“Liberty means responsibility. That is why most men dread it.” – George Bernard Shaw
One of the recurring themes at this week’s debate between Willard Romney and President Obama is this concept that, somehow, regulation itself -- any regulation -- tends to severely restrict commerce and has a negative effect on the economy. While such a thing is possible, the current regulatory environment tends to be the opposite of that. Republicans, and even some Democrats, have been dereguating for 40 years. It's unlikely there is much debilitating regulation left.
One of the more childish and irritating concepts the current incarnation of the Republican Party tends to push is the one that regulations are, almost by definition, restrictive and confining. They love to champion the idea that all regulations inhibit freedom, when in fact, most regulations actually enhance the freedom of business owners to engage in whatever commercial activity they desire. While rules against predatory commercial activity would keep Walmart from charging prices designed to put everyone else in town out of business, they keep everyone else in business and keep commercial activity thriving. Having a big box store displace 20 other retailers is not good for commerce. I can't believe that has to be said out loud.
Government has gone overboard with regulations in the past, and they occasionally still do, although to be honest, many ofthe most ridiculous regulations come from state and local governments, not the federal government. Washington, DC, for example, will fine you and possibly throw you in jail if you attempt to guide a tour of the city without a license. There are few federal regulations that come close to that level of micromanagement.
Used correctly, rational regulations help keep the people operating under our capitalist system working honestly, on a level playing field. When that happens, capitalism can breed intense innovation and creates markets for things that make life better. The United States became an economic superpower because we learned to use the capitalist economic system to its greatest effect, and the world economy is growing and expanding largely by following our lead.
Unfortunately, one thing the countrieswe compete with learned from us, that we seem to have forgotten, is that, contrary to the Republican meme, capitalism is not a religion, featuring “the market” as its godhead. Republicans believe in the basic concept that players in a market will always accede to the wishes of their customers, because that’s how they make money. This is the ultimate in absurd. There is a small but existent subset of humans who have a natural tendency to do anything to make money, and then to protect what they have at all costs.
For example, while Republicans these days operate under the assumption that food producers won’t allow tainted food into the marketplace because it’s bad for business, and that is probably the case for the vast majority of such businesspeople, there will always be that small subset of producers who doesn’t care about anything but making money. What if a pork producer decides to push some tainted beef into the market, so that people are scared away from beef and opt to buy more pork? Regulations create a basic floor for operation that keeps markets fair for all players.
Though many Republicans, including many who blindly support Romney just because he’s Republican, don’t seem to understand this concept, regulation doesn’t cause an unfair burden, it prevents an unfair burden. Regulated markets afford protection to all players in those markets, large and small. The basic reality is, too much deregulation could actually result in a collapse of capitalism.
The mortgage meltdown, which led to the Great Recession, and led us closer to economic collapse than we have been since the Great Depression, was not caused by “too much regulation, it was caused by a financial market that was created and allowed to operate without regulation or government oversight. People were allowed to use our money to invest in securities that had no specific value, but as long as they were bought and sold at a profit, everyone was happy as a clam. Unfortunately, someone eventually figured out the emperor had no clothes, and these securities had no actual value, which caused, the entire market to collapse. And because there was no regulatory structure in place to address it, the collapse of that market almost took every legitimate business down with it. The reason your 401(k) dropped like a rock in 2008 is because crooks, thieves and idiots were allowed to operate entirely at will. The sickest thing is, almost everything they did was legal at the time. The reason “banksters” aren’t in jail right now is because most of what they did, though economically disastrous, was actually not illegal at the time they did it.
Let me say that again. While a lot of mortgage brokers will probably go to jail for falsifying records, which they did a lot, almost nothing banks did at the time was illegal, because Republicans actuallyforbade the government from regulating the mortgage after-market. You hear a lot of whining from the GOP about Fannie Mae and Freddie Mac, but they were heavily regulated and existed for decades without a problem because of that fact. It wasn't until the creation of this unregulated mortgage market that problems started to crop up.
