A few days ago, Perry de Havilland suggested the rather cute idea of erecting statues of the US Senators who cooked up the Sarbanes-Oxley accounting law, on the grounds that this law has encouraged many firms into listing their businesses outside the United States and holding Initial Public Offerings (IPOs) outside Jefferson’s Republic. London’s stock market has benefited from this, as have bourses such as the Amsterdam Euronext, for instance. I do not know whether some of the impact of S-O has been exaggerated – this may be the case – but there is no doubt that from a regulatory point of view, the United States is not quite the model of laissez-faire capitalism that its supporters or indeed opponents imagine it to be. In fact, the US has been becoming a regulatory hell-hole for some time, such as with the recent crackdown on online gambling, to take one example.
Another man who deserves some sort of award for unintentionally driving business away from America is departing NY Attorney-General Eliot Spitzer. He is stepping down from the job to run for political office, and some say he has been doing that while in his present role. While some of his highly public campaigns to crack down on dodgy dealings should be applauded by free marketeers on the grounds that markets need laws against fraud, some of his campaigns seem to be driven more by the wrong-headed belief that markets must in some sense be “fair” and “perfect” in order to work in the interests of the general public. The mistaken idea that markets must contain no barriers to entry, contain “perfect” information and so on, has done incalculable harm to real capitalism, as also seen in the absurdities often perpetrated in the name of “trust-busting”. In his campaign against biased stock market research, for instance, Spitzer seems to downplay the old wise dictum, “let the buyer beware”, and presume to protect the customer against the shock-horror fact that banks might not be models of Olympian objectivity. There is a good and passionate attack on Spitzer’s record here.
Spitzer did some good but also a lot of harm to Wall Street and beyond. Competing financial centres, possibly including the rapidly-growing hub of Dubai, will rush in to fill the gap as capital becomes ever more fluid in this information age (yes, you read me correctly, I said Dubai, notwithstanding the local regional, er, difficulties).
In case any US readers get all hot under the collar about yours truly, a Brit, taking a prod at the US economy, I am only too well aware of how Britain is falling under the same regulatory menace, both of the home-grown and EU varieties. We all lose if the world’s biggest free economy becomes encumbered by bad laws.