In the campaign season of 2008, regulation is a decidedly unsexy topic. Yet the outcomes of the presidential and congressional races this fall matter because of the divergent positions that Republicans and Democrats take on the question of the regulatory powers of the state.
The collapse of two construction cranes in New York, the fact that sports utility vehicles are not subject to the same anti-pollution controls as smaller passenger cars, tomatoes infested with salmonella, lead-painted Thomas the Tank Engine toys, the spread of subprime lending and the ensuing foreclosure crisis, and downer cows in meatpacking firms--these are all diverse examples of regulatory failure.
Changing Society, one of the smartest academic blogs, offers an astute analysis of the "two imperatives that work against public health and safety in most modern societies: the private incentive that the provider has to cut corners, and the perennial temptation of corruption that is inherent within a regulatory process. On the providers’ side, there is a constant business incentive to lower costs by substituting inferior ingredients or materials, to tolerate less-than-sanitary conditions in the back-of-restaurant areas, or to skimp on necessary maintenance of inherently dangerous systems. And on the regulatory side, there is the omnipresent possibility of collusion between inspectors and providers."
Changing Society poses three key questions: "how effective are the systems of regulation and inspection that we have in our key industries — food, pharmaceuticals, hospitals, transportation, and construction? How much confidence can we have in the basic health and safety features of these fundamental social goods? And what sorts of institutional reforms do we need to undertake?"
Regulation is one of the most important issues at stake in November. Since the late 1970s, and accelerating during the Reagan/Bush years and again in Bush II, the Republicans have worked assiduously to limit the regulatory power of the federal government on the grounds that it creates inefficiencies and hinders capital accumulation. Liberals justifiably fret that Republican-appointed federal judges will whittle away at the precarious right to reproductive freedom. But Bush's newest appointees are, above all, characterized by their suspicion of federal regulatory agencies and their power.
John McCain is not as intensely anti-regulation as our current president, although on the financial industry, he holds his own with the deregulators--or as he put it earlier this year, “our financial market approach should include encouraging increased capital in financial institutions by removing regulatory, accounting and tax impediments to raising capital.” That doesn't bode well for a McCain administration. It's also highly likely that should he be elected, McCain will continue to fill the federal bench with judges hostile to regulation.
We have seen the negative consequences of the deregulatory impulse, particularly over the last seven and a half years. It's time to stand in defense of regulation.