Tuesday, April 3, 2012

Bashing Regulation: A Right-Wing Sport

Over lunch, I noticed a leader in the 18 February edition of the Economist, titled “Over-Regulated America”.  (Yes, it’s sad and true...when I’m working at the National Library, I spend my lunch break at a nearby coffee house reading the Monitor and old issues of the Economist and getting worked up about irrational political arguments.) 

The gist, as you have gathered from the title, is that the United States is heavily over-regulated.  Beginning, as all such arguments must, by citing a few examples of outlandish regulation to get readers’ blood boiling by pretending that this is the rule, the article went on to concede that “the problem is not that the rules are self-evidently absurd.  It is the ones that sound reasonable on their own but impose a huge burden collectively”.  Now readers are supposed to swallow this opening premise sans criticism or thought, and move on.  But I found myself wondering.  A burden on whom?  What kind of burden?  I didn’t realise that regulations on pollutants or using dangerous chemicals in agriculture were burdens on citizens or consumers.  But I read on.

“America”, the article continued, “is meant to be the home of laissez-faire”.  Oh is it?  Is that in the Constitution?  Is there an amendment saying that wealth shall trickle down, and if it happens not to, tough luck?  Or—given that some high-ranking Republicans seem to be under some misapprehension about the source of our laws—is there a Biblical commandment (or perhaps a footnote to one), which reads, And mine people in America shall embrace Reaganomics and eschew the use of common sense to regulate corporations?  I was under the impression that we were first and foremost a democracy, and that a laissez-faire economic policy, like a social democratic one, could be the people’s for their asking, rather than something inflicted permanently on us by the editorial boards of neoliberal magazines.

But the leader wasn’t finished.  “Unlike Europeans”, it read, “whose lives have long been circumscribed by meddling governments [you know, the ones that assure them universal healthcare more cheaply than our laissez-faire variety, long vacations, good sick leave, affordable when not free higher education, and other attributes of high-quality lives] and diktats from Brussels [which are somehow worse than the ones that our government took from the corporate gangsters of the financial, real estate, energy and weapons industries], Americans are supposed to be free to choose, for better or for worse [Choose what?].  Yet for some time America has been straying from this ideal”.

Now I realise we’re an obtuse people in the United States, so convinced of our inherent greatness and the worthiness of our incredible freedoms (they’re so great, we’re told, that other people somehow hate us for them), but it’s possible that we’ve been “straying from this ideal” because we realise that a laissez-faire society isn’t always a terribly decent one.  In the late nineteenth century, we gave our leaders the go-ahead to start reigning in overmighty trusts.  In the first half of the twentieth century we endorsed our government’s construction of the framework for a social welfare system.  In the 1960s and ‘70s we demanded that our government regulate destructive, polluting industries.  And again, since 2008, we’ve voted for those who wish to prevent a repeat of the recent economic crisis.  So we’ve been “straying” for rather more than half of our country’s history, and for good reason.

But logic can scarcely be productively applied to the righteous carapace of the Economist’s editorial Board.  “Consider the Dodd-Frank law of 2010”, it instructs us.  “Its aim was noble ... But Dodd-Frank is far too complex, and becoming more so”.  I was just waiting for this argument to appear, because it’s a favourite of right-wing polemicists.  Complex problems, in their estimation, demand simple solutions, and this is no exception.  “At 838 pages”, the leader objects breathlessly, “it is 23 times longer than Glass-Steagall, the reform that followed the Wall Street crash of 1929”.  It may very well have escaped the learned journalists at the Economist, but the financial sector is exponentially more complicated than it was in 1929, and the financial wizards who dominate it are ever more inventive in circumventing not only law, but basic moral frameworks.  It seems only logical that a more complicated system requires more complicated regulation.

Regulations, the leader suggests, are a bipartisan evil.  “Republicans write rules to thwart terrorists ... Democrats write rules to expand the welfare state.  Barack Obama’s healthcare reform of 2010 had many virtues, especially its attempt to make health insurance universal.  But it does little to reduce the system’s staggering and increasing complexity”.  Now why a law that seeks to assure insurance for over 300 million people should be simple, I’m not sure.  But in this specific case, the real reason for the complexity is that Obama’s timid reform—instead of going for a system off universal healthcare—simply grafted new rules onto an old and inadequate system.

The Economist identifies two sinister forces which drive this oppressive regulatory regime in the U.S.  The first is “hubris”.  That is, “the conceit of Dodd-Frank that you can anticipate and ban every nasty trick financiers will dream up in the future”.  This is a curious complaint, to criticise legislation that seeks to anticipate future problems rather than satisfying itself with solving yesterday’s problems.  Given the capacity of irresponsible industries to plunge our entire economy into turmoil, and wreak havoc on the livelihoods of working and middle class people, it seems that regulations that are as stringent and forward-looking as possible are exactly what we’d want.

The second evil, according to the Economist, is lobbying, which in their mind creates all kinds of costs of its own.  Once lobbyists get their hands on regulation, the aims of that regulation are either twisted, or else it gets still more complicated (and boy, does the editorial board of the Economist ever hate complexity!).  The solution (target regulations) is a rather facile one, given that the problem arises from the lobbying rather than the regulating.  The more thoughtful and intelligent approach would be to advocate for a reform of lobbying, but like a terrier, the Economist has latched onto its bogey of choice, and isn’t about to let mere logic deter it in its attack.

