How One Company Got the FDA to Ban All Its Competitors

Tom Toles cartoon on regulations

John Kelly, who writes a local column for the Washington Post, set out to investigate a century-old milk bottle claiming medicinal qualities and discovered a mid-20th century story of rent-seeking and crony capitalism:

But the big change for Burton-Parsons came in the late 1960s, when it entered the burgeoning soft contact lens market — not the lenses themselves, but the solution used to clean them.

And that’s where things took an interesting turn.

Up until 1974, consumers could purify their contact lenses by boiling them for 10 minutes in distilled water with salt tablets. But that year an Food and Drug Administration microbiologist named Mary Bruch — known as “the first lady of contact lenses” — gained oversight of that product. Bolstered by FDA ophthalmologist Arnauld Scafidi, Bruch started disallowing soft lens manufacturers from utilizing salt tablets, decreeing that consumers risked eye infection.

The only cleaning solution she approved was made by Burton-Parsons, which by then was headquartered in Seat Pleasant, Md., and owned by the Manfuso family, which also owned horse-racing tracks around the state. Its product — Boil-n-Soak — cost four times as much as the simple salt tablets.

It emerged during congressional hearings in 1980 that Bruch and Scafidi had been repeatedly wined and dined by Burton-Parsons executives. The Washington Post’s John F. Berry wrote: “Expense records showed that top executives bought Bruch more than 50 meals at places ranging from Caesars Palace in Las Vegas and Brennans in New Orleans to Maison Blanche and L’Auberge Chez Francois in the Washington area . . . [Bruch] also told the congressional committee that she exchanged vintage wine with one of the Manfusos who shared her interest in fine wine.”

Scafidi was unable to provide research to substantiate his claims that salt tablets were unsafe.

In 1974, Burton-Parsons had annual sales of about $5 million. In 1979, after five years of a near monopoly, it was sold to Alcon Laboratories, a subsidiary of Nestle S.A. of Switzerland, for $110 million, according to industry estimates.

Bruch and Scafidi were investigated by the FBI for the favors they allegedly gave the firm. Scafidi resigned, and Bruch was fired.

More on rent-seeking, crony capitalism, and lobbying regulators.

Posted on August 16, 2018  Posted to Cato@Liberty

David Boaz discusses the Ohio election results and the upcoming midterms on Bill O’Reilly’s No Spin News Podcast

Posted on August 8, 2018  Posted to Cato@Liberty

Socialist Experiments

In the summer of 1982, after the Cato Institute’s week-long seminar at Dartmouth, I drove to Boston with one of the other attendees. Touring the city, we encountered a protest rally on Boston Common. I don’t remember just what the rally was about – probably the “nuclear freeze” or a general protest against nuclear weapons, which was a strong movement then. As we watched, a young woman approached and handed us flyers calling for socialism. “Like in Russia and China?” I asked her. Unwilling to defend those disastrous results, she responded “We’re more interested in the experiments currently going on in Zimbabwe and Nicaragua.” I knew very little about those “experiments” and had nothing much to say.

Paramilitary members in Monimbo, Nicaragua

Now, though, 36 years later, we know a great deal about those experiments in socialism. The photograph at right appears on the front page of Friday’s Washington Post with the caption “Paramilitary members stand guard on July 17 at a dismantled barricade after police and pro-government forces stormed the Monimbo neighborhood of Masaya, Nicaragua, which had become a center of resistance.”

I was reminded of something very candid that the socialist economist Robert Heilbroner wrote: that socialism depends on central planning and a collective moral commitment and thus on command and obedience to the plan. And that means that “The rights of individuals to their Millian liberties [are] directly opposed to the basic social commitment to a deliberately embraced collective moral goal… Under socialism, every dissenting voice raises a threat similar to that raised under a democracy by those who preach antidemocracy.” Democratic liberties like free speech and free press are an inherent threat to the planners’ control.

And of course Zimbabwe suffered for some 37 years under the increasingly authoritarian rule of Robert Mugabe, which may or may not have changed with Mugabe’s replacement by his vice president. 

Consider not just democracy but standard of living. In the 36 years since I had that conversation, Nicaragua has been under the rule of socialist Daniel Ortega for about half that time, and Zimbabwe under Mugabe for the entire period. Nicaragua’s GDP per capita is the lowest in Central America – far below market-liberal Costa Rica and 50 percent below war-torn Honduras. Zimbabwe is even poorer. These aren’t just numbers. They indicate how people live. They tell us that in 2018, in a world growing rapidly richer, where poverty is plummeting, people in these countries remain desperately in need of businesses, jobs, food, and medicine. 

I wonder if my socialist interlocutor from 1982 is still interested in the socialist experiments in Nicaragua and Zimbabwe. 

