A question about business regulation for my fellow Republicans

[Nobody]

We don’t like government getting to big and unregulated, and we generally would like to see unions either with less power, or some would like to see them go away completely, but yet, with business, it seems the complete opposite. Most Republicans seem to have the mentality, that if you leave a business alone, it’ll do the right thing. As if the reason for a business to exist is to make the world a better place, and it would, if only the government would get off its back.

Now I’m not speaking about being against over regulation, I’m against that, but when I hear fellow Republicans speak about business, especially big business, they seem to have an almost no regulation attitude. Where does this come from?

I believe that any organization that gets too big and powerful can get corrupt and start doing things that benefit it, without regard for how it affects anybody else, whether that organization is government, religion, union, or business. And while most Republicans realize this about government and unions, they seem to be either oblivious about this when it comes to business, or they simply choose not to believe that a business that grows too big and powerful can be just as corrupt and cause just as many problems.

Now while on the one side, there are Democrats that tend to demonize big business and it’s leaders, on the other, some or most republicans seem to have the opposite view hold up big business and its leaders on a pedestal. Equally as ridiculous in my opinion.

Now I have nothing against big business, my like or dislike of a major corporation is decided on a case by case basis. It’s stupid to say that all big business is evil and corrupt, and it’s as equally stupid to say that all big business is great and wonderful. I also have nothing against making as much money as you can, so long as it’s done legally and ethically. But it’s totally naive to assume that business leaders are always, or usually going to do what’s best for everyone. Let’s face it, they’re usually first and foremost going to do what’s best for the bottom line. And while profit is important in order to stay in business, most business leaders don’t tend to look beyond that.

And finally, I believe that while most business leaders aren’t like Dennis Kozlowski or Kenneth Lay, I do believe that the government does have a part to play in helping to keep it that way. If someone knows that selling all their stock because of inside information, while encouraging their employees to keep all of theirs, for example, could land them in jail, and cause them millions of dollars in fines, they’ll be less likely to do that.

[Duckster]

corporation, n. An ingenious device for obtaining individual profit without individual responsibility.

– Ambrose Bierce, The Devil’s Dictionary (1911)

[rsa]

???

Excellent OP and debate topic. I have thought of posting something similar before, but never got around to it. So I was glad to see this and especially that it was posted by an SDMB conservative.

Since I am not a “fellow republican”, I will not offer my comments at the moment, but this OP is a day and a half old and I just hear crickets chirping. Have all of the republicans here been raptured or something?

[Binarydrone]

First, I will state right off that I am not a Republican. However, I think that I can offer some insight based on what I have seen and heard from my loyal opposition.

My basic understanding is that folks that are more conservative and desire less (or no) regulation believe that the Market itself will take care of these issues and that it is, ultimately, self-correcting. Further, it is my understanding that the belief is that as a regulating influence the government is inherently clumsy and inefficient.

While I admit that there is probably a great deal to be said about this point of view, like many liberals I find that the collateral damage associated with these corrections of the Market is not something with which I am comfortable. This is not to say that I think that the Liberal approach has worked all that well, but I don’t see a humane alternative

[Voyager]

I’m officially a Republican, because I haven’t gotten around to changing my registration. Mr. Bush has driven me out of the party. Remember that not all Republicans are rabidly anti-regulation. A lot of regulations began during the Nixon years (a person looking better and better when compared to the incumbent.)

I think there are two reasons. First, is the fantasy of pure deregulation making everything wonderful. In this world there are no crooked businessmen, and everyone has perfect knowledge. It is just as much a fantasy as a socialist one of a government being able to maximize investments for the greater good.

The second reason is that radid deregulators don’t care about the people getting screwed. So the air is dirty? Let them get air conditioning. So someone dies from an untested drug? They should have been smart enough to do their own research.

This is not to say that all deregulation is bad, but disaster after disaster, without a change in the fundamental position of the rabid deregulator, makes me think they’re in a fantasyland.

[Bone]

Joel writes:

We don’t like government getting to big and unregulated, and we generally would like to see unions either with less power, or some would like to see them go away completely, but yet, with business, it seems the complete opposite.

IANAR(epublican). Republicans are typically in favor of limited government. Understanding that there are necessary functions where government is the best providers of those function, they view government as a necessary evil. Positions on unions will vary, but I’d venture to say that their exemption from the Sherman Anti-trust act is a contentious point. They should have no problem with unions, or people’s ability to form them. However, they will say that they should be subject to the same regulation with respect to anti-competitive behavior. That would level the playing field.

Most Republicans seem to have the mentality, that if you leave a business alone, it’ll do the right thing. As if the reason for a business to exist is to make the world a better place, and it would, if only the government would get off its back.

