Protecting Consumers

Back when campaign spending was limited by law, there was an effective quota on taking money from special interests. After the cap was reached, it was more effective to do favours for voters than corporate interests. One way to do this was to support consumer protection initiatives.

Politicians once made reputations fighting high prices, unsafe products and misleading and unfair business practices. Somewhere along the line, after the Nixon appointees to the U.S. Supreme Court eliminated campaign spending limits (Buckley v. Valeo), interest in the practical concerns of consumers dramatically declined. There are some exceptions, but for every Member of Congress like Byron Dorgan, Henry Waxman or Ed Markey, there are many more who focus their energies on issues more relevant to helping out industry sectors than consumers.

While a predictable consequence of un-capped campaign spending, the decline in attention to the problems of consumers is rarely examined in terms of the impact on the public.

To be fair, some of the lack of current activity is a consequence of past successes. Reforms to protect consumers that were achieved during the 1960's and early 1970s were substantial and durable. Cars are much safer. Airlines can't arbitrarily bump passengers without compensation. Generic drug markets work better. And lots more was done.

There is also loss of confidence in government. In the late 1970s and early 1980s, considerable attention was given to the risks of regulatory capture, or the unintended consequences of regulatory interventions. Good intentions are not enough.

The economy has also grown more complex. We are using a much larger number of products and services, many of which move in international trade. The pace of innovation is faster.

Still, despite the challenges, there is plenty to be done, and it matters a lot to people struggling from paycheck to paycheck, and who suffer from poorly functioning markets.

Predatory lending and abusive debt collection practices, usurious interest rates on consumer debt, the high price of new medicines and medical, dental and legal services, the proliferation of unfair contracts of adhesion for online transactions, the marketing of unhealthy food products, slumlords that bilk renters of security deposits and fail to provide decent living accommodations, insurance policies or warranties that don't protect, the collection and sale of personal information leading to loses of privacy, the manipulation of data formats to prevent consumers from switching to competing software platforms, undisclosed conflicts of interest in reviewing and recommending products, and thousands of other topics have an impact on our lives. (Ed Mierzwinski blogs about many of these issues here).

There are also broader ways of considering the interests of consumers.

I travel a lot, most of it internationally. I'm often appalled that airlines can sell seats with such limited leg room, that I have to contend with an endless set of pay-for-use WiFi connections, that it is so difficult to find electrical outlets in some airports, and I resent having to pay to use luggage carts. I'd vote for a member of Congress who would champion a travelers bill of rights to address these and other irksome aspects of travel. There countless areas where governments could make consumers better off, if there was interest and political will.

One should also consider more the impact of government policies on consumers. The "incentive" for testing medicines on children is a six month extension of a drug marketing monopoly. It works, but at a very high price -- to consumers. Isn't there a cheaper way to do this? Do we really need to grant a 95 year monopoly as an incentive to publish new copyrighted works?

Many consumer protection measures involve disclosures of different types. Certainly more can be done. A consumer protection agenda focusing on transparency might include requirements for more useful reporting of service problems for airlines, telecommunications providers, manufacturers of personal computers and other widely used consumer electronics products, and other industries, perhaps provided by independent auditors. There could be far more transparency for pharmaceutical markets, including prices of products from manufacturers, hospitals and retailers (some hospital and pharmacy mark-ups are very high), and information on actual R&D outlays on products, as well as on marketing outlays and payments to physicians and academics who recommend products. We need better adverse events reporting.

Regulators should collect information on revolving door employment situations (including the relevant employment histories before and after government jobs), to make the risks of agency capture more transparent.

There are other, potentially even transformative ways to consider the interests of consumers. The Internet was created by network users, and first existed and grew as a challenge to more restrictive and closed networks that were largely designed to control and exploit users. The Free/Open Source software movement was likewise designed by both programmers and users, seeking more access, freedom and voice in software development. The open access journal movement is an effort by scholars and readers to create a publishing model that works better for them. The blogsphere is, among many other things, a collective effort by the public to create a rival systems of reporting and commentary.

I'm currently involved in a deeply ambitious effort to transform the way we pay for the R&D for new medicines. Rather than grant 20 year legal monopolies to drug developers for new inventions, and suffer from a host of pricing and marketing abuses, and weak incentives to invest in medically important inventions, drug developers would compete for shares of a massive R&D prize fund, that would reward drug developers for the impact of inventions on the improvement of health outcomes. (Read more, here, here and here).

In many different ways, political leaders could find ways to make things work better for consumers. There are several instruments for doing this. Governments can mandate greater transparency, regulate business practices, or use government procurement policies* to shape markets.

