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Fri, Feb. 21

Talk of the town: Some business regulation is necessary

After Ronald Reagan's election in 1980, one major mantra was deregulation of business.

The theory was that all the regulation business required would come from market forces - the only regulation necessary.

At that time I was a member of the Senior Executive Service in the U.S. Department of the Interior. Interior had a significant role in the regulation of oil and gas matters on the public lands of the United States. A number of proposals for deregulation were under consideration.

An oil industry executive contacted me about some of those proposals. Surprisingly, he was not lobbying for more deregulation. He wanted to limit the reach of the deregulation in his industry because he feared that his firm would have to compete at the lowest common denominator - something his firm preferred not to do.

Shocked as I was at the time, I think that recent history shows that this is what happens in business when deregulation goes to the extreme.

For more than 25 years, both Republican and Democratic administrations have been on a rampage of deregulation. The current state of the economy is an example of what happens with too little regulation.

Regulation does not work without the existence of an enforcement organization. Over the past 30 years, even when minimal regulation existed, the government decimated the budgets of the enforcement agencies. It sold this other part of deregulation to the citizenry as a reduction of the federal budget and, on that basis the citizenry applauded - only to now reap the results.

Many supporters of deregulation cite Adam Smith's concept of "the invisible hand" from his book "The Wealth of Nations" as a basis of their position. Having read the book more than once, I think that they overlook other statements of Mr. Smith.

He also said on page 128 of that book: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

This often-overlooked statement lays the groundwork for limiting the influence of businesses by regulation.

Too often in the past 30 to 40 years we have heard that the government had to bail out private companies because "they were too big to fail" (Chrysler, Lockheed, and now banks and insurance companies). This issue also relates to deregulation.

In the late 1800s and early 1900s we had such a thing as "trust busting." When corporations became too big and powerful, the government brought action against them. Later, using the anti-trust laws, the Justice Department began reviewing and approving or rejecting various business combinations.

However, over the past 30-plus years, this type activity has largely fallen to the cry of letting the market handle the question of business combinations. Hence, we now have businesses "too big to fail" because of their impact on the entire economy. One easy solution is limiting the impact that any business can have on the economy as a whole, so that the taxpayers never again have to bail out a business because it is "too big to fail."

In 1952 John Kenneth Galbraith published a book titled "American Capitalism: The Concept of Countervailing Power." The main thesis of this book was that American capitalism worked well because the countervailing power of citizens, government, organized labor, and businesses - all with power and all pulling in different directions - often leads the nation to balanced decisions.

Since that book appeared, organized labor now is largely gutted and big business has become ever more powerful and, in many instances, now controls government at many levels.

The citizens are on the receiving end of the lack of countervailing power; thus they get the consequent bill for the greed of many business leaders, and the striving for power and re-election by politicians.

We must do something to limit the power that is now in the hands of big business and their political cronies in government. It is time to regulate and to limit the size of businesses so that citizens never again will have to reward those who have made bad decisions and received too much money for making them.

Often these same businesses have given too little consideration to what they are doing to our nation, but they have become "too big to fail." Some have referred to this as the privatization of rewards and the socialization of risk - not the original concept of capitalism.

Bill Kendig retired after 25 years of federal service, most in the elite career Senior Executive Service. The president honored him with Meritorious Executive and Distinguished Executive honors.

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