This statement is a misleading. Republicans tend to recognize that the reason for a business to exist is to earn profit, not to make the world a better place. This is not a good or bad thing, it is amoral. The only way that a business could legitimately earn profit sans coercion or deception (things that the government should properly protect against) would be to appeal to a consumer need. The net effect of successful businesses is that consumer need is met, and both parties benefit through the voluntary transaction.

If any entity must become monolithic and powerful, it is always preferable for that entity to be a private enterprise, rather than a government institution. The former’s success represents consumer demand, and must be responsive to change else lose their position of power. The latter succeeds through special interests and the whims of lobbyists, slow to change and unresponsive to public sentiment.

“The greatest threat to human freedom is the concentration of power, whether in the hands of government or anyone else.” – Milton Friedman

[Sam_Stone]

It’s not that we think that businesses want to behave properly, or that they are immune from corruption. Rather, free market advocates point out that the market is a very strong regulating force. The reason we have safe workplaces, quality products, safe products, and good corporate governance has a lot more to do with the forces of the free market than it does with government.

Look at the Enron/Worldcom scandal. While many claim it’s a failure of the market, what it really shows is how strong the market is at regulating behaviour, and how weak the government is. All the government regulations didn’t stop this, and most of the people involved received either no punishment at all or a slap on the wrist. If it were left to government to protect people from these kinds of shenanigans, they’d happen every day.

Now let’s look at how the market reacted. Other companies with similar business models took a HUGE financial hit, even if they weren’t doing anything wrong. Take General Electric, for example. Its stock price took a drubbing after Enron, because GE is a widespread conglomerate with many financial divisions that shuffle a lot of paper around. This made investors nervous, and money fled.

This led GE to undertake sweeping reforms of its accounting processes, open its bookkeeping, and institute new accounting processes to avoid confusion. Now, GE has never done a thing wrong - it’s one of the most respected companies in the world. But in the wake of Enron/Worldcom, the businesses environment changed. Investors demanded much stronger accounting, and GE was FORCED to comply. Had it not, the share price might not have recovered.

You see the same effect all over the place. What do you think Ford worries about more - a government regulator forcing them to make some changes to a product, or a spectacular failure that can cost it hundreds of millions of dollars in sales? Do you think they fear a regulator, or a hundred-million-dollar lawsuit if they don’t use proper engineering practices?

For more exposition on these principles, I highly recommend Free To Choose, by Milton Friedman.

BTW, Amazon’s ‘Search Inside the Book’ feature is useful here. Just click it, and type “Worker Protection” or “Consumer Protection” for some good info.

Now, there are times when the regulatory power of the market fails. Mostly this has to do with areas where damages are individually small but cumulatively large, such as pollution. So I think there is a place for government regulation - just a much smaller one.

[Nobody]

@rsa

???

Excellent OP and debate topic. I have thought of posting something similar before, but never got around to it. So I was glad to see this and especially that it was posted by an SDMB conservative.

Since I am not a “fellow republican”, I will not offer my comments at the moment, but this OP is a day and a half old and I just hear crickets chirping. Have all of the republicans here been raptured or something?

I don’t know but it’s such a relief to see that I’m finally getting some replies. I was depressed that I wasn’t getting any replies and thought that this post would die with no replies what so ever. And actually, I haven’t been E-mailed that these replies has been posted. I just now looked in the GD forum and saw 6 replies.
But at any rate it’s late and I have to get up early for work tomorrow so I’ll have to read the rest of the replies and, if need be, reply to them myself tomorrow.

[rjung]

I take the Buddhist view of the matter: unfettered business and unlimited regulation are the yin-yang of capitalism, and harmony is achieved when both are in balance.

In that context, the stereotypical conservative view is an unbalanced one – “regulations bad, business good!” The notion that a free market will magically find a solution that maximizes profits while protecting consumers and workers is hopelessly naive. Fundamentally speaking, a company’s only motivation for doing anything is whether it maximizes profits; non-profiting factors, such as making things safer for consumers or less polluting to the environment, are only taken into account if and when they affect the bottom line. General Motors would sell crack cocaine if it weren’t for those pesky laws preventing them from doing so – and the tobacco industry continues to thrive because the laws do let them sell a carcinogenic, addictive substance legally. Heck, if it weren’t for those pesky laws prohibiting them from doing so, Phillip Morris et al would gladly crank up the nicotine levels in their cigarettes, to dig their hooks deeper into their customers… the way they do in China and other parts of the world.

Too much regulation is a bad thing, but that’s not what we have right now. Its only purpose is to serve as a bogeyman for free-market advocates, who don’t want us to pay attention to the dangers of completely releasing the reins on the market.

