Reagan, Friedman, and McCain: now look at the cost of deregulation
Uncle Ron and The Deregulators
Once upon a time, way back in the 1980s, some seemingly intelligent people (economics professors at the Chicago School of Economics, led by Milton Friedman, for instance) and some not particularly intelligent people (Ronald Reagan, for one) agreed something had to be done. Their nation was suffering under the chains of regulation and the tyranny of oversight and, like some sort of Charles Bronson–Chuck Norris deregulatory tag team, they were going to save it and they didn't care who got hurt in the process.
It seems that 50 years earlier, way back in the 1930s, some socialists with funny sounding names like Keynes and Roosevelt had tried to fetter capitalism.
And, as everyone knows, to fetter capitalism is to fetter freedom. And to fetter freedom is to fetter the American way of life.
How exactly did these radicals do it, you ask? How did they go about fettering capitalism and the American people's pursuit of happiness? How did they introduce this sinister and foreign-sounding thing called government oversight?
Well, firstly, they convinced a whole lot of people that the collapse of the economic system and the ensuing Great Depression was proof that government regulation of the financial system was a good idea. They argued that Wall Street couldn't be trusted to do what was right for the country and they even went as far as to say that it was the government's duty to watch over the economy to prevent any similar economic catastrophes from ever happening again.
It was a clever argument and, like Mao with his little red book, they sold it well. But not everyone was fooled. Certainly not Reagan and his spiritual mentor Uncle Milt. They immediately saw it for what it was: nothing more than a scam to stop really rich people from getting really really rich.
Dawn of A New Era
Well, by the 1980s all this regulation was driving the very rich absolutely nuts. So you can imagine their delight when the heroic Reagan came to power, riding out of the west shouting "Screw all that socialist shit!" as he set about returning the country to the happy, carefree, laissez faire days of the 19th century.
And so the era of Deregulation arrived (with the help of quite a few right-wing Democrats) and the very rich rejoiced. Milton Friedman was even awarded the Nobel Prize for Economics for his theories. It all seemed like such a no-brainer. "Government's not the solution, government's the problem", they shouted. "Let's deregulate everything!" And so they did.
Oh sure, there were a few hiccups along the way, such as the Savings and Loan crisis of the late-1980s and early-1990s, which eventually cost the American taxpayers $125 billion. But the deregulators and all those who worshipped in the Church of Reaganomics told us that that was nothing more than a strange anomaly.
"Who needs oversight when you can have freedom?" they reminded us.
And so the deregulators got back to work slashing and burning all forms of oversight... and it was good.
Chief among this lot was a senator named John McCain, who, with all his years of experience, knew a good idea when he saw one. In fact, he'd eventually rack up more than 25 years in Congress as one of the most vocal proponents of deregulation American politics had ever seen.
Reagan did a superb job, of course, but, truth be told, he barely got anything done back in the ’80s. It wasn't really until the Republicans regained control of both houses of Congress in 1994 that the real slashing began.
And then, after George W. Bush took the White House in 2000, all bets were off as eight glorious years of unfettered, unabated regulatory eradication took Washington and Wall Street by storm. And, man, was it ever a great party!
"It's all for the benefit of the consumer and the taxpayer,” they cried. "Nothing beats unbridled capitalism when it comes to lifting a country up where it belongs.”
Well, by the time 2007-08 rolled around the nation had itself a financial system unregulated beyond even Uncle Ron's wildest dreams. Joy, prosperity, and freedom had all been fully restored and America was once again a great, grand and glorious nation.
But then something funny happened.
As the proponents of government regulation and oversight had predicted all along, this unregulated paradise completely fell apart. Huge banks started failing; mortgage giants Freddie Mac and Fannie Mae both went bankrupt and needed to be nationalized; many families lost their homes and/or much of their life savings; the whole financial system froze up; and the government was forced to pump hundreds of billions, if not trillions, into the system to save it.
Worst of all, for the followers of Uncles Ron and Milt, when all the digging and analyzing had been done and the truth had finally been discovered, it was, in fact, the great panacea of deregulation that was found to be the root cause of everything.
It seems obvious now: banks and corporations, which exist solely to make a profit, will, when not overseen by regulators and regulations, eventually fuck everything up. But, hey, Uncles Ron and Milt (not to mention their number-one disciple Johnny McCain) seemed so damn sure of themselves that they started to convince almost everyone else as well.
It's just too bad they can't be here to see the fruit of their grand endeavours.
But I'm sure that even if they were here today to see all the pain, chaos and destruction their ideological baby has caused (so far), they'd still be passionately singing, over and over again, their favourite old anti-regulation ditty, "Oversight Blues":
"Alive alive, oh
Alive alive, oh
Crying "Shackles and chains,
Alive alive, oh"
I guess, like Kim Jong-il over there in North Korea, some people simply can't admit when their ideology sucks. Not even when it sucks so bad it's destroying an entire nation.
Mike Cowie is a writer currently embarked on a book about his three-year trip across Asia with his wife, Sonoko. Read more of Mike’s views on his Web site.
Dec 25, 2009 at 7:03pm
What about the role government played in forcing banks and Fannie Mae to lend to unqualified individuals. That had nothing to do with deregulation and was the main cause of our most recent financial crisis!!!!!