When President Obama signed the federal financial regulation bill this summer, he effectively put band-aids on the gouged eyes of government oversight. The bill, which in its vague definitions places the lasting power and implications of the legislation in the hands of the first appointed regulators, leaves plenty to be desired. But hey, it stops the bleeding.
One should be left incredulous when faced with the fact that not since the Securities Exchange Act of 1934 has a major regulatory law been passed. In the early part of the twentieth century, economic regulation became the norm; when it was allowed to stagnate in favor of the free market in the 1920s, the Great Depression followed. The average high school student can come to the conclusion that a little oversight over banking practices might have at least lessened the stock market crash in 1929. Then, in the 1930s, as part of the series of legislative acts intended to revive the economy and prevent another disaster, broad oversight was placed on transportation, banking, and Wall Street. These regulations were similarly left to idle until 1978, when the Airline Deregulation Act was passed. From that point until recently deregulation was the norm in, if not champion of, the American economy, held in high regard by the majority of businessmen, Congressmen, and common citizens: a policy as American as apple pie. What could have been expected but for history to repeat itself?
Americans who have experienced the era of deregulation have a hardened wariness toward government interference in business. Why change what worked so well for so long? Gallup polls taken every September from 2001 to 2009 showed a majority of Americans believed that the government was doing much that should be left to individuals and businesses, a statistic that dipped noticeably below 50% only in 2002 (post-Enron), and peaked in 2009 at 57%. Also in 2009, when Americans were asked if the level of government level of regulation in business was too much or too little, 45% felt that it was too much, a rise from the 38% who responded similarly a year prior.
Even in the beginning of 2010, well into the recession, another Gallup poll showed that 57% of Americans were still more worried about too much regulation of business by the government versus too little and 50% believed that government should become less involved in regulating and controlling business.
Unfortunately, but also luckily, the American brand of capitalism in which so many people had faith, one replete with a lack of oversight, has lost its luster. In 2009, for instance, the United States ranked fourth on the “ease of doing business index,” the World Bank’s measure of business-friendly regulations in a country. But in the same year, of the countries ahead of the United States in GDP per capita (according to the World Bank) at purchasing power parity, only Singapore had an “ease of doing business index” score higher than the United States. None of the other three were close.
The financial overhaul bill not only signals a governmental policy shift on regulation, but also coincides with a cultural and ideological shift in Americans. While a Harris poll taken in June showed that 45% of people still believe that government should regulate small businesses less, overall, 40% of the public favors stricter regulation in general, and 64% want to see more regulation in big business. When broken down by industry, only in regard to small business did fewer respondents want tighter regulation.
This change may be in response to the preventable oil-spill disaster, or to what many see as widespread immorality or corruption in corporate practices, or maybe simply to the sheer exhaustion of many Americans with unemployment rates and general economic torpor. Who knows? One thing to be sure of is this: once again, we in America are slowly learning that the surer, steadier hand of economy is often guided by the firm one of government.