Today’s narrative has a simplistic view: Companies lie; activists are outraged; regulations are tightened further; companies lie again… Wash, rinse, repeat…– Adidas lied about their shoes being made from recycled ocean plastics?
– Big Pharma is price gouging and profiting from the weak?
– Volkswagen installed software to have their cars cheat emission tests?
– All companies are greenwashing and making fictional ESG claims?
– BP and Shell claim to be on-target for “net zero”?
– The organic food label is riddled with false claims and fraud?
Outrageous! Totally unacceptable! Unethical! But … here it comes … completely understandable!
To play with this well-crafted narrative, we should still ask: What causes companies to make claims that cannot possibly be true? What causes them to cheat? Is it greed? Zealous marketing managers chasing performance bonuses? Is capitalism inherently evil?
These assumptions are what underlie the Industry Complex. But perhaps we should be asking this from another angle: Do irrational regulations undermine respect and cause reasonable people to find creative solutions to continue their businesses?
We need to go back to one of history’s most lamentable case studies of the abuse of the precautionary principle: the US alcohol prohibition period between 1920 and 1933.
Who created Al Capone?
As we watch today’s outrage at industry, I am reminded of Al Capone’s rise during the US Prohibition era and the self-righteous moralists who had forced a regulatory environment that encouraged lawbreaking and disrespect of authority. Trying to ban the sale and production of alcohol, like any legislation that does not enjoy wide public support, not only was doomed to failure, but planted the seeds for lawbreaking. The sanctimonious temperance moralists were quick to judge others, but not themselves or the structures that led to people breaking the law. Regulators at the time were quite surprised at the public reaction against the 18th Amendment – they were assured by those lobbying them that banning alcohol is what America wanted and that it would reduce immorality and criminality. The very opposite rang true.
But when laws are stupid or out of line with the public narrative (values and vision), it should come as no surprise that the authorities lose respect and lawbreaking becomes commonplace. Gangsters, dangerous home distilleries, speakeasies … the consequences to this early application of the precautionary principle were far worse than any benefits. I referred to this as the perversion of precaution.
Was Al Capone an opportunist without integrity or decency? Absolutely. Would he have become the legendary symbol of evil if there were no bad regulations that forced so many to break the law and willingly become his clients or tacit supporters? Of course not. Bad regulations lead to illegal practices which encourage opportunists to do what they can to fill the void. Rather than expressing moral condescension at the unforeseen consequences, perhaps we should focus on the presumed moral sanctity of the zealots who tried to impose these moralistic regulatory constraints on others.
What does this mean for bad regulations being forced through governments by today’s sanctimonious zealots – the environmentalists?
Greenhibition
Today, another generation of dogmatic puritans think they can force legislation to meet their self-assumed, moralistic social engineering objectives. Whether it is trying to impose restrictions on cars, agriculture, chemicals or industry in general, their cult fundamentalism has become more alarmist than the 1920s prohibitionists, who were merely fighting to uphold their social norms and traditional values. Today, the greenhibitionists are fighting to save the planet (and human existence on it) and they are willing to impose far greater precautionary restrictions on human practices than any prohibitionist had ever dared. But the reality is the same a century later: those trying to push regulators to act beyond the tolerance of the public are merely encouraging lawbreaking and the consequences this entails.
Whether it is Californian regulators continually tightening vehicle emission standards beyond what was possible or European ideologues thinking some circular economy can function economically without virgin plastics, industry non-compliance is inevitable when the rubber reality hits the road.
I was asked in a recent interview if the European Commission would succeed in their ambition to eradicate smoking. I cited Al Capone and warned that such zealots in Brussels hiding behind their civil servant badges would only make matters worse. Health researchers have been making progress in reducing the risks from smoking with harm reduction measures like e-cigarettes or heated tobacco products. The attempt to ban these reduced harm products (just because, well … you know … industry) will simply increase tobacco use or create a black market for the next budding Al Capone to take advantage of. On this upcoming World No Tobacco Day, there will certainly be calls for a total ban on all nicotine products (because these self-righteous activists all have degrees in political science rather than history).
So what has a century of regulations imposed by dogmatic virtue artists taught us?
DieselGate: A case study
DieselGate is perhaps the best case of a company, VW, that cheated, finding a way around regulations they felt were unreasonable. It was kick-ass (until they got their ass kicked).
