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  • Global Regulatory Capture

    Posted by Jonathan on March 3rd, 2011 (All posts by )

    Richard Fernandez:

    Therefore the mindless expansion of regulatory power is not always a good thing. Increasing the power of government without a corresponding increase in transparency, does not, as many liberals believe, lead to the control of “rent-seeking capitalists” by the state, but on the contrary, leads to the control of the state and the industry by individuals whose key competitive advantage is the skill at corrupting public officials. We wind up working for the players. When business is globalized, then regulatory capture may be effected by foreign businessmen. Those businessmen are often indistinguishable from foreign leaders, especially in the case of the oil-rich Middle East. And the foreign leaders/businessmen end up capturing the regulatory mechanism. Then we wind up working, as some dons and British politicians wound up working, for the Brother Leader who is, as everybody now realizes, a complete homicidal maniac.
     
    But it seemed like a good idea at the time. A combination of unaccountable, but powerful regulatory agencies in a globalized economy sets the stage for the capture of agencies by foreign despots. One of the dangers of the President’s “healthcare reform” and “Green energy” policies is that it creates precisely those conditions for the huge medical and oil industries. By centralizing control of the the healthcare industry, which is nearly 1/6 of the US economy, Obama has set up a target for regulatory capture more tempting than anything that had ever come before.

    Almost no one disputes that doctrinaire socialism, where despots run farms, steel mills and national airlines, is a colossal failure. But modern crony-capitalism or fascism, which tacitly outsources the means of production to well managed, nominally private enterprises while accreting ultimate control in the hands of politicians and their minions, remains viable as long as taxpayers continue (voluntarily or otherwise) to fund it. Many people think this system is unsustainable, but because it’s impossible to know accurately when the system will fail and a lot of people benefit from it (see this post, for example), it seems likely that the system will appear strong until almost the moment at which it goes down. And in the meantime it provides opportunity for the Kaddafys of the world to use stolen funds to buy entire governments.

    If you are bothered by flies on a manure pile you remove the manure, you don’t try to train the flies. If government corruption is a problem the best way to improve the situation in the long run is by radically cutting the size and scope of government, i.e., radically cutting government spending as a fraction of GDP.

     

    3 Responses to “Global Regulatory Capture”

    1. David Foster Says:

      “Almost no one disputes that doctrinaire socialism, where despots run farms, steel mills and national airlines, is a colossal failure. But modern crony-capitalism or fascism, which tacitly outsources the means of production to well managed, nominally private enterprises while accreting ultimate control in the hands of politicians and their minions, remains viable as long as taxpayers continue (voluntarily or otherwise) to fund it”

      This also fits in well with the hostility of today’s “progressives” toward economic prosperity. The older leftists believed in the overwhelming importance of economic factors, and they were convinced that if they could only get their hands on the farms, steel mills, etc, they could do a better job than the capitalists. Today’s leftists, otoh, view economic production as something much less important and which can be left to lesser minds, as long as the owners of those lesser minds are properly supervised.

      Also: “tacitly outsources the means of production to well managed, nominally private enterprises”…they will not stay well-managed for long, of course; the close ties with government will eventually destroy their productivity. See the accidental eloquence of mrs rearden.

    2. Mike K Says:

      I attended last night a meeting of past presidents of the county medical association in Orange County, CA. There were about 25 of us, including the immediate past president. The conversation turned to the Obamacare legislation and its effect on primary care. The consensus was that the AMA has destroyed its role in representing physicians. I was told that current AMA membership is 11% of US physicians. I know I get a solicitation every month from the AMA. I sometimes wonder how they pay the postage.

      The other consensus, and the majority of those present were primary care physicians, is that primary care has been destroyed, both by Medicare and by the new legislation, whether or not it is eventually repealed. There was some discussion that Canada is actively recruiting US primary care physicians. I tried to make the argument, at a left wing blog (Washington Monthly) two years ago, that the incentives in Obamacare were all wrong. That they tended to increase cost and decrease access. The result was I was banned from the comments. The left cannot tolerate dissent. It also has not a clue about human motivation.

    3. Brett_McS Says:

      Mike K, indeed the Left has no clue about human motivation. That’s why we need new, Soviet Man! Or, to bring the idea up to date, we need business to consider their community obligations, not just the bottom line.

      You know, if you get rid of the manure pile, will there be any government at all left? What sort of government wouldn’t attract flies?