Deregulation Dementia: Entrusting the public interest to CEOs is nuts.
John Balzar:
March 9, 2003
E-mail story
latimes.com
It was just a sentence, tucked away in a legal filing to
the federal government. But it was eye-catching. The
Texas energy company Reliant Resources Inc. was
defending itself against California's accusations of
market manipulation in the 2000-01 electricity crisis:
"We have heard enough," Reliant wrote, " ... to know
that their claims rest largely on after-the-fact judgments
of the way a better designed and differently regulated
market would have performed."
Precisely.
Underline "regulated market." Put it on your bulletin
board.
Those two words comprise the lesson we should have
learned "after the fact" from those days when the lights
went off. When schoolchildren sat in the dark. When
small businesses had to close their doors and send
employees home. When traffic signals went blank and
we tore our hair out while we paid through the teeth.
The lesson is this: Regulation is essential to free
enterprise. Deregulation unwinds the fastenings that
hold it together. If you cannot see it that way by now,
you're being stubborn.
Simply put, business cannot be expected to take care of
its interests and the public interest. Won't happen.
Never has. And we shouldn't presume it either. It's one
of those fairy-tale theories, like the 1960s
peace-and-love communes. It fails to account for basic
questions: To wit, who is going to wash the dishes and
clean up the mess?
Of all the things that make no sense in these topsy-turvy
political days, it's the powerful momentum that still
drives our hallucinogenic fever for deregulation.
Almost weekly, the Bush administration issues another deregulatory regulation.
Recently, energy companies were given a stronger hand in deciding how to clean
up the air pollution they produce. Really, does this make sense? They are willing to
throw a state into crisis for quick profit, so we entrust them to make the air
healthy?
Last week, the administration handed the chemical and pesticide industries a
similar victory -- proposing to weaken the way in which toxic substances are
screened for their cancer risk. Feel better yet? On Monday, the administration
reportedly will publish regulations exempting the oil and gas industry from having to
obtain pollution discharge permits at construction sites.
Self-regulation is the gooey stuff in a petri dish where trouble grows. Responsible
leaders in business cannot and never will be able to survive the competition of
corner-cutters. We all know that. The CEO who saves money by not upgrading
pollution controls wins the bid over one who does. The Wall Street broker who
offers free millions in IPO shares will get a CEO's business over a broker who
does not.
Deregulation is supposed to benefit us. Almost everything that's happened in the
last couple of years proves the opposite: Financial deregulation, communications
deregulation, transportation deregulation, workplace deregulation -- our industries
have wound up weaker and we're all worse off.
Greed, we say, fueled this costliest crime spree in our history, the ongoing scandals
of corporate America. But what fuels greed? Deregulation. "Deregulation" is
another word for "anything goes."
Where does this harebrained dogma come from? Some would say from Adam
Smith, the 18th century author of "The Wealth of Nations." He championed the
idea that free markets should answer to consumer demands. But that's not all he
said. I keep within arm's reach of my keyboard another book by Smith, "The
Theory of Moral Sentiments." Here is what he says about deregulation:
"Sometimes the interest of particular orders of men who tyrannize the government,
warp the positive laws of the country from what natural justice would prescribe."
Thank you, Mr. Smith.
Or let's take someone else from the past who is back in the news: Winston
Churchill. President Bush is basking in the many comparisons between his own
war leadership and Churchill's. So how about we listen to Churchill, the former
prime minister of Britain's Conservative Party, about business regulation?
"We are for private enterprise," Churchill said, "with all its ingenuity, thrift and
contrivance, and we believe it can flourish best within a strict and well-understood
system of prevention and correction of abuses."
Thank you, Sir Winston.
Regulation is not socialism. It is a set of rules, nothing more. Regulation provides,
to use the cliche, a level playing field. Conscientious business executives do not
have to stoop to the dirty practices of those who would pump contaminants into the
air or water for short-term gain. Or those who would fake power demands to drive
up prices. Or those who would promote worthless stocks to inflate their bonuses.
Regulation means that larcenous white-collar thugs won't be able to say, "Well, it
was all legal, you know."
Again, to quote my new friends at Reliant: "We have heard enough." |