Footnote: Kristian Niemetz of IEA wrote about how socialist “experiments” always become embarrassing after a few years. Except for “very short-lived experiments, such as the Paris Commune…. Those are the Jim Morrisons of socialism. They ended before they could turn into embarrassments.”

Posted on August 3, 2018  Posted to Cato@Liberty

RIP Andrea Rich

I am saddened to report that my dear friend Andrea Millen Rich died this morning at her home in Philadelphia at the age of 79 after a 19-year battle with lung cancer. She was, among many other things, the proprietor of Laissez Faire Books and the wife for 41 years of Howard Rich, the Cato Institute’s longest-serving Board member.

For more than 40 years Andrea was at the center of the libertarian movement, a mentor, counselor, friend, supporter, facilitator, networker, and gracious hostess to hundreds of freedom lovers – young, old, well-known, obscure, successful, down-on-their-luck, didn’t matter. 

She was the first chair of the New York Libertarian Party in 1973-74. The vice chair was Howard S. Rich, whom she soon married. From 1974 to 1977 she was vice chair of the national Libertarian Party, and in 1980 she played a key role in developing television advertising for the campaign of Ed Clark, the Libertarian presidential nominee.

From 1982 to 2005 she was the president of Laissez-Faire Books, which billed itself as “the world’s largest collection of books on liberty.” It had a retail location on Mercer Street in Greenwich Village, described in Radicals for Capitalism by Brian Doherty as “an important social center for the movement in America’s biggest city, a place for any traveling libertarian to stop for company and succor.” But in those pre-Amazon days, it was far better known for its monthly catalog that reached libertarians around the world. Through its Fox & Wilkes publishing imprint it brought many classic libertarian books back into print. (Brian Doherty’s own reflections, along with those of Nick Gillespie, can be found at Reason.)

Andrea often negotiated with publishers to make books more affordable, and some books only found publishers because Laissez-Faire could guarantee an audience beyond the small academic market. She even taught me how to negotiate with publishers. Through her work with Laissez-Faire she became friendly with leading libertarian writers including Milton and Rose Friedman, Robert Nozick, Thomas Sowell, Nathaniel Branden, Thomas Szasz, Charles Murray, Richard Epstein, David Kelley, and Margit von Mises, widow of economist Ludwig von Mises.

As president of the Center for Independent Thought, the parent organization of Laissez-Faire Books, she also launched and managed the Thomas S. Szasz Award for Outstanding Contributions to the Cause of Civil Liberties and the Roy A. Childs Fund for Independent Scholars. CIT’s biggest project was Stossel in the Classroom, which repackaged ABC News and Fox Business videos on economics and public policy by John Stossel for classroom use. The videos have been viewed by tens of millions of high school students – according to Stossel, reaching more people than ABC News and Fox News.

Along the way she also helped to found the Center for Libertarian Studies in 1976 and served on the boards of the Foundation for Economic Education, the oldest free-market think tank, and the Atlas Network, an international association of think tanks. She traveled as far as Russia and Kenya to meet libertarians and spread the ideas of freedom.

Andrea Millen was born February 8, 1939, to the late Louis and Vera Millen of Johnson City, Tennessee. She graduated from Science Hill High School and attended the University of Alabama. After she got a summer job at CBS answering fan mail for Mighty Mouse and Heckle and Jeckle (“my handwriting was perfect for it, they said”), she never went back to school. For 18 years, she worked in television, including for Sid Caesar, Joe Pyne, and the NBC News election unit.

She lived most of her life in Manhattan and Orangeburg, NY, but moved to Philadelphia in 2009.

She is survived by her husband of 41 years, Howard Rich, her sister Elaine Millen of Charlotte, NC, stepsons Joseph Rich and Dan Rich, Dan’s wife Maureen, and granddaughters Cati and Samantha.

Posted on August 1, 2018  Posted to Cato@Liberty

Rep. Jamie Raskin (D – MD) cites David Boaz’s article, “Donald Trump’s Eminent Domain Love Nearly Cost a Widow Her House,” on C-SPAN

Posted on July 23, 2018  Posted to Cato@Liberty

The Hidden Costs of Tariffs

This news report from the Washington Post is a striking example of the absurd costs of complex tariff systems:

Brand-new Ford Transit Connect vans, made in Spain, are dropped off at U.S. ports several times a month. First, they pass through customs — and then workers hired by the automaker start to rip the vehicles apart. The rear seats are plucked out. The seat belts in back go, too. Sometimes, the rear side windows are covered with painted plates. Any holes left in the floor are patched over. 

Why? Because there’s a 25 percent tariff on imported pickup trucks and work vans, but only a 2.5 percent tariff on passenger vans. So even with all the extra effort of building a passenger-quality van, and then dismantling it, it’s still cheaper to do that than to pay a substantial tax on the import. 

