The Problem with "Regulation"

As the US fumes over how much money was paid to AIG execs in bonuses, I sit with, paradoxically, both the knowledge of and absolute disbelief in how incredibly gullible, underinformed, and downright stupid the average American is.

Those of you who are among the "outraged" may be mad at me now. Okay.

We've known about the bonuses for months - they are honoring contracts from over a year ago. See what else the current administration and congress have known about all along, and actually helped create.

The problem with this AIG business is that Congressional laws, Executive programs, Federal Reserve monetary policy, and federal and state financial regulators all had a hand in creating this mess. Their policies created the conditions which allowed the housing bubble and the opacity of derivatives contracts which have now given the world economy a turbulent ratcheting down of its belt size. Their policies and decisions turned a localized market overexpansion affecting a few states into a full-blown crisis that will, before it plays out, have drastic structural consequences to world finance, almost certainly bring about substantial geopolitical changes, possibly ignite new or expand existing regional conflicts, and likely shift the world reserve currency regime away from the American dollar (as Russia is already calling for - you think things are rough now? Just wait until the American dollar is no longer buoyed by its world debt- and commodity-denominator status). You know what the worst, and the most condemning, part of it all is? AIG played completely within the government-sanctioned rules, as this article from the Wall Street Journal makes clear.

No one administration is entirely at fault here - the causes of the conditions which gave rise to this debacle directly stretch back to the Clinton Administration, and, it may be argued, much further. Politicians - IF they should ever decide to point fingers within their ranks rather than at AIG execs and Tim Geithner - will undoubtedly say it is one administration's or one party's fault, but that is not the case. It is the fault of the notion of government economic planning and regulation, and nearly every administration since Andrew Jackson's has been guilty of that.

Why does the government - whether Congress, the president, the Federal Reserve banking conglomerate, or even their best and brightest Ivy League economists - think it can successfully regulate (assuming any one of them could even understand) every aspect of the country's economy? A better question - why do average citizens, who regularly complain about Washington's ineptitude, trust the government to understand and regulate the economy? Government intervention always has unintended consequences and always creates winners and losers, skewing the playing field to the benefit of some.

My same question asked above - why does the government think it can successfully regulate - applies just as aptly to food policy. On Monday, Country of Origin Labeling (COOL) went into effect. The idea is that all fresh fruits, veggies, and meats should be clearly marked as to where they came from. A good idea. But meats have more requirements, and fish have even more. For domestic small livestock producers and aquaculturists, this means additional costly paperwork and animal tagging when their profit margins on their small-scale enterprises are already low enough. Some may accept that this may very well be the cost of better regulation and food safety measures and that small producers will simply have to run more efficient businesses to stay competitive, and that's fair.

But, as always, government regulations are hypocrital. COOL does not apply to any food which has been processed in ANY way - smoked, emulsified, mixed with other ingredients - and does not apply to the ingredients included in processed foods. So, we can still import the salmonella- or E. coli-infested spinach from Mexico, but we'll sell it as prepared fresh mixed salad greens so no one will ever know the difference. We can import chicken from melamine China but we'll cook it and put it in some other finished product so we don't have to mention China on the label. You can read the USDA's own release here, or the MSNBC story here.

This law specifically aids food processors and large agribusinesses. Surprise, surprise. And, I suppose, the inverse is true - that this law specifically targets small producers - but I prefer not to take the angle of emotionalism when I can take the angle of fact.

As Barney Frank and Chris Dodd, Congressional leaders whose campaign funds are essentially owned by financial interests, continue to spout off ideas how best to solve this "crisis" and then deflect criticism away from themselves onto corporate execs when the plans become unpopular, and as new government regulations on food safety are revealed to be a farce to aid large businesses, I ask this: when are we going to denounce this hypocrisy for what it is? When are we going to hold our governments and our elected officials responsible? Will the average citizen be willing to turn off his iPod, quit watching March Madness, quit being entertained for just a few minutes, put partisanism aside, engage his critical faculties potentially for the first time in years, take some measure of responsibility for himself, and ACT in our society as a citizen? (Oh, and you Canadians, this means you too - your government and its misguided policy-making is even more ubiquitous than the American, albeit, thankfully, much less corrupt.)

