Regulation and inequality

Thomas McGarity, who I interviewed for this Salon piece on regulation has an op-ed in NYT arguing that we should talk about regulatory policy in the context of inequality:

The deadly oil refinery explosion in Texas City, Tex., in 2005, the financial sector meltdown of 2007-8, the Upper Big Branch mine catastrophe in West Virginia and the Deepwater Horizon oil spill, both in 2010, multiple disease outbreaks because of contaminated peanuts, eggs, hamburgers and seafood, and dozens of motor vehicle and toy recalls were just a few of the visible consequences of the laissez-faire mentality that has pervaded the American political economy.

Less visible, but equally devastating, were the heart attacks caused by poorly regulated painkillers, the quiet desperation of millions of “underwater” homeowners who owed more in mortgage debt that their homes were worth, and the subtle but steady and irreversible increase in global temperatures as a result of carbon emissions.

The laissez-faire revival also contributed to the growing disparities in wealth and well-being that became painfully obvious during the last decade. While corporate executives, Wall Street bankers and hedge fund managers greatly benefited from the three waves of assault on regulation, the fortunes of blue-collar workers and the working poor steadily declined. Median incomes have fallen over the last decade.

The disparities brought on by the laissez-faire revival, however, go far beyond the vast disparities in income and wealth. It is of fairly small consequence to the disabled miner whose boss violated federal safety standards that the mining company’s revenues, profits and executive bonuses are on the rise. But the disparity becomes unconscionable when lax pension-protection regulations let the company spin off its “legacy liabilities” (pension and health-insurance guarantees) into an undercapitalized shell for the sole purpose of filing for bankruptcy protection.

Not all of the adverse effects of the laissez-faire revival have fallen disproportionately on the middle class and the poor. Lax regulation of airplanes is as risky for passengers in first and business class as in coach. The rich and poor suffer from the side effects of hastily approved prescription drugs. But the overall burden of deregulation is borne by those least able to carry it.

Needless to say, I agree entirely.

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