A New Approach to Business Regulaton

As a liberal Democrat, I favor regulation. But I also think business has a point when it complains about inappropriate or unreasonable regulation. Indeed, if the Democrats would better publicize the attention they pay to this complaint, they might do better at the polls. What never seems to get discussed, though, is WHY so much regulation generates complaint. Let me suggest a reason that is not ideological:

Our regulatory agencies, legally required to ensure fair comment and to provide credible studies of environmental and economic impact, now enact regulations only after a grueling and lengthy period of gestation. Once the regulation becomes final, nobody wants to go through that horrific process to make "minor" adjustments. As a result, as encumberments of the rule making process have proliferated, regulations have become rigid and too often ill-suited to a rapidly changing business environment.

There does exist a solution: the common law. The common law is a regulatory process based on brief, general regulations like the antitrust laws that inherently provides flexibility, in that judges can and do take account of changing circumstances and theories, and allow for rational and fair exceptions. Not every regulation would be improved by such a process, but many probably would be.

In this approach, agencies promulgating regulations would be allowed to write short, simple rules that set out the general idea and purpose, implementing them through case by case applications.  Business would benefit in several ways. First, the thicket of regulation would be sharply cut back. Second, the regulation could be tailored to the precise circumstances of the business in question. Third, as a body of rulings developed, caselaw would provide, based on practical experience, the details that are necessary to guide business decisions. Fourth, this approach would generate far more caselaw than the present approach, providing a much richer, more complete set of guidelines. Two other possible benefits: first, this approach would greatly simplify regulation in general; second, it might also greatly reduce the requirements for providing information, while requiring the relevant information to be provided in particular enforcement actions or for particular regulatory informational purposes. 

A Bleak Scenario

The first play George Bernard Shaw wrote, in 1892, was Widower's Houses. It sets out, with great clarity, the trap that ensnares everyone who lives in a large society (more than a few hundred souls) that does not provide a public safety net of some sort for people who cannot make an adequate living. In the play, the rich landlord of a row of execrable slum houses seeks to marry his spoiled daughter to a member of the gentry. All proceeds according to plan until the young gentleman learns that the girl's money comes from screwing rents out of the tenants. He insists that they live on his relatively meager funds alone. It transpires, however, that his funds are the interest on loans being repaid by those same rents. And as the prospective father-in-law points out, if capitalists like him don't provide slum housing, the tenants would go homeless. But if they try to fix the housing up, the tenants destroy the improvements. Consequently, everyone--tenants, landlord, lender--is trapped in a system. And all the moralizing--the landlord is greedy, the tenants are stupid and lazy, the mortgage holder is callous, etc.--is about the people trapped in the system.

What Shaw leaves unsaid, but is being said by Bernie Sanders, is that the system needs to change. In a rich society like ours, or like England at the time Shaw wrote, there is enough wealth to provide a social safety net for the worst off, so that a systemic trap need not arise.

But to get that wealth used in such a way requires a major change in the allocation of society's wealth. In the century or so since Shaw wrote, there have been two such changes. The first, consisting of Progressive, New Deal, and Great Society programs in the US, amounted to substantial reallocations of society's wealth, and resulted in tremendous economic growth through the 1970s. The second, the Reagan Revolution and the period of Republican domination of the US political process that followed, reallocated society's wealth in the other direction, back to the rich and privileged, and with the George W. Bush years and the Great Recession that capped Bush's efforts, resulted in a large economic decline.

The Republicans seeking the Presidency propose to continue the redistribution of social wealth to the rich and the privileged, although not in so many words. The Democrats both seek to reverse the direction of redistribution, but in very different ways. Bernie argues for a revolutionary leap; a change in one swoop of legislation. Hillary argues for a pragmatic program of change, necessarily gradual in nature. In World War II terms, Bernie wants to end the war with an atomic bomb; Hillary by fighting island to island until victory finally comes.

The trouble, of course, is that neither has the firepower. Bernie has no atomic bomb, just proposals. Hillary cannot guarantee any wins either; most likely, she would face the same total obstruction Obama has faced since 2010, and since even a Presidential victory and the winning of a Senate majority would not give the Democrats control of the House, the funding for any of her programs, much less Bernie's, would be up to the intransigent Republicans.

Something will change this bleak scenario, but as I write today, I don't know what.

Fear

As President Obama recently said to Marilynne Robinson, there is a spike in fear within the US right now. There seems to be widespread disquiet even in our wealthy and sophisticated metropolises. Outside of them, disquiet seems to have turned into outright fear, as the articles about the early death of middle aged white men suggest. And fear seems to underlie the mysterious appeal of the many loony and mean-minded Republican Presidential candidates and governors. Such fearfulness, which paradoxically come at a time of nearly unprecedented peace and well being, causes people to turn ugly and behave exactly contrary to the moral codes of their religions. Fortunately, we are a diverse and democratic nation. Although vicious and greedy demagogues aim to profit by fanning fears and hatred, as in Houston, plenty of us do not let fear shape our behavior, and we have plenty of kind, decent, and admirable leaders in the Lincoln and FDR mode to inspire the better angels of our nature.

The "base" and democracy

Reading and hearing TV broadcasts about Republican "base" voters has been a distressing experience. It seems to me that the "base" consists of three types of voter: the ideologue, the fearful, and the selfish. We are not dealing here with simple ignorance. Ignorant people can learn. The "base" does not seem to have that ability, because each voter type starts with a fixed point of view.