[Nobody]

@Joel

Most Republicans seem to have the mentality, that if you leave a business alone, it’ll do the right thing. As if the reason for a business to exist is to make the world a better place, and it would, if only the government would get off its back.

@Bone

This statement is a misleading. Republicans tend to recognize that the reason for a business to exist is to earn profit, not to make the world a better place. This is not a good or bad thing, it is amoral. The only way that a business could legitimately earn profit sans coercion or deception (things that the government should properly protect against) would be to appeal to a consumer need. The net effect of successful businesses is that consumer need is met, and both parties benefit through the voluntary transaction.

Well yes, we all know, or should know that business exists to make a profit and not to make the world a better place.
And actually, my biggest mistake in my post above, was saying “Most Republicans” because actually, when I think about it, I mostly hear that kind of talk from Republican commentators. On the one hand, they talk about how businesses exist to make money, pure and simple, then, on the other, when talking about deregulation, strongly imply a sort of, virtuousness, if you will, about business, and how much good comes from unrestricted, unregulated business. In my opinion they seem to oversimplify deregulation arguments.
But at any rate, this is complicated and I have a headache, so I’ll have to get back to this point later.

[Apos]

Look at the Enron/Worldcom scandal. While many claim it’s a failure of the market, what it really shows is how strong the market is at regulating behaviour, and how weak the government is. All the government regulations didn’t stop this, and most of the people involved received either no punishment at all or a slap on the wrist.

It’s a fantasy to pretend that government’s role was in ineffectually trying to stop these things. The government also aided and abetted them in many ways both on their way up and even a little after they came down. Only when the vultures started to circle did the government start to make any serious effort to reign them in. The reason government regulations are ineffectual is that the people being regulating by and large get to have major say in what the regulations are, and a major say in how they are enforced.

The problem is that the Republican party as it stands now is not a free market party. It is as much a party of crony capitalism as the Democratic party used to be (and is now losing its grip: I have no idea where it thinks it’ll be basing itself out of in the future). You don’t build a powerful political machine by advocating principles like free markets: you build it by making powerful friends.

The real problem is not that free markets won’t work, it’s that free markets cannot happen in a world where the winners of the capitalism game then gain overwhelming influence over the government, which can then in turn around and fuxor with the market for the benefit of whomever happens to be on top at the moment.

[Apos]

This led GE to undertake sweeping reforms of its accounting processes, open its bookkeeping, and institute new accounting processes to avoid confusion. Now, GE has never done a thing wrong - it’s one of the most respected companies in the world. But in the wake of Enron/Worldcom, the businesses environment changed. Investors demanded much stronger accounting, and GE was FORCED to comply. Had it not, the share price might not have recovered.

You see the same effect all over the place.

This is a fairly cyclical affair though: booms breed corruption and sketchy tactics, which breed potential major failures and scandals, which breed demands for major reforms, which breed confidence, which breeds booms…

The market is no insurance against major fraud unless the market is in a mood to care. And the market is very very moody. Right now, it cares. Tommorow it might not. The question is, the market “working” really well when it fails to keep companies like Enron honest, and then fails to properly give GE a break for being honest (leading them to unecessary and no doubt expensive and wasteful reforms)? Is there really no role for regulation at all?

The thing is, we can point to examples of regulation that worked well, and regulation that worked badly. If you favor one side of the issue, you can harp on whichever examples you like to the exclusion of others. I’m not even sure what those examples tell us, because they are rarely clear cut, and many times regulations aren’t used the way they are supposed to in order to accomplish what they should. None of this really answers the basic questions in any specific instance, and I generally think it’s pretty stupid to have a blanket policy “for” or “against” regulation in all political climates, all the time.

[Nobody]

@Sam Stone

It’s not that we think that businesses want to behave properly, or that they are immune from corruption. Rather, free market advocates point out that the market is a very strong regulating force. The reason we have safe workplaces, quality products, safe products, and good corporate governance has a lot more to do with the forces of the free market than it does with government.

So, it was really business itself who decided to create child labor laws, 13 hour work day maximums (yes, not for all professions, but for most), and so on?

@Sam Stone

Look at the Enron/Worldcom scandal. While many claim it’s a failure of the market, what it really shows is how strong the market is at regulating behaviour, and how weak the government is. All the government regulations didn’t stop this, and most of the people involved received either no punishment at all or a slap on the wrist. If it were left to government to protect people from these kinds of shenanigans, they’d happen every day.

