Chapter 4: Regulation: The Helping Hand That Harms

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Regulation: The Helping Hand That Harms

Most people believe that the United States is a free country with free markets. Whenever economic problems arise, they blame unfettered capitalism. The truth is that the entire U.S. economy is controlled to a very large degree by government intervention. The intervention, or regulation, consists of anything from anti-trust laws and price controls, to actions forcing companies to or prohibiting them from engaging in particular activities.¹⁰⁰ The Federal Register, the book which lists government regulations, now has more than 73,000 pages, which is an increase of 10,000 pages or 16 percent over the last thirty years. Still, socialists claim that our economy has been deregulated.

Every instance of intervention constitutes the government’s prohibiting individuals or companies from acting in a way they choose, by way of threatening the use of physical force. People believe that if individuals and companies were left to their own devices, they would harm others. In some small percentage of cases they would (but much less than under our current system of regulation). In these cases there should indeed be laws that promise and carry out punishment of those who physically harm others or their property (including the government) in the form of making them (or their insurance company, as it would be) pay compensation.

Most people mistakenly believe that harm can be done from the normal procedures of carrying out production and exchange, in other words, by individuals doing business with each other. They believe that all of our laws and regulations exist simply to protect innocent people from being harmed. Nothing could be further from the truth. As we have seen to some degree already and will continue to learn, businesses, unless they break simple capitalistic laws aimed at preventing the forceful taking of private property (including by way of fraud), cannot harm us by hiring us, producing for us, or selling to us.¹⁰¹ We need only these basic laws protecting property rights — which includes one’s person — and a court system in order to deter or punish acts of harm to one’s property; we do not need 73,000 pages to do it. If an individual’s property has been taken or harmed by a company or employer, they would have a legal claim to compensation.¹⁰² Don’t confuse political law (regulation) with civil and merchant laws (protection of person and property).

Most of the myriad regulations on our books, however, do not protect private property, rather, they allow one group to benefit at the expense of another group and to thus take their property. The regulations prevent companies from operating in a fashion that would offer too much competition to other politically favored groups. There is no net benefit to society at all from these regulations, but only harm and injustice.

Consider the list of government departments below, of which defense departments are not listed:

Administration for Children and Families (ACF)

Administration for Native Americans

Administration on Aging (AoA)

Administration on Developmental Disabilities

Agency for Healthcare Research and Quality (AHRQ)

Agency for Toxic Substances and Disease Registry

Agricultural Marketing Service

Agricultural Research Service

Alcohol and Tobacco Tax and Trade Bureau

Alcohol, Tobacco, Firearms, and Explosives

Animal and Plant Health Inspection Service

Arms Control and International Security

Bureau of Economic Analysis (BEA)

Bureau of Engraving and Printing

Bureau of Indian Affairs (BIA)

Bureau of Industry and Security (formerly Export Patent & Trademark Office)

Bureau of International Labor Affairs

Bureau of Labor Statistics (BLS)

Bureau of Land Management (BLM)

Bureau of Public Debt

Bureau of Reclamation

Bureau of the Census

Bureau of Transportation Statistics

Center for Nutrition Policy and Promotion

Centers for Disease Control and Prevention (CDC)

Centers for Medicare & Medicaid Services (formerly the Research, Education and Economics)

Community Oriented Policing Services (COPS)

Community Planning and Development

Computer Emergency Readiness Team (US CERT)

Cooperative State Research, Education and Extension

Domestic Nuclear Detection Office

Drug Enforcement Administration (DEA)

Economic Development Administration

Economic Research Service

Economic, Business, and Agricultural Affairs (SAMHSA)

Economics & Statistics Administration

Elementary and Secondary Education

Employee Benefits Security Administration (formerly U.S. Citizenship and Immigration Services)

Employment and Training Administration (ETA)

Employment Standards Administration

Executive Office for Immigration Review

Executive Office for U.S. Attorneys

Farm Service Agency

Federal Aviation Administration (FAA)

Federal Bureau of Investigation (FBI)

