Monday, August 30, 2010

The Regulatory State of Mind & the Choices it Chooses - Casting a wide regulatory net to neuter us all Part II

Hold on tight. To your Rights... and not your parrrty! (Cross posted at 24th State)
In digging into this sort of thing, regulations, where they come from and why, it's tempting to go off into which big businesses contributed most to which political party, the left or the right. But despite appearances, this really isn't a Left/Right issue. Sure the left is typically more enthusiastic for more and new regulations and controls, but there have been so many little 'r' republicans from Teddy Roosevelt to Richard Nixon to John McCain, and most points in between, as to make the 'Party' question irrelevant. It's not a political party issue, it's a philosophical issue, constitutionally limited government, or proregressivism, and the later choice is made in both parties.

More practically speaking, it's a 'have power & seeking influence' vs 'have wealth & seeking advantage' issue, ,. combined with an easy familiarity with political expediency over constitutional principles, and sad to say it abounds on all sides of the aisle, they unite collegially under the amorphous umbrella of 'Doing Good!', especially among those who see no problem with government mingling with business. What they both demonstrate above all, is an utter absence of understanding of what this nation desperately depends upon -and which is no longer taught - the importance of property rights.

Intentionally or not, what these do gooder's are doing, is voluntarily creating what amounts to a series of nice comfy house slave positions for themselves and not a few lesser slots in the kitchen for the rest of us, wherein they promise that none of us will need to worry or strive in any way in order to meet our 'needs' again, our wise regulatory masters will do it all for us. Rather than a simple old plantation owner, our masters today are to be a set of regulations, administered by regulators and represented by elected officials who are influenced by those who can afford them or help them to look good (and if you think I'm exaggerating, hold that thought for a bit).

And, of course, we don't have to worry about any slave driver's... no, today that function is to be taken over by friendly folks like the I.R.S.

Isn't that a relief?

What should be shocking, is that anyone sees the process of regulating industry as anything other than bargaining for power and control between those who have and are able to affect, influence or sell power, and those who are interested in gaining control of it. What claim to 'transparency' can possibly be made, which can't even see through that?!

Who'll regulate the regulators? Doh... the regulators of course!
This is a question well worth looking into, especially as regulatory control has lately bid to control the majority of the entire United States economy. Regulations have always been touted as 'looking out for the little guy', but in practice they have always been a means to enabling the government to come to the aid of less ethical, more politically connected, big businesses, and that has been the case from the very beginning. A good example can be found in the formation of the Interstate Commerce Commission, which was sold as a way to control the Railroads and prevent them from gouging the public with high prices and the threat of diminished services - but what it actually did was heavily favor the politically powerful major railroads, at the expense of the more competitive market oriented railroads which were nearly the publics only source of lower prices and better services,:

"...The public eventually began complaining of the monopoly pricing and corruption that were inherent features of the government-created and -subsidized railroads.

The federal government responded to the complaints with the Interstate Commerce Act of 1887, which was supposed to ban rail rate discrimination, and later with the Hepburn Act of 1906 which made it illegal to charge different rates to different customers. What these two federal laws did was to outlaw Hill's price cutting by forcing railroads to charge everyone the same high rates.[21] This was all done in the name of consumer protection, giving it an Orwellian aura.

This new round of government regulation benefited the government-subsidized railroads at Hill's expense, for he was the most vigorous price cutter.
That has a familiar ring to it... doesn't it? That there should be one rate for all? That it should be illegal to charge different rates to different customers? Whether we're talking about Railroad Neutrality, or Net Neutrality, large, established companies don't like having to manage and track and charge different rates for different customers based upon their demands upon the system, cutting away all excessive costs and waste in order to reduce charges to the least possible amount that will still allow a profit. No matter that the competition to refine those processes and considerations have traditionally translated into the lowest prices for the most customers; what it meant to them was more effort, heavier competition to the point at which only the best mgmt & personel can survive - and big businesses, particularly those who thrive on political trade, rarely welcome any of that - such an environment makes it almost impossible to engage in favoritism and other self important indulgences.

But wait a minute, you say, isn't the free market based on competition?