The story is also a reminder of how bad policies can linger for decades. In the early 1960s Europeans increased their purchases of American chicken. European governments responded by imposing tariffs on chicken imported from the United States. In retaliation, President Lyndon B. Johnson imposed a 25 percent tariff – known as the “chicken tax” – on potato starch, dextrin, brandy, and light trucks. Tariffs on the other products were eventually lifted, but the high tax on light trucks remains. Thus the counterproductive construction and destruction. And by the way, this is no secret; the Wall Street Journal wrote about Ford’s practice in 2009.

The Post goes on to report:

Tariff engineering has a long history.

In the 1880s, the Supreme Court ruled it was acceptable for a sugar importer to intentionally darken refined sugar with molasses to lower the grade and secure a lower duty. Three decades later, the court took up the case of a company accused of trying to evade a 60 percent duty on strung pearls by instead shipping loose pearls with holes pre-drilled for stringing. Those faced only a 10 percent duty….

For example, some athletic shoes, such as Converse All-Stars, come with just enough fuzzy cloth on the rubber soles to qualify them as lower-duty slippers. In the early 1980s, the United States imposed a tariff on motorcycles with engines larger than 700 cubic centimeters in a bid to protect U.S.-based Harley-Davidson, so Japanese companies turned to making 699-cubic-centimeter motorcycles instead.

[See https://www.cato.org/publications/policy-analysis/taking-america-ride-politics-motorcycle-tariffs]

Sugar import quotas also create opportunities for gaming the system, which the government tries to block. In 1985, the Wall Street Journal and then the New York Times reported that the Reagan administration had slapped emergency quotas on “edible preparations” such as jams, candies, and glazes—and even imported frozen pizzas from Israel—lest American companies import such products for the purpose of extracting the sugar from them. Apparently it might have been cheaper to import pizzas, squeeze the tiny amount of sugar out of them, and throw away the rest of the pizza than to buy sugar at U.S. producers’ protected prices.

A U.S. tariff is a tax on the American people. That’s easy to see. American consumers and businesses are forced to pay higher prices for the goods they want to buy. What is not so obvious is all the deadweight loss such obstacles to trade create. Businesses and consumers may have to shift their purchases to a less-preferred domestic alternative. And as the reports above indicate, companies sometimes go to great lengths to get around the obstacles created by tariffs, quotas, and other barriers to trade. Just think of all that wasted labor and material involved in getting a Ford passenger van from a Spanish factor to an eager American consumer. This is pure waste, waste that literally makes America poorer. In the case of the chicken tax, the waste is related to a 1963 executive order that’s never been rescinded. The sugar quotas benefit a highly concentrated, politically effective industry and impose costs on far more businesses.

Tariffs impose costs on Americans. We should be reducing and eliminating them, not expanding them.

Posted on July 9, 2018  Posted to Cato@Liberty

Could Inefficiency Balance Out Overregulation?

The top left-hand story on the front page of the Metro section of today’s Washington Post:

Lawyers for the District argued Wednesday for the dismissal of a lawsuit that challenges city regulations requiring some child-care workers to obtain associate degrees or risk losing their jobs….

The requirements … stipulate that child-care center directors must earn bachelor’s degrees and assistant teachers and home-care providers must earn Child Development Associate (CDA) certificates.

Meanwhile, just across the page, in the top right-hand space:

About 1,000 teachers in D.C. Public Schools — a quarter of the educator workforce — lack certification the city requires to lead a classroom, according to District education leaders.

So how about this compromise: the child-care licensing requirement will go into effect, but it will be enforced by the crack management team at DC Public Schools?

Posted on June 22, 2018  Posted to Cato@Liberty

Pro-business? Wilbur Ross Channels Hillary Clinton

On Wednesday members of the Senate Finance Committee questioned Secretary of Commerce Wilbur Ross about the costs to American businesses of the administration’s tariffs. Ross was unsympathetic:

When Thune warned that the drop in soybean prices (caused by China’s retaliatory tariffs) was costing South Dakota soybean farmers hundreds of millions of dollars, Ross responded by saying he heard the price drop “has been exaggerated.”…

Ross told Sen. Mike Enzi (R-Wyo.) that he’s heard the rising cost of newsprint for rural newspapers “is a very trivial thing,” and he told Sen. Benjamin L. Cardin (D-Md.) that it’s tough luck if small businesses don’t have lawyers to apply for exemptions: “It’s not our fault if people file late.”

That reminded me of then-First Lady Hillary Clinton’s response in 1993 to a small businessman about how her health care plan might raise his costs:

“I can’t go out and save every undercapitalized entrepreneur in America.”

Seems like lots of Washington operators don’t care much about the burdens that taxes, regulations, mandates, tariffs, and other policies impose on small businesses and their employees.

Posted on June 21, 2018  Posted to Cato@Liberty

Green Energy Corporate Welfare

On page 5 of my Wall Street Journal this morning, and page 7 of my Washington Post, a full-page ad for Wells Fargo banners

Wells Fargo and NextEra Energy join together to fuel low-carbon economy throughout the U.S. 

Meanwhile, the front page of my Journal announces

Green-Power King Thrives on Government Subsidies

The article explains that NextEra Energy

has grown into a green Goliath, almost entirely under the radar, not through taking on heavy debt to expand or by touting its greenness, but by relentlessly capitalizing on government support for renewable energy, in particular the tax subsidies that help finance wind and solar projects around the country. It then sells the output to utilities, many of which must procure power from green sources to meet state mandates.

And also:

While environmentalists applaud NextEra’s commitment to building wind and solar farms outside Florida, they have criticized what they see as its attempts to slow the deployment of rooftop solar inside Florida where it would directly compete with its utility business.

As Wells Fargo tries to rescue its reputation after its account scandals, maybe it should forgo bragging about helping a company get heavy subsidies in order to sell its products to compelled buyers. Maybe as part of its apology and restitution, it should swear off participating in taxpayer-subsidized projects, as BB&T in 2006 vowed not to lend to projects that relied on eminent domain.

Would NextEra even be profitable without all these subsidies and mandates? At least it’s not Solyndra, the Obama-connected solar power company that left the taxpayers holding the bag for $500 million when it collapsed. (“Obama’s green-technology program was infused with politics at every level, The Washington Post found in an analysis of thousands of memos, company records and internal ­e-mails. Political considerations were raised repeatedly by company investors, Energy Department bureaucrats and White House officials.”)

Maybe we should drop all these subsidies, restrictions, mandates, and trade barriers and let the free market deliver the right mix of energy at the lowest cost.

Posted on June 19, 2018  Posted to Cato@Liberty

President Trump’s Curious Obsession with Crime

In his Election Day tweet attacking Rep. Mark Sanford, President Trump declared that Sanford’s opponent, Katie Arrington, “is tough on crime and will continue our fight to lower taxes.” Well, maybe. She doesn’t mention either issue on her campaign website. (In fact, she has nothing but bland buzzwords about any issue.)

This tweet is typical. It seems like very time Trump tweets an endorsement or a criticism of a candidate, he calls the candidate “strong (or weak) on crime.” I count 60 Trump tweets since his inauguration that use the word “crime.” Some complain that he is being investigated for a “made up, phony crime” or charge Hillary Clinton with “many crimes.” But most seem to relate to a candidate: Dan Donovan is “strong on Borders & Crime.” Kevin Cramer of North Dakota is “strong on Crime & Borders.” Doug Jones is “WEAK on Crime.” Adam Laxalt is “tough on crime!” “Chuck and Nancy…are weak on Crime.” Ralph Northam is “weak on crime.” Also “VERY weak on crime!” “Keep our country out of the hands of High Tax, High Crime Nancy Pelosi.” And so on.

It’s not obvious that this makes political sense. Candidates aren’t talking much about crime, perhaps because they recognize the substantial decline in crime rates. In numerous Gallup polls over the past year, only 2 to 4 percent of Americans have identified crime as the country’s most important problem. Though about 50 percent of people say they worry a great deal about crime when asked that question directly.

But here’s the thing. Crime in the United States is in fact way down

Here’s a long-term look at the most visible crime, homicide:

U.S. Homicide Rates, 1960-2011 

Here’s a picture of broader crime rates:

U.S. Violent Crime Rate, 1973-2011

And yet, as the same source illustrated, at the very time when crime rates had fallen steadily and substantially for 20 years, 68 percent of Americans said the national crime rate was getting worse. (Crime rates continued to fall after 2011, though there was an uptick in murders in 2015 and 2016. The rate appears to have fallen in 2017.)

Of course, the president is better informed than average Americans. Surely White House staff have explained the crime statistics to President Trump. So why does he talk about “this American carnage” and pound away at the “crime” issue when endorsing candidates who never talk about it? Perhaps it’s part of his continuing use of racially charged language. Perhaps “crime and borders” is just shorthand for the kinds of social change he thinks his voters fear. Or maybe it reflects the fact that he grew up in New York City during a time of sharply rising crime. We all get ideas in our youth (“American cars aren’t well made”) that may stick with us even us as the facts change.

Whatever the reason, it seems curious that he so often cites “strong and crime” as the reason to support political candidates who haven’t talked about crime.

 

Posted on June 15, 2018  Posted to Cato@Liberty

About David Boaz

Click here to learn more.

Follow

Commentator

Search