Are Fat Cats to Blame?

Posted on 2011 August 27

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That energetic liberal friend of mine sent me another column which condemns the rich. This time, it’s an editorial in The Washington Post that excoriates financial movers and shakers:

http://tinyurl.com/43ndper

Clearly it’s an angry, out-of-control diatribe. The author is two drinks shy of going postal. I’ve read declarations of war that were less frenzied.

The guy does make an arguable point. It’s fairly clear that the financial wizards of Wall Street manipulated political events to their benefit.

But wait a minute. Of course the fat cats gamed the system! The bigger it gets, the easier it is to game. Even elected Democrats must bow to that power, lest they forfeit major campaign contributions. It’s as if the essayist had only recently discovered this time-honored truth and was incensed that people could be so venal. Welcome to Washington, dude.

The article points with alarm at right wingers who want to “deregulate”. The Left thinks that means “capitulate”. But the hyper-regulated system we already have simply feeds the big boys trillions, even when they wreck things.

Think about it: the stronger Washington gets, the stronger the fat cats get. I didn’t receive any bailout money. Did you? How come the biggest screw-ups got the most dough? We’ve been trying to control corporations from the nation’s capital for over a century, and the tycoons are richer and more powerful than ever. And how has all this federal oversight helped the Average Joe? By making it vastly harder to start a business? By reducing competition, which lets the insider companies charge higher prices and deliver lower quality?

With so much at stake, it’s inevitable that major corporations will “lobby” (read: “bribe”) legislators and regulators to do things their way. Who can compete with the big boys when they’re calling the regulatory shots in D.C.? The fox is guarding the chicken coop. 

“Insanity is doing the same thing over and over and expecting a different result.” What should we do, tinker with yet another rule that they’ll merely sidestep? Place another restriction on campaign spending that they can figure a loophole for? Come on! More rules give them more ways to tighten their grip on the marketplace, more ways to remove their own competitors, more ways to “educate” the bureaucrats on how to manage industries to the benefit of the biggest, richest players. The whole system backfires. On us. In the face.

Ah-choo.

A much better way would be to decentralize regulation. Market controls should be spread out, emerging at the very least from the states and communities — or, better yet, from watchdogs and insurers, who have incentives to put pressure on corporations. Instead, the system we’re burdened with is huge and cumbersome and centralized, and the stakes are gigantic, and every regulator and legislator is for sale. Decentralize it, and the big boys can’t control it all (or pay for it all) in one place. Decentralize it, and there’d be more competition among states and localities for businesses who want a fair shake.

Imagine a world where no one can use Washington to turn a company into an economic colossus that forces legislators and regulators to do its bidding, creating high prices and reduced quality. A world where you don’t have to fill out papers for a year just to open a hotdog stand. A world where nobody can cause nationwide financial ruin … and then get paid for it.

. . . For ways to decentralize regulation, see my blog: 

https://jimhull.wordpress.com/2010/12/17/how-to-regulate-business-without-getting-gamed/ 

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Posted in: Politics