The Battle against Over-regulation

After years of seeing new regulations being imposed on businesses, we are now finally seeing some relief. Most of us that run businesses are thankful for this change, but we need to examine the dynamics of how this pendulum of increase and decrease occurs so that we can act in a manner that will allow long-term relief from additional regulation. What we see now is a reaction to extreme over-regulation, but that doesn’t mean that this trend will continue without substantial change in how business is conducted on a national scale.

We can learn an important lesson from a period in the history of our country that is studied very little these days. It is known as the “Progressive Era” (the 1890s to 1920s). The movement that dominated this era was a reaction to social and economic problems that developed in the previous era, known as the “Gilded Age.” The term was taken from Mark Twain’s 1873 novel The Gilded Age: A Tale of Today. The book satirized problems of the day that were masked by a gilding of thin gold.
The Gilded Age was a time of tremendous economic growth in the United States. Ideally, it should have been a time of prosperity for everyone. In reality, some businesses thrived to the point where they dominated industries and drove the competition into bankruptcy. Some workers benefited from large wage increases, while others ended up in poverty.
The most successful industrialists, such as Jay Gould and Cornelius Vanderbilt, bought off politicians to gain favorable conditions for their businesses. As a result, they gained ever more power and wealth at the expense of others.

This social injustice led to reforms initiated in the Progressive Era. The reforms were designed to fight the corruption in business and government by employing “scientific” methods to solve the problems. It was started by intellectuals in major universities who gained the opportunity to “advise” the government on policy. Think tanks and similar groups were established to lead politicians in the right direction. The intellectuals were promoted as being above reproach, interested only in making life better for society through social reform. Their claim was that they were guided by scientific principles alone, not political motives. They were armed with a new science of economics. Interestingly, they looked to Germany for guidance. Most of the leaders went to Germany for their masters’ degrees.

As the influence of the progressives grew, they were able to form regulatory agencies within the government. These agencies had a degree of autonomy, not having to go through the process of legislation and judicial approval. They created laws (regulations), decided if the laws they created were constitutional, and then enforced them. They became a kind of fourth branch of government. Although they were subject to the oversight of the other branches, the reality was that they were able to act independently in their day-to-day activities.

As the progressives gained more power, they used “science” to influence a lot more than economics. They used the principles of Darwinism to promote social engineering. The policies that resulted from this were extremely disturbing. They believed that Anglo-Saxons were genetically superior to other races, so they sought to minimize the immigration of all other races. They forcibly sterilized thousands of people whom they considered unable to contribute to society. The movement came to dominate both republicans and democrats, including presidents Theodore Roosevelt and Woodrow Wilson. It’s painful to think that the government of the United States, backed by the majority of its citizens, could enact such policies. But then 50 years ago, who’d have thought that killing unborn children would be legal.

The point for us is that extreme corruption by businessmen opened the way for progressives to get a foothold in government. Once they did, progressives led the country into a very different, but in many ways, more sinister form of corruption. If anyone wants to find out more about this bizarre chapter in American history, I recommend the book Illiberal Reformers by Thomas C. Leonard. It’s not an easy read, but it’s very revealing.

Most of the regulatory agencies at work in the federal government can trace their beginnings to the Progressive Era. Some of these agencies are absolutely necessary. Laissez-faire, that is, allowing businesses to run without government interference, leads to corruption in business. Consumers will be defrauded; workers will be exploited; the environment will be polluted.
But as we saw, unregulated government leads to a different kind of corruption, regardless of how adamantly politicians claim that they are inspired by a greater good. Unchecked political power will corrupt; the public will be defrauded. Unfortunately, it’s human nature.

So, other than voting, what can we do? Not many of us are in a position to become politically active. One thing we can do is to conduct our businesses in a socially responsible manner. Obviously, the actions of one business won’t change the policies of the government, but we can cast a strong vote for less regulation by having consideration for our customers, employees, business associates, and neighbors.