Tag Archives: Theodore Roosevelt

It is Time for Balance Between Government Regulation and Free Market Economy

That Used to Be Us. The title of Thomas Friedman’s latest book sounds like a deep dark downer. Instead it is a wonderful framing of problems we face as a nation and the steps we must take to get back in the driver’s seat. As with many large macro-scale issues affecting our nation, we can also see them reflected at a micro-scale, in this case in the product stewardship movement. And, not surprisingly, the authors plead for producer responsibility policies in the U.S. to capture lost jobs to China, highlighting the plight of one California-based electronics recycler, Mike Biddle of MBA Polymers.

Written with Michael Mandelbaum, the book’s thesis is “…that China’s educational successes, industrial might, and technological prowess remind us of the ways” we used to be as a nation. Friedman and Mandelbaum focus on four challenges that we must address as a nation – globalization, the revolution in information technology, the nation’s chronic deficits, and our pattern of excessive energy consumption. The book also highlights one common theme that undercuts the malaise that runs across our country’s attempts at problem solving – a disdain for government and a firm belief in the myth of absolute free markets. To me, this is one of the biggest hurdles we need to overcome.

One of my first jobs out of college was with the New Jersey Department of Environmental Protection. I was hired to write permits for companies discharging effluent to groundwater and surface water. I had little educational training, and was not provided training on the job. I arrived at the industrial facilities with a checklist of To Dos, with little knowledge of what I was doing. I was matched with engineers and scientists with years of experience that dwarfed my understanding. And yet I was required to write a certain number of permits each week. When I asked policy questions of my management, I was told to keep writing permits. If I was one of the companies I regulated, I would be tempted to think that all government officials were losers. This is the attitude that grew among businesses in the 1980s and has gained steam over the past 30 years. Ronald Reagan made a career of denigrating government officials, and the Tea Party considers it hallowed ground.

But I didn’t jump on the pile of government bashing. Instead, I quit my job, went back to school, and sought to become a different kind of government official, one that fostered free market competition with sensible rules. There are many of that type of government official out there, and they are now in the majority. But no one wants to notice. Instead, we continue to hear uncompromising anti-regulatory dogma. I yearn for a more healthy balance. Just as jobs and the environment go hand-in-hand, so do regulations and the free market economy. In fact, without this balance, regulations will choke progress and the free market will result in corporate excesses requiring government bail-outs. Again.

That Used to Be Us recounts how Theodore Roosevelt’s experience “…taught him that for business to thrive it required consistent and transparent rules, as well as regulators authorized to prevent abuses and hold businesses accountable.” It mentions that “His [Roosevelt’s] concept of the vital role government had to play to regulate markets, as well as to protect public health and safety, not to mention to safeguard our nation’s wilderness, laid the basis for America’s Progressive era.”

Here are a few more tidbits to ponder from Friedman/Mandelbaum: “Markets are not just wild gardens that can be left untended. They need to be shaped by regulations that promote risk-taking but prevent recklessness on a scale that can harm everyone. The need for regulations arises from an unavoidable feature of any free-market economy, one that economists call ‘externalities.’ These are the costs of free-market activities that are not captured by prices, for which, therefore, nobody pays, and that can injure the society as a whole. To correct this market failure, government has to step in to make sure that something closer to the full costs of the activity do somehow get paid.”

These concepts are not new. In fact, they are basic economic principles. In his November 6 New York Times column, Paul Krugman wrote about the true costs of hydraulic fracking, saying “…special treatment for fracking makes a mockery of free-market principles. Pro-fracking politicians claim to be against subsidies, yet letting an industry impose costs without paying compensation is in effect a huge subsidy.”

Why is it that the government we rely on to correct market failures is so criticized for its attempts to tame the beast? And why is it that those whose products cause external costs on our society believe that voluntary solutions are the only solutions that exist, and that government should back off and let industry police itself, even when the evidence suggests over and over that this is not possible?

The balance between government regulation and the free market economy has gotten horribly out of whack in the U.S. The Product Stewardship Institute was founded on the principle of collaboration with industry. We spent countless hours explaining the concept of externalities, documenting actual costs to government and the lost jobs owing to pure waste of valuable materials. We jointly identified common goals, uncovered barriers to reaching those goals, and explored possible solutions. Data prove that product stewardship systems reduce external costs and turn wasted materials into jobs and economic value. Only a few U.S. industries are willing to accept this truth. Others fight.

The more we have succeeded in passing EPR laws, the more that companies have placed their bets on the corporate wheel of fortune. They have slowed legislation through lobbying, reducing their own corporate costs while imposing continued costs on the environment and government. There is no doubt that corporate change is hard to achieve, especially when those with the power are benefiting unfairly. If this sounds familiar, it is no wonder that Occupy Wall Street has struck a chord with Middle America. While those in tents plead to remedy a range of inequalities, those promoting product stewardship can rest assured that their micro-issue has resonated with the macro-issues facing our nation.

It is time for balance and time for change. That really can be us.

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