Must-read of the day: New York Times op-ed, "What Obama Left Out of His Inequality Speech: Regulation"

I noted several major sins of omission in President Obama's big economic inequality speech this week. But one thing I didn't emphasize nearly enough was Obama's neglect of an extremely important contributor to rising inequality: the revival of militant laissez-faire ideology and the war on government regulation.

In today's New York Times, there's a splendid Opinionator column by law professor Thomas O. McGarity on this topic titled "What Obama Left Out of His Inequality Speech: Regulation." It's a refreshingly plain-spoken piece. In it, McGarity writes:

History tells us that in periods when protective governmental institutions are weak, irresponsible companies tend to abuse their economic freedom in ways that harm ordinary workers and consumers. The victims are often less affluent citizens who lack the power either to protect themselves from harm or to hold companies accountable in the courts. We are in such a period today.

McGarity says that this although the anti-regulation movement portrayed itself as a grassroots mass movement, from the start it was a stone astroturf hustle:

It also took the determined efforts of a relatively small number of philanthropists and academics to create what I call an “idea infrastructure” around minimalist regulation, popularizing that ideology and persuading Congress, the executive branch, and the courts to scale back constraints on corporations.

Corporate activists — responding in part to a call to action by William E. Simon, a financier and architect of the modern conservative movement, who served as Treasury secretary under Presidents Richard M. Nixon and Gerald R. Ford — devoted tens of millions of dollars to the creation of right-leaning think tanks, media operations and free-enterprise centers in academia, as well as lobbying and public relations firms and “grass-roots” (but actually business-financed) organizations.

Three major things happened as a result of this decades-long deregulation fiesta:

1. Regulatory agencies were severely weakened. Their powers were diminished, their budgets were slashed, they were woefully understaffed, and frequently, the staff that remained were suspiciously cozy towards the interests they were supposed to be overseeing:

But they were remarkably successful in disabling the institutions charged with establishing the rules of responsible corporate behavior and with holding irresponsible companies accountable for breaking those rules. By the mid-2000s, those resource-starved federal agencies that had not become thoroughly captured by the industries they regulated were at best reluctant regulators.

2. Because of the lack of proper regulation, an awful lot of people were needlessly injured, got sick or died:

The deadly oil refinery explosion in Texas City, Tex., in 2005, the financial sector meltdown of 2007-8, the Upper Big Branch mine catastrophe in West Virginia and the Deepwater Horizon oil spill, both in 2010, multiple disease outbreaks because of contaminated peanuts, eggs, hamburgers and seafood, and dozens of motor vehicle and toy recalls were just a few of the visible consequences of the laissez-faire mentality that has pervaded the American political economy.

3. The deregulation bonanza has enriched corporations and elites, while at the same shifting risk onto ordinary America and annihilating their economic security. It's been one of the major contributing factors to soaring economic inequality:

The laissez-faire revival also contributed to the growing disparities in wealth and well-being that became painfully obvious during the last decade. While corporate executives, Wall Street bankers and hedge fund managers greatly benefited from the three waves of assault on regulation, the fortunes of blue-collar workers and the working poor steadily declined. Median incomes have fallen over the last decade.

The disparities brought on by the laissez-faire revival, however, go far beyond the vast disparities in income and wealth. It is of fairly small consequence to the disabled miner whose boss violated federal safety standards that the mining company’s revenues, profits and executive bonuses are on the rise. But the disparity becomes unconscionable when lax pension-protection regulations let the company spin off its “legacy liabilities” (pension and health-insurance guarantees) into an undercapitalized shell for the sole purpose of filing for bankruptcy protection.

[Snip]

The chief executive of the giant meat producer does not have to worry about losing a finger or contracting carpal-tunnel syndrome as he attempts to extract more “efficiency” from a poultry processing plant by persuading the Department of Agriculture to allow the company to speed up production lines. The health of few rich people is at risk from the plumes of unregulated toxic emissions that migrate through neighborhoods adjacent to large petrochemical complexes. The affluent tend not to live so close to railroad tracks as to be affected by toxic gases escaping from derailed tank cars.

As McGarity depressingly notes, even after deregulation caused a financial crisis that almost destroyed the world economy, "far-reaching reforms have not been forthcoming." Alarmingly, following the 2010 elections, Obama signaled that, instead of getting serious about regulation, he was preparing the way for another deregulatory orgy for corporate America:

Rather than rising to the defense of beleaguered regulatory agencies, the president hosted a closed-door “summit meeting” with 20 chief executives of major corporations, where he promised to work more closely with the business community. He then ordered all regulatory agencies to review all previously issued rules with an eye toward “streamlining” or eliminating as many as possible.

In Obama's 6500-word speech about inequality, he mentioned regulation only twice, and fleetingly -- and one of those times was to call for "streamlining" regulations that are "unnecessary" and "costly."

Forgive me if I don't feel hopeful about the prospects that our government will meaningfully address the national crisis of economic inequality any time soon.