U.S. Economic regulations
The concentration of markets by few large firms in key industries can be attributed to deregulation cult that has stifled competition, increases prices and led to reduced innovation. The high concentration of corporate power in terms of monopoly, duopoly or oligopolies by is as a result of big mergers by big firms that control the largest market share which have enabled the firms to make policies aimed at control the market (Reguly, 2). The government felt that market forces were better in regulation than competition bureaus , and thus led to firms that were too big that they could not be allowed to fail and hence , the 2008 financial crisis bailout. The money pumped in the economy as bailouts were used by firms for merging purpose, so that these few firms control the largest market. In addition, shares buybacks increased largely in value as these companies try to appease shareholders at the expense of wage increase and innovation (Reguly, 3). The duopolies and oligopolies may eventually be diluted by new entrants with new innovations and competitive pricing, but given that few will be willing to compete against large firms, the process may take a long time. The restoration of competition, job creation and innovation can be done through reducing unreasonable corporate concentration through regulation and antitrust laws (Reguly, 3).
Preserving innovation in the market will encourage innovation since quality of products is improved; pricing is done fairly and thus enhancing economic growth. The improved competition and quality of products will be of great benefits to the consumers (Infobase Learning,2). This can be achieved by enacting anti-trust laws which will enable the government to penalize firms that seeks to control their industries unfairly and this lead to the aforementioned benefits in the market and for consumers. Laws such as the 1890 Sherman Act and 1914 Clayton Act that tended to limit unreasonable monopolization or such an attempt and formed a basis on which courts and antitrust officials can build on as industries and business practices undergo changes (Infobase Learning,3). The antitrust laws help in limiting creation of monopolies and other anticompetitive practices that can discourage innovation and allow setting of high prices and thus, hurting the public. The courts and should consider aggressive prosecution of attempts by firm at monopolization while antitrust officials must question any merger that may curtail competition in an industry and hence harm consumers. Monopolization enables large firms in industry to prevent success of new entrants that would encourage competition and innovation by lowering prices to force them out of business and raising the prices again after the new firms have exited (Infobase Learning, 8).
Competitors can come together as cartels so as they can maximize profits through output limitation and fixing prices in their industries. The use of antitrust laws can play a major role in limiting any form of mergers that would hurt the economy through output limitation, reduced innovation and high prices at the expense of the consumers who are the public. The laws are also important in preventing firm from engaging in practices such as bid rigging, territories division and groups boycott that are devoid of any logic or reason for public policy purposes. Firms can also be prosecuted for taking part in anticompetitive practices (Infobase Learning, 8). Such practices are driven by the self-interest of firms which lead to exploitation and abuses.
The government should enforce rules that are aimed at protect the economy, environment and other practices that can lead to job losses. However, such regulations should be given more attention so that they are not inefficient and hence, counterproductive. The regulatory systems should not place illogic burdens on firms in way that they stifle innovation and hence, leading to negative impact on growth and job creation (Infobase Learning,2). However, effective government regulations can provide important protection of public against various dangers that arises from a free market especially neglect and corporate greed excesses (Infobase Learning, 4). These regulations will not have negative impact growth and job creation but will reduce impact of dangerous consequences like 2008 financial crisis. Past regulatory policies especially during the 20th century Great Depression were borne out of the need to enhance fair competition, consumer protection and prevention of malpractices (Infobase Learning, 5).The public focus on social problems experienced previously led to more attention being paid to work place safety, environmental pollution, racial discrimination and demand for action by the government to tackle such issues. The lack of regulation in financial sector, where firms were allowed to trade derivatives is majorly blamed for the 2008 financial crisis. The reckless behavior by the banks leads to major losses and use of large amount of taxpayers’ money and hence, the increased call for such firms to be broken up, re-regulated or both. The regulatory framework should be tool for controlling negative results of capitalism for the purpose of public safety and fairness but not undoing the free market mechanics (Infobase Learning,6).
While free markets can stimulate growth in the economy in a more effective way, during an economic downturn, government intervention helps in speeding up economic recovery and reduces human suffering in the meantime. The deregulation of markets can lead an unhealthy financial system like the recession and financial crisis seen in 2008 (Infobase Learning, 8). The previous deregulation meant that large banks could engage in lending activities even to individuals with poor credit rating and who were motivated by low interest loans. The deregulation policy had allowed few banks to grow too large that their failure during the credit crunch would have a devastating effect on the economy and even the collapsing of the entire banking system. The passage of regulatory policies like Consumer protection Act imposed various financial regulations on the investment activities undertaken by the banks and even expanding the roles of regulatory bodies (Infobase Learning, 9). The increasing income inequality that lead to protest across the country served as a proof that government had to step in to ensure the public is not exploited by big firms. The 2008 crisis could be attributed to the freedom given to the financial institutions in making risky investment decisions with little regard of what the future market would look like. If the banks had not been give the freedom to engage in the risky bets the financial crisis and economic recession could not have occurred (Infobase Learning, 4). More specifically , if banks have been required to have separate divisions that engage in trading of derivatives and subsidiaries that are separately funded , there would have been minimal threat to the performance of a bank and hence, saving it from a crisis( Infobase Learning,5). Reforms on financial regulation can, therefore, protect the economy from reckless actions of firms, which cannot be provided by a free market.
Works cited
Reguly, Eric. "It's time to call in the oligopoly busters." Globe & Mail [Toronto, Canada], 15 Apr. 2017, p. B1. Opposing Viewpoints in Context, ezmw.ez.cwmars.org:4200/login?url =http://link.galegroup.com/apps/doc/A489619903/O VIC?u=mlin_c_wachcc&xid=b96c3ff0
Infobase Learning, Antitrust Law: Should the U.S. government strictly enforce antitrust laws?" Issues & Controversies, 21 Jan. 2014 http://icof.infobaselearning.com/recordurl.aspx?ID=14178
Infobase Learning, Government Regulation: Do government regulations help protect the public against corporate excess." Issues & Controversies, 14 Oct. 2013, http://icof.infobaselearning.com/recordurl.aspx?ID=6323. Accessed 29 Nov. 2017.
Infobase Learning,.Financial Regulation: Would recently proposed financial industry regulations help prevent future financial crises?" Issues & Controversies, 12 July 2010, http://icof.infobaselearning.com/recordurl.aspx?ID=2256. Accessed 29 Nov. 2017
Infobase Learning,"Economic Policy and Financial Regulation: Should the government play an active role in the economy?" Issues & Controversies.17 Dec. 2012, http://icof.infobaselearning.com/recordurl.aspx?ID=6298. Accessed 29 Nov. 2017.