But the bottom line is, banksters won’t be going to jail for causing a near-collapse of the economy, because that was created and nurtured by a Republican Party that despises regulation. When Willard Romney said the other night that he would institute some regulation, he was lying to you. Republicans hate regulation. That collapse was caused by pure, unregulated capitalism, which is what the current incarnation of the Republican Party lives for, and make no mistake; they will recreate the same unregulated market, and they'll swear they'll do it right next time. Republicans advocate for unregulated capitalism, even though it’s essentially a breeding ground for criminals and idiots. If you can come up with one regulatory structure that was created by the current crop of Republicans and kept business in line, good luck, because there probably isn't one, really.
This nation’s Founding Fathers understood the need for comprehensive regulation when they included the Commerce Clause in the Constitution. The Commerce Clause doesn’t just politely request that the federal government consider a few regulations, it actually mandates such regulation. The government has no choice in the matter; it must regulate commerce “among the states,” and there is almost no commerce that isn’t either interstate or international these days. Case after case in our common law reiterates this fact, going back more than 200 years.
Without significant regulation, capitalism is harsh and cruel, and allows large players with lots of money to lock everyone else out of whatever market they've chosen to dominate. Without proper regulation, companies can put everyone else out of business, until there is one dominant company controlling every product in the economy, and freezing everyone out of the marketplace. Imagine, if you will, that Standard Oil had been left alone back in the late 19th Century. It’s entirely possible that every product you own could have the Standard brand on it, because they likely wouldn’t have stopped with the oil business. They would control pricing on everything, and all private employment would be under their purview. Needless to say, regulation is important in any capitalist enterprise, to make things fair for consumers and other potential capitalists.
Even with regulation, capitalism has a downside. Some markets, such as the employment market, need a pool of available workers to keep inflation under control. That is why it is so vitally important that we have a strong safety net in place, to take care of those who are necessarily left out of the system for any length of time. Every other industrialized nation has a strong safety net for those families who can’t or don’t work at any given point in time, yet Americans who find themselves unemployed through no fault of their own usually face losing everything if they can't find employment right away.
Why is that acceptable? Why is the wealthiest nation in the world allowing such a thing to happen? It’s because the current incarnation of the Republican Party doesn’t care about anyone but rich investors. They don’t care about capitalism. They’re perfectly happy with turning the entire economy over to Walmart and ExxonMobil and letting the Chinese make anything. They’re okay with allowing robber barons and idiots to create an economic subsystem that makes them trillions of dollars in the short run, but costs everyone else trillions more in the long run. They claim to be enamored with competition, but the only way to keep competition strong is to regulate commerce. The fact of the matter is, capitalism needs strong regulation to keep all businesses, large and small, on a level and fair playing field.
But we also have to recognize that some markets do not work within a capitalist framework. Take energy, for example. Almost every other industrialized nation on the planet has a plan for electrical generation, in which private companies run generation plants, but the transmission is (and should be) owned and maintained as a heavily regulated public trust. One reason our electrical grid is a complete mess is because we treat the entire system as a capitalist enterprise, with little or no planning between jurisdictions or markets.
Except for regulations requiring each utility to attach itself to an ad hoc "grid,” each system is built on widely divergent standards. We should have developed a grid plan 40-50 years ago, and demanded that utilities across the country adhere to one standard, with a national focus. But in their "deregulation" zeal, Republicans would have none of that. so we have a system that is a blackout or two away from complete disaster. Do you realize, for example, that the state of Texas has its own electrical grid, and it’s not connected to the rest of the country at all. That is just absurd, and could someday lead to major problems. Not only can we not depend on Texas to provide us with power when necessary, if Texas loses power, we can’t pick up the slack.
