Mod Note (Andy): Best of Eddie, this was originally posted on 4/17/13. To see all of our top content from the past, click here.
This is a fantastic discussion about the mechanism of government corruption given in February by Lawrence Lessig. This is a subject that hits really close to home for those of us on Wall Street, and Lessig highlights how it's not only bad for the American people, it's bad for the infinitesimal percentage of the population with the power to corrupt. Ever wonder why Dodd-Frank has been in flux since 2009? It's because Congress can extort more from Wall Street as long as it's on the back burner. Same with the JOBS Act, and almost every other bit of financial legislation. Warning: you might feel like taking a shower after watching this:
Mr Lessig doesn't understand that it is the government power that causes the lobbying. If government had no power, no one would lobby to have government force used against another person or competitor.
I think he completely gets that. Look at the example he gave about deregulating the telecoms in the late 90s. Congress knew if they deregulated they'd have nothing to hold over the telecom's heads, so deregulating would derail the money train. I don't think he's blaming the lobbyists for lobbying, he's blaming the government for being receptive to it.
Blaming the government for being receptive is like blaming a mosquito for sucking blood. So is its nature. The only real way to end corruption is to end government power. Lessig wants more regulation...I wonder who would write the regulation?
Lets not throw the baby out with the bath water.
There are things you can do to help curb corruption. Having a democracy and a system of checks and balances help.
I agree with EOK. The only way to end this is to scale back the size, scope and power of the government.
Of course you do.
I agree with you here (and on most things), but sometimes I almost feel like you're a caricature. I don't mean that offensively, but on most political/governmental topics I feel like I know how you'd respond. Then, sure enough a few comments later there's a post from you with those thoughts.
Like I said, I do agree with you, I just find it amusing/scary that you're always chiming in on message.
I actually just recently got involved in local politics. It's a long story, but the idiots running my town seriously didn't know their ass from a hole in the wall. What I've learned is that even small, local politics is run by money. It's a much smaller scale (influence and dollar wise), but the exact same shit.
Yeah dude, I am like a pull toy. Life is pretty simple. A powerful and expansive government can be manipulated. The goal shouldn't be to put Rube Goldberg restraints on the system. It should be to remove the power. This is why liberals claim the fact that big business wants government, as if that is a seal of approval for their nanny state. Big business wants government because they manipulate it to be a barrier to entry.
Less government = a less powerful entity for lobbyists. Imagine government was restricted.
1) No pushing banks to lend to unqualified lower income individuals. 2) No Fannie/Freddie 3) No bullshit "American Dream" of owning a home 4) No Bailing out banks
I love Hoover and hate Roosevelt.
Agree with the sentiment, but that might be the first time anyone's ever said that...
What do you mean? High quality vacuum right there.
This made me laugh my ass off. Possibly the best line I've ever read on WSO.
And I'm sure we'd love to go back to the days of Standard Oil and the Jungle as well.
Nice straw man. And we have never left those days. Oil is an Oligopoly now. We have illegals working in fields and in conditions that the majority of Americans wouldn't work. And instead of the Jungle in Chicago we export it to China.
We need less government. Less spending. Less regulation and influence.
He was pretty much over shadowed by Roosevelt. IMO, he was the last small government President.
Hoover was a monster and was Roosevelt lite. He was a massive interventionist. Smoot-Hawley tariff act for example. The entire new deal was an extension of Hoover's policies.
Surely you aren't serious? Hoover was a huge interventionist, just like Roosevelt. Hoover implemented tariffs, increased corporate and individual income taxes, embarked on public works projects, provided price supports (mostly to agriculture), coerced the nation's industrialists, and paved the way for Roosevelt's New Deal.
LOL.
Poor people wouldn't know what do do with government influence, nor would they have any means of incentivizing public officials. This guy's wasting his fucking time.
I guess this is the best way to tax poor idiots since the lottery was invented.
I am looking at Hoover through the lens of the depression. While he wasn't the perfect libertarian type candidate, he didn't go nearly as far as Roosevelt.
"Hoover feared that too much intervention or coercion by the government would destroy individuality and self-reliance, which he considered to be important American values."
"He was also a firm believer in balanced budgets, and was unwilling to run a budget deficit to fund welfare programs"
Do I think he was perfect? No. Do I hate the dude or think he was Carter/Obama? No.
I mean fuck, great depression guys, President IS responsible to the people after all.
Politics aside, this is just a totally ridiculous proposition. People have a first amendment right to free speech and expression, which means that you are free to spend your money to support a political candidate in whichever way you choose. Make a statute that bans direct contributions on excess of $x, that will just change the method.
What about independently wealthy people running for office? They don't need to raise money from big contributors - they already have it. I suspect you'd just see an increase in the wealth of candidates. So ban that too!!! What about individuals spending their own money to raise awareness of the issues they find important - issues that just so happen to favor one party over another? Ban that too!!
Forget about money, then. What about charismatic speakers or persuasive writers who control the airwaves and news pages?? Strange that Lessig isn't abhorred by the 0.05% of people that control 99% of the press coverage of politics, who publish 99% of the books on the issues, who opine on 99% of the talk shows. Surely this isn't very Republic-like either. I can imagine him saying, "You have to do very well in the press to compete in the general election!"
None of that is surprising, nor is it nefarious. Different people have varying amounts of influence over different problems. They are free to express their opinions or exert their influence, and it's not sensible to try to equalize.
The only solution here is to rid the government of its overbearing power. That will make political lobbying and pundit shows much less influential over our daily lives.
What I'm really surprised about is that there has been no effort to simply level the playing field in terms of money. Want candidates who have only loyalties to the people? Remove the money problem altogether.
In the 2012 election cycle the Romney and Obama spent a total $2billion combined. That is exactly one tenth of one percent of the annual budget. Could the country really not afford that once every 4 years? It seems a small price for the value received. If this happened then we would have candidates who have no monetary incentives and have equal platforms to pander to whichever people they like.
Putting all specific details of this aside, I think this is a fascinating idea. Very nice.
Reduce regular =/= no regulation.
I also think they do that already. Regardless, my reduction in government desire isn't directed specifically at employment or big corporations. I think we could greatly reduce and eliminate many regulations or restrictions before we get near cutting muscle and bone away. The goal is to shrink, not eliminate government.
Honestly, if we just had publicly financed elections for Federal Gov't, it would go a long way towards fixing all of this.
To add - anyone saying that lobbying and corruption exists because the gov't is too big and powerful is turning this into a chicken and egg problem. Even if lobbying came to prominence because of the gov't growing in size, you'll never shrink the gov't back down to its "proper" size without first quashing the lobbying / revolving door beast.
And you will never squash lobbying until government shrinks.
I'd give my left nut to no longer have a Dept of Education. That is a $1T cut right there (Obama math - everything in multiples of 10 years).
Right...but, we could theoretically pass a single law banning lobbying. We can't pass a single law shrinking gov't. At the very least, the latter is much less feasible without the former.
The government's size comes from threats of violence used to expropriate property, aka the income tax. End the threats of violence and government would evaporate in a second.
I believe the solution needs to start with smaller government and less government involvement. Before the passage of the 16 amendment, the government was restricted in the amount of tax revenue it could collect. The original constitution had all indirect taxes like tariffs going to federal government, but all direct taxes had to be divided among the states based on population. Once the Supreme Court ruled that income tax was a form of direct taxation and that all the money had to be divided among the states, the federal government passed the 16th amendment to basically say we can tax whatever we want and keep the money for ourselves.
We need to stop the vicious cycle of federal money subsidizing and paying for state program. It creates numerous levels of costly opaque bureaucracy, incentivizes corruption to get federal money to pay for projects, stifles competition by flooding the market with money so you can't see which programs are most cost effective and produce the biggest bang for the buck, and subsidizes poor management and stupidity.
All funding should be done at the local and state levels. I am not staying that that would fix everything, but it would go a great deal in limiting the damage to a local area or a particular state--you can more easily see where the bad policies are coming from---there is no "lack of federal funding" or some faceless federal employee that is the problem, the problem would rest somewhere in the local city government or the governor's office.
Money is power, and states and institutions are more worried about getting federal money by following some bullshit "federal mandate from on high" to get that needed funding than to make their own choices and programs. They spend more effort trying to LOOK good to get the federal money rather than actually DOING good and implementing lasting reforms tailored to their specific set of circumstances and needs. Federal spending for states is the QE before there was QE. The money just floods the market and raises all ships, but it isn't real created value. You ever wonder how unions were able to get these insane contracts (apart from obvious political corruption)---because federal funding allowed state politicians to payoff their supporters using state funds, rather than having to deploy those funds into meaningful and necessary programs. Need a new train or bridges, get the federal government to pay for it rather than hike transit fares--since we already raised fares to pay for bloated employee pensions.
