|[Do you think that]...At present, governmental ... regulation
of private corporations is excessive?' (writes Jessie from the USA).
I can relate this to general sociological issues here, but you may also need a nice case-study or two to develop this in the context of the USA (which I don't know too well). I mention a few specific cases here which might help -- like McDonald's, international financial speculation, Bill Gates, pollution and so on -- but I'm sure you can add some of your own.
The regulation of industry and all that went with it -- the market system, international trade, the growth of the money system and the rest -- was a major concern of the founding parents of Sociology at the end of the last century and in the first few decades of this. You might want to consult a good Sociology text here -- say Ritzer (1994). Each had their own characteristic approaches and concepts, but all shared a concern that the growth of unregulated industry was changing the social order, and that this would have both good and bad effects. The good effects centred on much-needed modernisation and economic growth. The bad effects concerned the damage to the social order that would also ensue -- the breakdown of traditional social solidarity was probably good, but what was going to replace it?
Durkheim, as you will know, saw a change in the basis of social solidarity as the consequence or rapid industrial growth and what we might now call globalisation. The old simple moral codes lost their authority as alternatives were encountered following contacts (initially trade contacts) with other societies. The rapid and extensive division of labour encouraged by modern industrial enterprises (the factory system, occupational specialisation) would destroy the old communities which were the basis for social solidarity -- people were now becoming quite different in terms of their jobs, incomes, work conditions and skills.
As is well known, Durkheim hoped that a new form of organic solidarity ( a kind of interdependence and toleration of difference) would replace the old 'mechanical' kind, and there is no doubt that he approved of the change (since the old solidarity was based on pretty authoritarian and intolerant enforcement of collective standards). Yet he also saw a need for the State to regulate the new social forces, to protect the social order, to restrain the new forces a bit -- no other body had this as its prime concern. The State had to support bodies that would reinforce solidarity (national community, a national education system, work-place guilds), and it had to prevent the social differences engendered by modern industry from getting out of hand. Thus modern industry tended to produce large inequalities of wealth and income, and this might be dangerously divisive -- so the State had to regulate inequality (by taxing the rich) to keep things in hand.
Much subsequent functionalist sociology was devoted to this problem too -- modern industrial societies were going to be unequal ones, but what sort of inequalities could be encouraged and how could the bad effects be minimised. Inequalities arose in market systems, of course, because of different rewards made available to people in different jobs. Some of this inequality might well be functional and helpful -- people doing the most demanding posts needed higher rewards to attract them and compensate them for undergoing lengthy training, for example. However, it was plain that not all large rewards were like this -- some seemed far too large, others seemed attached to fairly unimportant jobs. A well-adjusted State and society would ensure that fair rewards went to those pursuing the most important jobs see file on this . One way to do this was to ensure that the best-qualified people got the best jobs -- to tie occupational success to educational attainment ( that is, develop a meritocratic society). This would happen in the long term anyway, perhaps, but meanwhile the State might help things along a bit (e.g. by making sure State employees were recruited according to merit -- hence the introduction of competitive examinations in the armed forces and the civil service in the UK in the late 1880s, and the growth of universal State education as a means of spreading equality of opportunity).
Other strands in the thought of the founding parents were different here. Marx had analysed capitalism quite differently. For him, the massive economic growth (which he also admired) had developed after the establishment of a new way of exploiting people (through markets and wage labour (link) instead of the old ways of political repression or religious ideology). This had proved very effective and had funded an energetic social class of capitalists. This class then had proceeded to strip away the remnants of the old traditional society in order to release the potential of the new market forces. Marx and Engels did not always disapprove of this either -- at least rapid urbanisation (one consequence) had done away with sentiment and 'rural idiocy' as they put it (in the Communist Manifesto -- Marx and Engels 1975).
Massive social division was the result though, as capitalists benefited massively at the expense of everyone else. Of course, some limitation and reform was necessary -- hours at work were finally restricted in Britain, and some of the more dangerous trading practices outlawed. But this was only possible given sophisticated forms of exploitation that no longer relied on these nasty practices (mostly the growth in productivity following mechanisation). I think Marx is sometimes misunderstood here too -- I am not sure he did think that the working class would always be driven to accept the minimum of wages (the so-called 'emiseration thesis'). In a highly productive economy generating enormous wealth it is possible to be a little generous and allow some sort of reward to go back to workers: this is sometimes called 'trickle down' these days, and it is still used to justify large investments in dubious capitalist enterprises in poor countries. Further, long term, markets do set wage rates, so in times of labour shortages, bosses have to pay good wages to attract workers. The point is that relatively speaking workers get a rough deal, and that this is built into a system that teats them just like any other commodity and where legal, political, religious and educational institutions all reinforce this view so that it seems 'natural' (see my file on this ) .
