November 04, 2018
In an otherwise useful and important piece on how the Trump administration has backtracked from the Obama administration in enforcing laws and regulations on corporate conduct, the NYT asserted:
“…political appointees under Mr. Trump have led a philosophical shift in governing that favors big business and prioritizes the interests of individual investors.”
How does the NYT know that this shift is explained by “philosophy?” This sentence could have with equal plausibility have been written:
“…political appointees under Mr. Trump, with close ties to the industries they regulate, have adopted policies that favor big business and prioritizes the interests of individual investors.”
There is no more reason to believe that pro-business regulatory enforcement is explained by philosophical beliefs than good old-fashioned corruption. The NYT should not be asserting the former.
The piece also mischaracterizes the views of Jay Clayton, Trump’s pick to head the Securities and Exchange Commission (SEC):
“But Mr. Clayton’s remarks that day about job creation — something not directly under the purview of the commission — signaled a new emphasis on bolstering the economy rather than policing Wall Street.”
If Wall Street engages in abusive business practices it hurts rather than helps job creation. The financial industry does not directly create wealth. It is an intermediate industry, like trucking, as opposed to an industry like health care or food that directly produces goods and services of value to people.
As an intermediate industry, it best promotes jobs and growth if it does its work at the lowest possible cost. In the same way that we would not be benefited by a trucking industry that is four times as large but delivers the milk no quicker, we are not benefited by a large financial sector that no more effectively allocates capital.
For this reason, cracking down on abusive practices, that may enrich the industry but do nothing to promote the economy, is a job creation strategy. Hopefully, the head of the SEC knows this, even if the NYT doesn’t.
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