I'm also a big supporter of some form of direct democracy, which is what they have in Switzerland. In Switzerland, a group of citizens may challenge a law that has been passed by the federal government, if they can gather 50,000 signatures against the law within 100 days. If so, a national vote is scheduled where voters decide by a simple majority whether to accept or reject the law. Eight cantons (states) together can also call a referendum on a federal law.--This alone would help limit corruption, because no matter how much you spend on politicians, the people have the final say regardless----we could kiss Obamacare goodbye
Government is a greedy piglet that suckles on a taxpayer’s teet until they have sore, chapped nipples.
My goddamn nipples are chapped!
lol
So in a nutshell, to avoid corruption in government, we make government so small and powerless to solve the "problem". We will be left over with a new system that is bulletproof from corruption. My opinion is that no system is proof of corruption. It happens in communist countries (talk to your Russian friends), it happens in socialists countries. Heck, it happens in the very same companies we work at! At all levels. It is just human nature. And it will happen in this new system of "small government" proposed here.
Is the government too big? I think the government is too big in some places (DEFENSE). Why do we spend so much money on that? The US has the best natural defense in the world, its geographical location! All of its enemies reside in the other side of the globe! (Please don't bring out Cuba, Castro is not thinking of invading Florida). All I am saying is that we could balance our budget if we just did not spend so much money on unnecessary weapons. That is not to say that we should not spend a percentage of our budget on defense. But we can definitely scale way back. No need to spend as much as the next 12 countries combined! Also, I am not saying that is the only part of the pie that I would slice, but whenever I see you guys arguing about "big government", you never ever bring up defense.
I admit, I did not see the TED talk. I am just replying to some of the comments I saw here. I don't think the US has a corruption problem. Compared to the rest of the world, we are doing OK.
http://en.wikipedia.org/wiki/File:World_Map_Index_of_perception_of_corr…
Could we be doing better? Sure. But I think the biggest problem the country has is that government seems to be there for corporations, not for the people. Now, you would say this is corruption, and I think you would be wrong. After all, the lobbyist are not doing anything illegal. It is allowed by the laws of the land. Which bears the question: Do we need to put forth laws banning/limiting what lobbyist can/can't do? I think so. Just the past days we saw how a small group of the government blocked something as logical as requiring people buying guns to pass a simple background check. How can people be against this is just nonsensical to me. (Just now I heard an AK45 go off). But what do I know. Should we allow anyone to drive a car without having to pass a driving test now too, all in the name of freedom? And where were all you guys when the "Patriot Act" was passed into law, essentially taking a lot of the freedoms we enjoyed?
Now, going back to topic, how is it that the countries with the lowest corruption are countries like Finland, Sweden, Norway, Canada, Denmark, Australia? I wouldn't call those countries "small government". If anything, they are more of a "nanny estate" than the U.S. with all their free (actually payed through taxes) healthcare, education, etc! Does that proves that government size has no bearing on corruption? That corruption is not a property of government alone? Well, it is late and I need to get some sleep ;)
That's precisely why you should limit the government: corporations would have no reason to lobby a weaker government. No matter what laws you put together, the influence of powerful individuals or organization will be felt in Washington. The only way to minimize this influence is by limiting the influence of government overall.
I'm on the fence about gun control, so I'm not getting involved in that discussion. But, to be honest, I don't feel this "reduction in freedoms I used to enjoy" from the Patriot Act. That's not to say I support it, but I think the press devoted to it is overblown. It's yet another predictable consequence of having an overbearing government: they get involved in both your social and economic lives.
If you look across the globe, countries with the freest economies tend to have the least corruption. None of the countries you listed are restrictive economies, relative to the truly socialist, corrupt nations. All of them are wealthy, homogeneous countries. And ask yourself: how did they generate such wealth that has allowed them to expand governmental benevolence? Via free enterprise and free trade. What they decided to do after they became wealthy has no relevance. The U.S. could very well become a fully socialized country with free health care and high taxes - it would absolutely work! We are already wealthy enough that we don't need to be particularly productive as an economy: we can afford to import goods from abroad. However, over time, the economy would slow and - eventually - we would be surpassed by those countries with free economies. Span the globe and you will not find a single example of a country that dramatically improved the standard of living of its average worker without free enterprise and largely free trade.
So what's to protect or prevent corporations from directly being corrupt?
I didn't realize gun owners weren't voting people. Lobbyists represent people all the time. NAACP, GLAD, Feminists, Etc etc.
Government shouldn't be in the psotion to manipulate and regulate so many aspects of society. It should be strictly limited, as intended. Yes, defense should be restricted, but so should everything else.
I am against the background checks. I'd possibly be for it, but only if there was a massive gun law roll back and this was one concession. Sorry, but just because the 2nd amendment scares so people doesn't make it any less important than the 1st or other rights.
Goddamn it NorthSider! It happened again where I write a response and you post while I am in the process of writing. You are either really fast or I am slow as shit.
I'm sorry, but Bloomberg is hardly an unbiased source. We don't know what caused the explosion, but it is obviously because of less government. Sure. What a joke.
I'm convinced unbiased news sources are a myth. Unbiased reporting doesn't garner viewers/readers.
Why not let the free markets work it out? If it was negligence, people can sue and claim damages.
More government = more power = more corruption = death of free enterprise.
//
Why is everyone talking like the fire in Texas is the only example in which lack of regulation resulted in a bad outcome. What about the BP spill? What about the financial mess of 2008 with the lack of regulation of derivatives? I can go on and on and on. None of this things would have been prevented if we had a "free market" system. Companies, corporations, are there to make money. And yes, they cut corners in the name of profits. As a previous poster said, if not government, then who? I'm sorry, but some government intervention is necessary.
So let me get this straight. We can't create new laws to prevent this in the current system, because corporations will still have a lot of influence, to the point that such laws won't be enforced. Or if enforced and brought to trials, they will win thanks to their money. Makes sense. But isn't that the same thing that will happen in the perfectly "free market" system? Gekko21 says lawsuits can be brought in a free market system as a means of the little guy fighting the big corporations when they mess it up. But I guess your argument against the current system can also be used against your proposition of a free market with small government. How is that for faulty logic. Attacking a position with an argument that also discredits your own position.
The press has overblown it? Have you read what the Patriot Act allows the government to do? You guys are so full of contradictions. On one hand, you want government to be smaller, on the other hand, it is fine for government to overreach on citizens rights. Read the following article to see what I am talking about:
http://www.nytimes.com/roomfordebate/2011/09/07/do-we-still-need-the-pa…
Sure, I have not felt this absurd law directly. But who the hell knows what law enforcement has done to me, how they might have infringed on my privacy. And heck, even if I were to find out that they in fact have done so, there is no legal recourse for me, since it is the law of the land and they are by law allowed to do it!
There's many factors that contribute to corruption. And I think you are focusing on the wrong one. What those countries have in common, in my opinion, is income equality. They also have a sense of country, an opinion that all citizens should enjoy at least some minimal level of quality of life. Something this last elections and the opinions of Mitt Romney has shown to the world we do not have. Compare the map of index corruption to the one of income inequality:
http://en.wikipedia.org/wiki/File:World_Map_Index_of_perception_of_corr… http://en.wikipedia.org/wiki/File:GINI_retouched_legend.gif
In a way it makes sense. People are more likely to be corrupt if they know the system is rigged. Also, they are more likely to abuse of their powers when they make barely enough money to survive. My family comes from a country were the income inequality is huge, bigger than the US. When I visit, I always come across police road blocks in which police basically extort money of the citizens. My family is smart enough to take money out, and move on. You can't fight the authorities they say. But when I was told how much money a policeman makes there, I understood that they basically had no choice but to do that.
If you think about it, the US government has been growing in the last 100, 200 years. And you can argue that most of that growth has come in an effort to solve some problem created with a free market system. A lot of those laws that you now want thrown out of the window, came in response from abuses of corporations. Case in point. The creation of labor unions came after a big fire in a sweat shop in New York in which a lot of workers died. After the accident, that was the last drop in the bucket, and they had a big strike asking for better conditions for their workers and better salaries. And guess what, local government sided with the textile corporations, to the point of using the police to bully the protesters, beating them up, etc. In effect, a corrupt government, taking the side of where the money was! Before you propose going back to the 1900s era size of government, be sure to understand why we have the current government, what is the need, and what would be the REAL effect of getting rid of those agencies.
My argument in no way excludes the possibility of reducing the size of certain parts of government. As I said before, we spend way too much money on wars and arms. I think we also have too many loopholes for rich corporations and individuals that need to be closed (carried interest for example). We could definitely spend our Federal money in a wiser way, improve the infrastructure, spend more money on green energy, etc.
