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The Foxes Protecting the Hen House

 
 
Reply Sun 17 Nov, 2002 10:41 am
Harvey Pitt's resignation could have a domino effect on destroying the credulity of the government's oversight on corporate corruption. Looks like two dominos down and who know what will be revealed about the administration's behind-closed-doors negotiations and possible concessions with Enron. Could this end up being a bigger bomb than anything the terrorists can set off to further damage our economy? I'm rather tired of hearing how resiliant the US economy is -- that's whistling in the dark. I am profoundly sceptical about the ability of our government to keep business in line -- they haven't just given them a free lunch but a banquet. Are the arrests that have occured merely smoke and mirrors to give us a hand-out? Are they scapecoats for a larger, more foul smelling problem in out economy?
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Type: Discussion • Score: 1 • Views: 3,625 • Replies: 33
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Hazlitt
 
  1  
Reply Sun 17 Nov, 2002 07:04 pm
LW The well being of our country and the safety of the savings of millions of Americans rests, in some measure, with the integrety of the captains of industry. These are the ones who have learned the art of management in the culture of "greed is good," and the "bottom line is all that counts" and "success is measured only in money." What can we expect?

Moly Ivens had a nice little analogy the other day. She was responding to an idea favored in the current administration. She said, if the deregulation crowd in Washington is so sure that industrial leaders would adhere to voluntary guidelines, why don't we try a little test. Lets take down all the traffic signs and see if accidents, injuries, and deaths on the road decrease!

Why is is that nobody in our society can be trusted to operate without regulation, but when it comes to anybody connected with industry or business, they are somehow thought to be endowed with a special angelic quality that helps them to always do the right thing? No regulation needed.
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Lightwizard
 
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Reply Sun 17 Nov, 2002 08:17 pm
I like the traffic laws analogy. On California freeways I often observe that the drivers would like to make the laws as they zoom by at 90 MPH ina 65 MPH speed limit zone. It's true that making laws doesn't mean people won't break them. It's enforcing them that makes the most difference and this couldn't be truer with corporate corruption. It looks to me like that section of the administration is literally falling apart at the seams. I've worked for small companies and large corporations high enough up in management to observe what is done to skirt around the laws. One company was abusing the state laws by raising prices just before a sale and they consistently did this. It was in the last several months I worked there and I wasn't sure about what to do about it until clients complained to me at the time I left the company. I turned them into the Franchise Tax Board and they were duly punished.
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fishin
 
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Reply Mon 18 Nov, 2002 08:34 am
The problem with Ivens is that she tends to come up with a lot of simplistic analogies but she seldom matches apples to apples.

"Deregulation" of industry is NOT the total elimination of ALL regulations as she implies with her analogy. Deregulation is the elimination of EXCESS regulations.

Within any industry there will be competition and the airline industry is a good example. Back when it was first regulated the regulations covered fares and schedules to enure competition. Since the airlines couldn't compete on a cost basis or by having more or less flights than mandated they did other things. They bought bigger planes and installed bigger seats - so the government stepped in and regulated the size of seats on planes so that no one airline could have an advantage. The airlines then went to providing meals and drinks on flligts so the government stepped in and regulated the number of meals and types of drinks that coud be included in the basic fare. Then the airlines, since they where limited in how many meals they could provide, focused on the quality of the meals. Again, the government stepped in and regulated the size of portions so that no one airline could claim an advantage (the FAA even had regulations that limited the amount of meat that could be in a sandwich to 3 oz. at one time.).

In every one of those cases the government regulations were set at the lowest current level (i.e. smallest seat, fewest meals, least food in meal..) when they created the regulations so we ended up with the lowest level of service so that government regulators could say that all the businesses in the industry were at an equeal level and were competitive and all the while every single one of those companies was guaranteed a profit at the behest of the government regardless of their ability to perform - if they couldn't manage a profit the government just raised the fare rates to cover the losses and that was that.

The airline industry has long since been "deregulated' but there are still thousands of regulations that cover the industry. The entire FAA exists for that purpose. If that industry had been "deregulated" as her analogy implies then there would be no FAA and no government regulations of airlines or airline safety at all.

