Capitalism only works when society keeps it in check through government. The truth of this statement is illustrated by the pandemonium we see unfolding in the market today. This chaos is thanks to decades of deregulation which has allowed a small number of rich folks to get richer while the majority of society has suffered. It has allowed corporations and businesses to operate without impartial oversight thanks to the 'honor system' belief that they would police themselves and act in the best interest of the greater good. What has happened is instead the exact opposite. With much of the government regulation and oversight relaxed and pulled from many sectors of the economy we have seen business after business make decisions that harm the common good in order to increase their profits. It's an age old maxim that is at the core of human nature; if we know that no one is looking and we won't get caught, the temptation to break the law in order to benefit ourselves becomes overwhelming.
A very simple example of this is the reasoning many folks run through when boarding a public transit train in a big city. Many cities public transit systems work on the honor system. You're supposed to buy a ticket for 1 or 2 dollars at the platform and you're good to ride for a set time (a few hours, the whole day, whatever) While you're supposed to buy a ticket by law, there is no person or machine that checks you every time you board the train. Chances are pretty good that more often than not you can ride this train without ever buying a ticket and you probably won't get caught. Of course there are transit police that periodically check people for tickets and if you don't have one, you get a fine. But you notice that on average you maybe only happen to run into a transit cop once a month. If you only find yourself riding the train once in a blue moon, you realize your chances of not getting caught get even better. The next part of the equation then becomes what the consequences of getting caught without a ticket are. If it's only a 20 dollar fine, most folks will realize that they're better off not buying tickets on a regular basis and paying the odd fine once every month or two. If it's a 200 dollar fine and you find transit cops checking you at least once a week, it becomes a much different story. While this is a very simple example, it pretty much applies across the board in how people run a risk/benefit analysis. Major auto companies use this exact same thinking when calculating whether or not to run a recall. Same goes for food producers, toy manufacturers, the list goes on and on.
So what does this have to do with anything? Well, our present situation has gotten so bad that now captains of industry, the very folks who championed deregulation for years are now changing their tune and calling for the government to step in again. Over the last two decades government oversight has been wittled away to almost nothing in many areas; the transit cops now only board the train once every couple of months. Because of this, gangs and bullies have moved in and set up shop. While everyone used to rejoice in getting a 'free ride' they now realize that this lack of enforcement has allowed thugs with muscle to bully everyone else, even charging their own rates to anyone who wants to board. If the transit cops do happen to catch one of these gangs, they either look the other way or take a cut of the gangs income. What this has led to is an unsafe train which is now running barely maintained since the coffers that provide the upkeep costs have been near empty for a long time. Anyone who wants to ride this unsafe train does so at their own risk and has to pay usurious rates to thugs that have hijacked it. If you happen to catch a bad day when it jumps the tracks, tough luck pal!
This goes back to another maxim that has proven itself true down throughout the ages; if you break the rules, you break the system.
Running our economy on the honor system has allowed many folks to break the rules many, many times with little or no repercussions. We've made our bed, and now it's time to sleep in it!
If you don't believe this shift of thinking, just look at the letter being distributed by major U.S Airline Companies;
An Open letter to All Airline Customers:
Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.
For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers. Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.
Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.
Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.
The nation needs to pull together to reform the oil markets and solve this growing problem.
We need your help. Get more information and contact Congress by visiting www.StopOilSpeculationNow.com
Signed:
Robert Fornaro, Chairman, President and CEO; AirTran Airways
Bill Ayer, Chairman, President and CEO; Alaska Airlines, Inc.
Gerard J. Arpey, Chairman, President and CEO; American Airlines, Inc.
Lawrence W. Kellner, Chairman and CEO; Continental Airlines, Inc
Richard Anderson, CEO; Delta Air Lines, Inc.
Mark B. Dunkerley, President and CEO; Hawaiian Airlines, Inc.
Dave Barger, CEO; JetBlue Airways Corporation
Timothy E. Hoeksema, Chairman,Pres.and CEO; Midwest Airlines
Douglas M. Steenland, President and CEO; Northwest Airlines, Inc.
Gary Kelly, Chairman and CEO; Southwest Airlines Co.
Glenn F. Tilton, Chairman, Pres. and CEO; United Airlines, Inc.
Douglas Parker, Chairman and CEO; US Airways Group, Inc.
In a nutshell what this says is "lack of government oversight has allowed other people to game the system to their favour and now our industry is facing collapse!" This leads to another universal truth- folks will always gripe about the authorities until they are the victim of a crime. It is only when this happens that the same folks will turn around and demand the authorities intervene on their behalf.
Don't think of this as another liberal vs conservative battle. Please kindly flush that rubbish out of your head when you consider the current state of the economy. Folks from both sides of the aisle are equally to blame for what is happening now. It's time to put aside the hologram illusion of democrat vs republican pissing contests (which are mostly just show to distract you, in case you didn't know) The first step is restoring accountability and transparency. The way to do that is to re-enact many of the government regulations that were stripped in the last few decades in the name of free-markets and globalization. And enforce those regulations! Once accountability and transparency exist in the market again (they sure don't exist now as illustrated by the smoke and mirror show called 'structural investment vehicles' and 'exotic debt instruments' which are fancy words for creating fake money)
It's time for the transit cops to board the train again and start checking for tickets. And charge back fees to the thugs who have been running it for their own profit these last few years!