Occupiers Mantra: "We're Mad as Hell and Won't Take it Anymore"
I have blogged many times before and asked the question whether over-regulation of corporate activities in the workplace hinders economic growth. On February 9, 2001, the U.S. House of Representatives Committee on Oversight and Government Reform issued a preliminary report, Assessing Regulator Impediments to Job Creation. The report is based on almost 2,000 pages of letters from business groups that say government red tape is deeply harming the competitiveness of American industry and contributing to unemployment, especially in the manufacturing sector. The full report can be found at: http://www.scribd.com/doc/48523377/Assessing-Regulatory-Impediments-to-Job-Creation-Issa-Report-February-2011. The report comes as President Obama has vowed to eliminate unnecessary regulations, ordering a broad review of current government rules “to remove outdated regulations that stifle job creation and make our economy less competitive.”
Issa’s report cites an estimate from the National Association of Manufacturers that “structural costs imposed on U.S. manufacturers including regulation create a 17.6 percent cost disadvantage when compared with nine major industrialized countries.” The issue of cost disadvantage is important because Obama has made “winning the future” by making American business more competitive with foreign industries a top priority.
I always try to point out to critics of over-regulation that the issue of whether U.S. business is overly-regulated begs the question of why such regulation is needed in the first place. Our free market economic system depends on the exercise of ethical behavior by corporate officials to provide for the public good. Absent decision making based on ethical values such as honesty, integrity, and transparency, the system cannot be trusted to allocate resources in the best interests of society. The root cause of such problems is the pursuit of self-interests to the exclusion of all others. The financial crisis of 2008 was triggered by predatory lending practices and risk-shifting behavior that all but tossed aside the notion that banks and financial institutions have an ethical obligation to those who borrow money. Banks have an ethical obligation to be honest and candid about the inherent risks to borrowers of certain mortgage (subprime) loans and to fully disclose hedges against future nonpayment made by the holder of the mortgage through the purchase of credit default swaps.
It is important to remember that Adam Smith connected ethics to economics. Smith came to his philosophy of economic behavior described in The Wealth of Nations through his view of moral behavior espoused in his first book, The Theory of Moral Sentiments. Smith, who is generally regarded to be the founder of free market economics, posited that rational self-interest informed by moral judgments based on fairness and justice would lead to promoting the best interests of society guided by the invisible hand of the marketplace.
The self-serving and unethical conduct by commercial and investments banks led to passage of the Dodd-Frank Financial Reform Act by Congress that extends the regulatory arm of the government to areas including consumer protection, systemic risk oversight, executive compensation, and capital requirements. It is estimated that the act mandates nearly 250 regulations and 70 studies.
The Sarbanes-Oxley Act of 2002 was passed by Congress in response to a large number of business and accounting frauds at companies such as Enron and WorldCom that cost taxpayers billions and shredded 401-K and other retirement investment accounts. The Act added another layer of oversight of the accounting profession -- the Public Company Accounting Oversight Board -- and imposed onerous internal control assessment costs that many credit with the flight of foreign companies from the U.S. stock market.
The Foreign Corrupt Practices Act of 1977 was passed after the disclosure of widespread bribery of foreign government officials by U.S. multinationals to gain business abroad. The anti-bribery act imposes disclosure and internal recordkeeping requirements on U.S. businesses doing business outside the U.S.
Businesses claim these and other regulations impose excessive compliance costs that work against job creation and economic growth. That may be true and it is unfortunate but corporate America has no one to blame other than themselves for decades-long self-serving behavior born out of greed with no accountability to shareholders who ultimately are harmed by such behavior, and the public has helplessly stood by and watched the enormous loss of wealth in our society. But, the public has finally stood up and shouted: “We’re mad as hell and won’t take it any more”. This is the mantra of the “Occupy” movement. Many are fed up with the loss of personal wealth, not because of their own actions but, instead, due to corrupt policies of corporate America and Wall Street that created the financial nightmare we have been living since 2008.
Blog posted by Steven Mintz, aka Ethics Sage, on November 9, 2011