This article by Jane Anne Morris was published on her website, DemocracyThemePark.org, on October 15, 2012.

Regulatory agencies are not, and never were, the Great Protectors of the public interest that hazy origin myths suggest.1Understanding regulatory failure entails accepting this inconvenient truth and then moving on.

 

Are we ready to go beyond the usual ritualistic laments about how darned ineffective our “watchdog” agencies are? As the afterglow of Summer 2010’s trifecta of spectacular regulatory agency2 flameouts fades, are we content to just roll our eyes at derivatives and subprimes, tsk-tsk at another mine explosion, and heave tar balls at BP logos?

Is this a good time to consider that the whole regulatory agency concept is fundamentally flawed? Is there something not only undemocratic but insidious about this “fourth branch” of government? Is even massive “beefing up” of regulatory agencies enough to effect a cure? Are regulatory agencies that seem too big to fail really just too flawed to work?

Acknowledging the fundamental failure of the regulatory system does not require embracing a libertarian free market ideology where economic liberty means abandoning all sense that human beings are creatures of communities: ecological as well as social ones. Nor does it call for denying economy’s absolute dependence on ecology and planet.

But, it does mean going beyond the usual panaceas offered in times of especial regulatory travail. Beyond drastically increased funding for regulatory agencies so they can actually test, inspect, and enforce. Beyond tougher laws to jam revolving doors between corporations and regulators. Beyond hiring honest, hardworking people who genuinely believe in regulation to run the agencies.

Those who bristle at the suggestion that regulatory agencies are more problem than solution should consider this pinch of history. From a corporation’s perspective, the perfect regulatory agency is

“[S]omething having a good sound, but quite harmless, which will impress the popular mind with the idea that a great deal is being done, when, in reality, very little is intended to be done.”3

Charles Francis Adams, director and later president of the Union Pacific Railroad, used those words in the early 1880s to explain what the railroad corporations wanted (and got) in a regulatory agency. Railroad corporation executives knew exactly what they were getting, because they designed and approved it. Historian Gabriel Kolko’s work on regulatory bodies offers dozens of similar quotes, most from industry trade publications and official correspondence among corporate magnates.4

The upshot is that the first federal regulatory agency, the Interstate Commerce Commission (ICC: established 1887, abolished 1995), was thoroughly of the corporations, by the corporations, and for the corporations it supposedly regulated.5 This heritage remains with us today, for “success” made the ICC (set up to regulate railroad corporations) the model for a long list of federal regulatory bodies in industry after industry in later decades, including the rash of new ones in the 1970s.6

In other words, for over a century we’ve been working within a regulatory agency template based on design specs laid out by large corporations. It should be no surprise that the resulting regulatory knockoffs have not excelled at protecting the public interest. Regulatory agencies have long been workhorses in our democracy theme park. …

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