Why deregulation has gone too far: toxic drugs, tainted meat, exploding airplanes, and other dangers of unfettered capitalism

Free-marketeers will counter that all these downsides are a small price to pay compared with regulation, which costs the economy far more every year than the S&L debacle ever did. "Federal regulations cost $1.3 trillion in economic output to be lost each year," according to the Heritage Foundation's voluminous website on the topic. "When a business devotes resources to adhering to regulatory mandates, it is using those resources less efficiently."

But that misses the point. Left to its own devices, the economy -- no matter how large or small -- always inflicts some unfairness on those who don't own a lot of stock. The purpose of regulation in areas like telecom, electricity, and banking was to defray the cost of service for ordinary people at the expense of the high-volume users --businesses, mostly -- who could better afford it. These "cross-subsidies" may have distorted the economy a little, but they maintained a vital safety net for people who might otherwise have fallen through.

In the absence of many of these regulations, there's already plenty of evidence that lower-income people are losing out. The recent wave of banking mergers, for instance, has been hailed by brokers and economists alike -- perhaps because most brokers and economists earn enough to profit from it. For those who don't, several recent studies by the Federal Reserve have shown that large interstate banks charge higher service fees than small banks do, and that they're much less likely to make loans to small businesses. Meanwhile, the number of bank branches in inner-city neighborhoods is declining -- down 21 percent from 1975 to 1995, according to another Fed study.

The buyout frenzy that deregulation triggered has also eroded some of the other institutions that used to help define a sense of community, for middle and lower-income people. In the two years since Congress eased ownership limits on radio stations, 4,000 have been sold, and more than half of big-city stations are in the hands of just five companies. The result has been a rising flood of bland pop songs dictated by big companies that don't want to take risks. So what? Not much, if you have a 2,000 CD collection of your favorite music. If you don't, you could be out of luck.

That doesn't mean we should call in the Quality of Life police on every merger that would close down a neighborhood deli or bookstore. It does mean we should think carefully about who benefits, and how, before we unleash the bulls and bears of the market on our everyday lives.

Poison Pills

Of course, there are plenty of silly or overburdensome regulations on the books. The Equal Employment Opportunity Commission has been after the Hooters restaurant chain for years because Hooters doesn't employ male waiters (if you don't know why, God bless you.) The EEOC is also pursuing Joe's Stone Crab restaurant in Miami for failing to hire enough women waiters, even though most of the restaurant's managers, and its owner, are women.