May 16, 2003
In Defense of Predators, Gougers, and Greed
Market capitalism is a cold, unfriendly place. In a world where companies are free to compete for business, and people are free to compete for jobs, profits and wages enjoyed today can easily be gone tomorrow. And the only way to get ahead is by climbing up on the backs of your neighbors.
Is that the world you and I live in? Not really. For all of our post-Cold War bluster about the triumph of capitalism, the simple truth is that we don't really allow markets to freely function in the West. By our actions and our votes, we've made it clear that we're more comfortable in a world of regulations, subsidies, and taxation that restrain and soften some of market-based capitalism's rough edges.
At least that's what they are supposed to do. We don't like to see farmers struggle with low crop prices, so we use tax dollars to guarantee them a higher return. The same compassion is evident in our laws supporting the minimum wage, unemployment insurance, or even personal bankruptcy. Our ancestors lived in a world with penny wages and debtor's prisons, and few of us want to go back there.
The irony of the situation, however, is that it is the capitalist tiger we labor so hard to restrain that ultimately produces the wealth that allows us to afford such comforts. The world of profit and greed may not be a pretty place, but it has put plenty of food on all of our tables. Our efforts to soften the impact of the market's occasionally harsh messages can cut back the oxygen to this vital flame.
The 80 percent who said they were in favor of increased regulation of business in a recent Harris online poll probably didn't ponder that dilemma for long. They were upset with health insurance premiums, high energy prices, cigarette advertising and late, crowded airline flights. In an environment where the spotlight is shining brightly on CEO salaries, criminal malfeasance of a few corporate officers, and even the corporate connections of the Bush administration, the sentiment for increased government involvement in the economy seems to be on the rise.
There are two basic arguments commonly stated to support this new urge to re-regulate. The first is quite simple. People want valuable things -- like health care, new housing, or gasoline -- to be cheap, thus government should make it so. Of course, no government at any level -- at any time in history -- has been able to pull this kind of thing off without imposing a new, even more burdensome cost on its economy and its citizens.
A second critique of the private sector is a bit more sophisticated. In this view, a wide variety of situations -- from CEO salaries, high sales of gas-guzzling vehicles, or the fact that no non-stop airline flights are available between any two cities of choice -- are seized upon as evidence of "failure" of markets, by themselves, to properly operate. The guiding hand of government, it is said, is needed to oil the gears of the economy to make it work better.
It’s an appealing idea, were it not for one major flaw. Just exactly who, we should ask, is going to draw up the laws and staff the "smart" regulatory agencies who will guide the economy to higher heights? It was Nobel laureate James Buchanan who first noticed that the actions of those in the public sector could be just as well explained by profit, loss, and reward as those of the mere mortals who work for the corporations they would regulate. Perhaps market outcomes can occasionally be improved upon, but are we smart enough to come up with a way to make that happen?
The mixed form of capitalism we have in the United States today has served us well. Let's hope that we are wise enough to greet appeals to substantially alter that mix with humility and realism.
About the Author
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