subject: Government Regulation [print this page] Government Regulation Government Regulation
Until recently, America has had an economy that has been the envy and role model for many other nations. Not only did we have an economy that was booming, we also had a sense of security in our financial ability for the future. We may never experience this same sense of financial security again. We achieved this financial state by having free markets that were pretty lightly regulated as we have thrived as an economy that believes in the Laissez faire theory. On the other hand as we deregulated the free markets even further, we started making decisions that were not in the best interest of the economy as a whole and eventually led to a financial crisis. Immediately after our nation's financial meltdown, the government intervened heavily again and now the economy is slowly beginning to recover. So just how much should the government intervene when it comes to our financial markets? This is a controversial issue that we will look at from two different viewpoints, the Laissez faire approach and the heavy government intervention approach.
Some argue that our economy would not have been what it became without having a free market system. They are absolutely right. Free markets and low barriers to entry into business encourages entrepreneurship. That is what has made our country so great, the ability to have a dream and pursue it knowing that it is something well within our reach if we want it enough. Other countries just do not inspire that same self confidence as opportunities are not as common as they are here. What has made the "American Dream" such a motivation is the knowing that regardless of the obstacles we may encounter on our journey to achieve our goals, those obstacles can be overcome with enough determination. This is not the case in many other countries.
The more regulations that are imposed, the harder it is for entrepreneurs to enter the business world which forces them to stay within a company and this restricts creativity within the person that has an entrepreneurial spirit. Also, heavier regulation on the markets makes the saying "The richer get richer while the poorer get poorer" more of a reality by limiting opportunities to the self starter to break out into the business world on his/her own. Just look at China, though they have a booming economy, their country has one of the worst distribution of wealth within their economy.
Another argument that is made on behalf of the Laissez faire approach is the law of supply and demand. This is a very true fact of the markets. Prices and supplies of goods will always be fair as long as we have free competitive markets. And these free competitive markets are encouraged by lighter regulation by making the transactions more natural. With heavier government regulation the law of supply and demand is being manipulated and no longer is as natural as it should be in order to work its magic. An example of this is with the trade tariffs that are placed on imports and exports. This form of government intervention has an impact on the decisions businesses make from where to manufacture their goods to what countries they should deal with as far as importing and exporting.
The other side to this issue is in favor of government regulation. I do not think anyone would say there shouldn't be any regulation at all as that would only create chaos. The first obvious argument to support regulation is that people need some kind of law in order to keep society in order especially when it comes to money. Deregulated markets lead to decisions like the lending practices that caused this economy to fail. An example of that is the no doc loans that banks were issuing people for mortgages. If we had tighter regulations, that would have never occurred. I am one of those people that took advantage of the no doc loans and what was so crazy about them is that simply because I had good credit, the banks preapproved me for a $500,000 mortgage and were never going to ask me for proof of income. Thankfully, I did not take full advantage of the desperateness of which the banks were trying to give out money and limited myself to what was actually at my level.
People in favor of more government regulation believe it is the regulations that improve the economy. They feel that since people naturally have their interests in mind above all else, there needs to be government intervention as they would put in place regulations with the needs of society as a whole rather than just one individual. An example of this would be how the owner of a company may choose to dispose of toxic waste. If there were no government regulation, the owner of the company may decide to do it the cheapest way possible by dumping it into a river or burying it, but since the government has regulations to protect our environment and society, this is not a possibility without severe consequences to the business.
Government is not running a business that is in the market therefore, it is not impacted directly by some of the regulations, which allows them to have an unbiased approach to their regulations. Whatever benefits the government will, in one way or another, benefit society.The only downfall to this would be when you have corrupt officials, which is not as rare as it should be unfortunately.
Since there are such strong and valid arguments to both of these viewpoints, it is not possible to say which one is right. They both are right and we just need to have the appropriate mixture of both in order for an economy to run smooth. The people making these decisions are just like us, they try things if they do not work, they stop see what was wrong and adjust. That is all we can do as well. At the peak of the economy things were so good for everyone that it felt like what we were doing was right. Sure now we know it wasn't, but it was not that obvious while we were going through it. We are like the toddler that got burnt with the hot stove, it hurt and we will never make that same mistake again until the next generation.