What Proregressives Could Learn At Hogwarts
Yes, competition is a big part of the free market - but so is something else - virtue (when you finish chuckling... ask yourself why). The ugly truth is that more often than not, those who become successful in the free market, too frequently become it's greatest enemies, and they find many willing accomplices in government regulations and regulators. There's a line from one of the Harry Potter books, where Prof. Dumbledore tells Harry,

"The time is coming where we will all have to choose between what is right and what is easy"
That is a timeless truth, and unfortunately at this point in time, Harry Potter is just about the only place in our popular culture where you might have a chance of learning it. Once upon a time, it was a well known lesson, during the Founder's era it was a very popular and powerful one, the subject of famous paintings, and ancient tales intrinsic to Western Civilization (which pretty much explains why they are not part of Arne Duncan's 'educational reforms' today - that fundamental transformation having been nearly accomplished already),

"The moral allegory of Hercules’ Choice provides a straight thought-line from Renaissance humanism to the creation of the United States and its political symbols. Among classicists, it was one of the most beloved and inspiring tales of the eighteenth century. John Adams sought to make Hercules' Choice the national emblem in 1776:

  • I proposed the Choice of Hercules, as engraved by Gribeline [above] in some Editions of Lord Shaftsbury’s Works. The Hero resting on his Clubb. Virtue pointing to her rugged Mountain, on one Hand, and perswading him to ascend. Sloth, glancing at her flowery Paths of Pleasure, wantonly reclining on the Ground, displaying the Charms both of her Eloquence and Person, to seduce him into Vice.

-John Adams invokes Hercules as a model for his own self-development. The note may be found in a diary entry, Jan. 1759, in L. H. Butterfield, ed., Diary and Autobiography of John Adams, vol. 1: Diaries 1755-1770, Belknap, 1962, 72."
One of the reasons we need to be so on guard against big government and big business 'negotiating' for the 'greater good', is that one of the first things many business people turn upon once they become successful, is the Free Market! Competition is difficult, it's tiresome, and it is sooo much easier to control your market through the influence of your political connections in the government, who will 'stand up for the people!' and implementing policies and regulations which have the handy side effect of imposing barriers and burdens on your market, making it much more difficult for smaller competitors to hold on to their share, or for any new competitors to even enter it.

Sure there are costs involved for the bigger businesses to meet those requirements, but it's a bargain when you stop to consider what it relieves them from having to do instead - namely compete. Those are the choices we have allowed our government to be making for us, and they have put us on the easy, downward path of good intentions, and you know which road they pave.

Whether it's Net Neutrality, or a 'Free Press' subsidized by the government, Healthcontrol, Green initiatives, handicap policies, public minded initiatives, and nearly every other variety of market regulations, they all serve the uncompetitively minded. Sure they impose costs on big businesses too, but they can afford them - whereas a new startup, or a competitor whose only advantage in the market is their ability to offer lower prices to you - they cannot afford them - and that means that you soon lose the possible savings which they may have been able to produce for you and me.

For every James J. Hill building his Northern Railway himself, there are twenty Vanderbuilt's who will welcome and seek the embrace of government assistance and collusion. And changing the names to Google or Verizon doesn't change a thing. Or General Motors.

To the politically connected, but fat & lazy, whether they ply their trade on old iron railroads or the new information super highway, the easy solution remains the same: Create a new set of regulations that raises all rates and lowers the amount of service which most customers across the entire market will come to expect. Another useful side effect is that fat & happy political businessess are able to avoid any number of unforeseen consequences through competitive innovations, because regulations demand more and more instances of mandated conformity, more and more obstacles to entering the market for new comers. Competition is decreased, the need for competent skilled personnel is reduced and the 'value' of politically connected personnel increases.

Here's an example from the beginning of the regulatory era,

"...The Interstate Commerce Commission soon created a bureaucratic monstrosity that attempted to micromanage all aspects of the railroad business, hampering its efficiency even further. This was a classic example of economist Ludwig von Mises's theory of government interventionism: one intervention (such as subsidies for railroads) leads to market distortions which create problems for which the public "demands" solutions. Government responds with even more interventions, usually in the form of more regulation of business activities, which cause even more problems, which lead to more intervention, and on and on. The end result is that free-market capitalism is more and more heavily stifled by regulation."
Unforeseen consequences tend to crop up more and more, such as with these instances (H/T Reboot Congress) in the form of unlooked for shortages in the supply of Helium,

"But helium is also a non-renewable resource and the world's reserves of the precious gas are about to run out, a shortage that is likely to have far-reaching repercussions.

