Fallacy:
Without regulation from government, prices would rise, monopolies would take over, and the consumer would be harmed by unscrupulous businessmen. Regulation was called for by the people because greedy businessmen put profits before safety and caused great damage to people and the economy.
Response:
Regulation is called for not "by the people[*]," but by and large by big industrial players for the sole purpose of raising the barrier of entry to the market to small players. Big business detests unfettered competition from smaller firms as a general rule.
We see this effect during the late 19th century, when Big Rail lobbied Congress to push through the Interstate Commerce Act of 1887, and subsequent legislation which had the effect of curtailing the rampant competition. Big players were upset because prices for shipping were falling dramatically, and this was threatening the stability of their organizations.
From Roy Childs's "Big Business and the Rise of American Statism":
- BRS.48 American industry as a whole was intensely competitive in the period from 1875 on. Many industries, including the railroads, had overexpanded and were facing a squeeze on profits. American history contains the myth that the railroads faced practically no competition at all during this period, that freight rates constantly rose, pinching every last penny out of the shippers, especially the farmers, and bleeding them to death. Historian Kolko shows that: Contrary to the common view, railroad freight rates, taken as a whole, declined almost contiuously over the period [from 1877 to 1916] and although consolidation of railroads proceeded apace, this phenomenon never affected the long-term decline of rates or the ultimately competitive nature of much of the industry. In their desire to establish stability and control over rates and competition, the railroads often resorted to voluntary, cooperative efforts. When these efforts failed, as they inevitably did, the railroad men turned to political solutions to [stabilize] their increasingly chaotic industry. They advocated measures designed to bring under control those railroads within their own ranks that refused to conform to voluntary compacts. ... [F]rom the beginning of the 20th century until at least the initiation of World War I, the railroad industry resorted primarily to political alternatives and gave up the abortive efforts to put its own house in order by relying on voluntary cooperation. ... Insofar as the railroad men did think about the larger theoretical implications of centralized federal regulation, they rejected ... the entire notion of laissez-faire [and] most railroad leaders increasingly relied on a Hamiltonian conception of the national government.
This was the start of the trend where larger players in other industries began turning to the government for political solutions to the "problem" of falling prices and "unchecked" competition. In the steel industry, oil industry, and the newly created telephone industry, the big players, fearing loss of their dominance in the market, begged the government to regulate their respective industries. The most extreme was the case for Bell Telephone, which lobbied successfully to have their competition completely put out of business using the force of government, and have themselves handed a complete, 100% monopoly on phone service in the US. Regulation, far from being the champion of small business and protector of the consumer, does the exact opposite of the currently accepted pro-regulation myth, and is a protectionist measure for big business. We can see this in the roots of regulation.
Another big problem with government regulation is that it turns the notion of American Jurisprudence on its head: the accused is presumed innocent until *proven* guilty beyond all reasonable doubt in a court of law. Regulation presumes that targeted businesses owners and operators are guilty until proven innocent. This flies in the face of our very legal system, and is detrimental to small businesses and individual proprieters. (DV)
[*] This can can never be proven to be true, because democratic decisions are not unanimous; therefore "the people" represent the majority, and the minority are forced to accept this new policy over the barrel of a gun. So we cannot say people choose government regulation even at the most generous reading.