Regulatory Approach - Fix What We Have
The regulatory approach of Democratic Capitalism helped make our economy the largest in the world. Through laws and regulations, through compromise, we moderated the free market to help ensure everyone played by the same set of rules and everyone had a chance to participate in our economy. In part because of the battle between far left and far right and in part just because of inattention and the passing of time, we’ve slipped away from this regulatory approach. We need to get back to it. We don’t need to re-make or re-imagine government. We just need to fix what we have.
Civil society doesn’t just happen. It’s a commitment by all of us to be civil to each other. There’s an old, old saying: “Your right to swing your fist ends at my nose”. Laws ensure one person’s expression of freedom doesn’t infringe upon the freedom of someone else. They are part of living in a civil society, how we manage to peacefully coexist in a crowded world. A primary purpose of government is enforcing these laws and regulations, to protect us against the actions and whims of both our leaders and our fellow citizens.
Laws and regulations both constrain and extend freedom. Civil society is a tradeoff. We get the benefit of this amazing life possible when tens of millions of people cooperate in our modern, industrial economy. But we also have to figure out how to manage the freedoms of everybody in our crowded world. We all give up a little bit of our freedom to swing our fist. In return we have the freedom to live our own lives without getting punched in the nose. We all give up a small part of our freedom in some ways, so that we can have greater freedom in other ways. Our freedom to drive on the left side of the road in exchange for the ability to get where we want to go faster.
Economic laws and regulations are part of how our government extends freedom to all of us. The Free Market isn't the absence of rules, it's the federal government ensuring everybody plays by the same set of rules. In large part because of the battle between the far left and the far right, regulation has a bad reputation for many people. But government regulation isn’t an option. It’s the only way our modern capitalist economy can work. In the real world, you can't have a strong national economy without a strong, but contained, national government. Regulation is the lubricant that allows national commerce to happen.
We live in an exchange economy, where virtually everything each of us consumes was made by somebody else, usually somewhere far away. Mass production can produce large quantities at a low price, but producing large quantities only makes sense if there are large markets to sell to. For a consumer, buying something is an act of trust. They have to trust that the product they are getting will be as presented by the seller. It’s easy to trust if you are buying the sheep from a farmer you’ve known for decades and you could inspect the sheep yourself. It’s harder to trust meat packed hundreds of miles away.
The federal government provides the trust that makes a national economy possible. It ensures products and services meet minimum standards of safety, that they won’t inadvertently harm or kill someone. It mandates transparency of important information, for example an estimate of the fuel of a car or the packing date of a cut of meat. And perhaps the most importantly, in our exchange society the government serves as the guarantor of claims. The government ensures that if the company labels the can as green beans, there will green beans inside. If a company lies on its label the government will punish it or even forced to stop selling green beans.
The government serving as the guarantor of claims is cheaper and easier for everybody. If every person considering putting money in a bank had to first analyze the banks operations to make sure it’s well-run, then people won’t put their money in banks. We don’t have to check the banks financial records to make sure it’s not putting itself at risk with bad loans. The government handles that part, we just get to use the bank without worrying about it. Good regulation makes participating in our modern economy less complex. It’s one of the ways government ensures we all have a chance to participate in our economy.
Bad operators don’t just harm consumers with their substandard products. They also harm the legitimate producers, by stealing away revenue and causing people to lose trust in that kind of product. History has shown, over and over, people buy less in “buyer beware” situations. Effective government regulation protects legitimate companies from the damage done by unscrupulous companies. It makes it easier for people to confidently spend their money.
Government regulation is even more critical in finance. Our economy needs access to pools of money, aggregated from the retirement accounts of tens of millions of people. People only trust Wall Street with their money because the federal government oversees our financial markets to protect against fraud and the many different ways insiders try to gain an advantage. The government ensures at least a somewhat level playing field.
The battle between the left and right has damaged and undermined our regulatory structure. The right worked in every way possible to keep government from effectively regulating. The left used every need for updated regulation as an opportunity to push for deeper government involvement in the economy. After decades of the pushing and pulling, our regulatory system is bruised and timid and not always doing what needs to be done.
We need to get back to our old regulatory approach. Certainly, sometimes our regulations get it wrong and the benefit doesn’t outweigh the regulatory burden. Regulations can cause competitive imbalances and higher costs while taking decisions out of the hands of consumers. However regulations have been critical to achieving the quality of life we have and in many cases actually put greater control into the hands of consumers; requiring auto manufacturers to display a car’s average fuel economy is an example. If a mandate is uniformly and universally applied it doesn’t distort the competitive playing field and can be cheap to implement. Requiring all cars to have seatbelts ensured that no manufacturer gained a cost advantage, and because so many millions had to be produced the cost dropped significantly.
