On the Contrary

The conservative mantra is that over regulation of business by government kills innovation and makes our businesses less competitive.  There are actually two sides of this coin, because Democrats are just as guilty of this mindset when they claim they are protecting local jobs.  But do either of these sides ever consider that their protection of business and the status quo of business as usual is actually stifling innovation and making our industry, what’s left of it, antiquated?

What got me thinking about this is was a story in the New York Times describing how China was now has the lead in clean coal technology.  Now I would be the first to tell you that clean coal technology is mostly an oxymoron because no matter how you burn coal, CO2 is still a byproduct and there are other energy choices for us that bypass this problem of sequestering CO2.  But then you have China whose energy industry is primarily coal and you realize that in the short term, this is the most viable way of controlling greenhouse emissions.  So with the estimated largest coal reserves in the world, and 50% of our energy presently being produced by coal fired power plants, how come we are not the leader in clean coal technology and we could be selling this technology to the Chinese?

Well, the answer to that question is what I suggested at the start of this piece.  Businesses mostly have a very short-term view of profit.  Their stock prices and maximizing profits for shareholders is their primary goal, and any change to their industry that impacts their short-term profit is to be avoided at all costs.  Bottom line here is that most of our industries fight innovation and upgrading if it impacts the bottom line.  In many ways the business model that is being driven by stock market prices and maximizing short-term stockholder profits is, by definition, short term and counter productive to long-term health.  Enter our politicians who because they are driven by either conservative ideology, or short-term votes, and of course the money they can raise to obtain those votes, have exacerbated this stifling of innovation and growth.

First we have conservatives who feel regulation just adds cost to doing business, makes businesses less competitive, and stifles innovation.  So they have fought government energy regulations that might, in fact, actually make our industries more competitive.  Look at the cap and trade proposal to put an incentive into the market place to be more energy efficient and decrease green house gases.  The argument you hear is that this will just add costs to businesses that will be passed on to the consumer, and in affect be like a new tax (note the pejorative use of the word tax as in any tax is bad).  What they are really protecting is the status quo that inhibits innovation.  China on the other hand is requiring that every new coal power plant be built with this new technology; expensive now, and extremely cost and environmentally friendly in the future.  That is why they are leading in the clean coal technology.

Then there are the rust belt Democrats or the Southern Democrats who are either slaves to the industries that fund their elections, or to the workers in industries that will be affected by regulation.  The obvious example here is the automobile industry.  Had the government been successful at establishing tighter gas mileage standards many years ago, we might actually have cars that are competitive with foreign imports.  The biggest hurdles to doing this were the Democrats from Michigan.  But in a misguided effort to protect industries in their state from regulation, they have in fact signed their eventual death warrants.

In this new world that neither Republicans or conservative Democrats seem to be able to comprehend, it turns out that regulation may in fact be the engine that drives innovation and makes our industries competitive.  This is a whole new paradigm for the way we think about government intervention and regulation of businesses.  But sadly, the Chinese are leading the way, while our stuck-in-the-20th-century politicians continue to protect the status quo and sound the death knell for many of our industries.  Maybe in world where everyone is looking to maximize profits in the short-term, only the government can provide the incentives for business to invest in their future.