Reverse Ivens' analogy. Government "regulation" as it is currently practiced, is more like having the traffic signs but also having a cop every 100 feet along every single road to enforce them. Eliminating that type of scenario is what the "deregulation" crowd is pushing.
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blatham
 
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Reply Mon 18 Nov, 2002 09:13 am
fishin

I think the specifics of your post an excellent counterpoint to Iven's too-broad analogy. But I'm not at all sure that your final sentence..."Eliminating that type of scenario is what the "deregulation" crowd is pushing."...isn't equally guilty in the opposite direction.

Examples, such as LW's personal one above, or the many of which we are all familiar (ADM or Levi-Straus price fixing, tobacco, Enron, etc) of corporate or business entities acting in criminal self-interest, are too common to allow your claim.
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blatham
 
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Reply Mon 18 Nov, 2002 09:18 am
A suggestion/request to whomever might be doing invites to our new community...I found no abuzz voice more knowledgeable or rigorous on matters of economics than that of fakename. I'd love to see him here.
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fishin
 
  1  
Reply Mon 18 Nov, 2002 09:32 am
blatham wrote:
Examples, such as LW's personal one above, or the many of which we are all familiar (ADM or Levi-Straus price fixing, tobacco, Enron, etc) of corporate or business entities acting in criminal self-interest, are too common to allow your claim.


There are two seperate things here though. Ivens' analogy (and my reposnse to it..) dealt with the existance or non-existance of regulation. LW's comments (which I pretty much concur with 100%) are directed at the enforcement of the regulations that do exist.

I have no problem going after a company (or individual) that violates laws - in fact I'd encourage it. Nail teh bastids to the wall. That is the entire purpose of law enforcement and I support that. Law Enforcement costs are very low overhead to companies that follow the laws. (i.e. people who don't speed don't get speeding tickets.).

Regulation, as has been practiced in the US over the last 100 years, costs dearly and everyone in the industry pays whether they ever created a problem or not. "Regulation" by the Government has the same result as creating a monopoly does - it eliminates all competition and feeds itself by promoting bloat.
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Lightwizard
 
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Reply Mon 18 Nov, 2002 09:40 am
It's called government after all. Why anyone would ever get the notion that government meant governing only individuals and not business is funny. There's nothing in the constitution placing business in the position of religion. Freedom to fix prices, hire sweat shop labor in foreign countries, juggle the books, sell stock to your own employees knowing it is a bad investment -- the list is nearly infinite in breaches of the public trust. The regulation of the airlines is a good model for what not to do but the degree of deregulation is what gave the airlines a free ticket to pare down their security measures. We all know where that led to. I'm amazed that anyone would believe corruption is reserved only for government and that laissez faire means leaving business alone to use their own devices and treat the public as they see fit. Competition can breed covert tactics to get ahead of the other guy using nefarious means.
Where were the whistle blowers within the corporation? Answer: they were all masterfully caught up in the scheme.
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fishin
 
  1  
Reply Mon 18 Nov, 2002 10:03 am
Lightwizard wrote:
It's called government after all. Why anyone would ever get the notion that government meant governing only individuals and not business is funny.


You are absolutely right! Apply the same standards to both. We have laws that prohibit murder, assults, theft, etc.. Do we have government regulators assigned to walk around with each and every one of us ensuring that we don't do these things on a daily basis? Nope! We have law enforcement that investigates these events when they occur and a criminal justice system that prosecutes suspects. The system of regulation however, presumes everyone is guilty before they ever even do anything.

There is a difference between "governing" and "regulating". Government should, by all means, create an outline for the conduct of business. In some cases, where safety is involved for example, those laws should be pretty precise. There should be things like standard accounting rules and there should be occassional audits, (announced and unanncounced..).

