We are a nation of 325 million people. We have a bit of control
over the behavior of our 535 elected representatives in Congress, the president
and the vice president. But there are seven unelected people who have
life-and-death control over our economy and hence our lives — the seven
governors of the Federal Reserve Board. The Federal Reserve Board controls our
money supply. Its governors are appointed by the president and confirmed by the
Senate and serve 14-year staggered terms. They have the power to cripple an
economy, as they did during the late 1920s and early 1930s. Their inept
monetary policy threw the economy into the Great Depression, during which real
output in the United States fell nearly 30 percent and the unemployment rate
soared as high as nearly 25 percent.
The most often stated cause
of the Great Depression is the October 1929 stock market crash. Little is
further from the truth. The Great Depression was caused by a massive government
failure led by the Federal Reserve’s rapid 25 percent contraction of the money
supply. The next government failure was the Smoot-Hawley Tariff Act, which
increased U.S. tariffs by more than 50 percent. Those failures were compounded
by President Franklin D. Roosevelt’s New Deal legislation. Leftists love to praise
New Deal interventionist legislation. But FDR’s very own treasury secretary,
Henry Morgenthau, saw the folly of the New Deal, writing: “We have tried
spending money. We are spending more than we have ever spent before and it does
not work. … We have never made good on our promises. … I say after eight years
of this Administration we have just as much unemployment as when we started …
and an enormous debt to boot!” The bottom line is that the Federal Reserve
Board, the Smoot-Hawley tariffs and Roosevelt’s New Deal policies turned what
would have been a two, three- or four-year sharp downturn into a 16-year
affair.
Here’s my question never
asked about the Federal Reserve Act of 1913: How much sense does it make for us
to give seven unelected people life-and-death control over our economy and
hence our lives?
While you’re pondering that
question, consider another: Should we give the government, through the Federal
Communications Commission, control over the internet? During the Clinton
administration, along with the help of a Republican-dominated Congress, the
visionary 1996 Telecommunications Act declared it “the policy of the United
States” that internet service providers and websites be “unfettered by Federal
or State regulation.” The act sought “to promote competition and reduce
regulation in order to secure lower prices and higher quality services for
American telecommunications consumers and encourage the rapid deployment of new
telecommunications technologies.”
In
2015, the Obama White House pressured the FCC to create the Open Internet
Order, which has been branded by its advocates as net neutrality. This move
overthrew the spirit of the Telecommunications Act. It represents creeping FCC
jurisdiction, as its traditional areas of regulation — such as broadcast media
and telecommunications — have been transformed by the internet, or at least diminished
in importance. Fortunately, it’s being challenged by the new FCC chairman, Ajit
Pai, who has announced he will repeal the FCC’s heavy-handed 2015 internet
regulations.
The United States has been the world leader in the development
of internet technology precisely because it has been relatively unfettered by
federal and state regulation. The best thing that the U.S. Congress can do for
internet entrepreneurs and internet consumers is to send the FCC out to pasture
as it did with the Civil Aeronautics Board, which regulated the airline
industry, and the Interstate Commerce Commission, which regulated the trucking
industry. When we got rid of those regulatory agencies, we saw a greater number
of competitors, and consumers paid lower prices. Giving the FCC the same
medicine would allow our high-tech industry to maintain its world leadership
position.
Walter
E. Williams is the John M. Olin distinguished professor of economics at George
Mason University, and a nationally syndicated columnist. To find out more about
Walter E. Williams and read features by other Creators Syndicate columnists and
cartoonists, visit the Creators Syndicate web page.
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