From Wall Street to our own Department of Community Affairs, the subject of regulation remains an ongoing exercise in controversy, frustration and political opportunism. The marketplace vs. the regulated place, as if it were an either-or scenario.
What would Adam Smith do? Or better yet, since quoting the Founding Fathers has never been more in vogue, what would Alexander Hamilton do?
For context, “The Cycles of American History,” the 1986 classic by the late Arthur M. Schlesinger Jr., still warrants referencing a quarter century later. Arguably, now more than ever. Notably the chapter on “Affirmative Government and the American Economy.”
In short, with European mercantilism as precedent and model, the American colonies had long been accustomed to government intervention in economic affairs. The “hand” of government wasn’t so much seen as heavy as “fostering.” Laissez-faire was not a Founding Father favorite.
Make no mistake, Hamilton saw America as a dynamic capitalist republic, but he had his issues with the “reveries” of Smith, as he was wont to label them. He was not impressed with self-interest as the organizing principle of society. A “wild speculative paradox” is how he characterized the notion that the economy could regulate itself. When “unbridled,” the “spirit of enterprise,” he noted in the 7th Federalist, leads to “outrages, and these to reprisals and wars.”
Somehow I doubt Hamilton would have come down on the side of, say, scuttling the Glass-Steagall Act in the 1990s.