On Deregulation…

It looks like we’re in for another round of deregulation coming from the corporate puppets running the country.  We’re told that regulations make it more difficult, more expensive to run businesses and that regulations stifle innovation.  Well, yeah.  They do.  In the same sense that laws make it more difficult for armed robbers to rob people at gunpoint, sometimes rules get in the way.  Do we care that our laws prevent an armed robber from “innovating” by switching from a .38 to a .45?

Despite what you might have heard, there’s one thing that people need to remember about business.  A business exists for one reason and one reason only: to make money.  They are not, by nature, moral or ethical entities and they do not make moral or ethical decisions.  A properly run business will make money by any legal means available.  That’s a key phrase “…any legal means available”.  This means that the society in which a given business is operating not only has the right to regulate business activity, it has an obligation to do so.

A business may consider moral or ethical positions when making decisions but they may not and if the people running the operation decide to put those considerations aside they’re still operating within the framework of what should reasonably be expected of a business.  But declaring business inherently evil is as incorrect as declaring them inherently good.  “A business would never do that” is a false argument as displayed by the many, many times in which business do exactly the things defenders say they would never do.

For example, the Great Depression was kicked off by an artificial housing bubble.  The Savings and Loans crisis of the 80’s was kicked off by an artificial housing bubble.  The most recent economic disaster was kicked off by an artificial housing bubble.  Clearly, business will do things that shouldn’t be done in the name of profit and they’ll do those things over and over again.  But they’re still not inherently evil.  They’re just doing business.

The thing is, when any entity is operating without any moral or ethical compass, it’s behavior will move into immoral and unethical areas eventually.  This is inevitable.  They don’t plan it but they don’t plan against it, either.  That’s not their jobs nor their concern and I would argue it should not be.  That should be, by rights, where society steps in.

For the most part, society doesn’t make rules or laws for no reason.  Somebody has to do something – often unimaginable prior to their doing it – before we react.  Prior to the Great Depression, for example, people mostly didn’t worry about investment banks and commercial banks blending their business because it would be foolhardy to take risks that might damage their own businesses.  But some clever sod saw an opportunity for profit and did it anyway.

Enter Glass-Steagall, the law that prevented such behavior by commercial banks by controlling their behavior.  Commercial banking became stable until President Clinton signed the Gramm-Leach-Bliley Act of 1999.  (Please note, that is Phil Gramm (R), Jim Leach (R), and Thomas J. Bliley, Jr. (R).  Just sayin’…)  The masses were told Glass-Steagall had mostly been worked around, anyway, so this just finalized that process but it’s notable that the banking industry remained stable from the time Glass-Steagall was instituted until it’s provision were eliminated in 1999.

In the meantime, financial havoc was inflicted on an area of banking called Savings and Loans by a bi-partisan group that came to be known as ‘The Keating Five’ who blocked regulation in that industry in the early 1980’s, allowing financial players to inflate an artificial housing bubble in the Savings and Loans.  The Reagan administration saved the institutions that could be saved, heavily regulated their behaviors, then spun them off back into the private sector as Credit Unions.

Go ahead, take a guess at which segment of banking was spared the ravages of the 2008 meltdown.  Did you guess the heavily regulated Credit Unions?  That’s just one example, of course, and it’s certainly simplified for this purpose but the basic information is correct and the point is, we regulate when we discover we need to, not just to make it more difficult for businesses to do business.

There’s a caveat, here. For several years, now, there have been outside groups writing laws.  Groups like ALEC (I think that stands for ‘Assholes Legislating Evil Crap’ but I could be wrong…) write blanket laws and then work to have state legislatures enact them.  These are literally boilerplate, fill-in-the-blanks-with-your-information type laws.  They rarely, if ever, address actual situations that need to be addressed.  Instead, these laws are typically about expanding corporate powers and/or protecting corporations from interfering government intrusions.  I can see eliminating these rules as quickly as possible…

I’ll tell you this: as we prepare for the coming onslaught of deregulation, it’s important to remember that most regulations are put in place for a reason.  Yes, the regulations might slow profits and they certainly might interfere with innovations but the goal is to protect society and even the businesses themselves from their own avarice – something they should not be expected to do for themselves…

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