Scientists have warned that the world's most commonly used inert gas is being depleted at an astonishing rate because of a law passed in the United States in 1996 which has effectively made helium too cheap to recycle."
, and in and the ability to reap profits which aren't really dependent upon what you produce, "Flash Crashes" in the Stock Market,

"The mayhem had been primarily caused by an "overreliance on computer systems and some types of high frequency trading" strategies that roam the market en masse, looking to pick off pennies of profit....

Behind these changes, beginning in 1975, was a zeal to liberate the individual investor from the clutches of the archaic market makers who made a good living taking "eighths"�12.5 cents�for every share bought and sold.

The government later found Nasdaq dealers were even more gluttonous than first imagined. And by the time the last big market reforms were issued in 2005, the intent was to "give investors, particularly retail investors, greater confidence that they will be treated fairly," the SEC said at the time.

As spreads squeezed from eighths to pennies, a new batch of electronic-trading networks blinked into action. Volume trading was the only way to make money."
What has followed from regulatory policies and actions beginning way back then, as it still does now, is chaos. They have never accomplished what they were intended to accomplish, have never 'reigned in' who they were billed as targeting, they have never protected 'the little guy' and they have always, always, caused worse conditions than they ever sought to alleviate.

This is the pattern of results which regulatory agencies have produced since they began, and is what will continue to be produced today and through all our tomorrows - if we don't end them: smaller businesses and customers will pay higher prices for ever diminishing services - it's what happened with the railroads, and is what happened with the 'Public' Utilities, the Airline industry, the Banking industry and our current health care insurance industry... and it can no longer be thought of as a new or unexpected phenomena! There are a hundred years worth of easily discoverable history associated with this process - why don't we hear about this in school? Or in the media?

How about from 'consumer advocates'? You'd sure think you would, since the consumer has been the one that's born the brunt of all the regulatory good done unto them, and it has been known by them as far back as one of the first of the breed, Upton Sinclair, the muckraker who's book "The Jungle" provided the impetus for Teddy Roosevelt to create the forerunner of the FDA, the granddaddy of all regulatory agencies, said

"The Federal inspection of meat was, historically, established at the packers' request. It is maintained and paid for by the people of the United States for the benefit of the packers."

Gabriel Kolko, historian of the era, concurs. "The reality of the matter, of course, is that the big packers were warm friends of regulation, especially when it primarily affected their innumerable small competitors." Sure enough, Thomas E. Wilson, speaking for the same big packers Sinclair had targeted, testified to a congressional committee that summer, "We are now and have always been in favor of the extension of the inspection, also of the adoption of the sanitary regulations that will insure the very best possible conditions." Small packers, it turned out, would feel the regulatory burden more than large packers would.
And so it's been demonstrated to play out again and again, from the establishment of the ICC and the FDA, and on through the intervening century's worth of alphabet agencies on down to today's latest offerings of 'helping the little guy' with ObamaoCare - time and again, the worst of big businesses profit at the expense of smaller competitors, and especially at the expense of We The People.

This isn't a condemnation of 'Big Business', if a business can get big, titanic even, through providing it's customers with a product and service they want to purchase, and stay there by remaining competitive with their abilities & services, even to the point of being so efficient as to be the only company serving that need (and no, that is NOT a monopoly), I say fantastic and bully for them. But those that want to indulge in a 'third way' of partnering with government to maintain their positions... those should be roundly condemned and despised. We should especially note that these politically successful businesses manage to create their partnerships with government, in large part thanks to those well intentioned do-gooders like our PC tech writer in Part I, those who work so hard and with such little thought and forethought, so as to sway public opinion into not seeing what is right up and in their very faces.

Is that really surprising? Maybe we can make all this transparency a little clearer if we try looking at it from another angle, What is it, do you suppose, that Regulators are actually after? In light of what we just reviewed, it can't be any of their stated goals, not if there is even a hint of competence that is to be assumed to exist in either their agencies, or the legislators who 'oversee them', or the 'consumer advocates' who advocate for them,

So what is it that they are in the business of - Justice?

Nooo... no,, that's got to be ruled out right off the bat.

