Wednesday, December 10, 2014

The Proper Balance between Industry, Government, and the Public Good

In his first inaugural address, Thomas Jefferson said, “a wise and frugal government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement …”  In that sentence lies the answer to this central issue in American democracy … what us the proper balance between industry/private rights, government, and the public good.

First a question.  What does the phrase, “restrain men from injuring one another,” mean?  One could take it quite literally and think that it refers solely to criminal acts.  But early on, government and the courts realized that there were other ways in which men injure others, and so a system of contract and tort law was developed to protect people, as well as businesses, from injury.

During the Progressive era that held sway for most of the 20th century,  the concept was further broadened to include protecting the public good, which in effect means protecting all individuals and businesses.  For example, it is in the public good that small businesses prosper or that we breathe clean air.  Thus a whole system of laws and regulations were enacted to protect the public good from injury from the exercise of unbridled power by corporations.  

Whether it’s labor laws, security laws, environmental laws, or antitrust laws … all of these laws, and the agencies and regulations that implement them, were felt necessary to protect the less powerful from being injured.  And in so doing such laws fulfill the maxim stated by Jefferson.

There was a long time in American history when business operated with virtually no restraints.  But as the industrial revolution took hold, and corporations became very powerful institutions that had no concern other than the making of money, regardless what their impact was on others, government started understanding that it needed to act to protect the less powerful from injury.  

The first federal child labor law was passed in 1916.  Prior to that the Sherman Anti-trust Act and the law setting up the Interstate Commerce Commission were passed around 1890.  Over the next decades, countless laws were passed and regulations enacted to protect individuals, the public, and other businesses (such as farmers and small business owners) from the power of large corporations.

Until the Reagan presidency, it was commonly accepted by both Democrats and Republicans, as well as the general public, that such laws and regulations were critical to government performing its task of “restraining men from injuring one another” or in the words of the Declaration of Independence, “to secure” everyone’s right to life, liberty, and the pursuit of happiness.

This was not an “anti-business” era.  Hardly.  The prospering of business was supported by the government in many ways, in recognition that a robust business community was critical to the strength of the American economy.  But it was a time when government and the people understood that if large corporations were left to themselves, they would trample over everything in their path to making more money.

And so whether it was the Taft-Hartley Labor Laws, the Glass-Steagal Act, the Clean Water Act or the creation of the EPA, these were not “anti-business” measures.   They were measures that reflected the understanding that there needed to be a balance; that while corporations needed freedom to act, that freedom was not absolute.  They could not in so doing injure others, and it was the role of government to protect those who did not have the power to protect themselves against injury from the actions of corporations by retraining them. 

Ronald Reagan, however, brought about the beginning of a fundamental change in this accepted attitude regarding the role of government, both on the part of the Republican Party and a large segment of the public.  He famously said, “Government is not the solution to the problem.  Government is the problem.”

And so began the era of deregulation.  To a large extent, the financial crisis of 2008 that caused the Great Recession can be laid at the doorstop of deregulation … principally the repeal of Glass-Steagall.  Yet despite this event, which was catastrophic for many Americans, the attitude of less regulation is better regulation continues to be the rallying cry for the newly radicalized Republican Party and its Tea Party base.

Somehow, we must restore the meeting of the minds regarding the role of government and the balance our country had struck between private rights, government, and the public good.  How we get to that point I don’t know.  The polarization is so deep; the language of public discourse is so divisive.  Yet we must try or our country will diminish in greatness even as its corporations thrive.