BP oil spill? You mean the heavy regulations the government already has on the oil and gas industry? You are just proving the point that no amount of government regulation will ever stop all disasters, but what it will do is stifle competition, slow growth, increase government control, and become extremely costly to the tax payer. No one is saying get rid of of all regulation, we are saying we should have limited regulation. There is a great story in Private Empire the Rise in Exxon Mobil where the EPA and the liberals wanted to ban all this different petrochemicals because they were "toxic". There were some where there was data that said they were harmful and the oil companies were alright with banning them, but then the government did what it always will do when given too much authority and wanted to ban a whole bunch of other petrochemicals "just in case" they were toxic, which of course would have cost the oil companies billions and people thousands of jobs. There was one petrochemical in particular they wanted to ban because it was used to make rubber duck play toys and they were afraid it was toxic to children. They did a study and in order for a child to reach a dangerous level of toxicity they would need to eat 3,400 rubber ducks. A child would have to eat a rubber duck everyday for 9 years before it reached a high enough level of toxicity and Exxon still had to millions in lobby costs because the government STILL WANTED TO BAN IT.
Financial Crisis? Government was absolutely involved. Besides helping cause the crash with the the low interest rate environment and the mandatory lending to unqualified buyers. government regulators involved in the rating agency modeling process as well as signing off on bank capital ratios. In the book Fool's Gold, banks were in constant contact with government regulators about how certain derivatives would be treated and how different hedges could free up additional capital...and the government said yes to them all. Hindsight is 20/20 and businesses will make mistakes, but I trust a business to know what it is doing way more than I trust the government. Financial Crisis have occurred since Ancient Egypt and no amount of government regulation will change that. What does tend to happen is that when a financial crisis occurs, countries with free markets tend to rebound more quickly than countries with strong government control.
I am not going to deny the Patriot Act might be a contradiction to libertarians (although here you are fighting against the Patriot Act, but perfectly fine with the government interfering with business and taking away other rights; so maybe we are both damned). What my perspective ( and the perspective of libertarians that support the act) is that the bill covers a very specific high casualty threat and monitors just for that threat. If the bill (or anything like it) were to expand beyond Islamic terrorism or a large terrorist attack against unharmed civilians, I and all libertarians would be up in arms fighting the bill. I don't care if the bill happens to find video of you killing a hundred people and burying them in your basement that evidence cannot be used in a court of law or used in anyway to convict you. Maybe I am naive, maybe this is that one shred of liberty I am willing to give up for security, but since I know that I will not be planning a large scale terrorist attack against civilians I am ok with it.......... Repeal it, don't repeal it
First, those maps prove nothing. One is Gini Coefficient and the other is "perceptions" of corruption-with no real scale or strict criteria mentioned. Looking at those maps, The US has a slightly elevated Gini coefficient, yet less corruption which kinda goes against your point. South Africa is another example of a large Gini being less corrupt. In addition, there are a whole bunch of countries in similar regions that don't exactly follow your hypothesis--which only goes to say that every country has a different set of circumstances and cultures. I am not even going to discuss your Mitt Romney point (not that it is even that clear) except to say that Capitalism's vice is an unequal sharing of blessings, but Socialism's virtue is an equal sharing of misery.
This is priceless. Did you ever stop to consider there is large income inequality BECAUSE the government is rigged? How does a system "get rigged" without first having a controlling corrupt government? Capitalism doesn't mean there is freedom, but where there is freedom you will ALWAYS find Capitalism. Throughout history, it has been proven time and again that the only way for the average citizen to increase his wealth and pull himself out of poverty is for the society to have individual and economic freedom free from government control so that he may increase his well being through his own choices; governments that stop this freedom only promote poverty and are detrimental to their citizens. This fact is seen in EVERY SINGLE communist country where their citizens are poor, uneducated, died by the millions due to starvation and were only able to improve their lives after the government underwent free market reforms,
And when they were founded labor unions were used by organized crime to control business and steal from the worker's pension fund. Today labor unions are a plague on business, driving up unsustainable costs (airlines), bribing government officials with campaign contributions to stop the free market and bring accountability (teachers). Government laws in some states (liberal states) actually force all workers in certain companies to join a union regardless if they want to or not---talk about lack of freedom. Pay, benefits, and working conditions are the responsibility of the individual worker and the employer and not some bullshit union. No one is forcing anyone to work anywhere, you make a person choice to give your labor to y company for x dollars with an understanding of where you will be working and what will be expected of you. If you do not like the salary or where you will be working you can go and find another job...the choice is yours.
I completely disagree that the economic growth of the last 100/200 years has come in an effort to solve the problems created with a free market. The greatest economic growth in this country was between 1865- early 1920's. A time when there was less government regulation, almost no taxes, and great fortunes were made and lost by people who were innovators, pioneers, and job creators; all working with their individual efforts and ideas to revolutionize the world around them. Government is a weed that starts out small, but will slowly wraps itself around and strangles the life out of everything it touches if allowed to go unchecked.
You are talking about the triangle shirtwaist fire. The workers died in that fire because the doors had been chained shut to stop anyone from stealing. Libertarians are not anarchists. What they demand is an efficient government, and in many if not all cases that means small. There is nothing wrong with government that sets reasonable zoning laws or building safety requirements--like fire escapes and "you can't lock people in without easy access to a key". Laws such as these are non-intrusive and promote greater safety without interfering the normal course of business. Government is supposed to help set up a framework for business to operate and then to let businesses operate without interference. Nowadays, government becomes overly meddlesome in the affairs of business thanks largely to its size and scope. Passing new laws that say a business has to offer 5 paid sick days for employees? Banning all smoking on business's PRIVATE PROPERTY? The US has been around for over 200 years--they're that many things that government needs to pass new laws for or be apart of, but because of its size and nature...it makes itself apart of them.
See this just exposes you as another tax and spend liberal. Of all the reason's and responsibilities government has for existing, defense is the most important one. Do we spend too much on defense? I think we do, but I am much happier paying a large defense budget than some other bullshit government entitlement..at least the government is spending money on something that it is supposed to spend money on in the first place.
You talk about too many loopholes for the rich, we have the highest tax rates in the world and are the only country besides the UK that taxes our citizens wherever they go in the world. You want to talk about invasion of privacy with the Patriot Act, go look at what the IRS can do to you. A reasonable government says we have X in revenue and therefore can only do Y. Our government says well I want to do X so we better increase taxes so I get Y. The rich and companies are nothing more than a charge card for the government meant to be swiped whenever they run out of other people's money and have another crazy overly expensive project. They love to talk about how the middle class are getting squeezed, over the last 12 years the government budget has increased 98%. You could steal everything the top 400 billionaires own, all of their wealth, and it would barely pay for one year of Obama's budget deficit. You cannot tax and spend your way to economic prosperity. Taxes should be 10-20% with a sales tax if needed. Anything more is ridiculous and good for them keeping as much as possible away from the government.
Improve infrastructure and green energy? What a fucking joke. The federal government has never spend money on infrastructure efficiently and so much of it goes to government cronies or unions. Did you know that the government has already spent 12 billion dollars for high speed rail and we don't have a single foot of high speed track? 12 billion and all we got was a scattered 100 miles of "improved" track where normal trains could go faster. I forget where it was, but 200 million spent so that a commuter train could get to its location 10 FUCKING MINUTES FASTER...gotta love that efficiency.
How about green energy. Government lost 500 million on Solyndra, 263 million for A123, the battery maker, 200 million for Fisker auto; and those are only the ones I remember off the top of my head. Fisker lost 557,000 PER CAR they sold...and the irony? The car was called the Karma. Speaking of karma, after we lost 263mm on A123 a Chinese firm bought the company out of bankruptcy and renamed it B456 (no joke). The government wastes billions of tax dollars in tax credits and loan guarantees propping up an industry that very risky and just isn't ready for mass commercialization. Private capital should be risking their own money to improve the technology, not the government. The government doesn't and shouldn't be involved......Someone will invest time and money into making it work and if there is anything there worth exploring it will be because that is what the free market system does!
My hand kinda hurts from typing all this out, but I thought I would include this just so we can truly see what a large government really means.... http://theeconomiccollapseblog.com/archives/show-this-to-anyone-that-be…
Actually, this proves my point, not yours. The BP is an example of how even with existing regulation, corporations are willing to cut corners, preferring to pay a fine when caught breaking them. Imagine how more reckless these corporations would be in the absence of such regulations. And no, no one said that regulations alone will prevent bad things from happening. It is impossible. The government agencies responsible of enforcing these laws have limited resources, and can't check that every company, employee, etc, complies with the regulations of their industries. But at least, when something bad happen due to negligence (etc), we have a law that serves the purpose of making the people (corporations) responsible pay.
