The Perpetual Death Of Freedom

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JONATHAN CHAIT APRIL 28, 2010

The Perpetual Death Of Freedom

Daniel Gross has a good column in Slate about how Wall Street always claims regulation will ruin it, and it always wrong:

My general rule of thumb is that we should generally ignore what Wall Street has to say about financial regulation. Investment banks lack the common sense to know what's good for them. The financial sector opposed all the regulations that were good for it in the 1930s—i.e. the advent of the Securities and Exchange Commission and the creation of the Federal Deposit Insurance Corp. And the regulatory changes it requested and received in the past decade—eroding Glass-Steagall, getting the SEC to permit investment banks to increase their use of leverage—set the stage for the debacle of 2008.

Last December, TNR did a piece about the general history of American conservative opposition to social reform of all kinds. Such reforms inevitably produce hysterical cries of doom, and these cries are almost invariably wrong. Here's a taste:

“[T]he child will become a very dominant factor in the household and might refuse perhaps to do chores before six a.m. or after seven p.m. or to perform any labor.”

—Senator Weldon Heyburn (R-ID), in 1908, on why child labor should remain unregulated 

“I fear it may end the progress of a great country and bring its people to the level of the average European. It will furnish delicious food and add great strength to the political demagogue. It will assist in driving worthy and courageous men from public life. It will discourage and defeat the American trait of thrift. It will go a long way toward destroying American initiative and courage.”

—Senator Daniel O. Hastings (R-DE), in 1935, listing the evils of Social Security 

“[I]t would make it practically impossible for any publisher in the United States to accept any food, drug, or cosmetic advertising without facing squarely into the doors of a jail.”

—Federal Trade Commission Chair Ewin L. Davis, in 1935, on the dangers of empowering the Food and Drug Administration to regulate the food, drug, and cosmetic industries

The funny thing about these complaints is that, though they are usually made in the name of the free market, they regard the market as a fragile thing unable to withstand any interference whatsoever. Conservatives consistently underestimate the market's ability to adapt and thrive under sensible regulation and other liberal restraints. And then, in time, the hysterical predictions are forgotten. The status quo at any given moment is something conservatives will call "freedom" -- freedom being the condition threatened by the next liberal reform -- when in fact freedom consists of a long series of liberal market interventions that were decried as a threat to (or sometimes the death of) freedom at their inception.

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posted in: jonathan chait, federal deposit insurance corp., united states, daniel gross, daniel o. hastings, weldon heyburn, federal trade commission, securities and exchange commission

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