Government regulation stages a comeback

Subprime mortgage troubles and other shady business practices have helped to revive interest in restraining aspects of capitalism.

By David R. Francis | columnist

from the September 10, 2007 edition

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Regulation is back in Washington. Subprime mortgage troubles, recalls of Chinese products, rising electricity prices in certain states, and recent mining disasters have all revived interest in restraining aspects of capitalism.

"The great pendulum in the sky, between letting [capitalism] rip and constraint in the market is certainly moving back toward regulation," says Robert Reich, secretary of Labor under President Clinton.

Mr. Reich likens the mood shift to previous historic periods. There was the Progressive Era after the 1890s, when excesses of capitalism prompted legislation to stop child labor, improve workplace safety, and limit working hours. The attitude was "Let's control this beast," says Reich, now a professor of public policy at the University of California, Berkeley.

After the anything-goes 1920s and the Great Depression, President Roosevelt brought the New Deal and tough new regulatory agencies to Washington.

But since the late 1970s, Reich says, business regulation has been mostly relaxed, and the nation is now "experiencing the result."

There was the Enron affair and other shady activities of corporate executives this decade. More recently there have been a series of problems with unsafe products and drugs, environmental issues (including global warming), and the widening inequality of incomes. "There is a growing sense that unlimited capitalism has its benefits. But there needs to be more regulation to protect consumers and investors," says Reich, now promoting his 11th book, "Supercapitalism."

Wild West capitalism has profited consumers and investors enormously. But the public good has in some cases been sacrificed, he says. So liberal and conservative lawmakers must work together to reduce the impact of corporate money on politics and enhance the power of citizens.

Capitalism is partly based on the thesis that the self-interest of entrepreneurs, managers, and workers combine to produce the most good for a nation. But when thinking shifts into the extreme "greed is good" mode, the impact can be damaging.

Washington has been caught "napping again and again," says Ralph Nader, the veteran public-interest advocate, citing unsafe cars, bad drugs, and damaging cosmetics as examples.

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