In 2015 it was revealed that the German automotive manufacturer, Volkswagen, was gaming the Californian emission control testing process by developing a means to have their diesel vehicles detect when they were being tested and emit less (via a certain “defeat device” software installed in the exhaust system). Californian state regulators had been enacting a series of increasingly tighter emission standards (to the point where it was becoming impossible to keep diesel-powered vehicles on the market in the state).
So VW cheated the environmental regulatory process by getting their cars to operate more fuel-efficiently when it detected certain common parameters used during US EPA emissions testing. It was actually a brilliant engineering feat and these amoral problem-solvers should be applauded (but it was, however, against the law … however stupid the law had become). Volkswagen’s top management were fired, engineers did jail-time, the company had to pay tens of billions in fines and damages as well as buying back or fixing their diesel fleet. The company has since found religion (which I find rather worrying).
The reporting and analysis at the time was incredibly naïve. No one was questioning whether the emission standards were becoming excessively tight and irrational. No one had focused on who was lobbying for such restrictive standards (European automakers were far ahead of their American rivals in clean diesel power-train technologies). And was it only VW who was using this emission-cheating software? There were similar cases (and fines) going back to 1995 but nobody cared before now. It was assumed, from this scandal, that diesel motors were more polluting (and that other technologies were therefore clean) and, in reaction to the scandal, we have since seen the demise of the diesel powertrain, based on moral outrage rather than scientific grounds.
The reality is that all cars pollute (even more so electric cars): from the moment the car begins its journey of environmental degradation through the resource and construction process until long after the expensive, effluent-driven post-use recycling phase. It is suspected that the construction phase accounts for around a third of CO2 emissions that the average car will produce in its lifetime (more for electric cars when you factor in the extraction and processing phases). The reality is that cars pollute the air, the environment and public spaces (with noise and safety risks). Most microplastics in the environment come from car tyres (and heavier electric cars burn through tyres faster). No cars, and no manufacturers have a right to say they are clean, and no consumer who owns a car can pretend they do not pollute. … Sorry.
But what we have instead are those who assume that continually-tighter, arbitrarily-imposed regulatory restrictions on cars will allow people to pretend they are environmentally-friendly in their daily commute. Regulators assume they can ensure this fiction with whatever standards they pull out of the air and that they will be able to be met by manufacturers.
This is the new regulatory progressivism – that progress can only be made by continually tightening the screws on innovators and entrepreneurs. If the requirements are too severe to comply with, and too unreasonable, then any company has a choice: abandon the market or take a risk and break the law. This is a part of normal human decision-making. If anti-smoking legislation, in its continuous blind culture of meanness, forces smokers to light up at least 200m from a building’s entrance, we can expect smokers to find ways around that stupid rule (especially during winter).
In the case of VW, the cars were not dangerous or put drivers’ lives at risk. Many drivers complained post-recall that the compliant vehicles were rendered gutless. The sin that VW had committed was that they found a way around emission standards that had been reduced in the State of California at regular, and many would argue, irrational levels from 2010 to 2015. No automotive manufacturers could possibly comply with the environmental levels set by California so they were left with a choice: cheat the system or leave a very large market. The regulators, in their blind stupidity and dogmatic fundamentalism, had not earned respect any more than prohibitionists had failed to do a century earlier.
Volkswagen got caught and had to pay dearly. Were they the only ones? Of course not. I was stunned to see how no other automobile manufacturers stood up to defend VW against the over-restrictive regulatory standards when the crisis had erupted. Talk about “second-slowest-zebra-syndrome“. Without getting into the intra-nascent, trans-Atlantic battles between diesel and petrol/gas technologies, pretending that engineers can continue to meet unrealistic regulatory targets arbitrarily imposed by self-serving environmentalists is not only ridiculous, but it also camouflages a certain moralistic mean streak. As these zealots and their opportunistic lawyers were pecking at the flesh of VW for damages, we must not lose sight of the fact that the regulators had rigged the game in very much the same manner as prohibitionists. They had created a culture for cheating.
The activists had another agenda: to paste the public perception of industry as an unethical band of gangsters. This is the Al Caponisation of Industry. While there is no excusing certain corporate outliers who have damaged the reputation of their industrial sectors (certain banks caught up in the LIBOR scandal, a few price-gouging pharmaceutical companies, global supply chain abusers …) they are the well-publicised exceptions and not the norm, no matter how hard the cynics try to impose their opportunistic anti-industry smear campaigns. That corporate leaders have not stood up to defend the credibility and reputation of industry against these activist assault artists is shameful.
