Why bother having a nation at all–why not just dissolve the US as a nation, as a “People,” and rebrand it as an unassociated office park space for transacting business?
Of course government regulation is a highly controversial topic. Of course it’s no magical panacea. But as a nation, we seem to believe in laws and order, and the Rule of Law–doesn’t the Rule of Law, if we think that is indeed a worthy goal, necessitate some degree of government regulation–or do we assume that the free hand of the marketplace will also establish and enforces Rule of Law? That doesn’t seem to be the case historically. For instance, plucking a topic from current headlines, would we outsource national security here in the US to private companies such as Blackwater (it doesn’t look like market forces are doing a good job at making private security companies like Blackwater do a good job of establishing and enforcing the Rule of Law in Iraq and treating Iraqi citizens well–the government, I think rightly, is looking at more closely and tightly REGULATING such private security forces).
Do US citiznes want some sense of striving together for a common national purpose–or do we want to view the United States as just one large chamber of commerce, devoid of any other concerns besides transacting business?
If we view the United States as consisting of a “People”–we might consider that due to bounded rationality, the People can use always some protection from highly sophisticated and often well-financed private actors –and isnt’ the US is here to serve the People to a degree–such that where there are huge asymmetries of information, power, and experience out there (most US citizens aren’t highly educated, sophisticated experts in finance, politics, and law, and aren’t able to afford lawyers and other experts to guide their transactions and decisions)–the US can and does do the People a service by regulating the marketplace to make sure that people won’t get ripped off wholesale by unscrupulous private actors, to make sure that people can have some base expectation of Rule of Law, to establish faith in the economy and marketplace versus fraud and unsafe products and chaos.
Which isn’t to say that the government should hold every citizen’s hand, but rather that a base degree of government regulation and oversight in the interests of US citizens can be a good thing, where US citizens face information asymmetries and collective action problems and high transaction costs in a manner such that it’s sometimes more efficient overall to have the government make and enforce laws and standards and perform investigations and due diligence to keep citizens from being ripped off. If the government’s role isn’t to protect its citizens to a degree, what is a government for? Why bother having a nation at all, and not just make the US an office park?
So why was nothing done to avert the subprime fiasco?…
The answer is ideology.
In a paper presented just before his death, Mr. Gramlich wrote that “the subprime market was the Wild West. Over half the mortgage loans were made by independent lenders without any federal supervision.” What he didn’t mention was that this was the way the laissez-faire ideologues ruling Washington — a group that very much included Mr. Greenspan — wanted it. They were and are men who believe that government is always the problem, never the solution, that regulation is always a bad thing.
Unfortunately, assertions that unregulated financial markets would take care of themselves have proved as wrong as claims that deregulation would reduce electricity prices.
As Barney Frank, the chairman of the House Financial Services Committee, put it in a recent op-ed article in The Boston Globe, the surge of subprime lending was a sort of “natural experiment” testing the theories of those who favor radical deregulation of financial markets. And the lessons, as Mr. Frank said, are clear: “To the extent that the system did work, it is because of prudential regulation and oversight. Where it was absent, the result was tragedy.”
I mean, US citizens obviously believe in regulation, because they regulate their families, communities, etc. They don’t let their kids just run completely wild, they regulate them. The government is just a proxy for the US citizenry working together–US citizens deciding things should be one way or not, enforcing laws to establish minimum levels of organization, decency, efficiency, etc. So to always rail against government regulation in favor of “market forces” seems to me to be basically giving up on the notion of the government as an extension of the will of US citizens, and giving up on the idea of the US as a cohesive union of the US citizenry. Why be a nation when we can all just be independent rational actors who only deal with each other in transactions for financial gain, and don’t care to have any broader associations or goals as a nation? We could rebrand the US as the Non-united Non-states of Independent Rational Actors.