, to lobbyists favoring certain corporate entities.
The consequences of regulatory capture are far-reaching and affect everything from air quality standards, job security, and wages to consumer protection laws. This type of government corruption effectively undermines the public good by building a barrier between citizens and their access to justice. In the case of rent seeking, a corporation can extract tax money it doesn’t deserve from the federal government.
If left unabated, regulatory capture has serious economic and environmental implications – not only can it stifle innovation while leaving consumers vulnerable but ultimately it erodes trust in the government as an arbiter of fair play.
Examples Of Disasters Enabled By Regulatory Capture
There are many examples of lax regulation resulting in serious harm to the public. Too often corporations and politicians work together to harm the general public so that they can squeeze a few more pennies of profit. People die, honest workers lose jobs and the environment takes a hit.
Here are some of the more notable times regulatory failings hurt us all:
East Palestine, Ohio train wreck
While the full story will likely never be known, it’s safe to say the East Palestine, Ohio train wreck of 2023 was caused by a combination of factors. The fact remains that it happened. We have regulations to ensure these accidents don’t happen, but it did.
Something is wrong.
According to Reuters “the derailment resulted in the release of over one million gallons of hazardous materials and other harmful pollutants into Ohio’s air, streams, rivers, soil, and groundwater killing tens of thousands of fish and other animals, and recklessly endangering the health of Ohioans throughout the region.”
While it’s difficult to say lax regulation or regulatory capture definitively played a role, there is a long history of both issues in the transportation industry.
Regulators and the industry are not taking safety seriously, and haven’t for years. According to the New York Times, in June of 2015, the Federal Railroad Administration said it was “preparing a series of proposals that would address, in addition, to train speeds, distractions in the cab and further training for engineers.” This was after safety briefly came into focus following a derailment in Philadelphia and a crash in the Bronx. Despite the attention on safety for a few days, clearly, the FCA didn’t do enough to protect the public.
We only do things that make money. You can’t make money making people safe, so it’s not a priority for corporations and the politicians they employ.
BP Deepwater Horizon Oil Spill
The BP Deepwater Horizon oil spill released an estimated 4.9 million barrels of oil into the Gulf of Mexico, causing the deaths of hundreds of thousands of marine animals and other species. The total cost of the disaster has been estimated at over $65 billion, and the spill had devastating long-term environmental, economic, and social impacts on the region.
In the case, the Minerals Management Service (MMS), which was responsible for regulating offshore drilling operations, was criticized for being too cozy with the oil and gas industry, resulting in lax oversight and enforcement. This led to a lack of proper safety measures and procedures that contributed to the disaster.
The MMS was found to have allowed the industry to essentially self-regulate, with companies like BP being given too much latitude in terms of safety protocols and risk management. The agency was also found to have a “culture of ethical failure” in which officials accepted gifts, engaged in inappropriate relationships with industry insiders, and ignored conflicts of interest.
The Boeing 737 MAX Crisis
In 2018 and 2019, two crashes of Boeing’s 737 MAX aircraft resulted in the deaths of 346 people. It was later revealed that Boeing had exerted undue influence over the Federal Aviation Administration (FAA), which is responsible for certifying new aircraft designs. As was the case with the MMS, the FAA allowed Boeing to conduct much of the certification process itself, leading to critical failures in the aircraft’s design and safety features.
In addition to the 346 deaths, the crisis shook confidence in American manufacturing, cost Boeing millions in legal fees, not to mention irreperable harm to one of the country’s biggest manufacturers. It has been reported that the grounding of the 737 MAX planes cost airlines billions of dollars in lost revenue and additional expenses, including the costs of leasing alternative aircraft and rebooking passengers.
The Purdue Pharma Opioid Crisis
Purdue Pharma, the manufacturer of the prescription painkiller OxyContin, was found to have engaged in aggressive marketing and lobbying efforts that led to the overprescription of opioids and the subsequent opioid epidemic in the United States. Purdue Pharma had also successfully lobbied the Food and Drug Administration (FDA) to approve OxyContin for broader use, despite concerns about its addictive properties.
Millions of lives have been lost due to opioids and regulatory capture has, in part, been blamed for the crisis. The opiod crisis has been one of the most devastating issues facint the contry and a lot of the blame lies with corrupt individuals.
