Matt Yglesias considers the libertarian conceit that we don’t need government oversight of product safety, because “consumers want to buy safe goods. This means that producers want to be able to credibly signal the safety of their goods. That means that there ought to be, in a [regulation] free world, a market opportunity for  firms that rate the safety of consumer products.” Matt’s discussion of this conceit focuses on the credit rating industry, but the libertarian premise was debunked over a hundred years ago in a much simpler market: food.
The Nineteenth Century saw the rise of processed food. Urbanization meant the the growth of population centers which were too large to be supported by the crops grown on nearby land, and railroads allowed food grown many miles away to be proceessed and shipped to Chicago or New York or Philadelphia. With processed food being rather new and the federal government being rather unambitious by modern standards, however, there was no federal regulatory apparatus governing this industry.
As a result, consumers had no idea what they were really getting when they went to buy groceries. Products sold as “strawberry jam” were actually a mixture of glucose, food coloring, grass seed, and gelatin. Rotten eggs and rancid butter were often pulled from the shelves, deodorized, then sold to unsuspecting families.
Among the worst offenders was the ketchup industry. Not wanting to let rotten tomatoes go to waste, ketchup producers discovered that, with enough vinegar and spices, the taste of moldy tomatoes in ketchup could be completely masked, and the result was a product that was only slighly more watery in consistency than ketchup made with fresh tomatoes. If the color was off, red food coloring would do the trick.
Against this background, the H.J. Heinz Company was formed. Heinz’ first product was horseradish, which they marketed in a clear jar to show off the fact that their horseradish had no visible impurities. A few years later the company began selling ketchup, and much of their marketing focused on the fact that Heinz ketchup did not contain any rotten tomatoes—in stark contrast to many of their competitors. A relatively recent publicity piece about Heinz claims that “Henry Heinz recognized before most of his peers that pure food is not only good for you, but is also good business,” but the truth is that Heinz’ promise of a safe product was not itself sufficient to capture the ketchup market. By the start of the Twentieth Century, Heinz was a major ketchup producer, but so were several companies who padded their bottom line by mixing rancid tomatoes into their product.
Seeing an opportunity, Heinz joined the chorus of scientists, consumer advocates and government officials who were clamouring for federal oversight of the processed food industry, even sending future Heinz CEO Howard Heinz to lobby President Theodore Roosevelt in favor of a the Pure Food and Drug Act, which prohibited some of the processed food industry’s most revolting practicies and gave enforcement authority to the agency which would later become the FDA. In 1906 the Act passed, and most of Heinz competitors were pushed out of business.
Because Heinz was one of only a handful of major ketchup producers who were already in the business of mass producing ketchup solely from fresh tomatoes, they quickly capitalized on the vacuum that formed as the rancid ketchup industry collapsed. Heinz became the market leader, and it remains so today. 60% of American ketchup sales are controlled by Heinz.
My point in telling this story is not to give publicity to the H.J. Heniz Co., although if their marketing department would like to thank me, I’m happy to accept a check. My point is simply to indicate that, despite Heinz’ belief that “pure food . . . is good business,” the truth is that thousands of American consumers bought rancid ketchup for decades, even though they had the option to choose Heinz’ safer product. Market forces left thousands of Americans sick from tomato mold. It wasn’t until the federal government got involved that rotten tomato ketchup left the shelves of local groceries.
UPDATE: Natasha Chart has more.
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