That is called the court system which has already been mentioned and is one of the ways the free market checks itself.
LOL @ the suggestion that BP allowed the oil spill to happen so they could save a few bucks "cutting corners". You honestly believe that BP experienced a net benefit from Deepwater Horizon?? If BP could have at all foreseen the impending disaster, they would surely have paid to rectify the issue rather than wait for billions in fines, clean up costs and terrible publicity. And despite all regulator involvement, the spill wasn't averted. This is a totally non-unique argument: you give us no reason to believe that regulators are at all efficacious in curbing disasters - in fact, you prove the opposite.
You do realize that BP would have been held accountable, even without the EPA and related bureaucratic programs, right? That's what the court system is for.
This is definitely my favorite part of your argument. I love it when liberals just assume that anyone arguing against them must be conservative; when in fact, I am likely even more socially liberal than you are.
The reason, I suspect, why the article you link and many other in the media are so alarmed by the Patriot Act runs something along the lines of, "Can you believe that our benevolent government, which so elegantly curbs our economic liberties to protect us, could institute a program that curbs our civil liberties in the name of safety??"
To which my response is muted: of course I can. It comes as no surprise to me that our government is constantly overreaching its intended bounds. And quite frankly, relative to all of the government excess in this country, the Patriot Act feels rather mundane. But it is certainly illuminating how outraged the left get from even the slightest curtailment in civil liberties, yet willfully ignore other instances.
And I guess you'd reply by saying something like, "It is surely unjustified for the government to restrict my civil liberties in the name of protecting me from some foreign government or terrorist cell (or whomever the Patriot Act is aimed to thwart). The costs of restricted liberty for all American citizens outweighs any potential for the government to subvert terrorist attacks."
And I can't disagree with you! The Patriot Act rests on dubious ethical standards, at best! But it really is ironic when you come back and say, "It is completely justified (and in fact morally mandated) that the government restricts my liberties in the name of protecting me from some (apparently evil) company. The costs of restricted liberty for all Americans and the economic damage from regulatory compliance and bureaucratic overhead is surely outweighed by the potential for the government to subvert those shifty figures running multinational companies that sell us affordable goods!"
I mean, come on, you have to admit it's at least a bit ironic, right?? Protecting us from terrorist groups? Nay! Protecting us from companies? I'll check my liberties at the door!
Clearly my comment went over your head. Of course BP is way under with the spill. With all the lawsuits they had to face, and pay, they have lost billions. But had this accident not happen, and government officials have found they did not comply with regulations, they would have been fined some bullshit small amount, compared to their profits. And life would go on. I'm not saying corporations cut corners only for the sake of profit. Sometimes, employees don't know better. They might not know that they are doing something wrong. But that does not excuse them for not doing the right thing. And definitely, that does not makes the regulations bad. As long as the regulations exists for a logical reason, they should exist, and they should be enforced all the time. But the world is not perfect, and accidents will happen. Sometimes due to individuals not complying with regulations, sometimes due to lack of regulation.
You seems like a smart dude. That what is so surprising about your argument. Maybe what you fail to see is that the Patriot Act does not apply to terrorists only situations as you believe. Government officials can abuse this, and there are a lot of documented abuses of this law. This is only one such article for you to read and educate yourself, before making post that make you look dumb:
https://www.eff.org/deeplinks/2011/03/documents-obtained-eff-reveal-fbi…
So no, it is not ironic at all, since clearly I am not saying Nay! to government not protecting us from terrorists. I am actually saying Nay! to government intrusion of individual privacy by abusing the Patriot Act, that was meant ONLY for cases of verified terrorist activities.
I don't follow your logic. This would make sense if salaries were set by the government. Since this is clearly not the case, your statement is false. In the US, we have a minimum hourly salary, which helps to some extent avoid the situation present in my country of origin. But the fact that CEOs in the US now make 400 times what the average worker makes, compared to 42 times in 1982, points you to the real cause of all this income inequality in the US.
Is funny how you make your point of how the only countries that thrive are based on capitalism, how the communist countries starve. But you don't mention countries that have a mix of capitalism and socialism. They are in fact doing better than the US, which itself has some socialist things too! You talk as if the US is the best country in the world. There's a lot of studies that show otherwise. So, why can't we copy the things that are working in those other countries? Why do we keep this false idea that the founding fathers were God, and what they put in paper in the 1700s is the best system we can aspire to have? Maybe the fact that I was not born here allows me to not be blinded (by patriotism) to the shortcomings of our country.
This is my favorite number that gets thrown around these days. Let's just ignore, for a moment, that it refers only to Fortune 500 CEOs (that is, the 500 most successful CEOs in the country) and compares that to the average worker, despite the fact that the average CEO makes just over $100k per year (~2.3x the average worker). And let's forget that it includes income that those CEOs make from their equity in their own business.
But, can you take your head out of the rhetoric for a second and think about what you're suggesting? I know you tend to just accept numbers that come from your preferred sources at face value and never stop to sanity check them, but humor me:
2012 per capita income in the U.S.: $42,693 Now if we multiply by 400: $17,077,200
Do you honestly believe - honestly! - that the average CEO makes $17,077,200 per year??
Do you honestly believe that the average US worker makes $42,000 a year? That is $80,000 for a married couple. If you want to discredit the statement I made regarding CEO pay, you will have to do better.
Without knowing your country of origin it will be hard say exactly why? Corrupt politicians demanding bribes? Laws limiting foreign investment or laws/circumstances that put foreign investment at risk of serious loss and therefore discourages investment? Lack of natural resources or significant reason capital should be employed? Reason could be endless.
See you are too worried about what other people are doing rather than your own self. Income inequality isn't as important as equality of opportunity. In America anyone can make a fortune if they have a great idea, natural skill, or solid business sense. Look at the forbes 400 list, something like 85% of the billionaires are self-made and the rest of the list is second generation. In the words of Thatcher, you would rather the poor be poorer, provided the rich less rich.
CEO are getting paid a lot more because we live in a time where automation is decreasing the value of ordinary labor while increasing productivity. It is the idea and execution that matters most and since CEOs get paid in a lot of stock there salaries have risen a lot. Even without the capital appreciation they are getting paid more, but that is none of your concern or the governments. The CEOs pay is set by the board of directors which is elected by the shareholders...you don't like the CEO pay, buy some stock and put it up to a vote.
Those socialist countries? They are for the most part inefficient and slowly decaying. Just look at the current Euro crisis. They are able to exist on insane tax rates and/or natural resources, but that model is unsustainable as is being proven now and will be again and again in the future Socialism only works until you run out of other people's money.
And what areas are they beating the United States in? Education? One part of the problem is the US with shitty parents who in turn are producing crappy kids. The much larger part of the problem is the teachers' union with full government backing which protects crappy teachers and uses all of its power to stop any meaningful reforms. The US spends twice as much per child as any other country and yet we get below average results---Money is not the reason, government control while stopping people from seeking a better education is. We are slowly fighting the teachers unions and gaining back some control, but it will be a long hard fight. I suggest you watch the movie Waiting for Superman on netflix to get a better understanding.
Healthcare? The US has some of the best healthcare in the world, we have the highest cancer survival rates, and some of the best medical innovation in the world. A Canadian PM came to the US for heart surgery rather than stay in his own country. The US doesn't have long waiting lines and can get most procedures done in less than a week. In Europe, there are long waiting lines for the simplest tests and restrictions on what kind of surgeries certain people can have. Are healthcare costs high and rising in the US? Yes. But they are also high and rising in the rest of the world as well. Some of these high costs are caused by government which created state insurance monopolies and restricted competition. Medicare and Medicaid are huge entitlement programs that lose billions to fraud and are unsustainable and need to be reformed. Obamacare has driven insurance premiums up by 50%+ and the costs are only going to get higher as more of it is implemented--all thanks to government interference in the healthcare market.
I do not think the founding fathers were God, not am I blinded by patriotism. What I am is guided by principle and history. As long as a man's actions are not harming another person he should be left alone. A man works for is money and no government has the right to take it and waste it on useless government spending (27mm for Moroccan pottery, 350K for robot squirrel, every congressmen has a 2mm expense account, the list is endless). Any tax rate over 20% is theft in my book and now we have some states where the tax rate is over 50% (AND THEY ARE STILL 164bn in debt). No government has the right to take more than 50% of what a man earns. History shows time and again that you can't tax yourself to prosperity and that the government will gladly waste as much money as it can get its hands on. You somehow think that government is this efficient entity? It isn't. It is wasteful to the extreme. The most efficient entity at employing capital effectively and for the betterment of all society isn't some dark room full of government bureaucrats who feel nothing when they waste money on bad investments (because it isn't their's), it is the individual. Governments throw heaps of money at a wall to see what little sticks doles it out to cronies like popcorn at a baseball game, the individual analyzes his investments and nurtures the money he donates making sure that it is being spent efficiently and on a worthy cause. Individuals will make bad investments and bad donations, but these bad investments are simply part of the process because the collective of individuals will always find the best investments and most worth while donations.