Federal Bureau of Prisons

Federal Emergency Management Agency (FEMA)

Federal Highway Administration

Federal Law Enforcement Training Center

Federal Motor Carrier Safety Administration

Federal Railroad Administration

Federal Student Aid

Federal Transit Administration

Financial Management Service (FMS)

Fish & Wildlife Service

Food and Drug Administration (FDA)

Food and Nutrition Service

Food Safety and Inspection Service

Food, Nutrition and Consumer Services

Foreign Agricultural Service

Foreign Claims Settlement Commission

Forest Service

Geological Survey (USGS)

Global Affairs

Government National Mortgage Association (Ginnie Mae)

Grain Inspection, Packers and Stockyards Administration

Health Care Financing Administration

Health Resources and Services Administration (HRSA)

Indian Health Service (IHS)

Institute of Education Sciences

Internal Revenue Service (IRS)

International Trade Administration (ITA)

Management Under Secretary

Maritime Administration

Marketing and Regulatory Programs

Mine Safety and Health Administration

Mineral Management Service

Minority Business Development Agency

Multifamily Housing

National Agricultural Statistics Service

National Cemetery Administration Service

National Drug Intelligence Center

National Highway Traffic Safety Administration

National Institute of Standards & Technology (NIST)

National Institutes of Health (NIH)

National Interagency Fire Center

National Marine Fisheries

National Oceanic & Atmospheric Administration (NOAA)

National Park Service

National Technical Information Service

National Telecommunications & Information Administration

National Weather Service

Natural Resources Conservation Service

Occupational Safety & Health Administration (OSHA)

Office for Civil Rights

Office of Disability Employment Policy

Office of Enforcement

Office of English Language Acquisition

Office of Fair Housing and Equal

Opportunity

Office of Federal Housing Enterprise

Oversight

Office of Healthy Homes and Lead Hazard Control

Office of Housing

Office of Innovation and Improvement

Office of Intergovernmental and Interagency Affairs

Office of Justice Programs (Juvenile Justice, Victims of Crime, Violence Against Women and more)

Office of Management

Office of Public and Indian Housing

Office of Refugee Resettlement

Office of Safe and Drug-Free Schools

Office of Surface Mining, Reclamation & Enforcement

Office of the Chief Financial Officer

Office of the Chief Information Officer

Office of the Comptroller of the Currency

Office of the Pardon Attorney

Office of Thrift Supervision (OTS)

Operations Coordination Office Pension and Welfare Benefits Administration

Pipeline and Hazardous Materials Safety Administration

Policy Development and Research

Policy Office

Political Affairs

Postsecondary Education

Preparedness Directorate

Program Support Center

Public Diplomacy and Public Affairs

Research and Innovative Technology Administration

Risk Management Agency

Rural Business-Cooperative Service

Rural Development

Rural Housing Service

Rural Utilities Service

Saint Lawrence Seaway Development Corporation

Science and Technology Directorate

Special Education and Rehabilitative Services

Substance Abuse and Mental Health

Services Administration

Surface Transportation Board

Transportation Security Administration

U.S. Coast Guard

U.S. Customs and Border Protection

U.S. Immigration and Customs Enforcement

U.S. Marshals Service

U.S. Mint

U.S. Mission to the United Nations

U.S. National Central Bureau of Interpol

U.S. Parole Commission

U.S. Secret Service

U.S. Trustee Program

Veterans Benefits Administration

Veterans Health Administration

Veterans’ Employment and Training Service (VETS)

Vocational and Adult Education

Women’s Bureau

Almost every one of these departments exists to tamper with the marketplace in such a way that government can have the outcome it wants. Most of these interventions do not protect citizens or increase their standards of living one iota.

