The Value Of Regulation

4 comments June 13th, 2008at 06:55am Posted by Eli

Krugman has a great post today slamming the Republicans’ hostility to all forms of regulation – and not just on our terms (i.e., allowing poisonous food and predatory business practices is bad), but on their own as well:

[W]hen Grover Norquist, the anti-tax advocate, was asked about his ultimate goal, he replied that he wanted a restoration of the way America was “up until Teddy Roosevelt, when the socialists took over. The income tax, the death tax, regulation, all that.”

The late Milton Friedman agreed, calling for the abolition of the Food and Drug Administration. It was unnecessary, he argued: private companies would avoid taking risks with public health to safeguard their reputations and to avoid damaging class-action lawsuits. (Friedman, unlike almost every other conservative I can think of, viewed lawyers as the guardians of free-market capitalism.)

Such hard-core opponents of regulation were once part of the political fringe, but with the rise of modern movement conservatism they moved into the corridors of power. They never had enough votes to abolish the F.D.A. or eliminate meat inspections, but they could and did set about making the agencies charged with ensuring food safety ineffective.

(…)

One amazing decision came in 2004, when a Kansas producer asked for permission to test its own cows, so that it could resume exports to Japan. You might have expected the Bush administration to applaud this example of self-regulation. But permission was denied, because other beef producers feared consumer demands that they follow suit.

When push comes to shove, it seems, the imperatives of crony capitalism trump professed faith in free markets.

(…)

The ironic thing is that the Agriculture Department’s deference to the beef industry actually ended up backfiring: because potential foreign buyers didn’t trust our safety measures, beef producers spent years excluded from their most important overseas markets.

But then, the same thing can be said of other cases in which the administration stood in the way of effective regulation. Most notably, the administration’s refusal to countenance any restraints on predatory lending helped prepare the ground for the subprime crisis, which has cost the financial industry far more than it ever made on overpriced loans.

The moral of this story is that failure to regulate effectively isn’t just bad for consumers, it’s bad for business.

It’s amazing that even after so many clear-cut examples where “the market” did not prevent negligence or outright criminality, and even worked against business interests as well as consumer interests, that Republicans still will not admit that deregulation is actually not such a great idea.

Did I say “amazing”?  I meant “completely unsurprising and depressing.”

Entry Filed under: Bush,Corruption/Cronyism,Republicans

4 Comments

  • 1. Cujo359  |  June 14th, 2008 at 1:45 am

    I meant “completely unsurprising and depressing.”

    That’s more like it. I ran across an op-ed in the WaPo yesterday by some former FDA official, wondering why there wasn’t a better regulatory environment for produce. Both consumers and the industry wanted it, he wrote.

    The truth is that, while most businesses would be inclined to work for the long term, there’s always someone who’s interested in a quick buck and is willing to cut corners. People, in short, are stupid, and there’s really no getting around that. We need regulations so the stupid people don’t kill us.

    That’s the part Friedman, et. al, don’t get.

  • 2. Interrobang  |  June 15th, 2008 at 11:37 pm

    Hm. Spot the inconsistency here:

    Corporations are supposed to self-regulate based on their fear of class-action lawsuits.

    “Tort reform.”

    (Who do they think they’re fooling?)

  • 3. Eli  |  June 15th, 2008 at 11:38 pm

    Probably not so much an “inconsistency” as “something you weren’t supposed to notice”…

  • 4. Multi Medium » The &hellip  |  February 3rd, 2011 at 8:08 am

    […] instead of trying to badger South Korea into buying beef that they don’t trust, why not just improve our food safety regulations so that Korea doesn’t have to worry about whether our beef is tainted with mad […]


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