The boundless naivete of the “we just need more and better government regulations” crowd

There is a strong desire among many “progressives” to curb the power of corporate America. Their greatest tool, or so they think, is the regulatory nature of the modern democratic state. It is a curious tool, one that dates back at least a century in the United States.

The idea behind it, like many “progressive” ideas, is well-intentioned. It goes something like this: There is a tendency within the free market for consolidation and monopoly. Such monopolies are ruthless exploiters of the common working citizen and the consumer. They only care about increasing profits to the detriment of society and the environment. Therefore, society needs protection from these monopolists by the state and its intellectuals. They must regulate the “animal spirit” of the free market.

To understand this mentality, one would do well to consult Murray N. Rothbard’s The Origins of the Federal Reserve (among many of his other works). Right from his opening salvo, Rothbard explodes the myth of monopoly within late 19th and early 20th century America.

In contrast [to the monopoly theory of free-market capitalism], what actually happened was that business became increasingly competitive during the late nineteenth century

The early 20th century was not a political battle between the common man and the rise of big business. Men like J.P. Morgan used the progressives for his own ends. This type of relationship exists to this day. It is common knowledge that politicians are generally for sale to the highest bidder. The highest bidders tend to be Wall Street and corporate America. Even more important, there is a sort of revolving door between the halls of government and corporate boardrooms. None of this is remotely shocking.

What is shocking is that the do-gooders who desire to bring an end to this comfortable arrangement are astonishingly naive when they recommend “regulations” as the panacea. Whether its campaign finance rules or Sarbanes-Oxley, what the progressives don’t understand is that the very entities they are trying to regulate are the ones who write the freaking regulations!

All of the major corporate donors give to politicians because they want to exert influence over them. That influence manifests itself precisely in the mind-numbing language of regulations. Big business generally hates competition and every regulation they write specifically tries (and succeeds in many cases) to diminish the level of competition they have to face. Regulatory democracy and its state apparatus were set up for exactly this reason, in my opinion.

Like everything the state does, the blunt tool of coercion (with the threat of violence) is used to enforce its will. The voluntary nature of the free market is subdued, at least partially, in modern America. In America today, farmers are assaulted by armed thugs wearing badges for daring to sell milk that isn’t approved by Washington’s farm lobby (I mean the FDA). People suffering from cancer are thrown into cages simply for seeking an alternative to the Washington-Pharmaceutical establishment’s drugs. All of this abhorrent behaviour (and much more) stems directly from various regulations of the past. You see, once we give the state (and its corporate backers) the power to regulate our lives, we cannot be surprised when they do just that, by force if necessary.

Of course, all of the regulations in the world never come close to reaching their stated goals. Only the market can regulate honestly and, at times, with the necessary brutality so badly needed. Rather than bailing out reckless bankers and corporations, the market would have forced them into bankruptcy. Rather than printing up billions of dollars and handing them out to political cronies, the market would have forced big business to cope with reality, or disappear. In short, the market does not reward failure, but punishes it. The market doesn’t regularly debase the value of the currency to pay its bills and to buy friends, like the US Federal Reserve is doing at this very moment with its magical printing press.

We need a return to fundamental market principles of allowing bankruptcy, allowing the liquidation of bad debt and returning to a strong (and sound) currency. Until that happens, there will be no genuine recovery, only the debt-laden distortion of an economy we have today.

 

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