Of course, Marx thought (well when he was a young man anyway), that all this would end, that reform and regulation could only stave off the day when the whole system came crashing down. Long term, a serious crisis was inevitable. In terms of economics, the exploitation of workers had limits and so profits would decline in the end. This might be staved off a bit by mechanisation or by expanding into other countries, but it would come (modern marxists have their doubts, of course). In terms of politics, inequality would be tolerated only for so long before a rebellion broke out -- what had workers to lose ('only their chains' is Marx's famous answer, of course), what was in it for the rest of us who were not fat cats? We could all see the huge potential and productivity of modern enterprises and it was simply irrational to let the bulk of the proceeds go to a few people who already had far more money than they knew what to do with -- why give Bill Gates another billion while kids starve in Africa? (to use a contemporary example). Let's make the system serve everybody.
Key practices have to be ended and replaced, not reformed or limited . Thus to take two specifics both in Marx's Critique of the Gotha Programme -- in Marx and Engels 1975), first the slogan 'a fair day's work for a fair day's pay' disguises abstract exploitation and the wage system must be abolished. The marxist slogan instead is 'From each according to his [sic] income, to each according to his need'. Similarly, the State exists to regulate and thus protect and modernise the capitalist system -- communists will 'smash the state', or at least let it 'wither away' as it carries on for a bit merely 'administering things' until it is replaced. Well, we shall see…
Weber was a real pessimist. For him, one of the general characteristics of industrial societies was the growth of an inhuman calculative rationality which comes to dominate public life. This kind of rationality (zweckrationalitat) involved the selection of the most effective means to achieve given ends (and not, say the rational pursuit of the good life or of virtue or salvation which had been the goal of earlier societies -- wertrationalitat). This ruthless calculation is indispensable to modern societies -- neither business nor administration (bureaucracies)could succeed without it -- but it is inhuman. We all get reduced to means to an end, or to calculations on someone's spreadsheet, described as numbers (IQ score, social class, income bracket, life expectancy and so on). All social life succumbs until society becomes an 'iron cage'. Resistance is limited -- an occasional charismatic leader might restore human, non-calculative values to a central role, but on their death, the greyness returns; resistance movements might grow (like communist parties or perhaps feminist movements these days), but they will face a paradox --in order to grow and gain power, they will have to organise in a calculative way too.
Applying Weber to this question gives unusual results then -- business can only be regulated by States using the same logic as businesses. The calculative logic that reduces human beings to measurements is used by reformers as well as by entrepreneurs. There is no escape. We are all doomed to deeply unhappy and unfulfilling lives. Nice little read isn't it?
However, perhaps the most famous application of Weberian theory is Ritzer's (1993) work on McDonaldisation (and see file). Ritzer sees increasing numbers of organisations (including universities) following the rational principles that have made McDonalds such a worldwide success. He disapproves, in classic Weberian terms (using the 'iron cage' scenario), and adds some issues of taste and quality while he is there. Ritzer does not spell out the wider political context in terms of what the State might do to regulate this process, though. Rather, he advocates a form of consumer resistance. This connects with a whole range of work on how consumers can affect large companies, and for some (like Nava 1991), movements like consumer boycotts can be more effective than any other kind of action to limit the powers of large companies. Again,this is not really a new idea, though -- JS Mill (see below) advocated State support for these rivals to big producers ( although he had in mind Trade Unions) to enable them to operate in markets effectively to restrain the big operators. Getting back to consumers, it is clear that this is one option for States -- enact legislation to strenghten consumers, rather than restrain producers directly. The sort of thing that might happen here includes laws to include health warnings on dangerous products, to list ingredients, or to impose 'cooling-off periods' for credit purchases, the provision of information for consumers such as listing known side effects of medication (the USA and the Net together offer an excellent service for Brits), the provision of consumer courts and so on.
