8.
Regulation
The conventional, but
mistaken, understanding of regulation is that consumers or workers need
protection from unscrupulous big businesses and that Congress wisely and
compassionately responds to those needs to rein in nefarious businesses. Actually, business regulations were and
are instigated at the behest of and for the benefit of the businesses so
regulated. In effect, regulation
is a teaming of business and government to the detriment of potential
competitors--which the established businesses prefer not to face--and to the
detriment of the consuming public.
On a purely
theoretical basis this has to be the anticipated fundamental status of
regulation. This is because any
business regulated by a government agency has a focused interest in the
activities of that agency and will therefore spend a great deal of time and
money making sure the regulations are enacted in such a way as to benefit the
business. Consumers, on the other
hand, have a myriad of interests and only a minor or passing concern about any
particular industry and the regulations affecting it. Businesses in other words will naturally out-compete the
consumer in the political realm where regulation originates.
A few examples: The grandfather of regulatory bodies in
the U. S. is the Interstate Commerce Commission established in 1887 to regulate
railroads. The railroads had for
years attempted to fix prices among themselves, only to find that each individual
company found it to its individual benefit to cheat on such an agreement--each
individual railroad firm hoping the others would stand by the agreed-upon
higher price while it cut its own prices to increase business.
Finally, the
railroads themselves arranged for Congress to establish the I.C.C. so that the
power of law would guarantee that the prices were not cut. When the new technology of trucks was
available to compete--to the benefit of the consumers--with the railroads, the
I.C.C. began regulating trucks in such a manner as to benefit the
railroads. These truck regulations
consisted of mandated routes (making trucks behave as if they were operating on
tracks!), minimum prices and limits on what the trucks could carry and where
they could carry it.
Airlines were
regulated beginning in 1938, and in the 40-year period from then until 1978 no
new trunk airlines were granted a charter. These four decades saw a huge change in the airline business
as airplane technology advanced from propellers to jets, from 20 seaters to 400
seaters, from speeds of 120 mph to speeds of 600 mph. Yet, the Civil Aeronautics Board found no need to allow new
competitors into the growing industry.
This fact alone makes it quite clear that the purpose of the regulation
was not to protect the consumer but to protect the market of the established
airlines.
The word regulation,
properly understood, should evoke thoughts such as protection of businesses
from competitors, special privileges for established firms, and government
efforts to exploit consumers.
-
Fellmeth, Robert
The Interstate Commerce Omission,
(New York: Grossman Publishers, 1970)
-
Friedman, Milton
Bright Promises, Dismal Performance,
(New York: Harcourt, Brace and Jovanovich 1983)
pp. 127 - 137.
-
Kolko, Gabriel
Railroads and Regulation 1877 - 1916,
(New York: W. W. Norton & Company, 1965)
-
Kolko, Gabriel
The Triumph of Conservatism,
(New York: The Free Press 1963)
-
Stigler, George J.
The Citizen and the State,
(Chicago: The University of Chicago Press, 1975)
pp. 114 - 141.
-
Twight, Charlotte
America's Emerging Fascist Economy,
(New Rochelle, New York: Arlington House Publishers, 1975)
pp. 70 - 112.
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