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Putin’s Regulatory Scheme Looks a Lot Like Ours


Russian President Vladimir Putin is providing the American people, and specifically American businessmen, with a valuable lesson about a government-regulated economy and the benefit that regulation provides to those in power.

Keep in mind, first of all, that America’s modern-day regulated economy is no different, in principle, than Russia’s regulated economy. The difference is one of degree. The Russian government regulates the Russian economy more than the U.S. government regulates the American economy. But government officials in both nations share the belief that it is a legitimate role of government to regulate economic activity.

It’s always been that way in Russia, but it wasn’t always that way in the United States. Throughout the 19th century and into the 20th century, the federal government, by and large, left economic activity free of government control and regulation.

In fact, that was what was meant by the term “free enterprise.” It meant enterprise that is free of government regulation. While there were exceptions at the state and local level, for more than 100 years economic enterprise was generally free of federal control and regulation.

That’s one of the things that made the United States different from all other nations in history. It was one of the things that made the United States exceptional.

Not anymore. Now the United States is like Russia and other countries, at least with respect to government regulation. The move toward regulation began slowly, such as with the Sherman Anti-Trust Act of 1890 and ultimately became the official doctrine of the federal government during the presidential regime of Franklin Roosevelt. For a good synopsis of this phenomenon, I recommend a book entitled Three New Deals: Reflections on Roosevelt’s America, Mussolini’s Italy, and Hitler’s Germany, 1933-1939. You can read reviews of the book here and here.

The federal government sells its regulatory scheme to the American people by telling them that it’s all for their own good and their own safety. The government operates like a Big Brother in a family, watching over the citizenry, taking care of them, and keeping them safe with its economic regulations.

It’s also like that in Russia, where the government maintains heavy control over economic activity, ostensibly to keep the people safe and secure, just like here in the United States.

The real reason for the regulatory scheme in both nations, however, is to provide the government with a hammer to ensure conformity with government programs and policies. As long as a businessman is enthusiastically supporting the government or at least remaining silent, he’ll be left alone. But as soon as some CEO or company official takes an open and publicized public stance against government policy, the regulatory hammer comes crashing down on his head.

This past Sunday, the Washington Post showed how Putin is using Russia’s regulatory system to retaliate against President Obama’s imposition of sanctions against Putin for events arising out of the crisis in Ukraine. Russian regulators are targeting American products for regulatory violations, and they’re playing the innocent—saying that it has nothing to do with retaliation for Obama’s sanctions and instead is just regulatory enforcement.

According to the Post, the Russia regulators have either imposed or threatened to impose blanket bans on U.S. poultry, European produce, and U.S. fast food, owing to food safety violations purportedly found by regulators. Obviously realizing that it can’t fight the power of the state and its army of fierce regulators, Wendy’s has announced that it is closing its operations entirely in Russia.

In his own inimitable way, Putin is showing us the value of the regulatory economy, from the standpoint of any government, including the U.S. government, that maintains an economic system based on a regulated economy.

It’s no different over here. Consider, for example, the case of Qwest Communications CEO Joseph Nacchio. When he was approached by the feds to participate in their illegal scheme to divulge confidential customer data to U.S. officials, Nacchio, unlike other telecom CEOs, said no—that he wouldn’t not sell his customers down the river, especially as part of a secret, illegal scheme.

The feds retaliated, in much the same way as Putin is retaliating for the sanctions—by resorting to their regulatory scheme. Much as Putin is using safety regulations to go after U.S. firms and products, the feds went after Nacchio with insider-trading laws. They “found” some purported violation and ended up sending Nacchio to jail for several years.

Of course, the feds played the innocent, much as Putin is. They claimed that their prosecution of Nacchio for violating economic regulations had nothing to do with his refusal to play ball with the feds and their illegal surveillance scheme. It was all just a matter of enforcing economic regulations, they innocently claimed.

Not surprisingly, that’s what Putin is saying too—that his regulators are just doing their job and that their enforcement of economic regulations has nothing to do with Obama’s sanctions against Putin.

The fact is that under an economic system of a regulated economy, the government maintains a perfect way to keep everyone in line because it’s always easy to find violations of regulations. That undoubtedly explains why Americans rarely see corporate and banking officials taking public stands against the invasions, occupations, foreign intervention, foreign wars, wars of aggression, torture, imperialism, and other aspects of U.S. foreign policy. They know what would happen to them if they were to do so.

Vladimir Putin is showing us how a regulated economy works, not only in Russia but also here in the United States. Of course, there is but one solution to all this: a true free-enterprise system, one in which there is a separation of economy and the state, one in which economic activity is totally free of government regulation and control. Then and only then do people in the business arena feel free to express their true viewpoints about government policies.


This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.