In the UK, functionalist thinking has been dominant as a kind of practical politics, much of it associated with liberal philosophy too. (You will know better than I the US system - try some of this out on Jeffersonian or Jacksonian liberalism?). JS Mill, for example, admired modern industry for its reforming, modernising and wealth-creating capacities, but was also aware of the need to protect the social interest. Early liberals had thought that the social interest would be served by letting the private interests of individual companies fight it out in the market, but in Mill's time it was already clear that large companies could dominate markets (hence the move to bolster the other parties as above). Further, the 'social interest' gets more complex in modern societies, and establishing it becomes a specialist matter. Is it in the social interest to provide hospitals funded by State taxation, for example, or to leave each person to provide their own health insurance? Much depends on how you calculate things like long-term social interests. This was brought home in a vivid way in Victorian London with a large and dangerous cholera epidemic in the 1880s -- this affected mostly the poor, who had no health insurance so it was right (perhaps) that they bore the risk. But the epidemic threatened to spread to the rich as well. In this way, it could be argued that it was really in the long-term economic interests (let alone moral interests) of the rich too that health provision be extended to the poor, since an unhealthy poor population was a threat to everyone. State provision of health facilities followed (mostly the building of sewers in this case).
In this way, a number of proper functions for the State were identified. To regulate the activities of industry to safeguard health, for example (to prevent the adulteration of bread with poisonous substances, or to limit long hours, and unsafe working conditions of workers), Later, other matters had to be regulated -- transport and finance, for example. These matters had long-term social interests involved which private companies could not establish or preserve - it is in the interest of any single company to try to get a good exchange rate short-term for trading with foreign countries, but only the State can and must ensure long-term regulations and stability. For Mill, simple majorities in straightforward votes or referenda would not suit to establish the social good --majorities too cannot be relied upon to establish the real social interest (hence his warnings about 'tyrannous majorities' and his defence of tolerance of minorities as in the social interest). For Mill and others, as well as Durkheim and the functionalists, the only way to identify these special social interests was by way of a new science of the social -- Sociology!!
This kind of dilemma --identifying what States should do and what is best left to unregulated private enterprise has dominated liberal political thought ever since. In the USA it was not thought to be a problem at first. The pioneers established a kind of simple democracy where everyone was a small businessman at first, and few thought of what any national or political bodies might do except stand back and let the new society of equals develop. As industry (or capitalism) developed, it became clear that the old tensions were emerging even in the new society -- some people had become very rich and others very poor, some companies had begun extensive trading and so needed a national and international system of law and economic regulation - hence the need for a State and for State taxation and regulation. However, claims Habermas (1974), the actual political system in the USA was never carefully thought out as a result, allowing all sorts of inequalities to re-enter the originally revolutionary society.
States seemed pretty good at regulating economic activity, especially after World War 2 (another classic State function, of course, is to declare war). State intervention seemed good at ironing out the booms and slumps that private enterprise seemed to generate. Most western economies had had a series of terribly divisive economic depressions just before the War, which private enterprise alone seemed incapable of ending. State intervention was needed to jump-start the economy, by large public works programmes, for example (the 'New Deal' in the States). As a number of cynics have noted, State spending on armaments is also an excellent way to revive an economy --people get employed and have money to spend on other goods, so you have a 'multiplier effect'. After the War, the Allies, under US leadership, also saw the need to regulate international trade and finance with a series of agreements on foreign exchange rates or trade tariffs.
After decades of State regulation and growth in Europe and the USA, this approach seemed to come under fire, and newly elected conservative governments began to 'roll back the State'. State spending was reduced, especially on large State projects or on welfare benefits. State-owned industries in the UK were sold off (in the UK coal, railways, coach and bus transport). Privatisation was encouraged in all fields, even in health and education (which we had all thought to be State-run for ever). Legislation to protect workers, safeguard Trade Unions, set minimum wage rates or defend the environment were repealed. Above all, for my money, finance was liberated from Government controls, and people and companies were allowed to invest where and when they pleased. As expenditure fell, taxation could be reduced. The argument was that this would liberate private businesses to re-develop and re-energise the flagging British economy, reduce overseas debt, restore supremacy in trade and so on (major themes in US Reaganomics as well as in Thatcherism).
