To Regulate or Not to Regulate…

Regulate

There has been a major push to deregulate businesses, a push that was started with the Reagan Administration. Some argue that by deregulating businesses it would reduce the cost of doing business thereby giving businesses an opportunity to grow and add jobs while others scream that this would be the end of the world as we know it. It is difficult to say until it actually happens but if one looks at precedents set, one will be able to make a good educated guess.

In 1600, the East India Company existed as one of the largest and earliest unregulated corporations. This was a company ruled by profit-driven individuals. One manager by the name of Robert Clive became one of the richest men in the British Empire. Here is a partial list of their deeds:

  • Created their own army
  • Overthrew governments that were not friendly to what the company wanted
  • Installed their own rulers
  • Created their own currency
  • Raped and pillaged India to a state from which it still hasn’t fully recovered
  • Waged a war to force China to import opium –a large cash crop for the company

In an atmosphere free of regulations, the owners and managers were free to do as they wanted. Fast forward over two hundred years to the time of Vanderbilt, Rockefeller, and Carnegie. What remained consistent was extreme avarice.

  • Politicians were bought and sold
  • Competition was crushed ruthlessly
  • Blacklist and other threats were used to keep employees under control and under cost
  • Creation of monopolies not through skillful competition but ruthless practices

These scenarios created a need for regulations and unions. Move more towards today after Reagan deregulated banks and you find predatory practices which led to the housing financial crisis. If none of this had happened, it would not have been necessary to create all of these regulations; regulations are created in response to an action that results from greed. They are necessary to protect consumers, employees, and the corporations themselves.

One thing that is noticeable with many companies as well as politicians: helping them find new sources of revenues or savings often ends up in bonuses, raises, and perks for the owners and management, versus an investment in the company itself or the employees. Case in point: Reagan managed to get tariffs against auto makers such as Toyota which increased the price of the imported cars to about $2,000 to $5,000 more than they would have been without such tariffs. This was to give the big three auto makers some breathing room by making their cars cheaper and allowing them to have more financial resources to improve their manufacturing facilities. Instead, they raised their prices to match those of their Japanese competitors and gave themselves raises, bonuses, and perks for increasing sales when it had been the work of the tariffs.

Still think that it would be okay to deregulate businesses? Take a good look at the photo above – that was America before regulations that monitored industry practices were enacted.

Still unconvinced? Take a few moments and think about your bosses in action. This is with regulations. Imagine them without any regulations or labor laws.