The Great Financial Crisis
Many experts attribute the Great Financial Crisis of 2007-2008 to a combination of factors, including a lack of effective regulation and lax oversight. Specifically, financial institutions were allowed to take on excessive amounts of risk with few repercussions, and a “too big to fail” mentality pervaded Wall Street. This was all enabled by the repeal of important banking regulations, including Glass-Steagall, in the 1990s that had previously limited risk-taking by financial institutions. By paying politicians to help them make more profits, the financial sector caused the most severe recession since the Great Depression.
It’s telling that following the crisis, the idea of clawbacks, or the ability to recover pay from executives involved in malfeasance, was never pursued.
San Bruno, California Gas Explosion
The gas explosion in San Bruno, California is another example that highlighted how ineffective regulatory oversight can be when corporations are in control. The explosion, which killed 8 people and destroyed 38 homes, was caused by an aging and poorly maintained gas pipeline that had been operated by Pacific Gas & Electric (PG&E).
Despite regulations mandating proper maintenance of gas pipelines, PG&E had failed to adhere to them due to a lack of effective oversight. After years of reports and warnings of unsafe gas lines, the government failed to take action until it was too late.
The Fossil Fuel Industry And Climate Change Policy
The fossil fuel industry has been accused of exerting undue influence over government policies related to climate change. For example, the Trump administration rolled back numerous environmental regulations and promoted fossil fuel development, despite overwhelming scientific evidence of the dangers of climate change. Many of the officials responsible for these policy decisions had ties to the fossil fuel industry.
Fracking
By colluding with the government, the fracking industry has been able to evade regulation and oversight for years. Despite evidence that fracking can lead to water contamination, air pollution, and a host of other environmental hazards, the industry has continued to operate without meaningful restrictions. Furthermore, the government has allowed companies to hide information on chemicals used in hydraulic fracturing operations while also ignoring conflicts of interest in the regulatory process.
Fracking has been good for American energy independence, and it’s possible it doesn’t harm society. But by preventing regulators from doing their jobs, the industry has been able to skirt regulation and oversight — leaving citizens in multiple states exposed to potential harm.
The Prison System
Private prisons are another example of regulatory capture, as the industry is able to exert influence over public policy and criminal justice reform. Private prisons are incentivized to lobby for harsher sentencing policies in order to increase their profits, leading to higher incarceration rates and overcrowding. This has resulted in a number of human rights violations, including inadequate medical care and cruel treatment of prisoners.
The Kids-For-Cash Scandal
In one particularly horrible case, judges in Luzerne County, Pennsylvania were accused of accepting bribes from a private prison company to sentence juveniles to long-term detention in exchange for kickbacks. The scandal revealed the corruption and perverse incentives caused by allowing private companies to operate prisons. Regulatory capture had placed profits above the safety and human rights of the inmates.
Origins of Regulatory Capture – Who Benefits From It and Why
Regulatory capture is an insidious phenomenon that has audaciously crept its way into government agencies and institutions. By in effect bribing supposed regulators, privileged beneficiaries sidestep basic regulatory oversight and exploit consumers without consequence.
Regulatory capture usually starts at the political level through backdoor deals and lobbying tactics. Piles of cash, introductions to the powerful, exclusive job offers — all these and more are on offer for officials who, in return, provide access to the public purse.
By paying the right people the right dollar amount, private interests can basically write their own regulations.
Regulatory Capture Threatens the Future of Democracy
The insidious tentacles of regulatory capture are a threat to democracy, as they weaken the public’s trust in the government and undermine its authority. Corporations are able to gain an outsized influence over policy decisions, allowing them to promote their own interests at the expense of citizens. This is not getting better, as more and more money is pouring into lobbying and the political system.
Elected officials have a tendency to implement public policies that serve the interests of these elite cohorts, leaving the majority of citizens in an increasingly powerless and disenfranchised state.
Regulatory Capture is a Bipartisan Problem
Don’t make the mistake of thinking bad actors are only in the political party you don’t like. Government corruption is perhaps the only bipartisan game in town. Behind the charade of mainstream polarizations, the powerful are on the same team. The powerful protect each other, and don’t let newcomers in. Democrats and Republicans are really hyenas at a wildebeest carcass. Regulatory capture is just the logical outcome of this game.
Dismantling the Power of Regulatory Capture
Regulatory capture has a stranglehold on our Democracy. But it doesn’t have to stay this way – we can and must work together to tackle it.
To secure the future of democracy, it is necessary to challenge regulatory capture and limit its insidious presence – focusing on its root causes and combating its damaging effects for years to come.
