There has been a lot of items in the news lately that in my mind make the case for government regulation. The case against government regulation is that it stifle innovation and that the market is the best ultimate regulator for business. But let's look at 3 specific examples of current issues.
First, take all the toys (and other products?) that are being imported from China that contain lead. Most of the lead in the toys come from lead paint used because it is cheaper. Now who should be held accountable? The companies like Fisher Price who are outsourcing the manufacturing of their toys over in China? The problem with the global economy we are now participating in is that there are more and more layers of outsourcing. Trying to track down the proper company to manage and then make sure that their products are safe would be burdensome to the company at the top. Also, countries like China and India that are taking more and more of manufacturing does not have any concept of quality control. On the evolutionary scale of capitalism, they aren't yet beyond the concept of you can't poop where you eat.
A second example which is even more current is the thousands of flights that have been canceled because airlines neglected to maintain proper maintenance on their aircraft. In this case, it is an example of lax regulation and companies taking advantage of that lax oversight to save money. In the meantime, there were planes flying with cracked fuselages.
Finally, there was a meat processing plant that was forcibly putting downer cows into the food chain. This caused a massive recall of beef mostly from school systems that were feeding the beef, unknowingly to children. This was another example of oversight that needed to be better. The company was waiting until the inspectors had left before they purposely put in the downer cows. There has been a lot of discussion about the worry that terrorists could do something to harm the food supply. Apparently, we don't just need to worry about the terrorists.
I'm going to make an assumption that the government should have a role in public safety. The level of that role is always going to be up for debate. In all the examples, you have to ask what is the best way to accomplish protecting the public. I would argue that proper government regulation is more efficient than letting the market take care of things. It's really the difference between being proactive or reactive. Being proactive you find out about issues before they end up on the front page. That to me makes the most sense. I have a job in the service sector. The more we are proactive with our customers on issues, the more profitable our business.
I would also argue that it does not behoove businesses to try and regulate themselves for public safety. The job of a publicly traded company is to maximize profit for their shareholders. That means that there is constant search for ways to be more efficient and push prices down. That is the opposite of the mission of public safety. That mission does not take into account the cost of public safety. The government's mission is public safety. A properly run government should be able to do it more efficiently than companies. It also saves the company the cost of self regulation (a big assumption that they would comply). The problem with the current administration is that is not competently run, as has been proved by Katrina among a long list of deficiencies. It becomes a self fulfilling prophecy if you come in saying that the government cannot do anything right and then set off and prove that theory.
Ultimately, I think there is a balance both from trying to be over protective from the government and being mindful of the burden. However, the above examples do not even pass the common sense test. Our children should not have toys with lead paint, we should before that the planes are safe BEFORE one falls out of the sky, and we should make sure that the food supply is safe. Those are pretty basic. As usual, a little common sense goes a long way.
5 comments:
Absolutely. Regulation is not a bad word anymore than moderate or compromise.
There are key industries and infrastructure elements throughout the nation that we cannot rely solely on private industry to provide. Energy, Water, Transportation, Education, Health Defense, Police, Courts are all good examples. Note that I did not say we cannot have private industry in some cases (certainly we have them already in all but one of the examples I give). But the government must provide a hedge against vagueries in the market, and against the collapse that can come with strictly market based "controls".
I guess the hard-core Libertarian says no regulation whatsoever, but to me that's nuts.
Having said that, there is such a thing as excessive regulation, too. In the case of the recent airline bit, I think the excessive nature of the response can partially be blamed on the lack of common sense of the regulators (along with panicked lawyers?)
BTW, Sue said she left a comment, but I don't see it.
Away with the public nannies! Government regulation is nothing more than giving some agency so much power it become a roadblock. Agency are a collection of nannies justifying their existence and burrowing deep enough to be overlooked in the next administration change. Even when they do have power to protect the public, they don't exercise it. Case in point - it was not the FDA that expose the downer cows, it was the Humane Society. Where was the FDA? Not doing its job - again. And lets not forget the recent performance of the FAA. Were planes falling out of the sky? Were planes' landing gears collapsing on the runways? When was the last commercial airline crash in the United States? Yet the FAA put pressure on AA over bolts and wire bundles and stranded thousands of people across the country. Great for business, right?
Federal regulation runs to the extremes of none to the 1% doctrine (if there's 1% something bad COULD happen, take the most extreme preventive measure possible and utter the phrase "if one life is saved, it's worth the inconvenience." Smile for the media). You cannot impose federal regulation on everything. There may be standards to promote the common good and protect the consumer but agencies must not have all-encompassing powers and they should have to work with the industry and not against the industry it is supposed to regulate.
Regulatory agencies are not responsible to the public. They are administrative. They have too much power because they are unchecked. There's no accountability. When did the public demand the head of an agency get fired. Oh wait - Brownie was fired. But why is Cheritoff still there? The cozy relationship between the FAA and Southwest was exposed by a whistle-blower, not the head of the agency.
Frankly, regulators are potential trouble. Let's see. HUD - what happened in Philadelphia? Education - no child left behind. Children aren't taught to think or reason but by golly, they can pass tests. Transportation? What about the bridge and highway infrastructure. Where is the massive reconstruction? Energy? What is our energy policy and who does it benefit? Did you know that in Virginia, Dominion Power wants to take rural farm land by eminent domain to build high-power lines across the countryside? There are regulatory hearings going on and the matter has not been settled. However, it should be noted that so far Dominion Power has always prevailed before the regulatory agency. Courts - well, it depends on who you talk to.
Let's not even go to the SEC and banking industry. That mess is still unfolding.
I'm not against all regulation but I'd like to see more of a check and balance relationship. I want to see some accountability from the regulating agency as well as private enterprise.
We live in a complicated society and there needs to be some means of establishing public-good standards and creating rules for the conduct of business. However, there is a danger in letting the "government" have too much power that cannot be called into question or curtailed when its reach is excessive.
I'm tired of public nannies. I'm tired of people saying "it's the government's responsibility." The first line of responsibility is ours.
There's your libertarian! I absolutely agree, though, that as often as not the regulatory agencies are found to *not* be doing their job anyway! Especially with the big guys. When you are a little guy, though, you better look out!
Got to say I'm definitely on Suzanne's side on this. Although, in a few instances a case can be made for goverment regulation, but mostly it just creates a greater mess than it attempts to cleanup (or prevent). At a minimum, it costs a ton more, especially for businesses and consumers.
Which brings me to my main point...
I think your idea that it does not behoove businesses to try and regulate themselves for public safety. The job of a publicly traded company is to maximize profit for their shareholders is the critical flaw in your pro-regulation argument.
The fact is that planes falling out of the sky and kids puking up their cheeseburgers is bad for business....very very bad! Businesses are motivated greatly to avoid this, because to their profit goals. Will they make every attempt to balance risk (crashing planes) and reward (profit)? Of course, and they should.
Take comfort in knowing, however, that in these days of instantaneous global communication of even the must local an incident, the risk is likely to be extremely high.
This is why...greed is good!
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