Business Regulation -- the new Mantra

Government regulation of business is back as a political mantra. For the first time since Democrat Jimmy Carter began deregulating everything in sight in the 1970s, both sides are talking regulation. Since Carter, both parties have at least paid lip service to the virtues of deregulation.
Now, suddenly, with Bear Sterns, Lehman Brothers, AIG, Merrill Lynch all in the tank, it is fashionable for politicians to talk about [re]regulation again. Obama sounds as if he wants to re-regulate just about everything. Even McCain, Mr. Deregulation, speaks of being a Teddy Roosevelt Republican.
Of course that brings up visions of Trust Busting, muck raking, “malefactors of great wealth” (Teddy was talking about Wall Street) and the creation of regulating agencies like the FDA. All in all, the new talk represents a sea-change in attitude from the days of Carter, Reagan and Thatcher.
Interesting – and in my view some re-regulation is essential. Wall Street stock sellers definitely need watching over (regulation) just as much as any normal group of three-year-olds. Three-year-olds try to get away with as much as they can; stock sellers – and most commercial businesses – will sell as much snake oil and watered whiskey as they can get away with.
A frightening current example of a very much unregulated economy is China. Tainted milk, tainted dog food, lead in the paint, product piracy – need we go on?
Look, for instance, at what deregulation has done for television viewing. We went from a limit of about six minutes a program of commercials in the mid-70s to today’s programming in which the show takes up barely 40 minutes of the hour. A small example, but one I find annoying.
Okay, we absolutely need regulation. Heaven knows what they’d put in your gas tank, grocery bag or medicine cabinet without it.
But before we get too carried away, especially those in the largely unregulated field of privatized retirement funds and failing mortgages (who are probably the most scared and angry), let’s hold on a moment. Government regulation is very much like cancer chemotherapy.
Absolutely necessary to keep the patient alive – but if the physician allows too much of it, it can in many cases kill the patient before the cancer does. Any physician will tell you how delicate the balance has to be in administering chemo. Some of that stuff is lethal. Just enough to knock back or kill the cancer without killing the patient.
Same thing with government regulation. You try to keep business orderly. You try to keep it as reasonably honest as possible. But you have to be very careful not kill the patient – not to destroy the innovating and inventive spirit that has characterized American business.
Another analogy might be – you want to break the horse just enough so that he can be safely ridden. You don’t want to destroy the spirited feistiness that made you want to mount him in the first place.
Right now everyone is terrified and angry. (Investors should force themselves to remember how they cheered when Carter, Reagan and “W” slackened the regulations or took them completely away. In some ways you are getting your own back, unfortunately.)
Don’t let this fear and anger turn into destructive retribution. I would be much happier if our presidential candidates were calling themselves Hamiltonians. Alexander Hamilton was our first Secretary of the Treasury – and he had a clear grasp of one reality that is often forgotten on both sides of the modern American political fence.
Hamilton understood the business and government need each other. That for a nation to prosper, they must collaborate. Government funding development and restraining excess; business innovating and creating wealth. The necessity of that partnership is what Carter and Reagan seem to have forgotten – as do the most violent proponents of regulation.
We have many examples of the fruits of such a partnership to look back on. Personal computers, automobiles and highways, aircraft manufacturers and airports, government funded medical research, the vast steel company created at government behest to build the navy, etc. etc.
History also provides us with many examples of economic collapse, when government control/regulation choked off growth. A classic example is the Spanish Empire of the 1500s or that of the Soviet Union which folded under the weight of its own central planning.
Regulate, yes – but gently. Don’t kill the horse; it’s given us a good ride.