Ma Bell and the Modern Market

Conservatives like to complain that government regulation is stifling the economy. This implies that, once upon a time, the market was free of government interference. And likely they would point to the 1950’s as the glory days of the American free enterprise system. I suspect that if you were to ask most Republicans, they would likely say that the American economy was more free and open in the 1950’s than today. The reality, however, is quite different.

Remember “Ma Bell?” Ma Bell was the nickname for AT &T, the American Telephone and Telegraph Company. Ma Bell was the only phone company in the country until the early 1980’s. Ma Bell was a government sanctioned monopoly. There was no competition, there was no free market, in telecommunications in this country in the 1950’s.

Remember the Civil Aeronautics Board? Up until deregulation in 1978, the CAB controlled rates and routes in the American airline industry. There was no competition, there was no free market, in the airline industry in this country in the 1950’s.

Remember the Hays Code? Most people don’t know the name, but in the 1920’s the Motion Picture Association of America created a production code that prohibited the depiction of certain subjects in film. This was known as the Hays Code, and it was censorship, plain and simple. The MPAA kept a tight rein on films until the late 1960’s, when things began to loosen up. There was a tightly regulated market in films in this country in the 1950’s. In fact there was widespread censorship in this country until the late 1950’s, when judicial decisions allowed the importation and domestic printing of books like Lady Chatterley’s Lover. Most of the censorship occurred at the state and local level, but the federal government enforced these laws at the Post Office by refusing to mail books deemed obscene. These laws were largely overturned in the 1973 Supreme Court case of Miller v. California, 413 U.S. 15 (1973).

Before the deregulation movement of the late 1970’s, most of the American transportation industries were heavily regulated. Railroads were deregulated in 1976 (the Railroad Revitalization and Regulatory Reform Act of 1976), trucking was deregulated in 1980 (the Motor Carriers Act of 1980), and bus lines were deregulated in 1982 (the Bus Regulatory Reform Act of 1982). There was no competition, there was no free market, in the transportation industry in this country in the 1950’s.

Banks and finance were heavily regulated after the market collapse of 1929, but things began to change in the 1980’s. In 1980, Congress passed the Depository Institutions Deregulation and Monetary Control Act, which removed many restrictions on the way Savings and Loans operated. Many went on a tear offering new loans, and the system collapsed in the late 1980’s, leading to the so-called “Savings and Loan Crisis.” Banks were largely deregulated in 1999, with the passage of the Gramm-Leach-Bliley Act. There was no competition, there was no free market, in the banking industry in this country in the 1950’s.

(I have neither the time or expertise to discuss the widespread use of tariffs and import laws to protect domestic industry, but suffice it to say, the American economy didn’t have to deal with much worldwide competition in the 1950’s.)

The U.S. economy of the 1950’s was also operating in the shadow of World War Two, when the government, through various war time production agencies, essentially controlled the economy. War production rebuilt many industries that had languished during the Depression, and after the war many of these facilities that had been built at taxpayer expense, were given, or sold at very low cost, to private industry. War production nearly doubled the size and output of the American aluminum industry, and after the war these facilities were sold for pennies on the dollar.

So the so-called free market of the 1950’s was anything but, and exists not in reality but only in the febrile imaginations of conservatives.

There is no doubt that there is still a great deal of regulation in the American marketplace, but it is regulation of a different sort. Modern regulation does not regulate the operation of the market, but regulates the behavior of businesses. The most hated forms of regulation are environmental regulations, product safety regulations, and work place safety regulations. These are certainly a burden to business, but it not manipulation of the market like the government involvement of the 1950’s. This sort of regulation, however, is probably much more of an irritant to business owners because it seems to presuppose that they need adult supervision to run their businesses honestly and properly. It is also much more niggling and picayune. And so it is likely much more despised than earlier forms of regulation.

But just because it is more irritating doesn’t necessarily mean that it is more burdensome than the higher level of market control and regulation that existed in the 1950’s.

Author: Mike

I am a patent attorney in Lexington, Kentucky. My law firm web site is http://www.coblenzlaw.com. I ran for State Representative in 2010 and lost in the primary. Many of these posts are based on writing that I did for that election. Rather than delete it all, I decided to dump it onto the internet.

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