More or Less Regulation: What is the Answer?

August 20, 2012 in Economics, Home

We all remember when the housing market crashed. But do you remember why? In 1999 a group of republicans passed the Gramm–Leach–Bliley Act, signed by Bill Clinton, that deregulated home lending and led to a wasteful amount of new home construction. It help boost the economy and drove up home values, until the markets busted in 2007. Free markets are very unstable. In the free market, most people will lose and a few will win big. Any historical economist will tell you, unless we try to predict and avoid roller coaster markets we cannot have a stable society. Sometimes economists guess wrong, but usually not by much, and they rarely interfere with markets that don’t need regulation. When unnecessary regulations appear, they are usually lobbied by private industries in an attempt to destroy competing markets. Or to confuse the average America and cloud the line between good and bad regulatory agencies.  Some people will use any excuse to abandon these regulatory agencies, but we can’t stop trying to predict the future of markets. Large corporations try to predict profit maximization in their own industry. Big businesses will tell you what’s best for them, but they don’t know what’s best for a stable economy. Trust the economist trained in historic market trends saying, “We need regulations”. If you need another example, think back to when the energy markets led to outrageous electric bills and the collapse of Enron. In each case we saw deregulation, quick growth, and even quicker collapse. The Republicans leaders are always saying we can fix the economy by deregulating these markets. It would be a quick fix for job growth, but it would also stick the next guy with collapsing markets. That is how we got into this mess in the first place. So Republicans, please stop blaming Obama for the problems deregulation has caused. Remember it wasn’t deregulation that won us WWII and got us out of the great depression. We did it by asking the rich to pay more, regulating the markets, and by putting people back to work by building the infrastructure of America. Unless we act now, history will repeat itself. It happens every 70 years or so.

American Revolution 1775-1783:
- Prior: Money was tight, a mighty few had all the money and there was a shortage of work.
- After: Prosperity slowly accelerated for a long time, then people forget about the cost of war, and once again fight over money.

Civil War 1861-1865
- Prior: Money was tight, a mighty few had all the money and there was a shortage of work.
- After: Prosperity slowly accelerated for a long time, then people forget about the cost of war, and once again fight over money.

The Great Depression 1930-1940s
- Prior: Money was tight, a mighty few had all the money and there was a shortage of work.
- After: Prosperity slowly accelerated for a long time, then people forget about the cost of war, and once again fight over money.
- 70 years later wealth now increases for only just a few percent of people; primarily those who find ways of replacing jobs with computers/machines. We’ve had 30 years of deregulation, tax breaks and the constant threat of losing our social programs. We are falling behind the industrialized world in education, infrastructure, monetary value and money supply. Our problems and Government are much more complicated than past generations and the wars are more intellectual than physical.

Our society has forgotten the good in government, become overly entitled, and politically lazy. Does it take a giant collapse for us to learn the lessons all over again? Economist Milton Friedman would say yes; he has always promoted the shock doctrine, in other words, boom and bust economics. He believes that large concentrations of wealth is the best path for progress, and that disparity is justified. Its a sacrifice for greater good philosophy.

So, do we govern for wealth concentration or do we govern for stability? The democratically supported economic philosophy are actually more conservative than the GOP’s boom and bust for progress philosophy.

 

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