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Wednesday, December 19 , 2018, 7:00 am | Fair 42º


Randy Alcorn: A Remedy for Sociopathic Greed

The power of trial lawyers, not re-regulation, is the best way to stop predatory corporations

If greed is good, is greater greed even better? If so, for whom? Not the millions of people suffering in the current Great Recession. They and others are losing faith in the promise of American capitalism, and are understandably angry about the inequity of a system that pardons predatory greed with publicly funded bailouts.

Randy Alcorn
Randy Alcorn

Nevertheless, the empirical truth about free-market capitalism is that it is the best approach to creating prosperity for the most people. It harnesses natural human survival instincts, motivates industriousness, fosters creativity, and encourages competition. The latter is supposed to provide the intrinsic controls that ensure supply, fair pricing, quality and choice.

However, another empirical truth about free-market capitalism is that the mechanism of competition has failed to control capitalism’s worst abuses. It has certainly not been a surrogate for morality, let alone self-regulation. One does not have to look far to find ample evidence of that.

Last month’s West Virginia mining disaster that killed 29 miners has been blamed on chronic safety and maintenance violations by the mine’s owner, Massey Energy Co., which has been accused of calculating that it was more cost effective to fight citations and even eventually pay fines than to immediately correct unsafe conditions.

Toyota, the world’s largest auto manufacturer, delayed a vehicle recall despite findings that indicated potentially lethal defects with its cars’ acceleration. The possible danger to Toyota’s customers apparently was less important to the company than was losing significant market share should discovery of the defects be made public.

Both Massey Energy and Toyota have defended their safety records.

China’s practice of capitalism is possibly the world’s most sociopathic. Chinese companies have poisoned babies by knowingly using toxic ingredients in baby formula because it was more cost effective to do so. Killing a certain percentage of infants to increase profit margins is not beyond the limits of free-market morality for these Chinese capitalists.

Examine the history of free-market capitalism and you will find ample examples of virulently rapacious greed ranging from child labor in 19th-century Wales coal mines, to the Triangle shirt factory fire in early 20th century New York. Such horrific abusive greed occurs whenever and wherever free markets are expected to be self-regulating.

The fact of the matter is that free-market capitalism is no less subject to immorality, inhumanity and corruption than is collectivism — it is just the more effective economic system. But, because some people will cheat and engage in egregiously selfish behavior, capitalism needs government regulation just as football needs referees.

Which brings us to banking reform; even the guardians of gluttony who enthusiastically supported financial deregulation under the Bush administration can not entirely refute that America’s banking institutions — the money pumping hearts of capitalism — are in need of some restraint. The banks’ unbridled greed and irresponsible selfishness have precipitated the worst global economic disaster since the Great Depression. 

There may be hundreds of competing independent banks in this country but that does not mean there is self-regulation through competition. The nation’s 10 largest investment banks reportedly generate or manage 60 percent of the United States’ entire annual gross domestic product of about $14 trillion. Just four of these banks have 56 percent of the nation’s total bank assets and 39 percent of the deposits. It is easy to understand then how the actions of even a few of these financial behemoths could affect the entire economy.

Size does matter in this case. The big banks indulged in a feeding frenzy of sub-prime mortgages and fraudulently included these shaky loans in investment packages that were regurgitated throughout the global financial markets. The resulting mortgage defaults left the big banks underfunded, which quickly brought the entire economy to the brink of implosion.

The magnitude of selfish greed such as we are now suffering from will never be eliminated by government regulation that is insufficient in scope or lacking in execution. We saw that with Enron and other publically traded companies that fleeced their shareholders right under the nose of the inattentive Bush-appointed SEC regulators.

More effective would be a form of proscription once practiced in ancient Rome whereby gross transgressions against the public welfare were punished by complete confiscation of the offender’s wealth. All property, all assets were forfeit to the state — sort of the polar opposite of a bailout. Furthermore, it was forbidden for anyone to provide aid or charity to the offender.

Imagine if the culpable executives at Toyota, Massey Energy and the big robber banks were stripped of every last penny they had and no one could give them a dime. That would be more effective than prison, or a simple fine. What worse and more fitting punishment for callous, irresponsible avarice than to be rendered irrecoverably destitute?

Forget the SEC. Regulation without appropriate consequences for violations does not foster compliance. Fight predators with predators. Unleash the nation’s prowling packs of trial lawyers on greedy corporations and their sociopathic executives.

— Santa Barbara political observer Randy Alcorn can be contacted at .(JavaScript must be enabled to view this email address).

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