Adamson: Regulatory pendulum must stop at Indian country

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The word "regulation" in all its forms is getting a workout these days as never before. For the better part of the past 20 years, we've heard about the "deregulation" of everything except the kitchen sink drainage system - airlines, banking, electricity, communications and government itself have all had to undergo "deregulation," and now comes a bill in the Senate that would deregulate Indian energy development.

So much "deregulation" has brought its bookend, "regulation," back into currency again, between federal attempts to batten down the hatches on corporate theft and stock market cheats, court challenges to CD piracy and the national struggle against Internet spam.

The pendulum has swung so wildly between "reg" and "dereg" that it would be best to review the basics before coming to the point of all this for Indian country.

The Republican philosophy on regulation has always been clear: Regulation stifles economic development by giving entrepreneurs too many hurdles to clear and often killing innovation before it can even get off the ground. Who wants to get tied up in red tape when a more regulation-friendly path offers easier going? - if not the same growth potential or profit margin.

Democrats have tended to be less clear about it as they've tried to share credit for the success stories of deregulation, but at the end of the day here is what they believe on the subject: Regulation protects the public by reigning in business practices and practitioners that seek unfair advantage. Without regulation, competitive business practices become so ? so "human, all too human," if you will ? that ever more demented methods are perfected of foisting legitimate business costs onto the taxpayer, of presenting false valuations of corporate wealth to potential investors, of putting facades of decency on executive theft.

Both of these perspectives are correct according to particular sets of circumstances, of course. In a cycle of incredible economic growth, we cheer and call visionary those who cleared the decks of strangulating regulation, as has occurred twice in the national life since 1980 - once in the so-called "go-go eighties" and again in the techno-booming nineties.

Yet all of that begins to wear a different aspect when we find that hundreds of billions of dollars in household and national wealth have been drained away because calculating business interests managed to snake their way around regulatory controls - as has also happened twice in the past two decades, once in the late eighties when the Savings & Loan crisis became the biggest financial debacle in American history, and again just after the nineties when the "WorldCon" fraud of Enron and its many emulators made the S&L losses look like a missed allowance.

But yet again, count on it that once the regulators have moved in and cleaned house, barely a business quarter will pass before corporate America gets out its drum and beats it unabashedly once again - regulatory burden, regulatory burden, like a stuck record that won't give up its groove.

The pendulum will probably swing between "regulatory burden" and "reign the robbers in" for as long as free markets function. There seems to be no better way known of balancing the profit motive with the public interest.

But at one point anyway, economic theory and experience agree, that pendulum must stop. It must stop at unformed markets. It must stop well to the side of regulation, and it must swing no further then toward deregulation.

In normal markets, competition among numerous business interests keeps prices in line with production costs - people will not pay more for a product or service when another producer will sell it for less, and so the producers who can't keep costs down knows that they will lose business to someone who can.

But when there is not another producer? When competition is limited? That amounts to an unformed market, one that invites high prices because it doesn't have enough participants, enough business interests, to foster competition, or for that matter to prevent collusion. When there is no real competition, a whole train of other abuses comes flooding in - the environment can be despoiled because the unformed market will not reward competitors offering a better way. Community interests can be trammeled almost at will because the unformed market offers it few alternatives. Prices, inflated beyond any relation to the cost of production by absence of competition, fuel profit-takings that intensify the entire predatory cycle.

This is why regulation cannot be negotiable in unformed markets. The community is asking for trouble otherwise.

Business interests have come to see communities as markets. And in Indian country, they see mostly unformed markets.

The deregulation of Indian energy development prospects is moving forward in the Senate, and it may give tribes the choice to voluntarily adopt streamlined approval procedures on such projects - or not adopt them, as they see fit.

For those of us living in communities that would be called "unformed markets" in economic terms, this is occasion for the utmost vigilance. Such communities must resist the blandishments of energy developers completely, or they must develop their own adequate regulations and enforce them. For most Indian communities simply cannot afford the ruinous swings of the pendulum between the "reg" and "dereg" camps.

Rebecca Adamson is president of First Nations Development Institute and a columnist for Indian Country Today.