The State had grown to be very large, and this had meant high levels of taxation to finance State initiatives. Some State-run businesses had grown complacent in their monopoly position (service and prices for the old State-run Post Office telephone company in the UK were a disgrace), State funding had removed the competitive edge from lots of enterprises, and (maybe) State-funded welfare had produced a culture of dependency, resignation and complacency. Even for sympathisers (like the Habermas 1976), the modern large State was being asked to do too many things: to operate like a competitive business AND respond to demands based on social need, to subsidise welfare systems AND encourage risk-taking and enterprise, and (above all) to represent all its members, while trying especially to encourage the minority of wealth creators.
Let's try to bring this up to date a bit with some modern dilemmas. Many people think the balance has gone too far towards de-regulation and that things have got out of hand. Businesses are pursuing their own private interests harder than ever and social problems are re-emerging in a drastic way. Inequalitites of wealth and poverty are large again in Britain (still not as large as in the USA), and we are experiencing the return of problems like crime and disorder, poor health, educational underachievement, city squalor, social exclusion and social division. There are prickings of social conscience as beggars return to the streets, and there is a familiar calculative fear that the poor will not tolerate this much longer and may rebel and make the rich uncomfortable too -- by organising street riots or protests or tax boycotts or crime.
Internationally, similar effects are discernible. Unrestricted industry pollutes and despoils the environment, and wrecks traditional societies (which is good and bad as we saw). Industries exploit workers in the 'Third World' and destroy wild life. It is the same sort of argument as before. Companies follow their private interests here, but they do not and cannot follow social interests which are much longer-term and much less calculable. Yet it is in our long-term interests, all of us, to prevent global warming, the depletion of the ozone layer, the destruction of rain forests and so on, not to mention the exploitation, deprivation and starvation of millions of our fellow humans.
However, it may now be too late to try and regulate private enterprise even if we were persuaded to do so. There have been several major changes since the 1960s and 1970s, usually referred to as globalisation. One aspect of this is that companies can leave countries where legislation is too strict and set up elsewhere (and large UK and US companies have done just that), so they are beyond the reach of national legislation. Or they can go off-shore. Another aspect is the shift towards finance capital, and away from actual production. This is controversial, but it can be argued that those who finance production -- shareholders (mostly merchant banks and insurance companies) -- have gained more control over companies than ever before and they now take the major decisions. The problem is that finance is very hard to regulate --large amounts of finance remain in private hands so private financiers can easily defy government actions (seen best in the way currency speculators can defeat the wishes even of major governments). More dollars are owned by banks and individuals outside the US than by Fort Knox. Secondly, finance really is global (much of it runs on the Net of course), so that political events in Japan rapidly have an effect on stock prices in New York. The speed with which everything happens frightens even the experienced -- George Soros (a successful speculator) has written that he fears future decisions will be taken too quickly for human beings to apply proper consideration to the consequences (so, inevitably, computer programs are beginning to do so). The consequences may be incalculably complex anyway. The rather scary picture that emerges is that the financial market, in many ways the key to the whole stability of the economic system, is out of control, even by those private financiers who know it best.
Perhaps we should just learn to live with the system, or perhaps even de-regulate still more, and rely on the world market to solve its problems. I think most sociologists would be sceptical of this, but you can still find politicians and economist who argue that the market is the best solution -- if pollution gets so bad that it affects operations, the market will solve this problem (perhaps by permitting pollution engineers to make lots of money in solving the issue). If worker health does pose a threat to productivity, this cost will be recognised and steps will be taken to reduce it. As natural resources disappear, there will be major incentives to develop new artificial ones. Political problems will be solved if they become serious enough to threaten the system -- the market will make it profitable to solve them. The system is unstoppable, and certainly highly productive and successful, and any attempt to restrain it will only lead to inefficiency and delay.
Other answers are that nation states need to get together in to larger organisations themselves (one argument in favour of a European Community), or that the USA should lead a new attempt to establish a framework of international law or agreement -- to impose policies of 'polluter pays' perhaps, or to establish miminum safeguards for workers. Yet who will police this regulation and at what cost? And can it be policed? A massive surveillance system would be required, backed up by force if necessary -- and this is not really an attractive alternative either.
Overall, the dilemma seems to be that regulating markets leads to huge, expensive and powerful political agencies that aren't very effective anyway. On the other hand not regulating them will lead to substantial inequality and social unrest, and maybe long term disaster for the whole planet. Perhaps cycles of regulation and de-regulation make sense after all?
Habermas J (1974) Theory and Practice, London: Heinemann Books