The Fiscal Times reports on efforts in the US Congress to defeat the market:
The combination of regulatory oversight and class-action litigation can keep companies in line. But a bill in Congress consisting of a little more than 100 words would not only prevent Kaplan from seeking justice but also cripple virtually all class-action lawsuits against corporations. It’s known as the “Fairness in Class Action Litigation Act,” but lawyers and advocates call it the “VW Bailout Bill.”
The bill, which will get a vote on the House floor in the first week of January, follows a series of steps by the judiciary to block the courthouse door on behalf of corporations. “There’s no question the Supreme Court has ben moving in that direction to limit access to courts,” said Joanne Doroshow, executive director of the Center for Justice and Democracy. “But Congress has never done something like this, trying to step in and wipe out class-actions.”
It’s always interesting how the greatest beneficiaries of market economics – corporations – often hide from the darker results of the market when it doesn’t suit them. The natural place to run is the closest thing to a manager, the government, and attempt to find some way to ameliorate their misstep. Removing class action suits continues an approach we’ve already discussed once here, where small-print agreements with consumers contain unbreakable requirements that disputes will always be handled via mediation, rather than the judicial system.
But I have to wonder if the members of Congress involved in this action have considered the long term problems this action may provoke. The most important will be the market backlash: the American public, accepting that we have something resembling a free market, may be enraged that a company competing in the free market will be artificially protected from its misdeeds by an Act of Congress (will the President go along?). Remember when the Bush Administration decided to support the “too big to fail” banks? A lot of folks were really angry.
Second, changing the rules of the game is never a good philosophy. Even business leaders will not be happy, as predictability, so prized by managers, goes out the window when Congress thinks it should be protecting one company from its own mistakes.
Third, an entity which doesn’t suffer for its mistakes will never learn from them. Any parent knows this, and it applies to corporate critters as much as it does to singletons.
Fourth, if VW doesn’t have to deliver honest products to customers, why should anyone else? The free market system excels when good product is delivered at an honest price, and that’s not what we’re seeing here – and it may be discouraged if this legislation becomes law.
To take one more quote from the Fiscal Times article:
The simplicity of the VW Bailout Bill belies the chaos it would create. Proponents like the U.S. Chamber of Commerce, the bill’s leading lobbyist, say they merely want to get rid of “non-injury” class-action cases, based on potential damages from defective consumer products or corporate actions that have yet to result in harm. Lawyers for class-action litigants argue that defective products deserve compensation even if the consumer hasn’t yet been injured.
This ignores the concept of irremediable harm. There are some actions that can result in injury or death that cannot truly be remediated (despite legal attachments of value to human life, it’s little more than a gesture to the needs of the survivors). By prohibiting such actions before they occur, damages can actually be less; by prohibiting class action suits referencing such actions, such as those resulting in climate change, we put more people at risk of preventable injury, and in that way the government fails to fulfill one of its key functions.
Finally, it’s interesting how we seem to be moving back to mercantilism, the economic system preceding free markets, in the sense that certain firms prosper because of governmental protectionism, while others no doubt will never survive because they lack the favor of the government.
Sometimes, in order to preserve something, we have to destroy it – a phrase with a delightful double meaning in this case.
But it’s really important that the US government dispense its favor in the commercial world as it does in the religious world – that is, not at all.
