Monday, March 17, 2008

Industry Eats Itself

The airline industry was deregulated in the late 1970s as the next step in the conservative movement that brought us alleged tax cuts at the state level, the anti-abortion movement, and the first anti-gay movements in the mid-seventies. In the case of airline deregulation, economists convinced liberal Democrats that the airline industry, and therefore all its consumers, would benefit from the lifting of regulation. Airline deregulation was implemented without much fanfare, but with the blessings of an otherwise liberal Congress.

The industry will police itself, we were told. An unregulated market would create more jobs, lower prices, foster more competition, and lead to a boom in profits for everyone.

With that success under their belts, the deregulation movement started snow-balling, It found a poster boy in the face of Ronald Reagan, who convinced America that their government (the government for, by and of the people) was bad, needed to be gutted/downsized, and that industry would save us from inflation only if it was allowed to operate unfettered in an unregulated market. This became known as "Reaganomics" after the nation elected Reagan.

Let me take this moment to say that the only politician I recall speaking-out clearly and succinctly against this movement was George H. W. Bush, who referred to it as "voodoo economics"!

Neo-cons on both sides of the aisle began the long march to Friday, March 14, 2008, which I believe should be dubbed Red Friday.

Regulation of industry has proven to be a hugely successful policy. Every industry that was regulated after the Great Depression flourished, expanded, and realized profits undreamed of in the nineteenth century. Growth of American communications companies and financial institutions was spectacular while those industries were regulated, and those regulations ensured the industries, the companies and the workers who made them work, would be around forever.

Come now, Reaganomics. If we deregulate all these businesses then everything will be even better!

What we have seen however, is that once deregulated, an industry eats itself, its young, its resources, and its future is annihilated.

The idea that an unregulated industry will bring more competition, lower prices, more growth, more jobs, and greater growth was not only a pipe-dream at the time, it has taken only one generation to prove that it is an unmitigated (and unmitigatable?) disaster.

The airline industry is a disaster.

The entertainment industry is a disaster.

The telecommunications industry is a disaster.

And now, the financial services industry, the lifeblood of our entire economic systems, is a disaster.

Last Friday, the government gave two hundred billion dollars ($200,000,000,000) to Bear Stearns to prevent it from going bankrupt. And today, Monday March 17, 2008, Bear Sterns will be consumed by one of its competitors, JP Morgan Chase, for two dollars a share; down from thirty dollars a share last Thursday.

This is a financial collapse of amazing proportions. No financial institution has been bailed-out like this since 1929, the beginning of the Great Depression.

Still, however, we listen to pundits and politicians, columnists and candidates, worship at the altar of Ronald Reagan. Still we are being told that deregulation is the only path. That the marketplace will save us.

And I ask, how can the marketplace save America when it can't even save itself?

Dick Mac Recommends:

Howard Zinn -
You Can't Be Neutral on a Moving Train

Matt Damon, Howard Zinn

No comments: