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Capitalism works better with regulation

January 22, 2019

David Brooks, the venerable columnist of the New York Times, posits that “capitalism is a wonderful system” but suggests that it’s lost its way because “moral norms” have gone astray “and it needs to serve a larger social good.”

It sure does.

“Remoralizing and resocializing the market is the great project of the moment,” he wrote in the Jan. 10 edition of the Times. “The crucial question is not: How can we have a good economy? It’s: How can we have a good society? How can we have a society in which it’s easier to be a good person?”

Agreeing with Brooks, who is big on morals and ethics, is a given, with a major caveat: a dollop of government regulation to keep everyone honest, to curb the appetites of capitalists who would abuse the system. It should be shouted out loud, not merely alluded to.

If you want people to be good, they need rules to guide them when interacting with others or society at large, like proper manners. Ever been in class just before a teacher arrives? Pandemonium, right?

Wall Street is a good example of a need for control. Freedom needs to be monitored, the way lights control traffic. Imagine the chaos if everyone entered the intersection of St. Francis Drive and Cerrillos Road all at once.

Brooks doesn’t say outright how to remoralize and resocialize the markets, how to regulate it, settling instead for expecting the reader to read between the lines. But it’s people who run the markets, the economy. Does he expect people to police themselves? Who’s supposed to be in charge? The government, no?

He doesn’t directly mention regulation, but he wrote that the loosening of rules in the 1970s by President Jimmy Carter reducing taxes and Sen. Ted Kennedy by deregulating the airlines and the trucking industry created a situation in which “anything you could legally do to make money was deemed OK. A billion-dollar salary for a hedge fund manager? Perfectly acceptable.”

What happens when there are no controls? Capitalism ran amok in 2007-08, first with subprime mortgages so that people earning merely hundreds of dollars a week had mortgages of $500,000 or more. How could they be expected to pay back a loan that size?

What can happen when “social trust,” as Brooks put it, is violated and leaders lie in order to get their way in implementing policy? War. (See Iraq, March 2003.) President Donald Trump lies. Does that make America great?

Different example? Give corporations a huge tax cut in naive hopes they will use the money to hire more people, expand their businesses, develop new products. Doesn’t happen. The corporations use the extra money to buy back their own stocks in order to satisfy their investors. How does that help society as a whole?

Another one: Congress passed the Glass-Steagall Act in 1933 in a bid to control the banks following the 1929 stock market crash. It was repealed in 1999. No control. Repeal led to banks investing peoples’ deposits in unregulated instruments called derivatives, causing the 2008 financial crisis. How’s that for benefiting society? For ensuring good?

“Today the amoralism of the trading floor governs corporate decision-making,” Brooks wrote.

People and their society need to be regulated, wisely and gently, in order to create a more perfect union.

Richard C. Gross is a longtime journalist, at home and abroad, and retired as the opinion page editor of the Baltimore Sun. He lives in Santa Fe.

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