An argument can be made that a government mandated minimum salary actually suppresses the market rate for certain jobs and in others raises what would have been the market rate, forcing businesses to raise prices to offset said costs, therefore hurting the consumer, which is, ultimately, who the government mandated hourly wage is supposed to help.
Did you ever think that CEOs in the US add 400x more value to companies than the average worker?
The founding fathers were not Gods, and I don't believe I have ever heard anyone assert that they were. However, the founding fathers did create the framework for one of the greatest civilizations in history and that is a fact, not patriotism.
Gotta love how brainwashed the sheep are. Keep voting for larger and more expansive government and keep watching this country become more indebted, less competitive and less flexible.
Whenever someone talks about reducing government you always have the pro-government people bring up BP, Texas, insert corporation accident. Instead of using that as an excuse for more ineffectual government I ask those people "how did it happen when we have so much government?".
Government people will always retort that more government will solve it. Which it never does. This country was founded on the idea of a small and limited Federal government. We either restrict and reduce it or was condemn ourselves to a bloated bureaucracy and the disaster that is Europe.
Wow, you just don't get it. Let me try it in bold (first timer!) [/bold] I am not advocating for bigger government. Nor we claim a bigger government is necessary in order to solve all the problems in the world. Reread that sentence 3 times. bold. The BP accident happened even with the existence of regulations. But guess what, it would have happened if those regulations did not exists too! You can't use these accidents as an argument for either bigger or smaller government. Accidents happen. Heck, they probably happened in the caveman times. What the government should do is react to things that happen in an intelligent way. The BP oil spill was caused by the use of faulty cement. Ok, then make standards that say what grade to use, blah blah blah, so it does not happens again. I don't see anyone here asking for the removal of the construction codes of houses, bridges, buildings, etc. Or are you?
Actually I just remembered. The BP rig was actually checked by a regulator like a week before it blew and it was given the all clear. Also to bold or italicize or underline it goes text (ignore the spaces in front of the b's I needed it so they would show up and use u or i instead of b for others)
Yet you bring these examples up as reasons why we need bigger government!
http://www.tumblr.com/tagged/basic%20codes
just my 2 cents, and it may only be tangentially related as I've only read half the thread:
Definitely not an expert (very far from it), but did STEM undergrad and had experience working/interning at large chemicals/industrials/o&g/biotech companies. Consequently, I've been exposed to many safety doctrines and philosophies as well as process safety procedures and analysis.
The philosophy of process safety is that every accident is preventable, at least those predicated on human error. That said, it's generally recognized that this is an ideal and not a practical outcome. The best industrial safety practices mitigate as much human error as possible without being too practically restrictive to innovation and production. There's a significant diminishing return on regulation past a certain point no matter how granular the regulations become.
I'm not necessarily saying the West Texas or BP accidents could not have been prevented, but in these kinds of industries, shit happens. It's simply high-risk work.
Correct. Another way of explaining this is that there are material costs to reducing risk. We are all only willing to pay so much to reduce our risk of death / injury, and this is a risk that we price everyday. At some point, the cost of reducing risk is outweighed by the benefits of allowing it. That means that accidents happen sometimes.
So if accidents happen with regulation and without, please tell me what benefit this regulation has. I am not advocating for zero regulation, but if we are incurring a cost with little to no benefit then we need to evaluate things. Maybe we get rid of the regulation, maybe we change it, maybe we pare it down. But whenever I hear of an accident or something occurring it is always a call for MORE regulation, not BETTER regulation.
That is my issue.
Sometimes we do need more regulation. And that does not means bigger government. If you only have to change or add some rules in a book, that is not bigger government! I would only consider bigger government if we increase the number of federal employees, not if we increase the number of lines in a book.
And that my friend is EXACTLY where you are wrong. Putting the fact that I think the number of federal employees is probably way too high aside, a few extra lines of government regulation is exactly what we are talking about when we say Big Government. All too often those few extra lines, end up being over 2000 pages that will cost trillions of dollars and "We needed to pass it to find out what was in it". With all the amendments and pork, never is a bill just that bill, nor is it what is best. The amount of economic and social damage caused by 9 simple words is unmeasurable....I'm from the government and I'm here to help
Regulations without enforcement is useless. You need someone to write the regulation. You need a report to show its implementation and effectiveness. You need people to monitor it, to enforce it, to advise companies on the new changes.
Every increase in rule is an increase in government.
NorthSide, give up. Andres lives in the world where government protects him. Let him enjoy the false sense of security.
The sky is blue. Water is wet. Reducing government is good.
What happened in Texas was an accident and random. More regulation wouldn't stop it. If they were in fact lying and hiding we have courts and laws for this. Endless Federal regulation and the pensions that have to be provided to support it are not the answer.
Just look at the FAA and all of the canceled flights. This is how the government reacts to even a small cut. Ignore the fat, cut the bone and muscle.
We need to shut entire agencies. Lay off thousands of people. Convert pensions into defined benefit plans. Remove government unions. We should be looking for ways to cut taxes, not increase them.
Sure, we have courts to sue companies and ask for money on the deceased. But what about prevention? Should we let corporations take over that part? Do we just trust that they will do the right thing, since in the free market we have courts that makes them think it twice before taking a decision that leads to a catastrophe? That's some brilliant idea you got there.
Where was your government when the plant blew up? It has the right to inspect it. Why did it fail you and just listen to evil corporations. If only we had more government, more taxes and more regulation everything in life would be solved.
Maybe if you bother to read my posts, and by reading, I don't mean reading my words and interpreting them through your conservative bias part of the brain, maybe, just maybe, you would have read the part in which I said that no amount of regulation can avoid all accidents. You need a class in comprehensive reading.
I read your shit. Just because you write it doesn't mean it is correct.
Gekko making it rain. I was wondering what the hell homeland security and their criminal, anti-American existence had to do with this topic.
The issue here is, when it comes to CONSUMER facing issues, the free market economy works great. Voting with dollars actually works. Do I like Apple products or Google products? Do I eat McDonalds or Burger King? Coke or Pepsi. Those are things consumers can actually influence.
But business practices are not consumer facing, the consumer market doesn't have the ability to "vote" on safer workplaces, or environmental audits, or better safeguards, etc. Consumers don't (1) typically have visibility into these issues and (2) have limited ability to influence the activity.
The only market forces that would influence business practices of a company are (1) management and (2) labor. This process is a bit broken in today's environment because (1) management is not properly incentivized to address business practices and (2) labor no longer has the influence to address business practices.
Sure, there are definitely management teams in every industry that are well meaning and would make sure that they follow responsible, ethical, and safe business practices, but there are just as many who would rather cut corners to make an extra buck. And there are certainly very few market-driven consequences for the bad actors if they are not found out. Does that lead to a level playing field? No. Those who cut corners creates a "race to the bottom" effect.
Labor as the last "market force" to address and regulate business practices. In some industries this works, see the legal and medical professions. But in many industries, where labor is really "labor", workers don't have much leverage individually, nor do they have the expertise to address more complex issues (I'm fairly certain Joe Sixpack doesn't have much expertise in explosive chemicals). Unions used to be an effective way to address workplace issues (and yes, unions have a place in a free market system, unions are nothing more than supplier concentration).
In summary, when it comes to business practices in a free market economy: Consumers - not able to vote of safety, environmental, non-consumer facing issues Management - sometimes able, but not often incentivized to self-regulate. Certainly not enough deterrents or consequences from a market economy. Labor - sometimes able, but not often able or competent enough to address the issues.
So what's the endgame? Do we just hope for the best and companies aren't polluting (e.g. http://en.wikipedia.org/wiki/Love_Canal), aren't over-using natural resources (e.g. overfishing of tuna), aren't using creating unsafe workplace conditions (see McWane Corp), aren't releasing unsafe products (see peanut salmonella outbreak), etc? Or do we accept that these are inevitable events and rely on after-the-fact tortious claims to seek redress?
I don't anyone here is saying a free market system is wrong, bad, or not the way to run the economy. But the point those like myself are making is that there are definite shortcomings with a pure laissez faire with definite negative impact on people. While not the perfect solution, the government is the best option to serve as the regulator and enforcer of common standards and safeguards.
That's all well and good. Companies are corrupt, consumers can't judge safety, and employees have no bargaining power. Got it.
So you have all of the relevant risks that you discussed: corrupt businesses, limited labor bargaining power, etc. In light of that view, please answer the question:
For the sake of simplicity, let's assume that the government can tax anywhere between 0% and 90% of the total US income for the express purpose of regulating companies. In your mind, how should the government go about deciding what percentage of total income to tax for this purpose?
