Social Question

iamthemob's avatar

In a democracy, what type of government regulations help to maintain free market capitalism?

Asked by iamthemob (17147points) January 31st, 2011

I don’t believe that democracy can truly exist in a system that protects or exalts the interests of one group above another. The goal of a democracy, in my opinion, is not the equality of condition, but the equality of rights.

Given that no system can be free from the influence of one group or another, what place does the government have in ensuring that free market competition exists within a capitalist economy? What regulations are improper? And why?

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18 Answers

zenvelo's avatar

Some markets lead to a natural monopoly, some utilities are a good example. Regulations on monopolies are appropriate; otherwise the existence of a monopoly distorts the supply curve. Anti-trust regulation also promotes healthy competition.

Government regulation also protects workers rights. Workers who have to feed themselves and a family need protection from being exploited.

The best way to regulate industries is to internalize economic externalities.

thorninmud's avatar

OK, I’ll put the obvious one out there:

Regulation of campaign spending by corporate entities.

cockswain's avatar

Stiffer penalties for politicians or lobbyists engaging in “unethical” behavior.

iamthemob's avatar

@thorninmud, @cockswain

I’m on the fence about lobbying regulations and campaign financing. I fear regulating it ends up reducing the clarity…people who want to spend the money, will. Attempting to prevent them from doing so merely makes them do it with less clarity.

ANef_is_Enuf's avatar

@iamthemob although I don’t disagree with what you’re saying about clarity, I do think that is a big part of the problem.

cockswain's avatar

It’s like we’re saying “we know corporations are going to spend lots of money to influence elections. Even though we don’t like it because it gives lobbyists/corporations access to corrupt our politicians, we might as well at least make it more transparent.”

Even though that is what is going to happen, ideally it wouldn’t be that way. Regulations mainly exist because people don’t mind harming others to varying degrees if it is their own self-interest.

iamthemob's avatar

@cockswain

But how do you regulate it then? Realize there are extensive legislative and regulatory discussions already.

cockswain's avatar

That, my friend, is a question I’ve been hoping to have answered by the many thorough conversations in which I’ve observed and participated on this site for over a year. I don’t know, other than hoping more people would think and behave similarly to the way me and my friends think. If people were content to consume less and find satisfaction in less greedy pursuits, we wouldn’t have nearly the problems we have.

That’s a very simple answer, but basically I’ve so far concluded we can only legislate or regulate human nature so far. People always try to find a way to cheat the system, and it creates more rules to shore up the imperfect original one. Excessive regulation isn’t the answer, so that’s why I said “stiffer penalties.” People respond to incentives, positive or negative.

Some time ago I asked if white collar crimes should be prosecuted like violent crimes. I believe you contributed to that thread as well. But I just don’t have an answer to your question. If penalties are too stiff, our society is too draconian. If not stiff enough, we have what we have now.

What I think you’re asking is “what is an ideal system of gov’t.” But a similar question is “what is the best way for people to act in society.”

iamthemob's avatar

@cockswain

I did indeed respond – and the response was based on the problem with criminalizing behavior that was, in essence, lacking any criminal intent.

There are extremely damaging behaviors that result from behavior that may make sense at the time. This financial collapse is, in essence, the most profound example.

The problem, I think, is that we are attempting to regulate the behavior of private parties in order to ensure the unbiased behavior of our elected officials. Shouldn’t, however, the focus of any regulations regarding the behavior prevent the official from acting on influence?

So, I think the focus on politicians may be warranted, but shy away from an attempt to punish lobbyists or corporations.

cockswain's avatar

Yes, I recall your response now, and it caused me to reconsider my position indeed. These just aren’t black and white issues, and the criminal intent must be provable. However it is very difficult to build cases against white collar crime (my knowledge is limited here), because frequently no one action is criminal, but tied together with numerous other actions can eventually paint a picture of criminal intent. The legal resources are limited for such complex cases, so the parties involved know this and continue their ways. But again, you make an excellent point that the behaviors may not be criminal at the present, and in hindsight it becomes obvious that there was a problem.

To answer your most recent question, yes, I agree the regulations need to absolutely target the politicians. But I also do think there should be regulations for the corporations in how they interact with politicians. Hot tub parties and rounds of golf that result in favors should result in at least a couple years in prison for both parties, perhaps more for the politician.

There is a big difference between a small business owner trying to get the ear of an alderman vs. a corporation’s lobbyist shmoozing around Washington.

zenvelo's avatar

The social contract that allows “corporation” as a person, and thus separate from the owners (shareholders) is an artificial construct. It is not inherently a legal license. We could, as a society, enact laws that require social responsibility on the part of corporations in order to be distant from liability.

cockswain's avatar

@zenvelo Totally agree with that one. I can’t remember when the LLC laws came about, but they are flawed and thus exploited.

Jaxk's avatar

Social responsibilities laws? I leave that one alone.

The more legislation, the more regulation there is, the more Lobbyists you get. Somehow business needs a voice to keep from being run over by the regulation. There’s no question we need anti-trust laws and regulation where free market principle aren’t possible as in some utility services. But overall the congress is supposed to represent the people. When regulating business, someone needs to represent the business interests.

In our judicial system the people are represented by the prosecutor and the defense is represented by a defense attorney. Both sides are trying to persuade the judge or jury to see things thier way. In regulation, congress or the multitude of regulating agencies, are trying to regulate the various industries and whether right or wrong, they have little knowledge of those industries. A seemingly insignificant change could have disastrous affects. So business attempts to point out those discrepancies. Of course they also try to manipulate the system to gain advantage. In an era where everything, and I mean everything, is regulated, business will need full time lobbyists and surprise, surprise, they have them.

Less regulation would mean fewer lobbyists.

dimxhazy's avatar

@iamthemob,

How and why are you assuming a free market can’t maintain itself without Government regulations, if there was never a time in history when markets were truly free from regulations?

iamthemob's avatar

@dimxhazy

That’s not an assumption in this question. It’s simply that, as long as there is a government, the market is regulated. The question is regarding what regulation helps to inspire the best aspects that we theorize are a part of the free market.

Law regulates an industry even if it is not meant to do so directly. Laws against drunk driving, for instance, have an indirect regulatory effect on the liquor market, the automobile market, and the food service industry market.

dimxhazy's avatar

@iamthemob,

The way the question is phrased, is implying that a market can’t sustain itself without government regulation.

In this case, I think the market should be deregulated. This would cause a raised level of competitiveness, therefore higher productivity, more efficiency, and lower prices overall. Furthermore, it would eliminate any corporate lobbying, and the funding of political campaigns. As long as there is a need, there will be a solution.

iamthemob's avatar

@dimxhazy

“Deregulation” isn’t what I’m asking about. What type help, what type harm, etc.

There’s no implication of the ability of a market to survive without government regulation. In fact, from a free market perspective, the black market is the free market, which survives very well.

The implication that a democracy is a government, and that markets will be regulated in a democracy. Therefore, how can we best mimic free market benefits in a market that is regulated – what regulations will promote a balance of democracy and competition in capitalism?

dimxhazy's avatar

Well, that was my point. You can’t mimic free market benefits in a market that is regulated.

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