The ideologue: typically, but not solely, an evangelical who responds to leaders claiming to have heard the word of God. If God spoke, then we of course must obey. There is no room for disagreement or alternative ideas; challengers to the word of God are evil, or to be charitable, just wrong. There seem to be many non-evangelicals who come to the political and public policy scene with equally firm, fixed, theoretical ideas. Once such an ideological world view exists, such people simply conform all information to the view. If, for example, one wishes to deny global warming, one simply insists that the scientists are corrupt or overlooking stuff, thereby producing false data. The denial comes first, shaping the apprehension of fact. Aspects of the ideological world view also characterize the fearful and the selfish.

The fearful: the historical evidence, as reported in Daniel Pinker's book, indicates that the world has steadily gotten safer from war and other forcible attacks, and other evidence shows that people have steadily gotten safer from natural disasters, disease, and starvation. Nevertheless, it seems that many Americans are more fearful than ever before, perhaps because of the global dragnet for news that now bombards every household. Fearful people act very cruelly and inconsiderately, because they believe their survival, or that of their loved ones, depends on killing or otherwise eliminating those who they see as threatening. They also seek strongmen, often dictators or demagogues, to lead the nation out of danger. As with the ideologues, their preset ideas about danger override all other considerations, including actual fact.

The selfish: perhaps few people are deeply selfish, but selfishness seems to characterize many of the billionaires and multi-millionaires who finance politics these days. These are people, like the Koch Brothers, who pursue their own immediate self interests without regard for the consequences to others. They may well adopt and believe in ideologies that justify or at least support the measures that seem in their self interest.

Perhaps the people I have described do not make up a majority of the eligible voters. But they certainly seem to constitute a very large segment of those among the eligible voters who actually vote. To be sure, there are many eligible voters who take more thoughtful positions. Unfortunately, there are also many eligible voters who take no position and rarely, if ever, actually vote, or if they do vote, base their votes on tribal identification.

The question this next Presidential election may decide is whether or not democracy, as wounded by the current Supreme Court, can survive these forces.

Giving up the vote

When people are oppressed and hopeless they may rise up in anger, as in the turmoil of the Industrial Revolution. But it seems that if they are nonetheless fed and entertained, as are the modern victims of political discrimination in Europe and the US, they just give up. They don't expect voting to help, and so the Democrats flounder. Why? Because the Democrats look for support from those concerned about victimization, discrimination, and governmental policies that harm the public interest. Yet those they seek to protect don't vote! They especially don't vote in off-year elections when governors, state legislators, and US Representatives are elected. Because of their concerns and orientation, the Democrats should normally win the support of most Americans, and would if they all voted. But because something like 45 to 55% of registered voters don't bother to vote in off-year elections, and 40% don't even vote in Presidential election years, Democrats struggle to win half the votes of those who do go to the polls. And they are floundering in that struggle because they don't command the financial resources of the Republicans, they don't have the support of the most influential media, and they have proven themselves remarkably inept at communication.

Why I Don't Contribute to the NY Public Library

Dear Ms. Butler,

I don’t know if I am writing to you, or a publicist for NYPL, or an underpaid staffer, but in any case I will tell you why, although I am most grateful to the library for its wonderful collection and the research I was able to do there, formerly donated substantially, and thanked the library in the preface to the resulting book (The Origins of Business, Money, and Market, 2011), I no longer give money. The reason is quite simple.

Serving as the titular head of the library is a great honor, extended only to those who have been financially successful—as they must be to raise the huge sums necessary for the library and as anyone can see by looking at who those people have been. So I fully expected that the wealthy people who received this honor, and who then sought contributions from the rest of us, would be taking a modest salary—not trivial, because that would be demeaning, but not extremely large: they don’t actually need it, and their plea for funds from the public is usually based on the library’s serious want of same. So when I discovered that the salary being paid to the head of the library was well over a million dollars a year, I realized that the thousand or so dollars I could contribute was actually being used to pay this person far more money than I thought made any sense. Accordingly, I have not contributed to the library for a number of years, and have no intention of doing so until I learn that, as for the great Mr. Gregorian in former days, the leader’s compensation has returned to saner levels.

Keith Roberts

US Oligarchy

The news yesterday carried two unrelated articles that tell the current political story very clearly. One is about how corporate lobbyists have so thoroughly killed Republican Congressman Dave Camp's tax reform bill that the Congressman will not run again for his House seat, even though he holds the important position of chairing the tax writing committee. The second is about the Supreme Court's decision in a case, McCutcheon v. Federal Election Commission, No. 12-536, that holds unconstitutional any limit on the total amount of money that a person can contribute to political candidates or entities.

In other words, we now live in an oligarchy of the wealthy, in which politics (and judges) are completely controlled by those who can and do provide unlimited funding. They will control, for their own benefit, decisions on all important public issues, from climate change to war. Citizens, even those who by normal standards would be regarded as wealthy, no longer have a realistic voice in their own political destiny.

The implications are not entirely terrible. After all, some of the most successful societies in history have been ruled in this way. Think ancient Athens, Republican Rome, and Great Britain between the Act of Settlement in 1701 and the 1st World War. 

More ominously, though, we now live in a world where the fortunes of these oligarchs are no longer tied to the conditions and destinies of the countries in which they live. If the US declines as its middle class shrinks, while certain other countries flourish, the American oligarchs will not be much affected. And if worse comes to worst and social revolution breaks out, they will--like the bin Laden family on September 12, 2001--simply flee to places abroad.  Basically, they don't have much stake in the national destiny.

This leaves the US in a position identical with traditional colonial possessions. The mother country could exploit the possession quite ruthlessly, because its authorities had little stake in the colony's well-being, and returned as little benefit as was absolutely necessary to the exploited territory.