November 23, 2011

Concentrated Power: Why We Need Regulated Capitalism

By Glenn

Our founding fathers knew that concentrated power hurts society. They wrote a constitution that divided political power into three branches. This system has served us well for over two hundred years, protecting us from tyranny. The founders didn’t foresee today’s vast concentration of economic power and the destruction it could bring. We, however, can. We should have known the danger it poses to us all.

Before the Great Depression the federal government let corporations grow relatively unchecked. It was a free market paradise. No minimum wage. No workers’ compensation plans. No unemployment tax. No bookkeeping rules. No environmental laws. No safety regulations. If the free market myth were true, then this era should have been the greatest time in American history. It wasn’t.

The Great Depression and the New Deal brought this corporate paradise to end. President Franklin D. Roosevelt knew unregulated capitalism hurts average Americans. He decided to limit the power of corporations. They had to open their books to investors. Companies had to deal honestly with labor unions. They had to pay taxes. Businesses had to pay their workers better. Did the American economy crash? No. In fact regulated capitalism laid the foundation for the post war economic boom.

After World War Two the federal government took an even larger role in the economy. It provided veterans with housing, education and health benefits. The federal government built the interstate highway system. It invested in aerospace, nuclear and computer technologies. Federal regulations required the automobile industry to improve safety and fuel efficiency. Industries were forced to stop polluting our air and water.

The free marketeers screamed in protest. Liberals were destroying America. Socialists were punishing the successful. Capitalists would go on strike and bring the economy to a standstill. Luckily, no one listened to these Chicken Littles. The sky didn’t fall. In fact regulated capitalism produced the world’s largest middle class.

Unfortunately, the oil crisis of the 1970s opened the door for the Chicken Littles to gain power. Slowly and methodically the corporation elite reasserted their hold on political power. The geniuses on Wall Street started selling snake oil again-Free Trade, electricity deregulation and the grand daddy of them all, banking deregulation. They told us that the “market” would regulate itself and no one would be hurt. Boy, were they wrong. American jobs moved overseas. Electricity prices went through the roof. In 2008 American families lost $11 trillion worth of assets, setting them back by four years.

Now what do we do? Do we turn to the arsonist and say, “Are you an expert firefighter too?” No, we don’t. Can the free market and more deregulation magically fix the current financial mess? No, it can’t. We need to return to sensible regulations that check excessive corporate power.

There is overwhelming bi-partisan support for this approach. Trade deals need to be fair, protecting American workers and the environment. We need affordable consumer technology to produce energy locally and allow for greater efficiency. Healthcare insurance needs to be affordable for all Americans. Stockholders need a greater say in executive pay and long-term planning. Finally, hedge funds need to disclose their secret deals that threaten us all.

Change will not be easy. It never is. Chicken Little will be screaming the whole time. The sky will not fall. We’re Americans. We’ve been in situations like this before. If we learn from our past successes and failures, we can effectively limit corporate excess and create sustained economic growth. Our founding fathers would be proud that we too learned the lesson that concentrated power hurts society and that we found a way to dilute it.

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