Regulations

The purpose of industry regulations, in general, should be obvious. Regulations protect the public sector from the private sector. There is always a call for deregulation, usually by the Conservatives, stating that regulations shackle the private industry and inhibit them from growth. Conservatives tout that the free market will provide for self regulations: a business will be controlled by the demands of the public through their purchasing power. A simple look at history has shown that the free market system is not sufficient to protect the public.
In 1906, Upton Sinclair wrote The Jungle, which portrayed the horrors of the meat packing industry. In particular, the book focused on food safety issues. The book led to public outcry which then led to the passage of the Meat Inspection Act, the Pure Food and Drug Act of 1906 and eventually the Food and Drug Administration (FDA).
In 1966, Congress passed the National Traffic and Motor Vehicle Safety Act through the efforts of Ralph Nader. GM and other car manufactures now would become regulated by the United States government protecting the consumer. This led to the addition of seatbelts and stronger windshields.
These are just two high profile regulations in America. There are thousands of regulations that the general public is unaware about that were enacted to protect the public and keep the economy moving forward. Where would we be without them? Many of us wouldn’t even be here today if it weren’t for some of these regulations. The purpose of regulations is to protect the public, or sometimes even the economic system itself from free market capitalism.
The problem with the free market solution and self-regulations can be easily seen in the current economic crisis. Sub-prime mortgage loans were being given by lenders to customers they knew could not repay. Then the bad loans were packaged and sold off to investors. It was the lack of regulations and oversight that allowed for this risky behavior to continue and eventually bring down the entire world’s economy. Regulations are meant to protect the average public from the free market. A truly free market has one goal and one goal only: make money.
In a truly free economy there would be no regulations and business changes would just be reactions to consumer demands through purchasing power. However, things are too complex for the consumer to be aware of EVERYTHING nor should they have to be. The reason our society is so successful is that we are not “jacks of all trades”. The workforce is trained to have individuals accomplish specific actions while someone else will take care of another part. Our faith in the efficiency and honesty of all the other members in society leaves us to become not only more efficient in our specific tasks but also spend our free time doing the things we enjoy, which in the hopes of the US economy is to CONSUME. That is why in college we pick a major; so we can be as efficient as possible in something specific and trust other to do the same in another field. As bad as it sounds, the American people should not have to waste their time being fully aware of all the intricacies of all aspects of the economy. A major part of our economy’s superiority is the trust we can (should) have in others.
In the example of the food packing industry in the early 1900s, the general public was not aware of all the problems within the industry, nor should they have been expected to be. Without The Jungle, people would have continued to be in the dark. It takes congressional passing of acts and regulations to ensure quick, decisive, and informed protections (in theory). Free market change in the example of the food industry would have been slow and inadequate. Industries have always shown that they will do the bare minimum in addressing consumer wants, nothing more nothing less. The more complex an industry, the more imbedded aspects might be that need to be regulated for consumer protection as seen in the current financial meltdown. Congressional legislation has the ability to investigate, debate and enact changes that hopefully are broad enough to cure the cause and not just the symptoms of what ails (or could ail) the economy. The purpose of the government is to protect its people, not just from foreign powers, but from internal capitalistic powers.
In a truly free economy, business would have the freedom to do as it pleases leaving the public to fend for themselves making changes in business through their purchasing power. There are currently thousands of regulations that protect the consumer. Throughout history the government has come to the realization (usually through tragedy or public outcry) that there must be rules and regulations. It is true that there is a very fine line between sufficient and too much regulation. Without regulation we would be completely vulnerable to the will of greedy free capitalism. However, the aspect of the America’s economy that keeps us on top of the world market is our dynamism. Our businesses have the freedom and flexibility to adjust and evolve quickly to market fluctuations keeping the economy moving and growing. Without this ability, which excessive regulations can inhibit, the US economy could possibly lose their number one position. Congress should always be very aware of this fine line but also always be aware of the perils of free market capitalism. This is how our economy has always functioned. The US has always been a mixed economy; capitalism with a dash of socialism. A free economy up to a point is important but then the government must move in to protect the public. Some may call this socialism but I call it common sense.