People want government to regulate business, then in the same breath they complain about government being in bed with business. So each additional regulation will not benefit the voter, the citizen, but will simply benefit the business by preventing competition or increasing costs for consumers.
I suppose regulation would be good if government was limited and truly benefiting American citizens, but it isn't. It is massive, power hungry and in bed with corporations.
@ Northsider----42. Either he made the number up or he subconsciously picked it because that is the next number in his "The rich need to pay a little bit more", world view on its way to 75% tax rates. If the tax rate was 42%, I'm sure it would have been 45%
@freeloader--Northsider is asking you for the number so that you will publicly state your true intentions (even though we all now the your number is somewhere between 70-90%) and then we can debate the problem with government taxing for increased safety and the truth that no matter how much you spend you can never be "100% safe". There is ALWAYS something that can be done to increase safety for a price, but the increased safety has diminishing marginal returns and put to a more effective use of capital in some other area of government---a fact that the government will simply ignore as they demand more money from the tax payers or the more likely---borrow it and throw the debt on the backs of the future generation.
The 0-100% was also raised in one of President Obama's thesis papers while in college in which he stated that the government has the right to tax at 100% provided the people receive "value" for their tax dollars---who decided what was "fair value" wasn't clear, but most likely the government.
Insurance companies, the court system with punitive damages, employees, and even the media are part of the checks and balances system in a libertarian system. No owner or insurer wants to lose their investment when simply safety regulations could have prevented it. Same with employees, they have the right to chose where they want to work, if they don't think the job is safe or don't like it, they can find another job. If a company is unsafe they will lose the best workers as they quit.
You talk about a "Race to the bottom". It isn't a race to the bottom, it is a race to equilibrium. An individual, and/or company, and/or industry that balances the risk vs. reward. For industries that have more risks, you could see employees getting paid more. No employee will do a job that guarantees he will be seriously hurt or killed. just like an employer doesn't want to lose that employees experience and have to deal with law suits. Some companies and/or industries will be safer, but no matter what the market between owners, insurers, employees, and customers voting with their wallets will decide.
--Simple answer: Yes. And we trust that the other companies, insurers, and employees will learn from others mistakes and find solutions to correct the problems that need to be corrected. I have more faith in the individual actions and experiences of those mentioned above than I do of any government bureaucrat sitting behind a desk with no idea what he is talking about----and that is what separates you and I.This is a nice post, I'll admit. But the thing is guys, real life does not work this way. You say that workers that don't like their jobs can just move on and find another one. Life is not that simple. Maybe for you guys, working in IB and coming from the best colleges in the world it is. And maybe that is the problem. You don't see the world through the eyes of the people that don't share your background. There's a lot of people, poor people, people with families, living paycheck to paycheck. Do you think they have the option to say: "Jeez, I don't like this job. Let me go find another one. The children will have to feed themselves will I go look for this other amazing job". Also, how ironic that you say that in the free market employees can participate by voting with their feet. Well, that my friend is what an union does. The only way an employee can force change is by collective voting. Do you think an employer cares if one worker leaves? Give me a break. But when you have all your workers leave at once, that hurts the employer pocket. So make up your minds. If you are for free markets, you are pro unions.
You say you have more faith in the individual actions and experiences of "those mentioned above" than you do a government bureaucrat, as if those individuals are different. Do you think the people working for the federal government are really different, less smart, than the guy working for Goldman Sachs? If you think so, I don't think we can argue anymore. You just have an unfounded hate for government, as proven by your adjective for a federal employee.
Thank you freeloader for joining the conversation and helping point out to NorthSider how all his examples were plain stupid. Is nice to see that some people still get it and have escaped all this "free market" or nothing mentality that apparently is instilled while working in Wall Street.
Unions are not for free markets. Once a union takes hold in a company it forces all employees to join the union in order to work for the company, it forcibly takes money out of employees pockets, and when they go on strike they force all employees in the union to go on strike regardless of what the individual employee might think of the situation. Unions restrict individual employee freedom and they are protected by special union laws created by the government.
Unions are always looking out for unions and don't necessarily always have the employees best interest at heart. Just look at the airline industry, the car industry, or teachers as an example. The union contracts crippled the airline industry who couldn't pay their outrageous salary demands and had to declare bankruptcy. Look at the sorry state of underfunded state pensions--no state can afford the pension liabilities and many will eventually declare some form of bankruptcy (as we are seeing with towns and counties in CA already). Don't you think employees would have liked to keep their jobs rather than the company going bankrupt? What is going to happen when those pensions go bankrupt and the employees who didn't save enough because they thought they had this "too good to be true" pension coming find themselves in big trouble.
I think that having a employee group where employees can discuss issues and make suggestions to management about working conditions or things they might like is perfectly fine and even helpful. Protecting that group with political laws and allowing that group to exert actual power over other individuals is not acceptable.
You are seeing it already with the "Right to Work States". The second that a state passes a law that doesn't allow unions to force automatic membership, their membership plummets. Give workers more freedom and allow them to choose and they choose to keep their hard earned money in "their" pocket and negotiate employment by themselves.
I'm sorry, yes I do. Don't get me wrong, government and private companies have their fair share of both dumb and smart people, but the average private company is "smarter" than the government employee every time. Now part of this is because of incentives, the goernment is this bureaucratic nightmare that more or less is there to "sustain" itself and the employees aren't incentivized to radically improve anything--I know you might come at me with some examples, but the average employee is basically there 9-5 and just punching a clock. If they were there to really make a difference we wouldn't be losing 6 billion+ a year on Amtrak and the Post Office.
When the government does something stupid or wastes money (like they do constantly) who is accountable? We like to say voters will vote them out of office, but that never really happens (if ever). They can waste money, fuck shit up, and as long as it doesn't get really egregious they will get voted back into office because they are a democrat and will vote "yes" to gay marriage (same with republicans).
We accuse government of being inefficient all the time---it is a universally understood joke; their reputation is crap and nothing happens. A business loses its reputation and the investors lose money, the brand suffers, customers are unhappy and don't buy products, employees leave for competitors--just look at UBS or any number of businesses. In the business world, their is actual competition, ideas and products are generated and compete against one another with the market/consumer being the ultimate judge. Through this competition the best and most efficient ideas are created and thrive--look at Ford and the assembly line, look at Facebook vs MySpace.
I trust companies and "the above mentioned" because it is literally their job to be right and fix problems. They are incentivized to solve problems and get results because their money is at stake, feeding their families is at stake---and the possibility of earning a greater amount of money so that their families can live better is at stake. Insurance companies, employees, and businesses are all there to make money and they want to protect that money from losses (accidents, law suits, business failure). I trust that employees, business owners, and insurance companies know more about what is going on in the real world and on the actual ground than some government bureaucrat sitting at a desk in DC who is trying to push an ideological agenda.
Also, lets not forget that the libertarian argument doesn't have a problem with protestors raising awareness of certain issues so that customers force companies to change---look at blood diamonds in Africa or fair trade coffee---but that is individual voicing their opinions and other individuals voting with their wallets. The free market.
It's always funny when people revert to attacking an argument by complaining about it being based on principles rather than on anecdotes. That's how laws and ethics work. You can't effectively legislate or govern a populace without consistent principles. And that is what explains why you two keep avoiding answering my question about determining how much the government should tax to spend on corporate regulations.
It is very possible to spend too much / too little money reducing risk. In a free market, that balance is struck by supply and demand forces: a higher-skill worker has plenty of flexibility in what job to take; therefore, when he comes across a plant that doesn't perform safety inspections, he decides to pass up that opportunity in favor of the plant that does. The plant, therefore, loses out on the quality of its labor force that it could otherwise afford for the same price due to the increased risk. Now, a lower-skill worker has the opportunity to leave his lower-paying job for the higher-paying job at the plant, since the high-skill workers that would typically take jobs with the plant wages balked due to safety concerns. It is up to that low-skill worker to determine the balance of risk and reward: he can accept the higher-paying job at the plant but accept a higher level of risk at work, or he can continue to work in the lower-paying job with less risky working conditions. These free transactions capture the value of that incremental risk. Granted, this is a ludicrous situation, because there's no way that the investors and the insurance company would willfully support an uninspected plant; but I illustrate this worst-case scenario to prove to you that the free market system works even in the most far-fetched situations!
The government has no way to value these same risks: it does not operate via supply and demand, and there are no free transactions going on to determine when a proper balance is set. As a result, the government is forced to arbitrarily set a level of taxation that it views as "sufficient" to reduce some relevant risks.
