Entrepreneurship Gets Slaughtered

Creekstone Farms is a little slaughterhouse in Kansas with an idea that would have had Adam Smith’s mouth watering. Faced with consumers who remain skittish over mad cow disease -- especially in Japan -- Creekstone decided that all its beef would be tested for mad cow, a radical departure from the random testing done by other companies. It was a case study in free-market meatpacking entrepreneurship. That is, until the Bush administration’s Department of Agriculture blocked the enterprise, apparently at the behest of Creekstone’s competitors.

According to the Washington Post, Creekstone invested $500,000 to build the first mad cow testing lab in a U.S. slaughterhouse and hired chemists and biologists to staff the operation. The only thing it needed was testing kits. That’s where the company ran into trouble. By law, the Department of Agriculture controls the sale of the kits, and it refused to sell Creekstone enough to test all of its cows. The USDA said that allowing even a small meatpacking company like Creekstone to test every cow it slaughtered would undermine the agency’s official position that random testing was scientifically adequate to assure safety.

What it didn’t say was that the rest of the meatpacking industry was adamantly opposed to such testing, which is expensive, and had no desire to compete with Creekstone’s fully certified beef. “If testing is allowed at Creekstone ... ,” the president of the National Cattlemen’s Beef Assn. told the Post, “we think it would become the international standard and the domestic standard, too.”

The Agriculture Department’s Creekstone decision reveals the best thinking of Soviet central planning: The government shoots the innovator to preserve market stability. Though President Bush invokes free-market principles when it comes to industry downsizing, “outsourcing” jobs, media mergers and energy deregulation, those principles apparently have their limits when a company seeks to become an industry leader in consumer protection.

Located in the small town of Arkansas City, Creekstone is a model operation in an industry that often seems medieval. It traces the origins of its high-quality Black Angus beef to reduce the use of animals that have been given antibiotics. It pays high wages, employs humane slaughtering techniques (they make for better-tasting beef) and maintains a slow enough production line to guarantee worker safety and to ensure that animals are dead before they are butchered. Although the largest U.S. meatpacking companies have fought regulations that would force such practices, Creekstone -- which has been in business since 1995 -- has proved that some consumers will pay more for such corporate policies and the premium product that results.

The appearance of mad cow disease in the U.S. herd hit Creekstone’s small operation hard. Much of its market was in Japan, where all cows are tested for the disease and where U.S. beef is banned because American meatpackers don’t follow the same policy. So Creekstone’s chief operating officer, Bill Fielding, announced that he would voluntarily test the 300,000 cows his company slaughters annually, to satisfy customers willing to pay the cost. Absent the test, Fielding says Creekstone may face bankruptcy and have to lay off its 790 workers.

The Department of Agriculture seems to have only one purpose in preventing Creekstone from testing -- appeasing the big slaughterhouses. The USDA has a long history of doing the bidding of the meatpacking industry at the expense of the public. Indeed, in many academic studies, the department is presented as a textbook example of the problem of “agency capture,” wherein an agency becomes so identified with the companies it regulates that it becomes an extension of those companies.

The allegations of agency capture have been magnified in the Bush administration, in which former industry executives hold key regulatory positions -- Agriculture Secretary Ann M. Veneman has a chief of staff who was the head lobbyist for the National Cattlemen’s Beef Assn. and a senior advisor who was the association’s associate director for food policy.

When mad cow disease appeared in the United States, the department again took the industry line and resisted calls for added testing. Only after worldwide criticism did it reluctantly make such modest rule changes as requiring slaughterhouses to discard “downed” animals -- cows so sick that they had to be dragged into slaughterhouses to be butchered. Most Americans were surprised to learn that the department had ever allowed such animals into the food supply in the first place.

The administration may be correct that testing every animal in the U.S. is unnecessary and not cost-effective. But why not let Creekstone find out what the market will bear? The position of the administration is an affront to anyone who believes in the free market. It’s as if the Department of Transportation refused to allow Volvo to add air bags just to keep the pressure off other carmakers.

Congress should step in and end the department’s monopoly over testing kits. It should also call for the removal of the officials involved in the decision.

As for the self-described free-marketeers in the Bush administration, Creekstone Farms may not offer them an appealing meal but at least it doesn’t come with a heaping side order of hypocrisy.