Now let’s look at how the market reacted. Other companies with similar business models took a HUGE financial hit, even if they weren’t doing anything wrong. Take General Electric, for example. Its stock price took a drubbing after Enron, because GE is a widespread conglomerate with many financial divisions that shuffle a lot of paper around. This made investors nervous, and money fled.

This led GE to undertake sweeping reforms of its accounting processes, open its bookkeeping, and institute new accounting processes to avoid confusion. Now, GE has never done a thing wrong - it’s one of the most respected companies in the world. But in the wake of Enron/Worldcom, the businesses environment changed. Investors demanded much stronger accounting, and GE was FORCED to comply. Had it not, the share price might not have recovered.

Yes, that is an excellent example of self correction, and so, actually, I have nothing more to add.

@Sam Stone

You see the same effect all over the place. What do you think Ford worries about more - a government regulator forcing them to make some changes to a product, or a spectacular failure that can cost it hundreds of millions of dollars in sales? Do you think they fear a regulator, or a hundred-million-dollar lawsuit if they don’t use proper engineering practices?

Sounds slightly over simplified. Look at OSHA, where I work, TYCO Electronics, we make printed circuit boards. We get inspections from OSHA and if everything isn’t up to code, or we have a safety violation, or such, we get fined. Now, a small fine or two may not hurt the company, but if we don’t comply, then the fines would add up real fast, thus, we fix the violations in order to stopped from getting fined again.

@Sam Stone

Now, there are times when the regulatory power of the market fails. Mostly this has to do with areas where damages are individually small but cumulatively large, such as pollution. So I think there is a place for government regulation - just a much smaller one.

I pretty much agree with that statement too.

[Milum]

It really doesn’t make a hot happy damn which organization is big and powerful, a big private corporation or a big government, it is the being “big and powerful” that causes their narrow little selfish proprietary interests to deviate from the purpose of stated contracts and implied agreements with the people of the United States that are in place for the common good of all.

Implicit in the phrase “big and powerful” is corruption, and corruption can turn our great country into a gringo Mexico up north if wrong doing is not checked and punished timely, which is now.

A pox on both parties; both business and government should be made to honor the terms we set forth in the Constitution.

[Apos]

Yes, that is an excellent example of self correction, and so, actually, I have nothing more to add.

I still fail to see how it is a good example. It’s a failure on both counts, and an example of the way the market moves in a herd fashion. It failed to predict the disaters, despite the positions it was taking being clearly ridiculous (as anyone seriously examining the boom could see), and it failed to adequately reward the virtuous company until it did something that it hadn’t demanded of the disasters when it had originally poured money in. What this illustrates is basic herd behavior: overeacting wildly in both cases. Basic regularatory enforced transparency would solve the problems in these cases without having to worry about whether the fickle market was in a mood to care about fraud this week or not. They might care about GE’s transparency today. Tommorow, when GE slowly closes its books, and perhaps starts concealing losses through accounting tricks, there is no guarantee they will care until it becomes a huge story and trend all over again.

The market will not punish a corrupt company unless that corruption hurts the bottom line or creates uncertainty. Many companies exist purely because they are good at getting undeserved government largess. They are rewarded, not punished, for this, despite the fact that they are basically enriching themselves at public expense.

[Icarus]

To the market fundamentalists, I would suggest that “the government” is indeed part of the market. It is not separate or an external force, any more than my arm is an external force on my body. The reaction of “the government” to individual business issues by creating regulations is, therefore, a market reaction. Certainly regulation may be unwelcome or unanticipated, from the business perspective. But then, how is that fundamentally any different from other market reactions that are unwelcome or unanticipated, from the business perspective?

[Sam_Stone]

Government is NOT part of the market. The difference between market action and government action is that the government uses the threat of force to ensure compliance. Market transactions are voluntary. Government edict isn’t.

[Dewey_Cheatem_Undhow]

Let’s not be overbroad, Sam. Government is required to make the market possible. Without a mechanism to enforce contract and property rights – at the point of a gun, if necessary – the market simply wouldn’t exist.

[Sam_Stone]

I didn’t say government was unnecessary. I said it wasn’t the equivalent of market transactions. I was specifically responding to this:

To the market fundamentalists, I would suggest that “the government” is indeed part of the market. It is not separate or an external force, any more than my arm is an external force on my body. The reaction of “the government” to individual business issues by creating regulations is, therefore, a market reaction.

Government IS an external force on the market. That’s what regulation IS.

[erislover]

@Sam Stone

Government is NOT part of the market. The difference between market action and government action is that the government uses the threat of force to ensure compliance. Market transactions are voluntary. Government edict isn’t.

That’s a rather small view of the government. Seeing as it is one of, if not the, largest consumer in the market, it has quite a bit to do with it besides just enforcing regulations.