The notion that regulations give voters what they truly want is an incorrect one. First, voters are able to get what they want as consumers, as will be explained in Chapter 5. The price system, if allowed to operate freely, puts individuals in charge of the marketplace. Regulation, on the other hand, allows a minority group of voters to benefit at the expense of other voters who have not shown as consumers that they want what the minority voters want. For example, if consumers truly wanted “greener” vehicles or other alternative forms of energy, they would have shown, through their buying habits, that they were willing to pay higher prices for these less economical means of production. But they haven’t. Environmentalists, intent on pushing their unreasonable environmental restrictions upon all members of society, persuade the average voter to believe that going green is good for everyone. Thinking that it sounds reasonable and could do no harm, the average voter goes along with environmental regulation. But it does do harm by imposing the higher costs on them — costs that they chose not to vote for as consumers — harm for which they later blame the free market (more on environmentalism in Chapter 8).

One might argue that voters did in fact go along with the proposals, revealing that they in fact wanted the regulations. But that is the nature of the problem: the average uninformed voter goes along with all “reasonable sounding” proposals, without understanding the real damage to themselves. An example of this, as discussed in Chapter 1, is that it sounds reasonable to voters that the poor and the unions need a minimum wage and that imposing one would seem to do no harm; in fact it does. Similarly, forcing companies to incur higher costs for regulation x, y, or z would seem to not affect the voters’ own employment, wage level or standard of living, but it does. The voter just can’t see the negative consequences occurring.

Average voters, by going along with “reasonable sounding” proposals, almost always worsen their own lives. The cost of any particular regulation is one that they will pay for in the end, sooner rather than later. Making the means of production more costly and less efficient hurts everyone in numerous ways. The average voter would agree that environmental regulation is good. But if you asked them whether they were willing to have their family pay $5,000, $10,000, or $20,000 per year, or whatever the actual cost is, for this regulation, most would undoubtedly say no. Yet this is what they do to themselves by going along with regulations (via foregone higher wages or purchasing power).

But it gets worse: regulation breeds more regulation. Because government’s first intervention in the marketplace has unexpected negative consequences, politicians and average voters think yet more regulation is needed to fix the problem. Instead, more regulation makes things still worse. For example, as part of the commodities boom caused by the central bank (regulation), milk prices rose dramatically and then fell. Farmers increased supply when prices were rising, but they were left with an excess supply of milk when prices collapsed, causing losses. Milk farmers now believe that their oversupply of milk (selling at losses) was caused by an inability of the market to match supply with demand. They don’t realize that 1) “demand” was simply increased prices, not a real need to consume significantly more milk, and 2) that “demand” could never change so quickly and drastically in absence of the printing of money. Now the farmers, not knowing that their problems were caused by previous regulation, want new regulation in the form of government help in managing the industry, matching supply and demand for them, and providing yet more subsidies for their losses with taxpayer money. The additional subsidies will then help cause an oversupply of milk, and government control will have resulted in even more distorted prices and production — and losses. Soon the industry will need bailouts, price controls, and still more subsidies! At that point, many will call for outright communism (as they do today for healthcare) so that the government can have full control. The results from that measure will be the same as they were with food production in communist China, Russia, North Korea, and Cuba: death and starvation, economic retrogression, and a totalitarian state that kills its own people. Government intervention is like a disease — it starts tearing up what it touches and causes it to deteriorate.

In Cuba, regulation intended to protect and help citizens includes making air conditioners, toasters, and microwaves illegal. In Belize, citizens are protected by regulation giving one company a monopoly on cell phone service, making its owner very wealthy. Naturally, it is very costly to make calls.

Regulation is socialism. Karl Marx rightly stated that socialism is that state of transition between capitalism and communism. “Socialism;” “the third way;” “a regulated free market;” whatever the terms used, cannot be a lasting phenomenon, because the policies enacted inevitably cause more problems that then necessarily must be controlled with yet more regulation and more policies. Socialism must continually slide down the spectrum to communism.

With that being said, let’s take a look at our current state of socialist regulation and see what results can be identified from it. The few examples in this chapter summarize the imposition of prior regulation and the resulting problems. Both the lists below and their cause-and-effect scenarios are far from exhaustive. To fully expose the effects of all regulations would take years and years of writing by many people.