Regulatory capture: organic dairy industry edition

Just heard an NPR story today on the organic dairy industry and how some of it is organic in name only: Story link w/transcript

tl;dr: Some of the bigger outfits take serious shortcuts re: having the cows out to pasture.

SIMON: Was that a violation of the regulations?

WHORISKEY: Yes. Under organic rules, you’re supposed to graze the cows through the grazing season, and there are specific amounts of grass that they’re supposed to be eating during that time. But they’re supposed to be on grass throughout the grazing season. If - and we would go out to these places that had thousands and thousands of cows. And you might see 100, 200, 300 of them out, but the rest were not there.

SIMON: And they get away with it because there’s just not enough resources to monitor?

WHORISKEY: Well, the USDA has a very interesting enforcement system. Rather than sending USDA organic inspectors, each organic dairy or any organic farm hires their own inspection agency. They call them certifiers. And you hire your inspection agency.

They come out once a year, and they’ll check paperwork. They might do some other tests. But generally speaking, there’s obviously a conflict of interest there because they’re your employee, and they’re testing you and going to tell you whether or not your milk’s organic.

Aaargh. How does a first world country let BS like this happen? And I’m sure this isn’t the only industry this sort of thing applies to.

There would need to be 2 orders of magnitude more federal and state employees as inspectors to make it otherwise. And the same for every “organic” industry, and for all supplements, and all food producers, and all cooking oil, meat, spice imports, and etc. Our system is remarkable for how few catastrophes we have for all the holes which exist.

Pretty sure the industries are happy to “help” regulators out as well and likely had some verbiage to make it happen tossed in there.

Eh, the government contracting out some of their responsibilities is pretty necessary in today’s budgetary environment.

Most government agencies have staffing caps to “keep the size of the government in check”. Since few of them can actually accomplish their mission with such a small amount of man-power, they hire or certify contractors to do those jobs instead. If you counted full-time government contractors against the size of the government workforce (already the largest single employer in the country), that number would AT LEAST double. In some industries there are far more contractors working in government buildings than there are government staffers, who typically act as middle-managers.

That’s probably not a terrible thing. The contractors are more expensive on an hour-by-hour basis, but when you toss in medical care, pensions and whatnot, the contractors can be cheaper in the long-term… plus it’s easy to fire a contractor, while firing a government employee is really, really difficult.

These regulatory contractors cited above may sound skeevy, but if properly audited and monitored, they can (potentially) be less prone to graft and collusion than an actual government inspector. Or not. There are thousands upon thousands of these little shops, and some of them will be bad… the question is whether that rate of corruption and/or incompetence would be greater or lesser if it was government staffers doing the same thing.

Thing is, though, that these certifiers aren’t even shops contracted by the government. They’re contracted by the dairies themselves. And predictably, their certification sometimes doesn’t mean much.

This system was also in place for vehicle emissions (at least in Europe) pre-VW. The tests themselves were mostly done by a handful of private companies, paid by the manufacturers and nominally overseen by national regulators (type approval authorities in Europe).

Well yes and no. The government doesn’t contract with the inspectors directly, but they do license and certify which inspectors can be used; the farmers don’t just choose them from random guys on the street. From the WaPo article:

Under organic rules, the USDA typically does not inspect farms. Instead, farmers hire their own inspectors from lists of private companies and other organizations licensed by the USDA.

It’s not too different from getting your car inspected here in Virginia (and elsewhere, I presume). You can go to whatever gas station/mechanic/dealer that you want to in order to get your car inspected and pay them directly. They are all licensed by the state department of transportation to perform the inspection and their word is what gets you the sticker. I’m sure that there are some scruffy mechanics out there that will knowingly pass your invalid car if you slip them an extra few Benjamins, but they run the risk of losing their business and/or prosecution.

Wait, what? This baffles me. Here in Illinois getting your plate sticker means every few years you need to do your emissions testing at a Secretary of State facility. Just going to any old mechanic seems crazy to me.

Here in Oregon, the DEQ (department of environmental quality) testing facilities are run by the state DMV as well, per my understanding.

Back to the USDA-approved inspectors thing, I still think it’s ridiculous to expect them to not be strongly influenced by the knowledge of who’s writing their checks. It’s just the kind of bullshit we get when government agencies have to be kept chronically understaffed for ideological reasons.


Self-regulation by people who are hired by the people they’re regulating is stupid. It’s an insanely obvious conflict of interest. Now if it’s an independent organization or business, that’s fine. But if you write my paycheck and can cut me off if I say something you don’t like, then I’m never going to say anything you don’t like.

This is very important. Hawaii is infamous for the corruption of its harbor master, building inspectors, and the liquor board. As civil servants, it’s virtually impossible to fire them without risking huge lawsuits. In one famous, case the dean of the University of Hawaii was fired for expense account fraud, and while they courts found what did was wrong, he got an 8 million judgement for not firing him with the correct process.

You can fairly easily fire individual incompetent/corrupt inspectors, as well as replace the entire firm if the problem is found to be systemic.