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In Today's Capitalism, Regulators Not Relics
Published on Monday, January 28, 2002 in the Boston Globe
In Today's Capitalism, Regulators Not Relics
by Robert Kuttner
DON'T YOU just hate it when the phone rings during dinner and it's a ''courtesy call'' offering anything from credit cards to mortgage deals? Well, one of those archaic government agencies that it's so fashionable to hate - the Federal Trade Commission - has a fine, simple solution.

Under the FTC's plan, you just sign up to be off-limits to telemarketing. The FTC will keep a list of people who prefer tranquility to courtesy calls, and it will be illegal to bother them.

Needless to say, the FTC's proposal hasn't taken effect yet. The direct marketing industry is squawking, and so are the ideologues who hate consumer regulation. This is an outrageous interference with the freedom of people to be interrupted, they say, not to mention the freedom of phone companies to profit from the intrusion.

But most people would prefer to be asked. Justice Louis Brandeis famously observed that ''the right to be let alone'' is one of the most sacred of American rights, implicit in the Constitution, even if not expressly declared.

But why is it necessary for the government, in this case the FTC, to get involved? Can't consumers just exercise their buying power? Here we get to the heart of the story.

Phone companies have tried a variety of halfhearted measures to limit unwanted telemarketing, and they just don't work. In principle, the sovereign consumer could demand that service or shop around for a phone company that offers blocking of unwanted commercial calls. But good luck finding one.

This is what economists call a collective action problem. The private market won't provide what a great many consumers want, and private litigation doesn't do it either. That's where government comes in.

And, of course, telemarketing is just one minor annoyance wrought by business. There are much bigger ones that have no free-market solutions, and hence require government involvement.

A few are: pollution and global warming, clean food and reliable drugs, affordable access to medical care, and the need for corporations to keep honest books that investors can trust. The Enron scandal shows just how opportunistic corporations can be and what happens when government itself is corrupted by corporate money.

In a free society, citizens need to be protected from assaults of both government and business. The Founders of this Republic, most notably James Madison and Thomas Jefferson, understood that if people were to have rights, we needed a government strong enough to protect those rights. We also needed elaborate checks and balances and an explicit bill of rights added to the original draft of the Constitution to make sure that zealous temporary majorities in control of government would uphold rather than trample those rights.

Which brings me back to the case of the interrupted dinner. Today's conservatives remember only half of the story: Government should constrain government. But often it is private business that tramples on private citizens.

And if government is to protect citizens from private corporate excesses, government must not be bought and sold by the same corporations it supposedly regulates.

In this era, regulated companies dominate the agencies that regulate them. The Food and Drug Administration increasingly does the bidding of the pharmaceutical industry; the Federal Communications Commission is captive to telephone and cable companies; and the Securities and Exchange Commission is now headed by a man who lobbied against regulations to make corporations and their auditors maintain honest books.

The deeper problem is not the regulatory agencies, but the politicians of both parties (with Republicans leading the charge) who want them to be toothless watchdogs. The ideology of deregulation lends cover to old-fashioned corruption. Half of Congress should recuse itself from investigating the Enron scandal, because so many elected officials were on the take.

The Federal Trade Commission is my kind of relic - an agency that actually looks out for the public interest. The next time you hear someone disparage a regulatory agency as a ''Depression era'' holdover, that's the kind of agency you want to stay in business.

Enron-style abuses were all foreshadowed by the scams of the 1920s that helped lead to the Great Depression. As long as there are capitalists, there will abuses, and we will need countervailing regulatory power. But if we want to keep the regulators honest, we need to breathe some life into the system of democratic politics that holds them accountable. Otherwise, you will find your air poisoned and your pensions looted; your HMO will stand between you and your doctor, and courtesy calls will keep interrupting your dinner.

Robert Kuttner's is co-editor of The American Prospect. His column appears regularly in the Globe.

© Copyright 2002 Globe Newspaper Company


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