Laws should be enforced and penalties should be harsh. But I disagree with the idea that every aspect has to be controlled and that there has to be "over-seers" along every step in the business process at every business.
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Lightwizard
 
  1  
Reply Mon 18 Nov, 2002 10:24 am
Business are all made up of individuals and I don't believe it so go so far as to assume they are all suspect of breaking the law. Regulating the quality of the food on an airplane is totally absurd but leaving it up to the airlines to determine how much security is necessary proved to be a fatal mistake. This is veering slightly off subject as this has to do also with turning over parts of our government to private enterprise. Ah, yes, they've done such a great job with Amtrak!
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fishin
 
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Reply Mon 18 Nov, 2002 12:15 pm
What security determinations were left up to the airlines? The FAA set the standards for what could and couldn't be carried onto a plane - not the airlines. I wouldn't press the point that the airlines and the security companies they hired were perfect by any means but even if they had been absolutely perfect in every aspect of their jobs they wouldn't have stopped anything because the FAA had mandated that it was acceptable for a passenger to carry knives on to an aircraft.

The airlines didn't make those rules. The government regulators did.
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Lightwizard
 
  1  
Reply Mon 18 Nov, 2002 12:41 pm
Exactly the point -- the responsibility of the airlines or any business should be no less rigorous in questions like security. If you'll remember, airlines were routinely fined for not meeting the standards and I can't feel too sorry for them now -- they have to take a larger portion of the responsibility for the lapse in security. The proof is in the pudding -- security was then taken out of their hands. Wouldn't it have been nice if some smart corporate executive had realized that tougher security was crucial in their staying in business. It makes Michael Moore's "stupid white guys" ring in ones ear. If corporations were to take more responsibility and take it seriously, there wouldn't be as much reason for regulations. It works much like this site -- if it had no rules or regulations and everyone was trusted to behave themselves, that would be ideal. But that is simply not the case -- just the presence of the moderators makes for a more pleasant atmosphere. In other words, we're in an upscale cocktail lounge instead of a dive in the worst part of town where a barroom brawl is likely to break out. That's only offered as an analogy and again veering off the topic. The point of the discussion is that the administration has installed people in the position of oversight when they are apparantly nearsighted regarding their business cronies.
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husker
 
  1  
Reply Mon 18 Nov, 2002 12:48 pm
I was just using "The Foxes Protecting the Hen House" last Thursday to explain accounting to a sales guy. Funny!
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Lightwizard
 
  1  
Reply Mon 18 Nov, 2002 01:00 pm
That's funny, Husker. But do you have anybody lobbying the credit department to loosen up the reins on the sales department? Laughing You don't have to answer that if there are hookers involved.
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Lightwizard
 
  1  
Reply Mon 18 Nov, 2002 01:02 pm
It does bring up a thought on the fishin' airlines being responsible -- wouldn't one like to know how much lobbying was done and how effectively it was done to loosen up the regulations in regards to security? That's what should come out with a probe into what happened prior to 9/11 -- for that matter, what has happened since. Sorry, somewhat off topic again but there is some relevance as far as government oversight.
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Setanta
 
  1  
Reply Mon 18 Nov, 2002 01:20 pm
Lightwizard wrote:
It's called government after all. Why anyone would ever get the notion that government meant governing only individuals and not business is funny.


Not only is the topic title à propos, but this quote in particular. Frederick II of Prussia is usually referred to as "Frederick the Great," and, predictably, since most men read history to learn about military matters, it is assumed that this was because of his military performance. Put him in the category of "Kings who lead their own armies," and he just manages to qualify. Two of his brothers were as good, if not better, at military matters than he, which proved the salvation of Prussia in the Seven Years War. I do think he deserves the title "the Great," but more because of his attitude toward what constituted good government.

Frederick was so obsessed with the protection of the individual, especially the small, relatively powerless individual, that he had the wool pulled over his eyes on a few notable occassions. However, those occassions simply provided the exceptions which proved the rule that the law usually serves the wealthy and powerful--he was tireless in pursuing and eliminating corrupt officials and unjust tribunals. This has been an issue for as long as people have written history. Many men i know are disappointed in, and do not complete reading The Peloponnesian Wars by Thucydides. They open it, thinking to read of Greek martial glory, and, instead are treated to a detailed discussion of the political causes of the war(s) and the scheming which continued throughout. In particular, Thucydides, who participated in the war, speaks of the constant struggle between the hoi poloi and the aristocratic classes. Although a member of the latter, and sympathetic to their arguments, he cannot help but pile up the evidence of the cupidity, corruption and peculation of those in positions of power.

