Putting It All Together
I have an emerging view on markets, government, and what to do moving forward, and Better Regulate Than Never | The New Republic help my tie a lot of my thoughts together.
To understand the shape of our response to the crisis, we must understand the crisis itself. We have experienced a failure of capitalism — not the failure of capitalism. We know markets are still the best way to allocate resources and to set prices and wages. But the first and essential corollary to any theory of markets should hold that they are fragile and must be protected. No matter how frequently large swaths of the world loudly shout, “We love the market!,” virtually nobody does. In the absence of rigorous enforcement of rules, market players seek monopoly power and unfair advantages; they take risks at the undisclosed expense of others, or violate fiduciary duty. None of this means these actors are “evil” or “immoral.” But their actions demonstrate that self-interest, unbridled by enforcement of rules, will destroy the very market so many people so ostentatiously claim to adore.
Take that Michael Moore — I know a movie with this viewpoint wouldn’t sell as many tickets but keep crusading. This South Park clip is about Rob Reiner, but I always think of Michael Moore when I watch it.
Our market has been — and will continue to be — undermined by regulators who are intellectually or ideologically unwilling to confront powerful market players. Too many of our regulators have been tarnished by the culture of Washington, where the constant movement between government and the private sector has created a fear of disrupting the status quo. It is an environment where stringent enforcement — the very type we needed — jeopardizes future confirmations, alienates potential clients, and engenders social ire. This cozy world isn’t exactly corrupt. Rather, it perpetuates an insidious process of socializing the regulators and the regulated alike. Everyone emerges accepting a way of doing business that ultimately fails the public and the economy. Groupthink has prevailed, leading to an ideological conformity that forecloses challenges and alternative theories.
On Corporate Governance
But, once again, we’re missing the opportunity. Instead of adding bureaucracy, we should be using the government to help invigorate shareholders to police companies. They should be empowered to control executive compensation, eliminating all the conflicts that now encumber those decisions.
Yes, this is an opinion piece by Elliot Spitzer, and I think he is guilty of some of the worst excesses of government along with the rest. He doesn’t go nearly far enough into addressing why the Washington culture is so ineffective, or into bad governmentpolicies taht led us down this road. But I think he is on the right track about what reform needs to look like.