So that's the problem with "regulation" - that it always benefits some disproportionately, and there's always enough wiggle room while being completely within the regulation to create massive disturbances, whether in the world economy or in individuals' health.

What's the answer? Expect every citizen from the time of his or her childhood to take an active interest in our society and responsibility for his or her actions within it. Yeah, I know, about as likely to happen as fair policy coming out of Washington. I suppose that's a topic for another day.

What's wrong with this picture?

Beautiful, isn't it?

The expanse of amber wheat, the windbreak in the distance, the perspective of distance you would never experience in North Carolina.

I really do love living here in Saskatchewan sometimes. I could do with a month or so less of winter, a little more of a drawn-out autumn like we have back in NC, and without a few cultural practices I find annoying, but all in all it's a pretty good life. Seeing fields stretching to the horizon in every direction is sure a change of perspective from forested, hilly NC. And the sunsets! Unbelievable.

And the people here are different, too. These wide-open expanses, the rurality of this region, and the primacy of agriculture as livelihood sure do rear a different type of person from the busy, demanding, self-centered East Coast suburb. Not that social conditions here are idyllic, just different.

But can you tell me what's wrong with this picture?

Maybe you don't think anything is wrong, and maybe you won't agree with my assessment once I tell you what I think is wrong. Or maybe you've just never thought about these issues in the ways I do. Either way, hear me out.

I see a few things wrong here, things which matter a great deal to me as "causes", things I could "fight" if I were so inclined. Some of these things a great many social and environmental groups do indeed "fight" with protests and political action and petitions, all those democratic tools of discontent. I'll discuss each of the things I see wrong in future posts; for now, I'd like to give a somewhat lengthy introduction to this line of thought. Get a cup of tea and settle in.

The things I see wrong with this picture all stem from one fundamental concept of modern life that I see as seriously flawed: centralization. Centralization of governmental policy decisions, of capital and credit, of land use/zoning decisions, of the production of energy and other consumable goods, of food production/supply/processing, of economic policy, of security interests. I see all of that in this picture. Yeah, I know, I'm pretty screwed up.

I care a lot about the idea of sustainability. That's a term we hear a lot about these days, but I don't think many of us understand it. When I hear people casually using the term in the media, advertisements, etc., I notice that there is often more of a "maintainability" color to their discussion: "bio"fuels, alternative energy sources, organic farming, even different techniques of oil and gas production. Not that these things are inherently bad, but they are not sought after because they are truly sustainable but because they offer us different (and potentially less destructive) ways to maintain our current standard of living.

The problem is our current standard of living is in no way sustainable. And neither is our way of living. And neither is the centralization necessary to keep up either our standard or our way of living.

For the sake of increased productivity (and, therefore, for increased earnings and thus standard of living), workers moved production out of the home and into the workshop, out of the individual workshop and into the guild, out of the guild and into the factory. Ever since Frederick Taylor developed the idea of "scientific management" for factory workers in the late nineteenth century we've known the benefits, and the adverse effects, of the centralization of procedural decisions in the workplace and, by the extension of the factory model of management and of a few new inventions to the "industry" of agriculture, on the farm. And with the widespread use of the assembly line by Henry Ford came the realization that people acting as cogs in a machine could easily out-produce even highly-skilled independent, decentralized workers. We can accomplish so much more in this way, but at what cost?

Centralization of political and social institutions and specialization of labor were once beneficent hallmarks of civilization. Now, outside of a few select professions, they are little more than a way for the corporate boss to jerk us around. Specialization of labor creates the situation in which the centralization of planning is necessary to keep all the "cogs" working to potential (except in very small-scale communities with truly free markets - but market-moderation just doesn't work on the level of entire modern societies). Centralization of planning means those who do the planning have power over those so planned for. For evidence, take one look at the corporate atmosphere of today's average workplace and the stress and dissatisfaction it brings.

