Wednesday, September 17, 2008

Time To Reap What We Have Sewn

For over the last twenty five to thirty years one of the primary screeds of the Republican party is that government was evil, and one of the most heinous things that our government does is regulate business. In all honesty I have to admit that a significant minority of the Democratic party has also taken an anti-governmental regulation position. It has been a basic operating concept of every administration since 1980 and has been supported by a slim majority of Americans.

The result is plain to see. We have mega consolidation in almost every industry. We have gotten to the point that almost all rules regulating businesses are basically written by the business groups themselves. We are rapidly becoming a welfare state for corporations where the job of the citizen is to keep corporations healthy.

We have also gotten to the point where, in many business sectors, the competitors have consolidated to the point where, on a national level, there are only a couple of major players left. For a business this near monopoly is a great situation, for the consumer it has it's advantages and disadvantages, for a society it is a dangerous nightmare.

Economies of scale that develop when a business becomes a Goliath can offer benefits to the consumer but there are a number of costs. One of these was made crystal clear with the recent bailouts that have been offered to mismanaged businesses. At times an economy and society become so dependant on a company that the risk of it's failure is so great it can not be allowed. This is the reality we now face with Freddie, Fanny and AIG. If we had 20 or 30 companies doing the work of Fanny and Freddie do then if one or two failed it would hurt some, but it would not have cost the whole nation. If we had prevented these companies from becoming so large and in some cases basically the only provides of a services, then we could allow them to fail. However, the push to get government out of business regulation has allowed for consolidation and hyper growth that has created a situation where a business failure is a risk to the nation as a whole. The trouble is, failure is a central tenant of capitalism. We have ignored this truth and the cost for this inaction is now into the hundreds of billions of extra tax exposure for a nation that is already vastly overstretched. And the frightening truth is, there are still a large numbers of firms, in various business areas, that are very very sick.

So, next time you hear about a mega merger or other consolidation and hear about how they hope to get regulatory approval, the next time you hear people complaining about government rules, remember this very expensive lesson and scream at your elected officials to do their jobs.

Unless you like watching corporate offices getting hundreds of millions in bonuses and the having the tax payer bail them out.

Added On

This point is made very clear at Seeing the Forest

Since Reagan almost all of us are getting poorer, while a very few get vastly richer. Wages have largely stagnated since Reagan's election even as GDP and productivity have gone up. Pensions are a thing of the past. Health insurance is becoming a thing of the past as well.

As a result of the Reagan and now Bush tax cuts for the rich the government's debt is just about $10 TRILLION.

Skippy has also noticed what our tax dollars are buying



Progressio_Veritas said...

We are a capitalist nation until things go horribly wrong, then we turn into a socialist nation. Every taxpayer should be demanding that when the corporations the Fed has bailed out are back on their feet, that money is paid back with interest. This should be easy with AIG considering US Taxpayers are not going to own 80% of the company.

Though I have to say, I am tempted to pick up 10 shares of AIG for $2 a share.

Jon said...

It is a safe buy at this point anyway. This economic crunch was predictable and avoidable. All it took was proper oversite, but the McCain and Gramm what we get instead is disaster.

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