Sunday, November 22, 2009


In 1996 President Clinton famously declared "the era of big government is over."  Subsequent policies of both Clinton and Bush followed this supposed paradigm shift by reducing regulation and letting capitalism reign.

But what about big business? Was the era of big business over as well?

Balance.  Yin-Yang.  Black-White.  Zero-One.  Predator-Prey.

Duality and balance underlies most philosophies and engineering systems that work in the real world.

One of the reasons that ships are stable is that when they are rolled to one side by wind or wave, they develop a righting moment that pushes them the other direction.  Remove the righting moment (by a shift in cargo) and a ship will roll over and sink.

When a predator has decimated the prey population, the predator begins to die off due to starvation, allowing the prey population to rebound.  Populations are never stable, but oscillate in a dynamic tension.  No one ever expects the number of coyotes and rabbits to be exactly in balance.

The US Constitution is the exemplar of power duality: Pro-active power is separated into legislative and executive (the judiciary is essentially a re-active power).  Legislative power is divided between a population-based body and a state-based body providing a balance between urban and rural populations.

Capitalism is not synonymous with free markets, but is instead in opposition.  Capital accumulation is maximized for the individual or corporation through monopolies, whereas the wealth of society as a whole is maximized through free markets where capital is at risk.  But the duality of capitalism and free-markets is out of balance.  Capital accumulation in corporations that are effectively immortal and at low risk of failure creates a bias that prevents free markets from being truly free and transparent.  

The past year of economic distress leading to socialization of failure is an example of a system out of balance.  Big business needs a counterweight.  If we aren't going to use big government, then how will we balance?

We need to recognize that we have reached the natural end of an oscillation in our recent spate of deregulation.  We have found the edge beyond which further deregulation becomes a positive feed back that sends the system unstable.  Under such conditions, the only course that makes sense is to re-institute regulations to reverse the system.  Government regulation is the only proven tool we have to encourage free and transparent markets.  No doubt the we will eventually swing to far the other way and government regulation will one day again be stultifying. But that is the problem for tomorrow - today we need to solve the problem of insufficient regulation.

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