X.4: Can Regulation Actually Work?

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Can Regulation Actually Work

Capitalism has enlarged and enriched the middle class.

But there’s a problem – capitalists seek to monopolize a market. That CEO in the television interview I mentioned in my earlier post laid it out honestly and correctly. Without competition, eventually the most effective capitalist will own the entire planet. In other words, capitalism is so efficient it will destroy itself without competition. Moreover, it will destroy competition without regulation. But can regulation actually work?

Regulation as we know it does not and cannot work! Until the early 1900s, what little regulation America had fell under state control. But then the U.S. government began taking over and vastly expanding the reach of regulation. As a result, today we are horribly over-burdened with regulation. But unfortunately, thanks to regulatory capture, the largest corporations can sidestep regulation and also use it to prevent smaller businesses from competing with them. Here is Wikipedia’s description of regulatory capture:

[R]egulatory capture occurs because groups or individuals with a high-stakes interest in the outcome of policy or regulatory decisions can be expected to focus their resources and energies in attempting to gain the policy outcomes they prefer, while members of the public, each with only a tiny individual stake in the outcome, will ignore it altogether. (Regulatory Capture)

Regulatory capture operates mainly through large campaign contributions, by which corporations protect themselves from government interference.

At the same time, they can use their money and influence to whitewash their public image. That is, they can distract public concern away from the steady increase of their economic and political power. (Derber 1998, 153)

You or I or a small business owner can’t afford to drive to Washington to complain to regulators every time we are cheated by a large corporation. But the corporation’s lobbyists live in Washington, so they can easily “capture” the regulators’ attention with campaign contributions to the politicians that appoint those regulators. And voting for a different political party will never solve this problem. That is to say, as Pete Townshend of The Who noted in his song “Won’t Get Fooled Again”, there’s no difference between a new boss and an old boss. (Townshend 1971)

Now let’s suppose there were such a thing as a truly free market. Then, even without government control, competition would happen naturally, just as the founder of modern capitalism, Adam Smith, envisioned it:

Every individual … intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. (Smith 1759, IV.456.9)

But a truly free market will be impossible until we separate money and politics, because money buys influence over the market.

Can regulation actually work when our government only attempts to or perhaps only pretends to regulate capitalism? Does capitalism regulate government?

Would you believe me if I told you it is possible to separate money and politics? Can regulation actually work? Would you believe that it’s possible to prevent regulatory capture and ensure corporate competition?

This site is for discussing how to improve our political system. It is NOT for discussing party politics or political figures. So if you have a non-partisan question or comment, feel free to leave it below.

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Sources:

Derber, Charles. 1998. Corporation Nation. NY: St. Martin’s Press.

Smith, Adam. 1759. The Theory Of Moral Sentiments. Printed for Andrew Millar, in the Strand; and Alexander Kincaid and J. Bell, in Edinburgh.

Townshend, Pete. 1971. Song “Won’t Get Fooled Again” from the album Who’s Next by The Who. New York: Decca Records.

Regulatory Capture. Wikipedia. https://en.wikipedia.org/wiki/Regulatory_capture (Accessed Jul. 14, 2017).

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