But what does this have to do with sustainability? Centralization for the sake of efficiency makes us act in ways that are not sustainable, since it removes the individual from the process of production of those things necessary for life. In agrarian societies, and within the last century in predominantly agrarian regions of "developed" nations, the majority of the people individually or as family units performed the tasks necessary for living and, hopefully, earned enough money to buy those few luxury and specialty goods they could not produce themselves. When one's labors are directed at producing those things necessary to live there comes a moderating influence which curbs consumption of extraneous goods. That moderating factor may be as simple as extra free time or as serious as the necessity to survive, but it is there; the moderation comes because one's labors are directly producing the majority of goods for his livelihood. Moderation in consumption conserves resources, thus enabling sustainability.

Another issue arises here: the agrarian (or otherwise predominantly self-sufficient) landholder-worker has a natural incentive to conserve his goods, to conserve his resources, and to improve his holding, since his continued survivability depends upon these elements (that is why the Jeffersonian ideal of the yeoman farmer was, and is, so powerful - it could have, and should have, worked. But Jefferson did not foresee the California gold rush or the Civil War or the Irish potato famine or the rise of industrialism or the massive demographic shifts in their wake). Direct personal interest in the continued productive capacity of those things under one's care tends to steer one away from over-production of goods, an inefficient waste of labor and resources. This disincentive to waste directly enhances the chances for sustainability.

In today's society, moderation makes for bad business. We've seen that evidenced in the credit bubble. Even the limitations brought by the natural productive capacities of resources are circumvented through chemical means and by the outsourcing of production to foreign lands.

Those individuals who do produce in today's centralized system - industrial-scale farmers, hydropower operators, miners, factory workers - only produce one small element of the entire chain and never truly have an appreciation for what it takes to produce all the other goods of everyday life, and therefore are never moderated in their pursuit of those goods.

In fact, as long as goods enter the economy by no effort on the part of those not directly involved in their production (the vast majority of workers for any one specific good), then there is neither a moderating limitation on consumption nor a disincentive to work as a cog. In fact, the opposite is true: the ease with which a variety of goods not produced by the individual may be procured encourages the individual to work in his specialty all the more, to make more earnings, to procure more goods. That is why modern economic theory can legitimately be based upon the assumption of perpetual growth - because perpetual demand is a given within its framework.

And so we keep working, trading our time for money, paying taxes on our earnings, using the remainder to buy the stuff we need and want, hoping to "retire" someday. All the while we are investing and trusting more fully in the centralization of our economy and of political power into "a few strong hands".

Haven't the events of the last year shown us that centralization of finance opens up world markets to drastic blows from a small percentage of faulty investments in a very few localities? That centralization of food processing can have far-flung deadly effects when something goes wrong, and that centralized food safety regulation fails horribly when one processing plant slips through the cracks? That centralization of government power cannot help but create winners and losers in any of its endeavors? That centralization of economic thought leads to "corrective" responses tantamount to the original problems?

And in any way did any of this centralization add to the sustainability of current human endeavor? No. No, we just pass the buck to someone else, to someone on the other side of the world, the country, the aisle of Congress, or to a different generation entirely. The responses of centralization tell us to keep spending so our GDP doesn't look so bad and so China can still afford to subsidize our "stimulus", to hold more debt than we can afford so we won't put any more pressure on the banks, to trust the new regulatory regimes which will in time fail us just like the old ones did. And in the meantime we continue to rape the earth.

In the end, the individual lives and dies. In the end, every notion of existence is decentralized. Why, then, do we go along with centralization and the loss of personal liberty it brings? Why do we trust the centralized powers even though they exploit the earth and destroy peoples' lives? Is it just because it's easier, or is it simply to slough off responsibility for one's own actions onto the group?

So, what's wrong with this picture?