On Aug 31, 2009, at 7:16 PM, Mike Beggs wrote:
> I think you're right about general micro reform, but I'm not sure
> about finance or labour markets. There was no doubt a rationalisation
> of financial regulation, which began in a lot of countries in the late
> 1970s or 1980s with a sweeping away of old bank-centred restrictions.
> They really were anachronistic and sclerotic by the 1970s, because of
> the growth of non-banks and diverse markets that had sprung up to
> allow banks to manage their liabilities more flexibly. But almost
> immediately new regulation programs began to try to deal with this
> more complex ecosystem - reflected, for example, in the Basel Accord.
But one reading of the Basel Accord was that it was an attempt to use capital requirements as a substitute for supervision. That is, with enough of a capital cushion, the banks could be trusted to do anything. Ha ha.
> I think it's wrong to see the present crisis as one simply due to
> 'deregulation', given that a key motivation for all the SIVs,
> off-balance sheet lines of credit, etc., was precisely to get around
> regulatory capital requirements, which were so central to the
> post-1980s regulatory program.
De-regulation doesn't mean no regulation at all, though it came close to that. Had the central bankers and regulators been doing their jobs, they would have stopped all that off-balance sheet nonsense. But they didn't. As Greenspan himself put it, he'd thought that the self- interest of managers and shareholders would have been enough to avoid disaster.
> As for the labour market - maybe it's different in the US, but in
> Australia we've seen a highly centralised wage-setting system based on
> juridical institutions replaced by a more decentralised system which
> is still highly legalistic. It's still extremely highly regulated -
> possibly more so (but how do you quantify regulation anyway?), but now
> proscribing centralised bargaining. For example, it's now illegal for
> unions to 'pattern bargain', i.e., to attempt to establish equal wage
> rates for the same jobs across more than one firm. When you add in (is
> it additive?) all the occupational safety and health, equal pay etc.
> legislation, it's still pretty regulated.
We've got nothing like that. Employment is "at will," and aside from minimum wages there's hardly any control on what employers can pay in the U.S. Occupational safety regs are hardly enforced here. Equal pay legislation is mostly enforced by litigation, and Wal-Mart can always afford better lawyers than the workers.
Doug