In an era of limited economic resources for families, greater attention to the protection of consumer interests would be welcome.

In the 1970's there was an effort to create a federal agency to advocate on behalf of consumers. This was a major initiative, that would have created a permanent institutional presence for advocating on behalf of consumer interests before all federal agencies. The idea, championed by Ralph Nader at the time, was to provide a durable and well funded institutional capacity and mandate to evaluate and promote the interest of consumers in interagency deliberations, ruling making, and other areas.

In 1974, a bill to create a federal Consumer Protection Agency (CPA) was supported by thirty-two state governors, 120 national and local consumer, farmer and union groups, the Economic Crime Committee of the National District Attorneys Association, the U.S. Conference of Mayors, and the National Association of Attorneys General. It passed the passed the House of Representatives by a three-to-one margin. The bill was opposed by Presidents Nixon and Ford, and by the nation's business establishment.

Carter promised to support the legislation to create the agency, but after he gave only lukewarm support, the legislation was defeated and eventually forgotten in the wave of anti-government sentiment that accompanied the election of Reagan in 1980.

President Clinton was never focused on consumer protection issues. He pushed a largely deregulatory agenda on issues concerning e-commerce, and refused to discuss anything but self regulation or industry controlled dispute resolution for online transactions. He picked corporate lobbyists to staff many key positions in the government, got rid of the NIH requirements for reasonable pricing of government funded pharmaceutical inventions, extended copyright terms to 95 years for corporate owners and pushed for the anti-consumer DMCA digital copyright legislation, blocked parallel trade on pharmaceuticals from Canada and Europe, tried to undermine European Union privacy measures, and he loaded up trade advisory bodies with corporate lobbyists, while he and his cabinet refused to meet with the TransAtlantic Consumer Dialogue. (As a Senator, Hillary has been much better than Bill).

Bush has been extremely hostile to consumer protection issues. Obama will soon be President, working with solid democratic majorities in the House and the Senate. He should use his power to advance consumer interests in ways that have been neglected for decades.

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* Government procurement policy was used to induce auto manufacturers to deploy cost effective air bag technologies, to simulate markets for recycled paper and to require more energy efficient computer designs.

Comments

[Mover]

"Politicians once made reputations fighting high prices, unsafe products and misleading and unfair business practices."

If I may, I'd like to correct what I believe to be a small typo.

It should read, "Politicians once made reputations by appearing to fight high prices, unsafe products and misleading and unfair business practices."

Politicians have not really intended to do anything other than manufacture issues to gather votes with. Actually fixing anything would deprive them of an issue for their next campaign.

[Mover]

"Back when campaign spending was limited by law, there was an effective quota on taking money from special interests. After the cap was reached, it was more effective to do favours for voters than corporate interests. One way to do this was to support consumer protection initiatives."

This scenario does not work. The limit on campaign contributions only limited how much a politician could take and be above board about it. Additionally, if they didn't continue to follow through with the promises that earned them the payola, they would be out of luck during the next round of money collecting.

The changes in the campaign finance laws only made it more profitable for unscrupulous politicians to bank more money. Obama has a new record, over $600,000,000,000.00 to run for president and over $300,000,000,000.00 from untraceable sources.

If we want the problem fixed, we have to change FEC regulations so that only represented constituents may donate to any politician's campaign. Corporations can't vote. PAC's can't vote. A person in Detroit cannot vote for a US representative, US Senator, or state and local politicians in Florida. Why should they be allowed to support politicians outside their own districts.

[aznurse]

anybody know why Richardson has decided not to be Commerce Secretary?

[Mover]

He's being investigated like the Governor of Illinois, he knew about it, but didn't tell the Obvama team about it, they are saying..

[AnnfromCA]

I agree that the consumer protections have been grossly ignored for long enough. Watching Democrats pass a bill, and Obama did also vote for it, that allowed 30% rates on credit cards was horrifying. It's a much bigger part of the problem we face now than they are willing to admit. People have ended up choosing between keeping credit cards or paying the mortgage.

Enough is enough.

[Donkslayer]

I have very little sympathy for anyone who has to "choose" this way unless they were paying medical bills with their credit cards.

[hortonhearsawho2]

The pills on the cover, made me think wow, they have a pill for that now.

[DaCoach]

Well presented. The subtle intervention by special interest lobbyists has rewritten the daily lives of Americans. It will take time but there is an urgency to balance the scales of justice. As a result of the shift of equity away from the consumer, trillions of dollars have flowed upstream to the rich and powerful. One thing that always bothered me was the ability of drug companies to spend tax deductible ad dollars on TV urging consumers towards products that must be prescribed by doctors,

[SaulZ]

This is a good article. The two things that Pres-Elect Obama can start by:

1. Tell Americans that they need to be savers first and then consumers. Consumption should primarily come from disposable income, not from borrowing.

