The Myth of Deregulation

The following article was written by Dawie Coetzee and published on the Artisanal CarsNovember 5th, 2011.

This has to be said sooner rather than later, especially in light of the inclusion among all the sound and salutary demands of the Occupy Wall Street movement of the demand for more regulation. The danger is that meeting this demand will leave the offending corporations even more powerful than they have hitherto been.

However fictitious the little gem doing the rounds, which places the EU regulations on the sale of cabbages at 26 911 words, a cursory search will reveal the general consensus that such a level of regulation, be it real or imaginary, is at best absurd and at worst draconian. Most people have a healthy abhorrence for petty bureaucratic interference in the form of all manner of regulations. My fear is that an undefined and unqualified demand for financial regulation might leave this abhorrence unarticulable. And it is my belief that articulating this abhorrence is more necessary than ever.

Corporations nest in regulation. Corporations cultivate regulation for their own purposes. The corporations that are responsible for our current problems are not the products of Industrial Revolution-era laissez-faire policies; they are very much the product of modern controlled capitalism. It is certainly not a case of a few maverick operators breaking the rules. Our current predicament has come about by the corporate majority obeying the rules.

It is not merely that they have adjusted to state regulation. It is not even that they have manipulated regulation to suit their own ends. They have actively sought regulation, have nurtured and nourished regulation by subtle and unsubtle means. They have done this to establish and maintain a state of oligopoly impregnable to unforeseen competition; to render their products indispensible to the consumer, and thus also themselves as exclusive providers of their products; to maintain a state of perpetual unsaturation in markets that by rights should by now be oversaturated many times over.

The corporate requirement for regulation is simple: that compliance – which includes the onerous processes of providing proof of compliance – should be relatively easy for themselves and highly troublesome for anyone else. It is the latter part that is often overlooked: corporations gladly inconvenience themselves if they thereby inconvenience actual or potential competitors more. That is how the corporations have come to be as powerful as they are: by causing sanely-scaled alternatives to be regulated out of existence.

Corporations use many means to cultivate regulation. Provocation is a favourite: corporations keep pushing governments’ buttons until they get the regulations they want. Conversely one thing they cannot do is overtly to demand the regulations they want, for negative public sentiment is too convenient – and safe – a tool to risk losing. Corporations need to maintain the myth that they do not want regulation. Regulation demanded by incorruptible paragons of virtue in the face of corporate opposition will not be questioned, even if it plays directly into corporate hands. Hence all the “free market” rhetoric. Hence, also, the misnomer “deregulation”, which is in fact an edifice of regulation no less exacting than any other which merely happens to favour the corporations. For what the world requires is real, literal deregulation: but the word by which to demand it has been stolen.

Likewise a market that is free in any intelligibly rational sense of the word is the one thing the corporations will not be able to survive.

I have no proof one way or the other, but I would not put it past certain corporations deliberately to err in order better to create a context in which they are unassailable. Did BP dump crude oil in the Gulf of Mexico on purpose to provoke a response from government that would be detrimental to some or other rival? It might well have been worth whatever cost BP might eventually have incurred in clean-up and compensation.

Some corporate acts are not explicable in any other way. Fixing the Ford Pinto exploding fuel tank thing in the early ’70s would not have hurt the profit margin on the Pinto materially. The very ease with which Ford could have made good is often cited as a case of “corporate callousness” and an argument for stricter regulation. But by leaving the thing alone Ford could provoke ever higher hurdles for European and Japanese competitors to jump if they were to compete against the Pinto in the US market, hurdles it turned out many found themselves unable to attempt. This was at a time when imports had been eating into the US market for a decade, but when a fresh fuel crisis gave smaller, better designed, imported cars a sudden advantage. By narrowing the import field through provoked regulation Ford ended up with a greater market share to itself.

Now, many will counter that the imported alternatives were eliminated by the regulations because they were “unsafe”. The truth is that their manufacturers could not afford the processes by which they were required to demonstrate compliance with, nor the extra component production facilities to make parts that are no safer but merely happen to meet, the specific requirements of the regulations.

And this does not even begin to address issues of personal responsibility expected from drivers, in the sense that any vehicle is safe in the hands of a driver who is adequately skilled, alert, and sensible. The regulatory scenario thus cultivated promotes the culture of the unskilled, inattentive, and indifferent driver, consistently with the corporate desire to sell to as broad a market as possible by maintaining dependence on motor vehicles in the vast majority who have no particular interest in using them properly. And the increase in vehicle traffic thus generated in turn increases the justification in demanding ever stricter levels of safety.

And thus regulation breeds the “need” for more regulation, and cui bono? Not ourselves, not even if we did not count creative liberty a spiritual prerequisite for all lives to be meaningful.

Would a sudden abolition of regulation put things right? Probably not: but the operative word is sudden. Slow haste is instead required to dismantle this edifice. At the very least it should not be built higher: and that needs to be understood when deciding exactly what to demand when things like the Wall Street protests provide the opportunity to make demands.

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