Problems abound here:
Say the government spends too little reducing risks. Now all of a sudden, people are making decisions in the marketplace with a false sense of security: this plant has been inspected by the government, surely it is safe! Employees of all kinds accept jobs assuming that the working conditions are less risky than they actually are! The government isn't actually mobilizing enough resources to mitigate relevant risks!
On the other hand, say the government spends too much reducing risks. Because everyone is legally obliged to pay taxes, the mix of risk and reward grows imbalanced. Because of the mandatory safety inspections, companies can afford to pay lower wages to employees, who are more willing to work in otherwise-risky working environments. High skill workers will have no reserves in taking high-wage jobs, since safety has been vetted everywhere, which pushes low skill workers into lower paying jobs more permanently. On top of that, all workers are burdened by taxes above-and-beyond what the market would bear, leading to even lower take-home incomes.
It is the government's inability to determine the proper amount to spend on corporate regulation that makes it an ineffective regulatory vehicle. Unless you have some solution to this problem, in which case I am happy to hear it. That's why I asked the question in the first place.
More important than the number is the reasoning. I'm not too concerned about an exact number, but am more interested to hear how the government should go about deciding how much to tax (i.e., what analysis should they do to determine how much to spend trying to mitigate risks).
The only number those on the left know is More. It is somewhere between 0 - 100% and only they know it.
How are unions doing now? Just read an article in BusinessWeek about how Brazil passed laws to give maids more pay and overtime. Maids were cheering. Two paragraphs in and people were talking about firing maids, mothers quitting jobs and watching their own kids and other people finding cheaper labor.
Laws meant to help end up hurting. Unions did real well when the rest of the world was in shambles and developing. How have they done since the 1970's? You have workers down south making 20 bucks an hour for manufacturing and you have union workers up north killing the big 3 automakers.
From that Newsweek article: " While domestics once worked unlimited hours, drew paltry benefits, and could be fired for a trifling, now they are entitled to a maximum eight-hour workday, a month’s paid vacation, and a 50 percent bonus for overtime. In addition, employers are hit with a fat fine when they dismiss their workers without cause. Labor leaders, scholars, and politicians hailed the law, which passed without a single dissenting vote, as a second emancipation. “Today we are closing down the last slave quarters and throwing away the key,” intoned President of the Senate Renan Calheiros."
So let me get this straight. You are complaining that these workers are getting the same rights (or similar) that you get? How low can you fall dude? Brazil passed this law without a single Nay. Good for them. Sure, this move will make it more expensive to have a maid. They estimate a 20% to 40%. And some of them will have to let go of their maids. But in the end, I believe Brazil will be better off.
Haha, so you're saying that those maids would rather be unemployed than not get overtime and a month's vacation?
Hitler had some pretty high approval ratings too, does that mean his policies were right?
"Daniela Batista, a working mom in Sao Paulo, says she may fire the nanny who has cared for her children for two years to avoid paying the additional 800 reais ($400) a month she says it will now cost her in overtime pay alone. "
" Legal Domestics, a group that promotes rights for maids, estimates that 815,000 mostly poor, black women could lose their jobs as a result of the stricter rules. That’s 40 percent of the current 2 million documented domestic workers."
"Even though it pains her to break her kids’ emotional bond with their baba, as nannies are affectionately known, she says she’s likely to replace her with someone at a lower base salary." cs agency.
I don't get overtime. I get vacation I never take. I don't work 8 hours. I don't get a fine if I am dismissed without cause.
Listen man, take your bleeding heart elsewhere. This law will only hurt the people it was intended to help.
Let me summarize what's going on.
People need to learn what opportunity cost is and how that applies not only to the the gym and the amount of calories in the bagel they had for breakfast, but how that works with regard to tax dollars and freedom/civil liberties. I mean, it's much safer for everyone to drive 10mph on the interstate rather than 60mph or 70mph...but we assume that risk because we feel the benefit of getting places 6x or 7x as fast is worth the tradeoff. This is no different than any other decision we make in life, whether its the food we eat while we are on a diet, the clothes we buy, the apartment we rent or the government regulations we feel are worthwhile. Personally, I fail to see benefit the Department of Education provides, so either allocate that money to another department that can provide a benefit or don't take it from the people in the first place...thus allowing them to save, invest or spend it, which will further support the economy. Truth be told, the latter is probably the best choice since there is so much fat to be cut from the government.
The fact of the matter is, the government spends our money in a way that's far less efficient than we would otherwise spend it ourselves. It is for that reason, and others, people like myself champion a smaller...not non-existent...government.
As Gordon Gekko said, "Greed is good." Why? Because everyone is greedy in their own right and that's what propels us in our individual directions. For some reason, many liberals and anti-capitalist believe they can regulate and somehow curb greed...but like banning all guns, it's just not realistic and shouldn't even be entertained as a legitimate debate topic. In fact, greed and self interest is exactly what makes capitalism the greatest and most successful form for economy/government. And don't take it from me, take if from the man himself...
http://www.youtube.com/embed/RWsx1X8PV_A
Lastly, socialism and communism create a far greater sense wealth disparity than any other form of economy/government.
Regards
Governments and Value III: Bribery, Corruption and other "Dark" Costs (Originally Posted: 05/02/2012)
In this last post on the effects of government on valuations, I want to return to the value destructive effects that corruption, bribery and other "illegal" side-payments to government officials can have on value.
In many countries, business people know that to keep doing business, they have to grease palms and provide “gratuities” to the gatekeepers of officialdom. A spate of news stories in the last few weeks should alert us all to the reality that the problem is not only still prevalent but that companies everywhere are exposed to its costs.
I am not an expert on corruption but here is what I see as the ingredients that allow it to flourish. First, for official gatekeepers to have power, you need gates: the more licenses, permissions or other official approvals you need to operate, the greater the potential for corruption. Second, it is a lot less risky being corrupt if you have political hegemony (whether it be of the dictatorial variety or one party rule), an ineffective legal system (making it impossible to challenge biased official acts) and an apathetic or controlled media (that either cannot or will not view corruption as a good news story). Third, the odds of corruption increase if the system is designed on the premise that corruption is the rule rather than the exception. Thus, setting the salaries of public employees at well below what the market would pay them, given their qualifications, on the assumption that they will augment these salaries with "side payments", will ensure that you will attract the "most corrupt" people into government and a continuation of the system.
If you are valuing a company that operates in these dens of iniquity, how do you incorporate the costs of corruption into your value? Here are a three alternatives:
- Treat bribes as operating expenses: From a valuation perspective, it would be easiest to deal with bribes if they were out in the open and treated as a separate line item in the expenses. So, in your operating expense breakdown, you could have a line item titled "Bribes and payments to corrupt officials" with the expense associated with it. Perhaps, we can then assess firms on the efficiency of their bribery and treat it as a competitive advantage for companies that are exceptionally good at getting results for their money. Unfortunately, even in countries where corruption is endemic, it remains "under the surface" and unreported.
- Treat corruption as an implicit (and unreported) tax: In the more likely scenario, where corruption exists but is not explicitly reported, it may make sense to consider the expenses associated with it as an implicit tax levied by the government. The fact that this tax revenue goes to the government officials and not to the taxpayers is deplorable, but that makes little difference to the company paying it. While this idea may seem farfetched, PWC did exactly this in an "opacity index" that they computed for dozens of countries and converted into tax rates. In 2001, for instance, they estimated the added cost of operating in China was the equivalent of facing an effective tax rate of 46%. Unfortunately, this listing is almost a decade old and while the opacity index itself has been updated by others, the effective tax rates no longer seem to be computed by country.
- Increase the cost of capital to cover "government" partners: When corruption occurs at the highest levels, you can argue that as a private business owner, you have "corrupt government officials" as partners who provide no capital but get a share of the income. Consequently, you have to generate a higher return on your capital invested to cover the cash outflows to your implicit partners. You can find interesting attempts to quantify this effect here and here.
There are two complicating factors. The first is that the United States (among other countries) has laws on the books that forbid companies from paying bribes not only to US officials but to officials in other countries . As a consequence, the costs of bribery may be far greater than the actual expenditures incurred and include the penalties that these companies will be face, if the bribery is exposed. The second is that the "right connections in high places" in countries with extensive corruption is a significant competitive advantage in itself. Odious though we may find this proposition, the firms that understand how the system works (or who to pay and how much to pay to make it work) will generate excess returns and higher value than their more virtuous counterparts.I don't think I'm arguing the current system of government is efficient, effective, or ideal. My point is that while free market mechanisms are certainly good for economic growth and wealth creation, it's not ideal for every situation.