The need for Realpolitik
Earlier in this series, I argued that we need to go back to Realpolitik as the key policy strategy. Idealism creates a climate for Al Caponisation, for lawbreaking and for a loss of respect and trust in the regulatory process. Realpolitik would take a pragmatic approach and find the best means under the given circumstances to regulate, moving the process (harm reduction, environmental improvement, health improvements) to a better, albeit not perfect, state. Under a Realpolitik framework, California would have worked with the automotive industry to find a reasonable policy path to reduce emissions and companies would not have had to become creative in getting around the idealists.
In a Realpolitik policy environment, all actors in the process would work together, find compromises and develop a reasonable timeline for improving technologies and societal benefits. But somewhere in the evolution of policymaking, it became a full-time, academic profession that adopted a perfect-world idealistic ambition: a delusional evolution of the state as the safety protector, zero-risk guarantor and the social virtue benchmark. Precaution rather than compromise became the policy tool of choice. The pragmatism of people striving to find workable solutions for the benefit of the greater good (Realpolitik) was lost in the moralising free-for-all that had become public policy in the Nanny State.
Nowhere has this become so evident as in the European Commission’s recent strategy toward food production policy, in particular their idealistic Farm2Fork strategy. Nowhere has the Al Caponisation reality become so evident as how dysfunctional farming policies have become thanks to an extreme policy-virtue-dogma.
Realfarming
Six years ago, in one my most memorable life experiences, I was on a ten-day speaking tour of farming communities in Southern England. At one Q&A, a farmer asked me how he would be able to protect his crops from his present black grass infestation without glyphosate. I told him he would probably have to stock up on the herbicide and then cheat if the ban pushed through. The look on his face said it all – farmers don’t cheat. They’ll stop farming first rather than break the law.
If Realpolitik does not enter into the policy process on agricultural technologies, we will definitely have a farming crisis. Outside of the organish fibsters, Al Capone does not know how to drive a tractor. Organic rules, driven by marketing aspirations, are “irrational by nature” (based on an arbitrarily-imposed, cosmopolitan naturopathy), thus there have been some classic case studies in cheating from mislabelled organic feed to the use of banned pesticides. If Farm2Fork pushes through, with its irrational ideological foundation, the organic lobby will lower its standards (ie, lie) but the conventional farmers will just walk away from their land. In Europe, this will be a disaster for the food production industry.
Farm2Fork is Frans Timmermans’ prohibition death knell. It arbitrarily imposes irrational policy diktats on farmers (25% reduction of fertilisers, 50% reduction of pesticide use and 25% of farmland dedicated to organic crop production). If the European Commission does not move the goalposts, and if conventional farmers leave the land rather than cheating, then the food processors and manufacturers will have to get creative. Don’t bother reading the label at your supermarket; none of it will be true.
European agricultural yields will go down significantly (even the European Commission’s own Joint Research Centre, which Timmermans chose to ignore, predicts a 40% decline), imports from less sustainable farming systems will increase and global food security will suffer. But will most European farmers cheat? No. The Common Agricultural Policy’s next framework is increasing its compensation for anticipated Farm2Fork losses but many farmers will just leave the land or shift to agroforestry.
Conclusion: Eliminate the cheating environment
The next chapter will conclude this Industry Complex series. I have become rather dark in my writing so a positive message to end this series would be appreciated. But I seem to be acknowledging that the situation has become so absurd as to justify cheating and breaking irrational laws. Rather than finding a positive route for industry to take, I seem to be likening them to one of the greatest gangsters of all time. So what, positively, should industry do then to get out of this horrible quagmire?
- Should industry break the law if the law (regulations) has become irrational?
- How could we get regulators to abandon their idealism and put forward more pragmatic regulations?
- If companies (and the public) lose respect of our regulatory process, should we just ignore their grand strategies and dogmatic virtues?
In battling the Industry Complex, my clear conclusion is that industry must never cheat – the activists have rigged the game so that industry would have no other choice but to either cease operations or break the rules. It fit nicely into their public trust destruction gameplan. These little shits are cunning, clever and corrupt and it is time to stop playing by their rules and falling into their traps.
Rather, in my concluding article, I will propose 12 steps to challenge the rigged regulatory system they are hopelessly fighting against and find a way to rebalance the scales that have been created by the activist communities to destroy industry, their technological innovations and social benefits.
It is to this conclusion that I now turn.
David Zaruk is a Belgian-based environmental-health risk policy analyst specializing in the role of science in policy and societal issues. He blogs under the pseudonym: The Risk-Monger. Follow him on Twitter at @zaruk
