Doing the Math on Federal Regs

Rex Nutting, MarketWatch’s Washington Bureau Chief, offers a misguided, if sincere, take on federal rulemaking. Presented with the possibility of a new regulation, Nutting contends, “[t]he businessman does what businessmen do: He fights the regulation tooth and nail.”

Discussing the costs and benefits of environmental regulations, Nutting rightly notes the costs of widespread corporate ruination of the natural world. And in the present, state-distorted economic system, where genuine individual rights are subordinated to big business impunity, Nutting’s on the right track.

His thesis embraces an important mistake, however, in claiming that government amounts to “the people,” setting big government in opposition to big business. Contrary to Nutting’s earnest assertions, capital and the state are, as a practical matter, virtually indistinguishable. The federal agencies that regulate a given industry are no friends of the proverbial “little guy.” They do the bidding of the plutocrats, even if inadvertently.

The argument underlying many treatments of regulatory capture, even if only implied, is that it’s an irregularity, a glitch in an otherwise pragmatic, working balance between “public” and “private” interests. It too often doesn’t occur to the student of regulatory phenomena that institutional pressures and incentives drive the strictly technical conversations she imagines.

A certain coziness, however “professional” or “objective” its appearance, is a matter of course when companies and government agencies work so closely together. The groups needn’t consciously collude or engage in the kinds of corruption — outright bribes to influence specific decisions — that catch the attention of mainstream news.

Due to no more than the natural and ineluctable tendencies of the groups involved, regulations tend to concentrate power in big business rather than reining it in. Analyzing the state of the American economy at the turn of the last century, historian Gabriel Kolko wrote that the large trusts were increasingly “unable to compete successfully or hold on to their share of the market.”

The regulations that ensued from “national progressivism,” Kolko argued, were in effect a “defense of business against … democratic ferment.” Regulations made doing business far more costly and complicated, and while the reigning business powerhouses could absorb the new costs, the local country store usually couldn’t.

The result has been an economy constituted of corporate cartels protected from genuine competition and able to pass their enormous costs onto consumers and taxpayers. The state is in its very nature a “captured organization,” a vulturine institution that functions to manipulate economic relationships for a small elite.

Without any conspiratorial motive on the part of any one person or group, the state and organized interests impose a version of “competition” that’s tolerable to the rich and powerful — one in which, for instance, self-sufficiency and -employment are anomalies.

Unless you can afford a phalanx of compliance lawyers to parse the regulatory terrain, unless you have an army of lobbyists to swarm the seat of government, your chances of finding a niche between state-privileged corporate behemoths is slim.

The way to protect the environment, undermining corporate excess and freedom from responsibility, is to withdraw special privileges and dispensations. As the source of those, the state is the single greatest impediment to accountability and anything like environmental sustainability. The state is not “the people,” unless by “people” you mean agency czars and corporate CEOs.

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