Regulatory capture originates from the corrupt intentions of certain powerful groups. But the power of this practice does not have to remain unchecked – we can take steps to tackle it head-on.
The best way to fight back against the corrupting influence of regulatory capture is to take action now, proactively. We need to recognize how it manifests in society and how it works. Politicians must be held accountable when they participate in unregulated favoritism; communities should come together to advocate for policy changes that will strengthen regulation, bolster enforcement, and hold those responsible for wrongdoing accountable.
We must also place a priority on transparency in regulations since opacity allows manipulation by special interests.
We should all strive to be informed citizens with the knowledge and courage to stand up against unfair practices when we see them occurring.
It is only through collective action that we stand a chance of stopping regulatory capture and creating a better future for our children.
Demanding Corporate Responsability
Consumers have the power to pressure companies to act honestly by making informed purchasing decisions and holding companies accountable for their actions. When consumers demand transparency, honesty, and accountability from the companies they do business with, it can create a powerful incentive for those companies to act in the best interests of their customers.
Here are some ways that consumers can pressure companies to act honestly:
- Vote with your wallet: Consumers can choose to buy products and services from companies that have a track record of ethical behavior and transparency, and avoid companies that engage in deceptive or unethical practices.
- Speak out: Consumers can use social media, online reviews, and other channels to share their experiences and opinions about companies and products, and hold companies accountable for their actions.
- Support advocacy groups: Consumers can support advocacy groups that work to promote consumer rights and hold companies accountable for their actions. These groups can raise awareness of issues related to regulatory capture and other forms of corporate misconduct, and pressure companies to change their behavior.
- File complaints: Consumers can file complaints with government agencies, industry groups, or consumer watchdog organizations when they encounter deceptive or unethical behavior by companies.
By pressuring companies to act honestly, consumers can help to promote greater transparency, accountability, and integrity in the marketplace, and help to prevent regulatory capture and other forms of corporate misconduct.
Using The Political Process
Here are some ways we can ensure that government works for the people, and not just a few powerful interests.
- Increase transparency: Transparency can help to prevent regulatory capture by making it easier for the public to understand the decision-making processes of regulators and to identify potential conflicts of interest. This can be achieved through measures such as public disclosure requirements, open meetings, and whistleblower protections.
- Strengthen regulatory agencies: Regulatory agencies can be strengthened by providing them with adequate funding, resources, and staffing. They should have clear goals and be accountable for reaching them. Agencies should be staffed by individuals with relevant expertise and experience, rather than those with close ties to the industries they are tasked with regulating.
- Encourage competition: Competition can help to prevent regulatory capture by creating alternative pathways for companies to pursue their interests. This can be achieved through measures such as antitrust laws and policies that promote market entry and competition.
- Establish clear rules and guidelines: Clear rules and guidelines can help to prevent regulatory capture by providing a framework for decision-making that is not subject to undue influence. This can be achieved through measures such as standardized procedures, clear criteria for decision-making, and strong ethical standards.
- Increase public engagement: Public engagement can help to prevent regulatory capture by providing a voice for those who may be affected by regulatory decisions. This can be achieved through measures such as public hearings, comment periods, and opportunities for public input into the decision-making process.
Taking down regulatory capture will demand both vigilance and bravery from us.
The world without regulatory capture would be one in which every stakeholder is taken seriously and where opportunities are open to all people equally. We must strive to make this vision a reality.
A World Without Corruption
A world without regulatory capture would be a much more equitable place for those most impacted by it. Economic systems would function in the public’s best interests, not just those of companies or special interest groups. There would be greater transparency in how the industry is regulated so that people are able to understand the regulations and ensure they are being followed. Companies would be held accountable when they break regulations, as there wouldn’t be corporate control of the regulatory authority.
In this world, everyone would have their rights properly upheld and respected; laws and guidelines could not be taken advantage of to benefit select individuals or entities at the expense of everyone else.
We have seen evidence through the years that when citizens challenge that entrenched power—whether through public outrage, scrutiny from investigative reporters, or legal action—it can spark lasting change. The rallying cry is to arm ourselves with knowledge and keep pushing back against the forces that harm our right to fair and free markets by holding regulators and corporations accountable.
It’s up to us to ensure regulatory capture no longer takes root in our society by staying vigilantly aware and committed to the core values on which our democracy was founded: freedom of thought, transparency, justice, and equity.
Help us make things Less Bad.
