- Historic Sites
The Controversial World Of
The Regulatory Agencies
April 1977 | Volume 28, Issue 3
By the mid-1970’s, the steady growth of regulatory agencies had contributed to the evolution of a large and complex system of competing governments. The resulting situation did not represent a rational response to presentday problems, but instead a merger of two historical processes: the early reactions of government to industrialization and the rise of Big Business; and the series of crises that have occurred since the 1920’s. In combination, these forces produced a network of bureaucracies that competed with each other and sometimes tended to cancel each other out. One agency could not grow without giving some other agency the incentive to do likewise. The result was that both grew. The impact of the Environmental Protection Agency’s regulations, for example, forced state and urban governments to monitor local business behavior and increase their own staffs. HEW pursued affirmative-action programs, and in so doing forced universities and other institutions to complete innumerable questionnaires certifying their compliance with federal guidelines. The Civil Aeronautics Board, the Department of Transportation, and the Interstate Commerce Commission competed furiously for influence in shaping the nation’s transportation policies.
In part, the growth of regulation reflects the rise of Big Government. Yet even the most inflated estimates of the regulatory sector show it to be a tiny part of the total personnel or budget of the federal government. If all possible federal regulatory agencies were counted, the result would be a total of about twenty-five, with about 100,000 employees. Contrast these figures with the total number of public employees in the mid-1970’s: 2.7 million federal (excluding uniformed military), 3.1 million state, and 8.6 million local. The surprising fact is that during the last two decades the great growth of the public sector has been in state and local government, not federal.
Even so, regulatory agencies have also grown (see box). More striking than their growth is the failure of any to disappear. Why, one might ask, is it so much easier to create any kind of governmental body than to abolish it? Why do we have overlapping city, borough, and county governments, together with water, school, and public utility districts, all subject to state and federal legislation, and in turn to state and federal courts and regulatory agencies? Why don’t we streamline the government, and thereby simplify the whole complicated process?
Perhaps someday we shall. In the meantime, we might remember that the American government was designed in the first place to block the growth of absolute power. That design has proved successful to a fault. The Founding Fathers often chose weakness over efficiency in the interest of freedom. Then, too, public agencies, like some of the industries they regulate, are not subject to the discipline of the Smithian market place. They compete with each other for the taxpayer’s dollar, but none of them is ever put out of business because its cash flow was poorly planned, or because its inventories grew too large, or because a competitor began to make a better product. Finally, interest groups in the private sector come to depend on the agencies, developing ad hoc alliances with them that resemble the alliances between defense contractors and the Pentagon. It is this symbiosis of business and government that lies at the heart of current complaints from the political left. It accounts for the recent clichés about industries capturing agencies, and about agencies betraying “the public interest.”
The truth is that the interests of industry and “the public interest” are almost never precisely opposed, just as they are rarely identical. Most often, the relationship is fuzzy and ambiguous, comprehensible only after careful thought about particular situations in particular industries. The word “capture” is therefore slightly off the point; one captures one’s enemies, not one’s friends, and not casual bystanders. To talk of capturing an agency postulates an adversary relationship between government and business that is by no means a constant condition in the regulatory process, either in practice or in theory.
In their efforts to serve “the public interest,” however that elusive entity may be defined, regulatory agencies perform a surprisingly diverse set of functions, some of them in open conflict with others. The Federal Trade Commission, for example, is supposed to promote maximum business competition. Yet other agencies, such as the ICC, the FCC, and the state utility commissions, limit competition in order to prevent chaos in particular industries, some of them natural monopolies. The Civil Aeronautics Board is supposed to promote airline development, keep fares to just and reasonable levels, and see to it that the nation’s cities—even some quite small cities—are provided with regularly scheduled air service. No agency could do all these tasks well, because the tasks themselves conflict with each other. Each task is a part of “the public interest,” but which one of them should take priority over the others?