Which is worse: Regulation or
By Paul Craig Roberts
30/01/08 "ICH" -- -- Libertarians preach the morality of the
market, and socialists preach the morality of the state. Those
convinced of the market’s morality want de-regulation; those
convinced of the state’s morality want regulation.
In truth, neither seems to work.
Consider for example the rules against collusion. The political
left imposed this regulatory rule in order to prevent monopoly
behavior by companies. One consequence has been that, unable to
collude, firms are slaves to their bottom lines. In order to
compete successfully in the competitive new world of globalism,
firms have curtailed pensions and health insurance for their
Or consider the regulation of new drugs, which drives up costs
and delays remedies without, apparently, doing much to improve
Or the fleet milage standards that regulation imposes on car
makers. These regulations destroyed the family station wagon.
Families needing carrying capacity turned to vans and to panel
trucks. Car makers saw a new market and invented the SUV, which
as a “light truck” was exempt from the fleet milage regulations.
The effort to impose fuel economy resulted in cars being
replaced by over weight fuel-guzzling SUVs.
On the other hand consider the current troubles resulting from
banking and financial de-regulation. The losses from this one
crisis greatly exceed any gains from de-regulation.
Or consider the plight of the de-regulated airlines and
deterioration in the quality of air service. Or the higher costs
of telephone service and the loss of a blue chip stock for
widows and retirement funds that resulted from breaking up AT&T.
Or the scandals and uncertainties from utility de-regulation
which permits non-energy producers like Enron to contract to
deliver electric power.
Economists claim that de-regulation results in lower prices.
Cheap advanced fare airline ticket prices are cited as evidence.
What these economists mean is that the fares without stopovers
are cheap to people who can plan their trips in advance. Other
passengers subsidize these advanced fares by paying four times
as much. Moreover, de-regulation has created bottom-line
competition that has lowered service, removed meals, and results
in periodic bankruptcy, thus forcing the airlines’ creditors to
pay for the low fares. Pilots, flight attendants, and aircraft
maintenance crews subsidize the lower fares with reductions in
salaries and pension benefits. Are bankruptcies and mergers
leading the industry toward one carrier and the re-emergence of
Consider the fall-out from trucking de-regulation. As in the
case of the airlines, the claim was that more communities would
be served and costs would decline. But which costs?
De-regulation made every minute a bottom-line item. Trucks
became bigger, heavier, and travel at higher speeds. Highway
safety suffers, and highway maintenance costs rise. The courtesy
of truck drivers declined. When trucking was regulated, truckers
would stop to help people whose cars had broken down. Today that
would throw off the schedule and threaten the bottom-line.
Economists dismiss costs that aren’t included in price. For them
the cost that matters is the price paid by consumers. The truck
that gets there faster delivers cheaper to the consumer. The
myriad ways in which people pay the price of de-regulation are
not part of the price paid at the check-out counter.
Economists also say that offshoring lowers Wal-Mart prices, thus
benefitting the consumer. They don’t say that by moving jobs
abroad offshoring reduces the job opportunities and life-time
earnings of the US labor force, or that it wrecks the finances
of the laid-off US workers and destroys the tax base of their
local communities. None of these costs of offshoring enter into
the price of the offshored goods that Americans purchase.
Privatization vs. socialization is another dimension of the
conflict. Those who distrust the power of private ownership put
faith in public ownership, and those who distrust the power of
the state find freedom to be imperiled in the absence of private
ownership. 20th century experience established that public
ownership is economically inefficient without producing
offsetting gains in public welfare. Those in charge of
nationalized firms live well both at the expense of taxpayers
Nevertheless, privatization can be pushed too far, and it has.
As a result of the upfront cost of building prisons and their
high operating costs when in government hands, prisons are being
privatized and have become profit-making ventures. Governments
avoid the construction costs and contract for incarceration
services. Allegedly, the greater efficiency of the private
operation lowers the cost.
Private prisons, however, require a constant stream of
prisoners. They cannot afford to have vacant cells. If
incarceration rates fell, profits would disappear and bankruptcy
would descend upon the owners. Thus, privatized prisons create a
demand for criminals and, as a result, might actually raise the
total cost of incarceration.
The US--the “land of liberty”--has the largest prison population
in the world. With 5 percent of the world’s population, the US
has 25 percent of the prison population. The US has 1.3 million
more people in prison than crime-ridden Russia, and 700,000 more
prisoners than authoritarian China, which has a population four
In the US the number and kind of crimes have exploded. Prisons
are full of drug users, and the US now has “hate crimes” such as
the use of constitutionally protected free speech against
“protected minorities.” It is in the self-interest of prison
investors to agitate for yet more criminalization of civil
liberties and ordinary human behavior.
The case for de-regulation is as ideological as the case for
regulation. There is no open-and-shut case for either approach.
Such issues should be decided on their merits, but usually are
decided by the reigning ideology of an epoch or by powerful
The Bush regime has de-regulated the government in the sense
that the regime has removed constraints that the Founders put on
executive power. This was done in the name of the “war on
terror.” Simultaneously, Bush has increased the regulation of
our travel and communication, spying on our Internet use and
specifying to the ounce the quantities of toothpaste and shampoo
with which Americans can board commercial airliners.
Crises destroy liberty. Lincoln used the crisis of states
withdrawing from the union to destroy states’ rights, an
essential preservative of liberty in the minds of the Founders.
Roosevelt used the Great Depression to destroy the legislative
power of Congress by having that power delegated to federal
agencies. Bush used 9/11 to assault the civil liberties that
protect Americans from a police state.
Perhaps we have now reached a point where both libertarians and
left-wingers can agree that the US government desperately needs
to be re-regulated and again held accountable to the people.
Paul Craig Roberts was Assistant Secretary of the Treasury in
the Reagan administration. He was Associate Editor of the Wall
Street Journal editorial page and Contributing Editor of
National Review. He is coauthor of The Tyranny of Good
Intentions. He can be reached at: PaulCraigRoberts@yahoo.com
Click on "comments" below to read or post comments
Be succinct, constructive and
relevant to the story.
We encourage engaging, diverse
and meaningful commentary. Do not include
personal information such as names, addresses,
phone numbers and emails. Comments falling
outside our guidelines – those including
personal attacks and profanity – are not
See our complete
use this link to notify us if you have concerns
about a comment.
We’ll promptly review and remove any
Send Page To a Friend
with Title 17 U.S.C. Section 107, this material
is distributed without profit to those who have
expressed a prior interest in receiving the
included information for research and educational
purposes. Information Clearing House has no
affiliation whatsoever with the originator of
this article nor is Information ClearingHouse
endorsed or sponsored by the originator.)