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Making the Rules

Feb 18, 2013

By Blair Boehm 

 
By Blair Boehm
 
Self-regulation is a beautiful thing and no one likes being told what to do. This is a strong part of American culture and, in reality, permeates most of our daily lives. This is often called personal responsibility and is generally the best way for society to fix its problems. The problem with this way of fixing problems is that it is a voluntary system that taps society’s best, and worst, tendencies. When society leans too much on its lesser characteristics, government steps in to correct the imbalance. This is often not a desirable situation, but when a societal ill is not being addressed it is the government’s role to address it.
 
This has happened many times throughout American history. Trust-busting in the early days of the twentieth century, civil rights legislation in the later half and a myriad of other government policies are all evidence of this mechanism. Even our Constitution came with regulations directed at our government called the Bill of Rights. 
 
Of course regulation can go too far with the most popular examples being communism in Russia, or Nazism in Germany. Environmental policies are current examples of hotly contested regulations, particularly in areas that rely on the land for livelihoods and feel that their conservation efforts are sufficient. Since 2008 we have largely been focused on regulations and restrictions directed at the economy and the private sector. 
 
It is without doubt that the financial collapse of later half of this last decade was due, in no small part, to a lack of regulation of the financial industry. Trading in toxic loans was rampant, housing prices were inflated to incredible levels and individuals were given lines of credit that would be laughable today. The industry had taken the trust that was afforded it when the regulations were reduced and twisted it for the sake of profit. No one individual or company was to blame, but the industry as a whole should have taken steps to self-regulate and avoid the crisis that resulted.
 
In a smaller way, this is what the liquor, beer and wine industry has done for decades. Little known to the general public is the fact that advertising is highly restricted for the companies that make up this market. These are self imposed regulations that govern the use of certain marketing tools to sell alcohol. Sex is a great example of something that is frowned upon in this industry and they go to great lengths to regulate this amongst themselves. This is partially to avoid the inevitable race to the bottom that would result from the uninhibited use of this tool. It is also because after Prohibition, and watching the restrictions placed on tobacco companies, this industry truly knows what government regulation can do. 
 
To put a current event in the mix, the President used his State of the Union address to announce his desire to raise the minimum wage to $9 per hour. This has aroused the justifiable worries of inflation and whether small businesses will be able to absorb the increase. It has also brought to light the fact that our middle class is shrinking away to nothing and that continued income inequality in this country will have dire consequences in the future. When this is taken into account against the fact that corporate profits and CEO pay have never been higher, it is no wonder that government is stepping in to correct the imbalance. 
 
Industry as a whole has failed to correct the problem of middle class pay. Large companies have had a few years now to recover from the financial collapse, they have been given tax cuts, tax breaks, tax holidays and the faith of the American people in their ability to create jobs. The profit motive has pushed corporate responsibility for many of our largest companies into the background. They have forgotten what our classic captains of industry took as a given that without consumers able to buy a product, the long game for that product is not so bright. 
 
Raising the minimum wage may not be the best way to revive a middle class in this country, but it is currently without a substitute. The administration and his party have decided on this route and the opposition party has no alternative save more tax cuts and less regulation. The opposition’s ideas have been tried since the dawn of the millennium with the result of a measurably diminishing middle class. From this we can safely assume that giving more money back to large companies in particular does not translate directly to more higher paying jobs for everyone.
 

Raising the minimum wage does seem to contrast the President’s usual rhetoric of using a scalpel instead of a hatchet, but it could have many redeeming consequences. Those companies who have been trying to provide higher pay will now be more competitive against those who have neglected wages. The negative effects of high degrees of income inequality could be pushed down the road a little further. Most importantly, perhaps those companies that have become so large, influential and profitable will begin to self regulate and pass these benefits on. After all, no one likes being told what to do. 

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Blair Boehm attended Iowa State University where he accumulated a bachelor’s degree in Political Science and a master’s degree in Public Administration. He has worked in a variety of capacities including legal, accounting, mortgage lending and as a research assistant for Dr. Politics. Boehm lives in the Twin Cities where he is working with a local nonprofit, MusicWorks Minnesota, as a board member and consultant. 

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