Why? Well, can you really claim to be upholding & enforcing Justice... without there being an actual crime having been committed in the first place? Think about it, if the police came to your door tomorrow and said

"We've had reports that you purchased ammunition yesterday, and seeing as studies proven that most firearms incidents involve ammunition and pose a grave risk to public safety, we're going to need you to go ahead and wear this monitor at all times and make regular reports to our dept, we're going to need to see regular reports of gun cleaning, and of course verify that you're using approved oils & clothes, and proof they've been disposed of properly..."
, would you be willing to call that 'justice', or even justifiable?

I really hope not. We'll have a look at what they are after, and what best to call it, in the next post.


Sal said...

Taking a page from Ben's Cliff Hanger book, are we?
Making you my home page, now that Bob's closed up shop.

I dunno, I understand the principal, but still can see the point of some regulatory agencies. Don't want to agonize over every foodstuff I buy, or devote my life to growing my own- couldn't do it, anyway.
But I guess it's imposssible to give an inch, here, without violating the principle and paving the way for more and more regs.

Unknown said...

you are invited to follow my blog

Van Harvey said...

Hi Sal, & thanks!

"Taking a page from Ben's Cliff Hanger book, are we?"

Heh... the editor at 24th State gently suggested that I try to keep posts to 800-900 words, 1,000 in a pinch. I nearly choked... I can hardly keep an aside to eight or nine hundred words... but I'm trying my best... but it'll mean a few more parts than otherwise.

"I understand the principal, but still can see the point of some regulatory agencies. Don't want to agonize over every foodstuff I buy, or devote my life to growing my own- couldn't do it, anyway."

Well... I don't want to get too far ahead of myself, but keep in mind that getting rid of regulations doesn't mean getting rid of the rule of Law and of Property Rights, neither of which forbids standards or allows negligent actions or causing damage & injury.

There are oodles of standards which are observed in one industry or another and some companies observe them... some don't, and people do or don't buy from them, depending on how important what degree of quality is important to their needs. But if a company claimed to be upholding a set of standards, and was lax, they could be hit hard with civil & criminal negligence; that doesn't require regulations, only knowledge and common sense - and legal recourse - the very things regulations tend to obscure.

The same would, and will, emerge if we ever get the govt out of the way (and I should say I'm not a libertarian, govt is a necessity, but regulations are not). No company which sold infected meat would escape criminal prosecution, and without the FDA, EPA, ETC, they wouldn't have any standards & loopholes to hide behind.

Similarly with a business which put it's employee's in dangerous conditions - they would, and should, be open to not only civil prosecution, but criminal.

I think that very little would change from the publics perspective, except maybe a false sense of security. From the businesses perspective, I think there would quickly be a set of industry standards settled upon, as "UL Approved" is for the electrical industry, and a seeking out of, and trumpeting of "Meets & exceeds WizBang Safety Standards!", as well as audits by WizBang personnel in order to maintain their credibility.

Where as at the moment if and when a company 'fails' an EPA investigation, say, they are fined by the govt (the money going to the govt, not the supposedly injured party, you), a notation gets added to reams of catalogs, and it disappears from view.

Were they to fail 'WizBang' inc's audits, they'd likely lose their top rating (WizBang would be in constant competition with 'SecureU' standards company over whose standards kept your safety uppermost), competitors would capitalize on that, the publicity would be adverse and huge, and if they lost the standards, they'd likely lose their ability to peddle their product. Not that they'd be shut down for failing to meet standards, but 'finer stores' would refuse to sell them; no doubt there'd be markets which advertise "Only WB approved products sold here!".

Or if someone engaged in false advertising, that's fraud, and legally punishable, and of course, if real damage or injury was done, justifiable lawsuits would fly.

What we'd hopefully soon 'lose', would be stickers like 'Contents of hot coffee may be hot'!

Sal said...

Van, you kill me.

I was perfectly willing to wait for the next post, you know.
But I'm gratified to find that I had guessed the right answer.

So glad you have another venue to spread the wealth (in a non-Obama way) around. I must go look.

xlbrl said...

What is it about government that has so inspired us to rely on it to inspect our food? More than ever, business is terrified of lawsuits, and if anything, on over-weaning government releases them from some of that burden.

It is no secret that big business was backing the start up of the government inspection racket in the '30's. Small companies do not have the economy of scale to afford the blizzard of paper.

Van Harvey said...

Xlbrl said "What is it about government that has so inspired us to rely on it to inspect our food?"

You peaking over my shoulder?