Another great example is oil. Why do we act as if the oil “market” is actually a capitalist enterprise, when it’s actually a closed market that needs heavy global regulation right now. If the wide swings in gasoline and heating oil prices over the last four decades haven’t made that apparent, what will? If the major oil companies were actually competing with each other, where’s the one buying Venezuelan or Brazilian oil at a deep discount in order to blow its competitors out of the water? The market is rigged, and it needs to be heavily regulated and taxed with an eye toward reducing our dependence on it. I'd have no problem paying $5 per gallon if the money wasn’t going into the pockets of people who already have plenty. If the money was going to build efficient public transit systems, or to pay for alternative fuels exploration, no problem. But every time they raise the price, oil companies’ cash reserves get fatter and we get nothing out of it. That’s not capitalism, folks; that's effectively taxation without representation. Isn't that what our original revolution was about? Do we really think only the government can tax us?
Another industry that doesn’t lend itself to capitalism is insurance. I have a problem with the way most insurance companies are run, but no insurance company should be run as a for-profit enterprise. The problem with for-profit insurance is most acute when it comes to health insurance.
The nature of insurance is actually the epitome of socialism. Everyone puts money into a pool, and those who need it take what they need. You know, "from each according to his abilities, to each according to his needs." Insurance is downright Marxist. All insurance companies really do is collect money from us, then cut checks and pay bills on our behalf. I understand there are administrative costs involved with insurance, but profits? What services or products do insurance companies actually provide that entitles them to a profit? And under a system like ours, which requires that company profits increase every year, there are only two ways for any insurance company to do so; to collect more in premiums and to pay out less in claims. Now, what could be wrong with those concepts, really?
Life insurance companies make most of their profits from people who take out a policy and allow it to lapse. Ever notice, they’re all over you to take out a policy, but once you have one, you rarely hear from them again? They’re actually hoping you’ll forget to pay your premium. If you pay premiums for ten years, then forget to pay your premium one quarter or month, they get to keep everything you’ve paid in so far, and never have to pay out a claim. It’s largely the same with car insurance, although car insurance tends to be highly regulated in most states. Car insurance companies strive to keep good drivers, and try to increase premiums for bad drivers enough to make them look elsewhere for insurance.
The concept of for-profit health insurance, however, is nothing short of insidious. If we choose to go without life insurance, it can be difficult for survivors when we die, but there are programs like Social Security and welfare to help them out. We really can go without a car in many places in the country, as New Yorkers prove pretty much every day, so we can choose whether or not we want to buy car insurance. Health care is not a consumer product. We will all need it at some point, but we rarely get to choose when or where we buy it. We like to point to smokers, drinkers and people who eat too much sugar and fat as huge problems, but the fact is, we can contract meningitis or pneumonia from someone we pass on the street, and incur tens of thousands of dollars in care that we can’t afford to pay. Without health insurance, catching a disease from someone who passes us on the street or getting hit by a bus can result in us losing everything we've worked for our entire life, and that simply shouldn’t be.
We should all have health insurance automatically, from the moment we’re born until the day we die. But while health care delivery can be a (highly regulated) capitalist enterprise, there is no way paying our medical bills with our own money should result in profit for anyone. Those who pay the bills deserve to make a living for their work, but they shouldn't be able to skim profit from that exercise.
The non-capitalist approach is not unprecedented, by the way. Our health insurance system was almost entirely non-profit until about a quarter century ago, and while most universal health care systems are not single payer, private insurance companies who work under those systems are heavily regulated non-profits.
It’s time we started realizing that the most responsible capitalism is heavily regulated, and that all good capitalist systems are conducted with a realization that not all endeavors work well in a market-based environment. Our system became the strongest economic system in the world through a public-private partnership that acknowledges that reality. It’s time we returned to that model.
The Romney/Republican “capitalist” model, in which regulation is minimal because it’s automatically a “restriction on freedom” belies the fact that there are always multiple people whose freedoms must be kept in balance. Yes, businesspeople should have the freedom to engage in commerce, but that freedom also entails significant responsibility; to consumers who frequent their business, as well as to the others who also engage in commerce, including others in the same business. And we have to recognize that not everything should be subject to the capitalist system. Markets mature and change, and we often become dependent on some products. We must understand that basic societal needs sometimes take precedence over profits.
Capitalism is not a religion, and money is not our god. Stop treating them as such.