• Home
• Personal Finance
• Economy
• New School
• Asked & Answered

• ABOUT
• FAQ
• RESOURCES
• ADVERTISE
• CONTACT

Were We Fooled/What Did We Expect?

Torn between two titles due to propaganda effort of Reagan years and “fool me once shame on you - fool me twice shame on me.”  The De-Regulation effort began under President Gerald Ford and it was a bi-partisan effort.  The thought was if federal government loosened or eliminated regulations on businesses they would grow and help the economy.  But Ronald Reagan and every subsequent president took De-Regulation to a higher level.  Today, we are experiencing the effects of decades of De-Regulation led by both major political parties. 

During the late 70’s and early 80’s when the economy was in the midst of a recession, high unemployment and inflation people were desperately looking for answers.  Ronald Reagan provided them with catchy phrases (largely inaccurate) such as “Government is the problem.”  People bought this terribly short-sighted message.  “Government is the problem” is code for let corporations run wild through our environment, financial system and economy.

Reagan’s De-regulation propaganda was based on the theory that ‘free markets’ were the best answer to any problem in a capitalist economy.  Participants in the marketplace could regulate themselves because it was in their best interests to do so and government regulation gets in the way of market participants self-regulation.  Sounded good in theory and sounded even better when Reagan and his propagandists started spreading their poison. 

But again, the De-Regulation push was a bi-partisan effort.  Bill Clinton had to get in the act after all he had big time Wall Street benefactors to take care of.  Clinton signed into law two of the biggest pieces of De-Regulation of the financial sector in U.S. history:  Gramm Leach Bliley Act (GLBA) and Commodity Futures Modernization Act.  GLBA ushered in (and actually blessed Citicorp illegal activity) “Too Big to Fail” financial conglomerates.  CFMA basically allowed many of the Over the Counter (OTC) derivatives, that exacerbated the global financial crisis and caused the huge bailout of AIG, to go unregulated. 

George W. Bush left a trail of destruction with his big De-Regulation push.  While previous administrations helped, Bush took De-Regulation to unprecedented levels.  He basically allowed regulated entities such as oil, coal and other energy companies to rewrite regulations in their favor.  He turned off the regulatory structure of the federal government.  Bush, much like Reagan, had a deep antipathy toward regulations. 

This De-Regulation push was based on a terribly flawed ideology of laissez faire capitalism.  This ideology sounds good in theory or on paper - free up businesses to do their thing.  This ideology is flawed in many respects the two biggest ones are: 1) it fails to account for human nature - mainly greed; and 2) it totally disregards the after effects of de-regulation or no regulation such as financial and ecological crises and death.  Laissez faire ideologues believe that market participants will self-regulate - a nice pie in the sky notion.  Imagine a corporation or CEO, who is making millions or billions of dollars off a profitable but highly unethical or highly risky business practice do you think they will say “wait, I maybe hurting my someone [workers, environment or in case of TBTF - economy] let me pull back from making my millions or billions of dollars in the interest of someone or something else”.  Yeah right - it never happens.  Then there is the destruction or crises left over from de-regulation - who pays the price and who is left to pick up the pieces - sadly not the malcontents that started the crises.  It’s us that are left holding the proverbial bag.  But that’s fine with laizze faire ideologues.

But let’s put this is De-Regulation Push/laissez faire capitalism into real context:

*Deaths at West Virginia Mine Raise Issues About Safety - 29 miners die in the worst coal mine accident in U.S. history and Massey Energy’s safety record and its relationship with regulators is being called into question.

*From the Top Down, Sloughing Off Blame for the Spill - the worst oil spill in U.S. history (still leaking as I write this).  We are now finding out that the oil rig permit process was a joke and other regulatory oversight of offshore drilling was practically non-existent.  Eleven workers died in this accident. 

* Trillions of dollars in personal wealth lost, recession and unemployment for millions of Americans due a financial crisis fueled mostly by de-regulation that allowed financial behemoths to gamble hundreds of billions of dollars in the residential mortgage market.

Is that real enough for you?  All of this courtesy of a terribly flawed ideology that believed that de-regulation was the answer.  It wasn’t the answer and now we are paying the price in terms of lives and economic security. 

The answer is that regulation is needed to hold capitalism in check.  If capitalism is left unchecked greed can and typically kicks-ins and overwhelms any notion of self-regulation often with deadly and/or destructive consequences.  Yes, regulation can be too overbearing and a proper balance must be reached.  But have a light touch or no regulation is not the answer. 

So the questions remain: Were we fooled or What did we expect?

Good luck.