The great pendulum of American economic outrage moves back and forth over time between anger at big government and anger at big business. For almost thirty years, big government has been the target -- starting with Ronald Reagan's admonition that government is the problem, not the solution; through Bill Clinton's declaration that the era of big government is over; and George W. Bush's hands-off brand of free market fundamentalism.
We deregulated much of the economy and pretty much allowed corporations to do what they wished. And for the first twenty years the result was largely good -- a buoyant economy, a bullish stock market, a strong dollar.
But now we're experiencing what happens when the pendulum swings too far and big business is given so much leeway that the public is harmed and the economy jeopardized. The corporate looting scandals that began with Enron were a wakeup call. Then came the practice of post-dating executive stock options. And more recently, an epidemic of unsafe products: drugs like Vioxx, tainted foods, Heparin and lead-painted toys imported from China.
We've had defense contractors that don't deliver on their contracts, and insurance companies that won't deliver on their promises. And just this past year, the subprime loan mess, a financial meltdown on Wall Street, out-of-control hedge funds and derivatives. Perhaps manipulation of oil futures markets.
The reality is that neither big government nor big business is the problem. Both are necessary parts of a modern economy. Problems arise when they're out of balance -- as they were by the 1970s, when government had grown so large it was stifling the economy, or as they have become this decade, as big business, including Wall Street, grew so irresponsible as to undermine public trust and threaten the economy.
Now the pendulum of outrage is swinging back against large corporations. America is heading toward another era of regulation. The real question is how smartly we go about it, and whether we can keep the pendulum from swinging too far.
Robert Reich is Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written twelve books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Supercapitalism. His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Mr. Reich is co-founding editor of The American Prospect magazine. See his blog at http://robertreich.blogspot.com/