Political/ Regulatory Extortion

The Independent Institute ^ | March 1, 2000 | Thomas J. DiLorenzo

[Exton1]

“The most spectacular period of economic growth in our history is over,” they wrote, because “government is destroying two vital instruments of that growth—the system of contract rights and the large corporation.”1 Constitutional and electoral constraints on political plunder have proven ineffective, Jensen and Meckling wrote, as the courts, politicians, and regulators have revoked or attenuated property and contract rights and have attacked freedom of association as well, “especially in the civil rights arena.”2

With regard to the stock market, Jensen and Meckling forecast that because of the instability of property rights caused by government intervention, investors have become much less certain that any contract they enter into now will be subject to the same rules and regulations in the future. An early consequence of the erosion of property rights will be a reduction in the capitalized values of corporate securities, with many corporations able to remain in business only so long as they can finance their operations from internally generated cash flow or [government] subsidy.3

As of 1999 the Dow Jones Industrial Average was about 15 times higher than it was in 1978, when Jensen and Meckling issued their dire warnings. But this doesn’t mean that they were wrong about the effects of the American regulatory state on stock prices. The Dow Jones average might be even higher yet were it not for the large degree of governmental control of the means of production that is exercised through regulation. And the stock market is surely much more volatile because of the great uncertainties created by regulation. Overzealous regulators may even cause the market to crash. As discussed below, it was proposed regulation and taxation of corporate takeovers that likely precipitated the 1987 U.S. stock market crash.

[Exton1]

Mr. DiLorenzo has a great book "How Capitalism Saved America, on sale at Amazon for about $3.00. A must read.

[H.Akston]

The 17th Amendment needs to be repealed, to give the States some say whether they want to have things like off-shore drilling.