Lou Dobbs, China, and "Idiot Libertarians"

So, I accidentally turned Lou Dobbs on for exactly one minute this afternoon. He was talking about the Chinese toy and food import "scandals" that were in the news over the summer. After ranting about Mattel's corporate greed, he then went into a diatribe against free marketers, asking where are the "free marketers and libertarians now?" regarding this whole Chinese import debate. Continuing his rant, he stated that the whole scandal should prove to "idiot libertarians" that government regulation of trade is necessary to protect the safety of the American people. Finally, he drew the connection - as usual - between corporations and their ability to influence government in order to screw the consumer.

I did some research and found that, indeed, the libertarian movement has been less than concerned about the China toy recalls. Most libertarian commentary on the issue has discussed it only tangentially discussing other issues of China trade policy. Of course, the reason for this silence is mostly because libertarians aren't overly concerned with toy "defects" that have apparently caused little or no actual harm to US consumers (so far as I can tell).
Nonetheless, I figured that I will answer Mr. Dobbs' challenge (since I'm sure he's a regular reader of Publius Endures).
So, here are 6 reasons why the Chinese toy recalls do not represent a failure of the free market:
1. As far as I have been able to tell, the tens of millions of recalled toys that Dobbs complained about have resulted in exactly zero reported injuries. Indeed, the Consumer Products Safety Commission, in the most recent round of recalls, indicated that no injuries have occurred as a result of the allegedly defective products. So, I can't see how the market has created an unacceptable danger to the consumer if tens of millions of the toys subject to the recalls have caused exactly zero harm, or at least such a low level of harm as to be statistically irrelevant.
2. The fact that US government rules have apparently been violated in terms of the materials contained in the products is not in itself proof of a market failure and of the need for stronger government rules. If rules had been followed, and a statistically significant number of injuries had resulted nonetheless, then one could say there was a market failure and new rules could be justified. But the fact that rules have been broken does not justify stricter rules.
3. In fact, since many millions of products were imported and sold in violation of the government's rules and few if any injuries resulted over a substantial period of time, the evidence would suggest that the government regulation is either far more strict than necessary or is totally without value. This means that the only possible reasons for the rules are either to act as a means of protectionism for US manufacturers or they are completely arbitrary since the government lacks the ability to precisely set its standards at the most economically efficient point.
4. Dobbs' ad hominem attack on libertarians clearly shows his absolute ignorance of fundamental libertarian and free market principals. Most importantly, it ignores the fact that a true free market approach opposes corporate welfare just as vehemently as it opposes social welfare programs. Corporate welfare such as government subsidies, special tax breaks, and - most importantly for these purposes - limitations on liability are completely anti-free market. Obviously, corporate welfare significantly reduces the economic incentives to provide a safe product for the consumer since the government policies artificially reduce the corporation's marginal costs for defective products. Corporate legal protections and subsidies diffuse liability costs amongst the entire company rather than on a handful of individuals with a personal stake in the company. As a result, a corporate decisionmaker will only see his earnings reduced by a comparatively small amount if the company is found liable for defective products; without corporate welfare, that individual might be personally liable for all legal damages.
5. The fact that the products in these cases were recalled despite a lack of any significant injuries actually suggests a market success rather than a market failure. Even in the case of the dog food recall fiasco, only a few dozen of the millions upon millions of dogs that had eaten the "tainted" food wound up dying or with permanent health problems- the risk of serious injury was statistically only slightly higher than the chances of winning the lottery. Most -if not all- of the relevant toy and food recalls were voluntary, despite absurdly high costs to the companies. This means that the companies involved were concerned about permanent or long term damage to their consumer image in the unlikely event of injuries occuring. The recalls, by and large, were not the result of government enforcement, then, but of the profit motive.
6. Tariffs. I don't know what, if any, tariffs were involved in the questioned imports. However, the existence of the tariffs has a perverse effect on market incentives. A realistic hypothetical can demonstrate how this is relevant: ABC Co. currently makes a particular product in the US; however, the cost of producing the product in the US is increasing, but demand for the product will not support a correspondingly higher retail price. ABC Co. also knows that, for a variety of reasons, it can produce this product for much less in China and keep its price at current levels or even less. Therefore, it agrees with a Chinese company to produce the product in China at a particular price. Suddenly, however, a tariff is put in place or an existing tariff increases. This creates an increase in production cost to ABC Co. However, it still must keep its retail price point the same. As a result, ABC Co. must choose between either discontinuing the product or obtaining a lower price from the Chinese manufacturer. If ABC Co. chooses to pursue a lower price from the Chinese manufacturer, that manufacturer will almost certainly have to choose between ending its production of the product or finding a cheaper way of producing the product - including, perhaps, lower quality materials.

Having proven that the "unsafe" Chinese imports are not a market failure but a failure of too much regulation, I would like to suggest that Mr. Dobbs take a refresher course on free-market economics. Hazlitt's "Economics in One Lesson" should do the trick.