In praise of gov't regulation

Unfettered capitalism - the unrestrained free-market- produces disastrous results. Yes, it makes money. Yes, it allocates wealth in some sense, "fairly". Yes, it drives innovation. But left to their own devices, capitalists have no social conscience. ... in fact, SHOULDN'T have any social conscience. This is good: greed works wonders! The only thing that matters is making $$.

We need not imagine "hypotheticals" here.

Unfettered capitalism in 19th-century Great Britain led directly to poorhouses, child labor, pea-soup smog, and the general degradation of the larger "common-wealth".

Unfettered capitalism in the U.S. led to the Triangle Shirtwaist Factory disaster in the early 20th century: workers locked in a room consumed by fire.

Unfettered capitalism led to Love Canal.

Today, unfettered capitalism in China produces unbreathable air in Shanghai. Some of my biz colleagues have recently returned from conferences in Shanghai; they report that you cannot see the tops of buildings for the smog, and that breathing is difficult.

These are not "hypothetical" situations. They are historical and current facts.

With respect to "creative financing"... The Depression-era restrictions on financial institutions were put in place to prevent specific abuses of unrestrained capitalism. (full disclosure: I am less-than-well-informed on Depression era/New Deal economic policies!)

Recently - a subject on which I am well-informed - unrestrained capitalism led to Enron's downfall: fancy financial instruments were floated to "create wealth"... when the house tumbled down, the fact that credit was founded on worthless collateral became apparent.

The current subprime mess? Nothing more than Enron, amplified.

Incentives? In pure capitalism, the only incentive is to make $$... NOW! If you succeed at this, you are a success. Does it matter that your collateral is worthless? No.

I note that even Jim Cramer favors regulation:

"Do not be fooled by the sirens of laissez faire," he told a packed audience at Bucknell University's Weis Center for the Performing Arts in the continuing national speakers series, "The Bucknell Forum: The Citizen & Politics in America."
...
He said that deregulation is the equivalent of saying that "private industry will do it better, that volunteers will do it better, that business if left unfettered will produce so many rich people that they will do it better than the government can."

Even the best of the nation's private enterprises, Cramer said, citing companies like Wells Fargo, Pepsi, United Technologies, Google, and Costco, can't meet those demands.

"You, the next generation of corporate and government leaders, should know and understand the limits of what even the best of capitalism and the marketplace can do to promote the general welfare. As future citizen capitalists you must not embrace the unrequited love of the government of the United States for private enterprise," he said. "Be wise enough to see that government regulation is a necessary evil."

I particularly like that he cites the Preamble: "... to promote the general welfare."

What auto company in its right mind would voluntarily develop & produce reduced-emissions technologies? The competition would kill 'em! - developing & producing these technologies is costly, and the cost cannot be recovered in sales price! What auto company in its right mind would voluntarily develop and produce increased fuel-efficiency technologies? The competition would kill 'em! - developing and producing these technoligies is costly, and the cost cannot be recovered in sales price!

BUT: if Government Regulations require the implementation of reduced greenhouse gas emissions, the playing-field is leveled: everyone in the market has to meet the standards - they'll do it!

If Government Regulations require the implementation of increased fuel-efficiency standards, the playing-field is leveled: everyone in the market has to meet the standards - they'll do it.

Note: I am NOT suggesting that Government specify how the standards are to be met, only that the Government set the standards! Quoting one of my favorite philosophers:

"Never tell people how to do things.
Tell them what to do and they will surprise you with their ingenuity."
[Gen. George Patton]

"... to promote the general welfare": this is one of the few national strategic objectives that ought guide all policy!