Taking your interstate freeway example. It may be safer to drive at 10mph, and there is a risk/reward tradeoff in driving 60mph or 70mph. However, it is equally dangerous to have no speed limit and allow everyone to drive at their own preferred speeds. Letting timid drivers go at 25mph and aggressive drivers at 100mph on the same road is likely going to lead to a lot of accidents. That's why there is an uniform speed limit that everyone abides by. You might not agree with the specific limit, but the limit serves as useful purpose.
Not sure where the Dept of Ed comment comes about...
The alternative to government regulatory bloat is not anarchy. If, as you suggest, speed limits serve a prudent social goal and reduce the economic costs of needless injuries, then there is no reason to believe that speed limits wouldn't exist on a "free market highway". Your error here is assuming that leaving the burden of regulation to the private sector means a total elimination of oversight. There is enough self-interest involved in every day transactions to ensure the optimum amount of oversight by independent parties.
And here's where I just don't understand your logic. The reason our current system of government isn't efficient, effective or ideal is because that is the natural state of government! There is no incentive for government to be efficient, effective or ideal. It has very little accountability and no intrinsic motivation to get work done efficiently.
Why are you so convinced that people are incapable of making informed and intelligent decisions on their own? You say that many government regulations have common sense applications - if that's true, what makes you think that a free populace would do away with those common sense oversight policies? Why would anyone voluntarily get rid of oversight that common sense dictates is necessary??
I don't agree with you highway example, if anything it actually helps the free market argument. When are speed limits ever really enforced on the highways? The speed limit is naturally dictated by how many cars are on the road ("the market") and the individual drivers. You won't see cars driving 60mph when there is heavy traffic, but you will see cars go as fast as they are allowed to go based on market conditions...if fewer cars are on the road or a large segment are going faster there is no problem going 70, 80 miles an hour on a road that officially has "55mph" speed limit. People don't get pulled over if they are staying with traffic and not driving erratically.
At the same time the market has naturally decided that the right side of the road is for drivers that want to drive slower and the left side of the road is for drivers that want to drive faster, there is no government rule that made this divide, it was simply decided upon by the free market of drivers. The world won't fall apart because government isn't around.....to quote Jurassic Park, Life finds a way
Thank you Aswath - interesting post.
Damn, that's thought provoking
This is some great deep stuff
Your time really is appreciated.
Interesting post
Thank's for taking the time to post this, very interesting.
I think this should read that the US was the 24th least corrupt country.
Really appreciate these posts. Thanks!
Wow, thanks for posting this. It was very thought provoking and also very thorough.
You sir are exactly right. Heck, even Alan Greenspan reconsidered his position on "free markets" are perfect:
http://www.sanders.senate.gov/newsroom/news/?id=bc863544-b90f-4eda-bafb…
You sir are exactly right. Heck, even Alan Greenspan reconsidered his position on "free markets" are perfect:
http://www.sanders.senate.gov/newsroom/news/?id=bc863544-b90f-4eda-bafb…]
These are completely valueless remarks. "I'm not saying the government does a good job, but it could..." There's a reason why the government isn't currently efficient, effective or ideal, and it isn't because they aren't trying hard enough or taxing people enough.
Wow, how indoctrinated are you that you dismiss these remarks as valueless. Remarks coming from the biggest defender of free markets. Yeah right, valueless.
Andres, you don't have a clue. The Brazilian woman doesn't need to accept anything. She can simply fire her nanny which many will do. Or find cheaper labor or pay someone under the table. Or simply not work.
Prices go up and people do without. I am sure a ton of people COULD afford to pay the wages, but just because they can doesn't mean they won't.
Oh and my bonus isn't overtime bro. It is delayed compensation based on performance. But please hold my hand since you know so much lol.
At this point, pretty much all of Andres and Freeloader's arguments have been repeatedly refuted from a number of different angles. Instead of responding to these refutations and answering straightforward questions about their positions, they've pivoted to weak non-sequiturs and random anecdotes like, "Oh, here's a free marketeer that has been recently doubting his opinion! Obviously government intervention is good!" or "Here's a story about a nanny losing her job because she won't work overtime! Obviously we should mandate OT pay!".
This is a hallmark of a position without a practical defense. If you can't argue in terms of principles and logic, you hold inconsistent and incoherent points of view. Anecdotes don't help in a debate about the most utilitarian economic policy. And that's why Andres and Freeloader cannot answer a question like, "How should the government determine how much money to tax to spend on corporate regulation?" Because that would require logic and consistent principles, which are the substance of laws and ethics.
Actually, the Brazil's domestic story was brought up by TNA. Try keeping up with the conversation. And I'll end that Brazil situation with the following: if these families have an issue with this law being extended to include domestic, they should have been protesting this law when it did not include domestic. But since they didn't, they don't have any right to complain about it now. Clearly an example of people bitching about something when it does not help THEIR cause.
First, as a libertarian I would have complained about the law before it includes domestics, but your logic is completely impractical and absurd. Using you logic, the government has the reasoning to interfere and do whatever it wants and no one should ever complain. Government put up laws regarding the pay of domestic help, it should create laws to control the pay of every employee and business owner, they didn't complain when it didn't include them, they have no right to complain now. The same could be said about any laws on cars, apartments, businesses, all were regulated before and people didn't have a problem, so they can't complain now.
New York passed a bill that banned smoking in private places, but allowed it on private property/clubs, people weren't happy, but they allowed it because "at least they still allow it in private clubs"; a year later they banned it on private property, and today they continue to pass laws restricting smoking, piece by piece. That is how government gets involved and steals your rights, piece by piece...
Is funny how you attack me and freeloader for not using logic. Particularly when he explained point by point why your counterexamples where just plain MORONIC. He did a better job than me at that.
Est placeat itaque sit doloribus corrupti dolor. Error inventore enim dignissimos eligendi qui. Libero quo suscipit similique qui qui omnis est.
Dolores placeat asperiores aut voluptas enim amet qui libero. Mollitia atque in recusandae non. Culpa sit itaque sunt accusamus occaecati corrupti voluptatibus nulla. Quo et perferendis sapiente iusto alias quasi.
Asperiores nihil cumque explicabo voluptas. Ut eligendi maiores quia omnis id. Quos veritatis pariatur dolores facilis blanditiis veniam. Itaque itaque error porro et et nulla saepe.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Tempora est voluptatem amet minima quam. Quisquam autem beatae asperiores dignissimos. Repudiandae quas aut ipsam assumenda corrupti nam.
Aut voluptas in ullam exercitationem non. Corporis est expedita a magni sed blanditiis aliquid. Deserunt qui beatae eligendi. Sunt sed est placeat modi dicta rem. Dolores quia sequi eum ipsa sed qui qui. Atque commodi animi quis omnis aut ea.
Unde nobis eius excepturi odit aut ut aliquid. Quae repudiandae omnis odit laboriosam hic. Voluptas eum ex asperiores ut aut temporibus. Ea pariatur doloremque voluptatem aut laboriosam sit.
Vel enim culpa aperiam est natus. Et suscipit iusto expedita adipisci.
Ut repudiandae nihil dolor et ipsam consequatur omnis architecto. Quia delectus exercitationem corporis ex sed nihil. Nostrum non dolores quas blanditiis autem ipsum deserunt libero.
Qui et omnis consequatur labore sapiente. Dolorem et non hic ad est. Numquam veniam vero vel velit. Et ad ut ut molestiae autem. Pariatur id temporibus rerum iste voluptates excepturi at. Tempora magnam eum corrupti enim voluptatum et sed. Sint alias et sit et ullam.
Similique ab nostrum libero nesciunt voluptatum. Necessitatibus quidem dolor et excepturi. Voluptatem voluptas quaerat nobis praesentium. Ut quo vitae adipisci eligendi minima mollitia.
Quis rerum voluptas vitae iure ut. Vero ea sint sit excepturi enim cupiditate. Sed a est eos pariatur. Et neque harum aut. Quo et quisquam sint.
Vero illum voluptas placeat et error. Explicabo adipisci officia est. Cum quo rem et. Culpa impedit tenetur accusantium dolor molestias. Rerum qui non vitae omnis ut.
Numquam fugit et aut excepturi. Perspiciatis eos fugiat quasi id sequi distinctio. Ipsam nisi accusantium iusto eos adipisci minus aliquam. Occaecati quam magni ut placeat. Sed cupiditate illo dolorum quis. Corporis numquam unde voluptas est voluptatibus.
Aut ullam dicta quasi sit temporibus corrupti. Aut quia earum est facere velit labore minima. Sunt qui libero eum dicta aut dolores. Deserunt voluptatum est odit enim provident officiis quasi. Repellat eos ipsa et voluptatem eos explicabo rerum vitae.
Possimus aliquid natus sed ut. Tempora ipsa laboriosam ad laborum repellat ipsam. Vero illum perspiciatis perferendis fugiat voluptatem. Itaque in quod soluta doloremque et.