The events on Wall Street this week have proven a number of things about the state of the American economy: 1) the recession is going to get worse before it gets better, 2) the government will bail out greedy and careless corporations rather than let them totally collapse and cause more severe short-term damage to the economy, and 3) the general consensus is that Washington must be more proactive in regulating the problematic real estate and banking sectors.
But I wonder: is more rigorous regulation really going to solve the problem? Certainly there needs to be some regulation, but I've always been suspicious of the idea that government (in all of its complicated, corrupted interests) is more efficient and enabling than private enterprise.
Regulation by the American government has historically been a good idea during times of intense industrial change (as in Teddy Roosevelt's Square Deal) or war (as in FDR's New Deal), but in times of relative stability, de-regulation has been more effective for the economy (as in the Reagan 80s). It's hard to tell where we are right now.
In general, I tend to think that regulation (and the political push for it... typically a liberal/progressive/Democrat concern) is founded in a flawed philosophy. Regulation assumes that people are ultimately too stupid or greedy to self-regulate. Like most liberal thinking, regulation is about entrusting the government with more power--on the premise that one centralized authority acting with some vague "national interest" in mind is more capable than a million mini-authorities with their own self interests (usually the pursuit of wealth and property).
It's condescending, really. Are average citizens really too dumb to act in their own best interests? Maybe. I suppose the liberal perception is that too many Americans are ignorant and emotional on the level of Sarah Palin (the whipping girl for unprecedented levels of unleashed liberal hatred). Thus, it's probably better to limit the personal agency of these hicks and give the power to the presumably smarter politicians in Washington.
The problem is this: self-interest is always a more effective motivator than collective interest. The fact is: we're humans. Humans are flawed, selfish, and, above all, desperately preoccupied with our own safety and future. Though it is a higher, more virtuous, doutbtless more Christ-like ambition to put the community or collective first, it is unfortunately impractical that humans will, en masse, "come together" to serve the nation before they serve themselves. As it happens, they actually end up serving the collective better when they put their own self-interests first. Why? Because collectivism only works when everyone is on board, and regrettably our fallen world renders that scenario impossible.
If this were Eden and we were perfect, all of us would agree that the community took precedence over the individual, that regulation for the greater good was far more important than our own self interests. But then again, in such a world our self interests wouldn't be so problematic.