2. Regulate the financial system. The regulations, amongst other things, should accord critical powers to risk managers and auditors.

3. Use the fiscal policy instruments along side the Central Bank's monetary policy instruments to address the economic malaise ASAP. Government and Fed have to work together. There can't be a lone-wolf approach.

[RButler]

Thank you for a concise comment. I especially like #1. While millions of Americans are waiting for Obama to provide universal health care, they are probably at the movies every weekend making Hollywood rich. Our prioties are so upside down. We should be spending our resources first on food, shelter, health care, education and other basics. Then, go to the movies or the ball game or get you nails done or that plasma TV or whatever with any money you have left over. But, Americans don't think like that. They would have no savings but would take out equity loans to buy goodies run up their credit cards. How do you fix stupid?

[luziannagirl]

The ones who aren't stupid need to push those in power to stop dumbing us down (Republican War on Intellectualism) and force-feeding us "buy buy buy" like there's no tomorrow messages.

[2sunny]

Oh, I like your style.....three quality statements to start/continue to live by......work towards.....

And James L. thanks for a well heeded article. We need to keep this information forefront in our attention span.

[Mixpixlix]

Thank you for spellng out what has troubled me for two decades. I remember Ralph in his heyday and our elected representatives fighting for consumers and not manipulated by lobbyists.

The greed the infected this country was beyond imagining. Even Greenspan admitted he didn't see it coming. Posh! A simply review of history and human behavior ought to have given him a clue.

In the 90s I remember seeing posters proclaiming: He who dies with the most toys winds. It should have been a warning.

We've seen the worst of our elected, business and civic leaders. Let's just hope that the pendulum is swinging back and consumers matter once again.

[Chip W]

Two responses:
Greenspan said the derivatives market worked just fine, it's just that people got greedy. This seems to me to be a blindness in rah-rah Free Market thinking. Free Market allows for one aspect of human nature: People will act in their own self-interest. But it ignores other aspects: Greed, short-sightedness, just bad decisions. This seems to me where government comes in - some humans in an oversight position to try to prevent the humans who are playing the game from messing things up.
"He who dies with the most toys wins" There was a TV commercial recently - a credit card I think - with the song blaring in the background "I want it all, and I want it now." Made me cringe. Consumerism has been taught and practiced for quite a while now.

[luziannagirl]

Right! ChipW you said it!

Free Market thinks greed is everything and everything can be bought & sold, and self-interest will fix everything.

BAH! goes the buzzer. Wrong, wrong, wrong.

There are SOME things essential for survival if not quality of life, that are NOT amenable to private ownership or buying and selling in a market. There are some things that are collectively owned, and which ONLY government can protect and manage.

[RetireGreen]

Stop calling Americans consumers! It's bad for the environment, the economy, and the individual. It promotes the idea that people, and the society they live in, is defined by consumption.

[TrishR]

Sorry, but Americans are consumers - as are all citizens of all countries, in fact, all humans.

Even during the 5 years that my husband & I lived in a mud hut that we built ourselves, we still bought groceries, clothing, books, gasoline, propane, gifts, pump parts, etc.

Of course, it"d be nice if we saw problems of consumers as problems of members of a community. As a rich nation, with many natural resources, it is disgusting that citizens live in the streets, middle class families lack health insurance [many smaller, poorer nations manage to provide], 3/4ths of people bankrupted are broke from medical expenses, and family values seem to have eclipsed the common good. People who sense that one false move means losing everything learn, in the worlds of Vonnegut, "Grab too much or you'll get nothing at all" - not only to assure their own comfort & health, but also for their kids, though inherited wealth isn't necessarily good for people's mental health, productivity or feelings of good will towards other members of their society.

When our country really needs the best efforts of citizens for an important goal, like soldiers in war, we don't attempt to get their best efforts out of them by making them scrounge for housing, food & health care, we provide those things. Tenure doesn't cause professors to stop working on scientific experiments or teaching or writing. Maybe a little less fear of losing everything might make this a better country.

[luziannagirl]

RetireGreen probably means that American does not equal consumer. What many of us also do, in addition to some consuming, is to sustain. We give back. We contribute to society, the environment, the public good, the commonwealth, to people collectively.

We would like emphasis placed on sustaining, especially sustaining that which by its very nature cannot be individually bought and sold, as well.

[brubelg]

Bravo! Preserving the openness and user-centric nature of the Internet will be key for protecting consumers (and producers) in the short, medium and certainly, the long run!