Achieving the right balance isn’t always easy, and certainly requires compromise. But we can achieve this balance, and we need to – the strength of our economy depends on an effective approach to regulation. Our commitment for Democratic Capitalism, to ensuring all Americans can participate in our economy on a relatively level playing field, is dependent upon effective regulation. Again, we don’t need to re-imagine government, we just need to get back to what we already know works. We need to get back to the compromise of Democratic Capitalism.
Civil society doesn’t just happen. It’s a commitment by all of us to be civil to each other. There’s an old, old saying: “Your right to swing your fist ends at my nose”. Laws ensure one person’s expression of freedom doesn’t infringe upon the freedom of someone else. They are part of living in a civil society, how we manage to peacefully coexist in a crowded world. A primary purpose of government is enforcing these laws and regulations, to protect us against the actions and whims of both our leaders and our fellow citizens.
Laws and regulations both constrain and extend freedom. Civil society is a tradeoff. We get the benefit of this amazing life possible when tens of millions of people cooperate in our modern, industrial economy. But we also have to figure out how to manage the freedoms of everybody in our crowded world. We all give up a little bit of our freedom to swing our fist. In return we have the freedom to live our own lives without getting punched in the nose. We all give up a small part of our freedom in some ways, so that we can have greater freedom in other ways. Our freedom to drive on the left side of the road in exchange for the ability to get where we want to go faster.
Economic laws and regulations are part of how our government extends freedom to all of us. The Free Market isn't the absence of rules, it's the federal government ensuring everybody plays by the same set of rules. In large part because of the battle between the far left and the far right, regulation has a bad reputation for many people. But government regulation isn’t an option. It’s the only way our modern capitalist economy can work. In the real world, you can't have a strong national economy without a strong, but contained, national government. Regulation is the lubricant that allows national commerce to happen.
We live in an exchange economy, where virtually everything each of us consumes was made by somebody else, usually somewhere far away. Mass production can produce large quantities at a low price, but producing large quantities only makes sense if there are large markets to sell to. For a consumer, buying something is an act of trust. They have to trust that the product they are getting will be as presented by the seller. It’s easy to trust if you are buying the sheep from a farmer you’ve known for decades and you could inspect the sheep yourself. It’s harder to trust meat packed hundreds of miles away.
The federal government provides the trust that makes a national economy possible. It ensures products and services meet minimum standards of safety, that they won’t inadvertently harm or kill someone. It mandates transparency of important information, for example an estimate of the fuel of a car or the packing date of a cut of meat. And perhaps the most importantly, in our exchange society the government serves as the guarantor of claims. The government ensures that if the company labels the can as green beans, there will green beans inside. If a company lies on its label the government will punish it or even forced to stop selling green beans.
The government serving as the guarantor of claims is cheaper and easier for everybody. If every person considering putting money in a bank had to first analyze the banks operations to make sure it’s well-run, then people won’t put their money in banks. We don’t have to check the banks financial records to make sure it’s not putting itself at risk with bad loans. The government handles that part, we just get to use the bank without worrying about it. Good regulation makes participating in our modern economy less complex. It’s one of the ways government ensures we all have a chance to participate in our economy.
Bad operators don’t just harm consumers with their substandard products. They also harm the legitimate producers, by stealing away revenue and causing people to lose trust in that kind of product. History has shown, over and over, people buy less in “buyer beware” situations. Effective government regulation protects legitimate companies from the damage done by unscrupulous companies. It makes it easier for people to confidently spend their money.
Government regulation is even more critical in finance. Our economy needs access to pools of money, aggregated from the retirement accounts of tens of millions of people. People only trust Wall Street with their money because the federal government oversees our financial markets to protect against fraud and the many different ways insiders try to gain an advantage. The government ensures at least a somewhat level playing field.
The battle between the left and right has damaged and undermined our regulatory structure. The right worked in every way possible to keep government from effectively regulating. The left used every need for updated regulation as an opportunity to push for deeper government involvement in the economy. After decades of the pushing and pulling, our regulatory system is bruised and timid and not always doing what needs to be done.
We need to get back to our old regulatory approach. Certainly, sometimes our regulations get it wrong and the benefit doesn’t outweigh the regulatory burden. Regulations can cause competitive imbalances and higher costs while taking decisions out of the hands of consumers. However regulations have been critical to achieving the quality of life we have and in many cases actually put greater control into the hands of consumers; requiring auto manufacturers to display a car’s average fuel economy is an example. If a mandate is uniformly and universally applied it doesn’t distort the competitive playing field and can be cheap to implement. Requiring all cars to have seatbelts ensured that no manufacturer gained a cost advantage, and because so many millions had to be produced the cost dropped significantly.
Achieving the right balance isn’t always easy, and certainly requires compromise. But we can achieve this balance, and we need to – the strength of our economy depends on an effective approach to regulation. Our commitment for Democratic Capitalism, to ensuring all Americans can participate in our economy on a relatively level playing field, is dependent upon effective regulation. Again, we don’t need to re-imagine government, we just need to get back to what we already know works. We need to get back to the compromise of Democratic Capitalism.