Now for the Economist’s solutions: “all important rules should be subjected to cost-benefit analysis by an independent watchdog.  The results should be made public before the rule is enacted.  All big regulations should also come with sunset clauses, so that they expire after, say, ten years unless Congress explicitly re-authorises them.  More important, rules need to be much simpler.  When regulators try to write an all-purpose instruction manual, the truly important dos and don’ts are lost in an ocean of verbiage.  Far better to lay down broad goals and prescribe what is strictly necessary to achieve them [leaving implementation to regulators] ... Would this hand too much power to unelected bureaucrats?  Not if they are made accountable.  Unreasonable judgments should be subject to swift appeal.  Regulators who make bad decisions should be made easily sackable...”

Cost-benefit analysis, a favourite tool of those interested in dismantling social welfare provisions, spell the end of morality in our politics.  Firstly, they’d spawn their own sphere of influence peddling, and these studies would undoubtedly cost a pretty penny.  Lobbyists would descend on the ‘independent watchdog’ like vultures to a carcass, and the work of such a ‘watchdog’ would in itself hamstring the ability to enact legislation.  Sunset clauses miss the entire point of legislation.  I don’t see that regulation should be subject to a different philosophy than other kinds of legislation, and if we think our politics are poisonous and destructive now, imagine what would happen if we debated the EPA’s existence, the logic of social security, the rationale behind national parks, the justification for healthcare provisions, every ten years.  Again, this would be a boon to lobbyists, and the flow of money which would accrue around such debates would not only corrupt our politics and squeeze out the voices of ordinary voters, but would also mean that no legislation would have a lifespan sufficient to actually test its effects.

Moreover, cost-benefit analysis is an economic measurement.  And economic measurements tend to fail rather dismally when it comes to measuring human welfare.  People tend, for example, to value schools and universities for the work they do in creating thoughtful citizens out of our children.  But there is no measurement that can place an economic value on “thoughtful citizens”.  Yet, it’s something we wouldn’t want to do without.  The mercenary approach to restructuring the University of California that is currently being undertaken at the behest of its governing bodies and administrative heads is a perfect example of what happens when you devalue things like knowledge of literature or history, or the creation of well-rounded citizens. 

And imagine the blood that would flow and the democratically-backed legislation that would be shredded if we gave Congress (presumably that’s who the Economist has in mind to look over regulators’ shoulders.  The entire point of having regulations is that once voted into being, they not be subject to partisan whim.  Who defines what an ‘unreasonable’ judgment is?  Unreasonable in the eyes of a polluter who is able to spend big bucks convincing a Congressional representative that it’s a burden on an irresponsible industry?  Or unreasonable in the eyes of the powerless people who feel its effects first-hand but have no voice in government?  And a punitive approach to regulators who do their job (sacking anyone who you disagree with) would surely discourage them from carrying out their duties.

There is, the Economist ends, a “real danger: that regulation may crush the life out of America’s economy”.  I’d say there’s a greater danger: that the irresponsible behaviour of the wealthy backers of powerful industries, together with their hired politicians, might plunge our society into the same kind of turmoil that we’ve experienced since 2008.  Or during the Depression, for that matter.

In skimming through old issues of The Uganda Herald, I ran across a piece evaluating FDR’s first ten years as President.  The analysis, you should bear in mind, is from a disinterested paper, in a colony thousands of miles from the United States.  They wrote admiringly of Roosevelt’s accomplishments, and it’s worth quoting:

“Since President Roosevelt was inaugurated on March 4th, 1933, the United States Federal Government developed greater responsibility for the American people as individuals.  The President brought to the White House with him the proposition that the Federal Government, in the last analysis, was responsible for the alleviation of the people’s economic difficulties.  His philosophy was: Everyone is entitled to a measure of security—insuring this is a legitimate function of the government.  Opportunity for work must be open to all ... Under his direction in 1933, Federal spending took a variety of forms—work relief, public works, public housing, rural electrification, the Tennessee Valley Authority flood control and electric power project, and many others ... With all this came such reforms as the stock market control through the Securities and Exchanges law, the rejuvenation of the anti-trust laws, tighter control of banks and other financial institutions.

“Gradually, a body of new legislation extending government control and financing into business, industry and agriculture was built up.  Together agencies administering these laws exercise enough control to make possible a form of government planning.  President Roosevelt’s programme indicated the government could, by supplementing the private economy, guarantee full employment in the future”.*

So yes, we did “stray” from the view that Government had no responsibility to its citizens.  We broke with the view that it should be accessible only to the affluent, and stand aloof from the trials of ordinary citizens.  We repudiated the notion that any person, interest, industry or corporation had the right to behave in a manner antithetical to the common good.  And we accepted that it was not enough to leave the planning of our economy to those who believed in short-term profits and private interest rather than accountability and the public good.

And I think, whatever the Economist says, that our “straying” has been for the best.


* The Uganda Herald.  17 March 1943.  “Roosevelt Completes Decade in White House; Ten Memorable Years”.

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