A thought about government corruption and regulation of the private sector

John Steele Gordon in his economic history of the United States, Empire of Wealth: The Epic History of American Economic Power, describes the pervasive political corruption in the nation in the second half of the 19th century. One commentator noted that the country was unique in that Americans on preparing a legal case employed not only a lawyer but also a judge. Gordon points out that giants of industry such as Carnegie, Rockefeller and Vanderbilt whose views of the world were formed during this period of rampant governmental corruption would have thought the idea of government regulation of industry to be absurd.

The lessons of the origins of the Great Depression and the recent economic crisis include the need for effective regulation of financial services. History also teaches that it is necessary to regulate other industries (ENRON, BP, etc.)

One of the key problems of corruption of government then is that one can not trust a corrupt government to fairly and effectively regulate the private sector! I wonder how many people focusing on developing nations recognize that problem?

Incidentally, I wonder if the conservatives who distrust governmental regulation of the private sector are not slaves to the ideas formed in the distant past when in fact government was much more corrupt and could not be depended upon to regulate fairly or well. Cultural systems can conserve attitudes for long periods, even when the conditions which led to the formulation of those attitudes have changed and the attitudes are counterproductive.

Gordon's book is well worth reading. It is relatively easy to read as might be expected from a man who has extensive experience writing for magazines. His narrative illustrates the importance of the frontier in American economic history and the economic bases of the Civil War (a plantation economy based on slavery in the south versus a diversified economy based on small farms and manufacturing in the north). It also illuminates the importance of technological and institutional innovations in the growth of the American economy.