Freeman

ARTICLE

Regulation

DECEMBER 01, 1980 by JOHN A. PUGSLEY

Every major industry in the world, including food, commodities, housing, transportation, medicine, energy, and money, is regulated at almost every level of government. Just listing the regulations pertaining to any single industry would take vol umes.

In the field of finance, the government regulates (among other things) the amount of interest each type of financial company can pay on loans, the amount that can be charged for loans, the way interest must be disclosed to borrowers, where finance companies can open offices, what their advertisements can and cannot say, what types of securities can be issued, what must be and what cannot be said about securities, who can sell them, and how the sellers can be compensated for their sales.

In the field of medicine, the government regulates (among other things) who can practice medicine, what schools can teach medicine, what courses are to be taught, what types of medicine are acceptable, where doctors can practice, what prescriptions are allowed, what drugs can be sold, under what conditions drugs can be sold, who can sell them, what education is required for those who sell them, in many cases what can be charged for them, who can manufacture them, and what can be said about them in advertisements.

In the field of transportation, government determines (among other things) who can operate airlines, buses, taxicabs, and railroads, what equipment is acceptable, how often equipment must be serviced, the timetable of service, where passengers can be taken, who can operate the equipment, how much can be charged, what attendants must tell passengers, how passengers must behave while being transported, and how much can be carried aboard the transporting vehicle.

In the transporting of goods, government regulates (among other things) the amount that can be shipped by different types of carriers, what routes carriers can take, how much each carrier can carry, what hours drivers and pilots can operate, what carriers can charge, who can operate transport equipment, how old operators must be, and what training and experience they must have.

Of course, food is perhaps the biggest industry of all, and certainly the most highly regulated. Take the case of a simple hamburger. A study by Colorado State University identified over 41,000 state and federal regulations that apply to this common sandwich. These regulations apply to everything from the grazing of beef cattle to the assembly of the burger at your local fast food outlet.

This is a small sample. Mountains of regulations suffocate every field of human endeavor, from medicine to manufacturing, from construction to energy. The government is out to protect us—from ourselves. How did politicians and bureaucrats become so concerned about our well-being?

The Source of Regulation

On the surface, the government’s regulation of business appears to be a genuine attempt at consumer protection. The regulations are justified on the grounds that they protect us from greed, ensure open competition in the marketplace, and protect our domestic economy. While there is a growing feeling that many government regulations are stifling business because of the inefficiency of the bureaucracy, still, almost everyone is for them in principle. But that is a part of every good sting. The victim must be totally convinced that he is benefiting even as he is being robbed.

The only reason individuals take action is because they believe they will get something they want by taking that action. People, in general, are not altruists. Yet it would seem that there must be some self-sacrificing individuals who are willing to devote their lives to designing regulations to protect us from greedy businessmen who would sell us shoddy or dangerous products. After all, how could a politician benefit from supporting business regulation? It must be that he has a genuine concern for the safety and well-being of the public. Otherwise, why would he work so hard to pass so many laws regulating business?

It’s simple. Politicians who support business regulation are not doing so because of deep-seated concern for public safety—they are merely meeting the demands of lobbyists who are hired and paid by businessmen. With only a few exceptions, the entire body of government regulations applying to business in the world today was designed and created by the very businessmen who are being regulated. These are self-imposed restrictions. However, do not think for a moment that these businessmen are altruists. These regulations are not aimed at them; they are aimed at you. Business regulation is the cleverest of all methods ever devised for taking money from you without your knowledge.

Sound far-fetched? Of course it does. We have been programmed our entire lives to believe that the government acts in the interest of the individual. We believe it is one giant consumer protection agency. In fact, it is nothing of the kind. It is one giant agency programmed to protect the business interests of established firms at the expense of the individual consumer.

Confidence Games Designed to Curb Competition

In real life, there are three ways that a businessman can limit his competition and thus gain your business by default: first, he can get the government to prevent the competitor from offering products at all; second, he can get the government to force the competitor to raise his price; and third, he can get the government to force his competitors’ costs up, thus indirectly forcing up the price.

All three of these methods are widespread confidence games that have been around for centuries. By getting government to limit the introduction of competitive products into the marketplace, any businessman can set his own prices for the same products much higher and you will buy from him without suspecting that he has forced you to do so.

If you still question this analysis, examine the evidence. Take some time and research the records regarding which individuals lobbied for regulations, designed the regulations, and reported violations of the regulations. Time after time, you’ll find that it was not wounded consumers who were responsible, but businesses already active in the market. Established airlines lobbied for creation of a Civil Aeronautics Board, volunteered to draft regulations governing airlines, and then screamed when deregulation was mentioned. Established banks lobbied for establishment of the Federal Reserve. Established trucking firms demanded regulation of interstate trucking; established shipping firms demanded regulation of ocean freight; established railroads demanded regulation of the rails. Established firms do not like competition. It threatens to take away their customers, and lower their profits. Free enterprise is a fine concept when a businessman wants to complain about government interference in his own affairs, but when competition threatens his markets, he is quick to point the political guns at his adversary.

When the entrenched firms succeed in getting the government to regulate their industry, you, the consumer, are the loser. You are not protected by these regulations; you are denied the chance to buy the product of someone who might have been willing to offer you a lower price or a different quality. You are deprived of your chance to set your own values on goods.

Conclusion: Intervention Lowers the Standard of Living

Price controls, wage controls, antitrust laws, professional licensing laws, minimum wage laws, immigration laws, tariffs, and all other forms of personal and business regulation result from the attempt by one individual to limit “your ability to spend your money with whomever you choose, or to sell your property at whatever price you choose.

These laws are justified on the grounds that people are somehow injured because the individual who owns goods or services is asking too high a price for them. If you catch a fish, how is someone else injured if you set a price he thinks is too high? Why is someone else’s opinion better than yours as to what price you should sell it for? Whose fish is it, anyway? Does it belong to you, who caught it, or another individual who wants it, or to all the other individuals who make up society?

When the majority of individuals in a society try to enforce their claim on the production of others through the legal process, they are guaranteeing that their society will have a lower standard of living than if they honor each person’s right to enjoy and set his own value on the fruits of his labor. The standard of living of any nation is directly proportionate to the personal freedom enjoyed in that nation. The people of China and India are not poor because they are stupid; they are not poor because they lack natural resources; they are not poor because they lack modern industrial tools. They are poor because they have lived for decades under social systems in which the established, entrenched classes are able to use law and custom to control the production, price, and sale of all goods and services produced. By removing the ability of individuals to benefit from ingenuity and hard work, they have destroyed the incentive of individuals to produce and save. Without savings, there is no capital for the creation and improvement of the tools of production, and without tools there is only poverty.

Legalized plunder destroys the standard of living of any nation because it attempts to violate all of the economic laws that are an immutable part of human nature. Legalized plunder has strangled China, India, and most of the rest of the socialist or communist world. It is the reason for their abysmally low productivity, and the subsistence-level existence of their citizens.

By the same token, the people of the United States are not rich because of any special intelligence, natural resources, or work habits. We are rich because for the first 150 years after the founding of the nation individuals were allowed nearly total freedom to produce and control the products of their labor. This freedom encouraged individuals to develop habits of hard work and thrift, and to apply their intelligence to the natural resources in order to create the wealth of this nation. As one person after another discovered that government is a willing agent that will plunder others on request, plunder has grown and the rewards of production have fallen. Thus, the freedom that created the nation withers, and so does your standard of living.

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December 1980

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