In Ab Urbe Condite, by Titus Livius (Livy), the theme of the abuse of the Plebs by the Patres and the consequent political struggles and civil strife in unending. The eventual victory of Patrician over Plebeian left Rome a slave-run state, and the destruction of entrepreneurial and small enterprise eventually lead to the collapse of the imperial government in the western regions of the empire (erroneously know as "the fall of the Roman empire"). The empire in the east survived largely because the Anatolian plateau and the more fertile regions of Syria wrested from the Parthians had been settled by veterans of the Legions, as well as Roman Plebeians who had been vocal opponents of the latifundia. With slave labor largely unknown in the east, that portion of the empire survived by more than a thousand years the sack of Rome by Alaric and his Goths in 410 C.E.

I won't go on and on about this, other than to comment that my reading of history is that people in power cannot be trusted, and ought not to be trusted, AND that Americans are far to trusting (read, lazy) indeed. In the Venetian Republic, if you accused a public man of peculation (appropriating public monies) and he was acquited, you were executed, and your property went one third to survivors, one third to the government, and one third to the "wrongly" accused. If the accused were convicted, one half went to the accuser, and one half to the government, and the survivors be damned. There were few such accusations made, most were proven, and the Republic was rarely known to have any big problems with corruption or peculation. This was a state given over wholely to the pursuit of wealth, and, knowing themselves and each other, measures such as this, and others hardly less stringent, were in place to protect all from the cupidity of the few.
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husker
 
  1  
Reply Mon 18 Nov, 2002 01:27 pm
Wizard - man I hate talking to myself, I'm working to enable those sales folks.
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fishin
 
  1  
Reply Mon 18 Nov, 2002 01:29 pm
Lightwizard wrote:
It does bring up a thought on the fishin' airlines being responsible -- wouldn't one like to know how much lobbying was done and how effectively it was done to loosen up the regulations in regards to security? That's what should come out with a probe into what happened prior to 9/11 -- for that matter, what has happened since. Sorry, somewhat off topic again but there is some relevance as far as government oversight.


IMO, it's irrelevant at this point. It might be interesting to know but what does an investigation gain us other than that? If that type of information is to be paid for by a public inquiry then it should have been done prior to Federalizing airport security positions in the wake of 9/11.

But, trying not to veer too far here, my overall point being that government, while well intentioned, has a piss poor way of attacking the issue of regulation. We want to be able to buy meats that don't kill us in our grocery stores yet there are no Federal Government regulations that specificy that only uncontaminted meats will be sold. Instead, we have thousands of regulations that tell meat processors how to clean their plants (and those plants are inspected for cleanliness), temps for meat storage, etc..

Regulation, by and large, controls the process all along in the hope that the eventual output will achieve the desired state. Why is the concern focused on HOW the desired state is met instead of IF it's met. The entire regulatory system is still mired in the roots of the industrial revolution. 100% backasswards. Why not state the desired objective and then force the producers to meet that standard?
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Setanta
 
  1  
Reply Mon 18 Nov, 2002 01:29 pm
Damn, buddy . . . here's a broom, go push back the sea . . .

(since Fishin' got a post in before i could post this, i'm talkin' to Husker . . .)
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Lightwizard
 
  1  
Reply Mon 18 Nov, 2002 01:46 pm
I was a controller/credit manager for five years straight out of college so I know some humorous and some tragic stories regarding control of the sales department. I once went on vacation and the boss decided to let the sales department do a deal with a company run by all ex-convicts! Funny and tragic and it was hell to collect that debt. Credit should be a part of the sales department in most cases as it is an incentive to buy but then the oversight must be pretty stringent in order to avoid bad debts.

Fishin' -- I agree that government is very backward when approaching the regulation issue and it doesn't help to have favoratism through lobbying mixing it up. How about campaign financing reform being high on the agenda?
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