Last week, Andrea from one of my favorite blogs Fools and Sages wrote a piece called The Slippery Slope of Consumer Protection.  Her conclusion was that a double-standard exists in the area of consumer protection.  Here on Hope to Prosper, I am a bit of a consumer advocate.  So, I decided to write a post dedicated to consumer protection and responsibility.  This is a topic that has a host of financial ramifications and a number of moral dilemmas.

People without Conscience

There is a segment of the population who feel they shouldn’t be held accountable for their actions.  They believe it is their basic right to do whatever they choose and allow the responsibility to fall upon others.

They know how to work the system that was put in place to protect the weak and the vulnerable.  They run up debt and then declare bankruptcy.  Or, they look for opportunities to sue others, even if they are primarily at fault.  They have no qualms about taking from others nor are they embarrassed by their lack of integrity.  Often, they will joke or boast about their transgressions.

It’s fairly easy to cast judgements upon people.  But, it’s not so easy to legislate morality.  It’s nearly impossible to write effective laws to protect consumers, without allowing opportunities for the caniving.  There is no perfect solution to this problem.  Compromises are inevitable.

What is the most effective way to deal with schemers?

Failure of Leadership

Consumers have been attacked by many for taking on too much debt, for signing contracts they didn’t understand and for walking away from debt, even when they could afford to pay it off.  But, how is this different from the actions of business or Government?  Aren’t corporations structured in ways that allow them to declare bankruptcy and keep their assets?  Doesn’t our Government sign laws that they don’t understand and run up debt they can’t afford to pay back?  How can we expect consumers to abide by a moral obligation that is absent from the conscience of business and Government?

America seems to have lost it’s moral compass.  And, the example was set by fraudulent corporations and a corrupt Government.  No rule of law will force a return to an ethical America as long as these unjust conditions are allowed to exist.  The Government must lead by example and business must be held accountable, before consumers will regain their principles.

Have business and Government set an unscrupulous example?

Role of the Consumer

I believe most people are honest and want to do what is right.  After all, our country was founded the principles of liberty and justice and it has survived because of the honor and courage of it’s citizens.  Unfortunately, there isn’t much respect for the rights of the consumer or for their enormous contribution to society.  Consumers are now looked upon as “piggy bank” by the Government and a “mark” by business.  We must stand up against this injustice or risk financial enslavement to the Government and the wealthy.

The role of the consumer is to power the economy with their purchases, fund the Government and supply brain and muscle power to business.  Since our country is no longer producing goods at levels seen in the past, our economy is now based primarily on consumption.  Unfortunately, much of our consumption is based on debt, which erodes our future ability to purchase.  Consumers have begun to delay purchases and pay down their debt, but this has slowed the economy.

Can we sustain an economy that is based on consumption?

The Role of Government

There has been a systemic failure in almost every aspect of Government.  Corruption has subjected us to pillaging by the wealthy; politics have obstructed our ability to govern; and incompetence has undermined our financial stability.  Even with valiant efforts towards reform, not a whole lot has been accomplished.  There have been small victories, such as the CARD Act and overdraft reform.  But, the Government has failed to reign in business or to provide critical reforms in the areas of derivatives and market manipulation. 

The Government’s role is to provide a structured set of rules for business and consumers to follow.  And, they have an obligation to enforce these rules in a fair and consistent manner.  Their role is not to protect people and businesses from themselves.  Their role is to protect them from the deceitful and predatory practices of others.  Failure to define and enforce the law risks anarchy.  Also, the Government’s role is not to create wealth.  They can only consume and redistribute wealth.  Their misguided effort to stimulate the economy only places a larger debt burden upon business and consumers.

Will consumers be protected from increasingly hostile businesses?

The Role of Business

Without effective regulation from Government, business has been allowed to set their own greedy agenda.  The Financial Collapse of 2008 was blamed on consumer defaults, but it was caused by the unsafe leverage used by business, as a way to increase profits.  Business grows bolder in their contempt every day, as they find new ways to skirt consumer laws and manipulate the markets.  This will not end until it is stopped.  There is a lot of money at stake.  And, money buys influence.

The role of business is to create jobs, develop products and provide goods and services.  Business used to be the primary generator of wealth within our economy.  But, now they seem to shuffle and divert more wealth than they create.  Business cannot be allowed to operate without regulation when profits are at stake.  And, business cannot be allowed to corrupt our political system to take advantage of consumers.

How can we refocus business on the creation of wealth?

Regulation that Works

The moneyed interests in this country effectively “influence” our politicians to such a degree that voters have lost their voice and their protections.  And, since incumbents have such a tremendous election advantage they aren’t inclined to listen to voters over campaign contributors.  The recent Supreme Court ruling that repeals the McCain-Feingold law will only make this worse.

Instead of creating a bunch of new laws, which have few teeth and many loopholes, we need to aggressively enforce the laws we have and to let business know they will be held accountable.  A prime example would be the dismantling of Arthur Anderson after the fall of Enron.  A message was sent to business that this type of fraud wouldn’t be tolerated.  Until business respects the rule of law, there will be no justice for consumers.

How can we regulate business without creating red-tape?

The Bottom Line

The bottom line is that consumers, business and the Government each have a responsibility to each other and to the economy.  As all three parties selfishly take advantage of each other, the golden partnership has begun to break down.  And, prosperity may be sacrificed, with the balance of power.

“When government accepts responsibility for people, then people no longer take responsibility for themselves.”

George Pataki – 53rd Governor of New York

Recommended Reading

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