High time to re-think regulation
Recently I participated in a bi-partisan gathering that turned to discussing regulation and free-market economics. Dismantling regulation, of course, has been a favorite talking point from the right for at least the last four decades. (Witness our now-retiring U.S. Rep. to Congress Cathy McMorris Rodgers’ endless declarations that we must rid ourselves of “burdensome regulations,”a harbinger of the current Republican Party’s push to “dismantle the administrative state.”) Several at the gathering, including people with both conservative and liberal leanings, nodded to the impression that regulation and the burden of excess paperwork are stifling business—and, thereby, stifling the hallowed workings of the “free” market. Within the discussion group it seems curious to me in retrospect that I cannot recall a single concrete example of a burdensome regulation being raised. Perhaps that shouldn’t surprise us considering the pervasive intellectual stew we have all been simmering in for most of our lives.
For decades the economist Milton Friedman promoted the idea that a market maximally free of regulation would also maximize societal good as a desired (but incidental) side effect of its participants’ freewheeling pursuit of individual profit. Partly thanks to Professor Friedman and his intellectual predecessors, probably every one of us was introduced in school to the marvelous workings of “supply-and-demand,” essentially Adam Smith’s “invisible hand,” in establishing optimal prices for products and services—the essential ingredient of the “free” market ideal. Since the 1970s these ideas have been endlessly hammered home in our brains in media blather by talking heads of right wing “think tanks” like the Heritage Foundation, the American Enterprise Institute, and the Claremont Institute, as well as local manifestations like the “Washington Policy Center” or the recently Idaho-hatched “Mountain States Policy Center” (led by Chris Cargill, current member of the City of Liberty Lake city council).
After this passive acknowledgement of supposed oppressive regulation, several members of the discussion group raised examples where a lack of regulation of the free market (and enforcement of those regulations) was damaging to the common good. In the midst of a widely acknowledged housing crisis rents and home prices are rising in significant part on account of excess money in investment funds (as well as wealthy foreign interests) being used to buy up whole tracts of new homes and artificially jacking up prices with a demand signal that has nothing to do with individual prospective home buyers seeking shelter.
Worse, some pointed to the recent government lawsuit against landlords and property management companies like the real estate tech company RealPage that uses algorithms to discern the profit maximization point that a given rental market will bear. As the Federal Trade Commission points out, price-fixing by algorithm is still price-fixing. (Washington State under Attorney General Bob Ferguson recently joined the federal lawsuit against RealPage.) Simply put, if landlords and property management companies are able to share on RealPage the rent levels that enough people are willing to economically stretch to in order to have a place to live, then they can set a regional monthly rent that maximizes profit even if some units sit empty. The added benefit? The government, not the colluders, can be blamed for “inflation.”
Others in the group noted the movement among online vendors to set prices offered to individual consumers by using data on that particular consumer’s buying history.
Not mentioned during the discussion, but rattling around in my head were the trust-busting activities of the Theodore Roosevelt administration and how I was taught in high school economics that the formation of monopolies, the ever greater gobbling up of small companies by large ones, distorted “free” market economic principles.
Several participants chimed in citing the monopolistic behavior of grocery conglomerates and the resultant “food deserts” as small grocers are forced out of business.
The general sense of the group seemed to turn toward the idea that, while certain regulations could be cited as a drag on the “free” market, further reducing government regulation of mergers, acquisitions, and monopolistic behavior would be worse.
Somewhere in the midst of the discussion, a member of the group and an earnest conservative asked, rather pointedly, did we really want an economy in which the government controlled what goods and the price of the goods that would appear on the shelves of our grocery stores? The question seemed out of place. No one responded, asked for clarification, or challenged it. It was only later that I could see the straw man hidden in the question.
This was a conservative, it seems to me, suggesting that any regulation would lead to the planned economy of the “communist” U.S.S.R. with its scarcity and empty shelves we were all taught in school to expect of the “communist” alternative to unfettered “free” market capitalism. The question was a subtle way of suggesting that Democrats are closet communists or socialists, a frequent accusation from parts of the right, rather than citizens suggesting that giant multinational corporations, conglomerates and trusts definitely need regulation precisely for the purpose of insuring that the economy works for all of us and is insured of being relatively “free” rather than dominated by the whims of the uber-wealthy.
The straw man, the dishonest idea that Democrats advocate for communism, fell on its face. Whether the speaker intended it or not, the question they posed served to underscore the intellectual poverty of right wing attempts to invoke fear of communism in any attempt to level the economic playing field. That no one took the bait suggested to me the emergence of a new paradigm, one in which regulation helps assure the freedom of the market.
Keep to the high ground,
Jerry