In today's WSJ, Tenneco CEO Gregg Sherill opined that:
According to a recent analysis in The Economist magazine, the overwhelming majority of Americans say they prefer the free enterprise system to any collectivist alternative. In one such poll, as the Economist reports in a feature titled "The 70-30 Nation," the Pew Research Center asked respondents whether they were better off in a free market rather than a socialist economy "even though there may be severe ups and downs from time to time." Seventy percent said yes.
So why are the 30% in charge of the 70%? According to American Enterprise Institute President Arthur Brooks, the "game changer" was the economic crisis. As he writes in his book "The Battle," "the opportunity to expand the 30 percent coalition was not the Democratic sweep in 2008. It was the financial crisis of 2008-2009, which was used as a tool to attack the free enterprise system . . ."
Sherill's observation reminded me of an article by Yale law professor Roberta Romano, The Sarbanes-Oxley Act And The Making Of Quack Corporate Governance, 114 Yale Law Journal 1521, in which she explained that:
Stuart Banner's historical research suggests that these examples are not exceptions but rather are the template for financial regulation. Examining the conditions for securities market regulation in the eighteenth and nineteenth centuries in the United Kingdom and United States, he reports that legislation was adopted only after stock market declines, which, by 1837, coincided with economic contractions. Banner contends that the reason for the association is that deep-seated popular suspicion of speculation comes in bad financial times to dominate otherwise popular support for markets, resulting in the expansion of regulation. That is to say, financial exigencies embolden critics of markets to push their regulatory agenda. They are able to play on the strand of popular opinion that is hostile to speculation and markets because the general public is more amenable to regulation after experiencing financial losses. A regulatory agenda, in short, does not generate popular support in a booming market. Due to greater sophistication in our understanding of market processes, there is far less popular suspicion of trading speculation today than in prior centuries. But we can still identify in Banner's formula for new regulation--the conjunction of the impact of a stock market downturn on public attitudes and the presence of political entrepreneurs with off-the-shelf regulatory proposals (Banner's ever-present critics of free markets)--a pattern largely consistent with the making of SOX.
Just as was the case with SOX, the thirty percent were in place and ready to go with Dodd-Frank. The question now is whether the 70% will be able to regain control of the political process and unwind the damage today's bill passage will wreak in the future.
