I agree that R&D should be encouraged whenever possible, and protecting technology is a no brainer, but when you say that we should relax regulations and bureaucracy, slow down. 1: Businesses and Corporations want you to believe that we should get the government and regulations out of their way so they can be free to do business how they want and be free of government and bureaucreatic involvemnet. Sounds good on paper, but it has been proven that businesses can NOT be trusted, they only care about the bottom line, that is the nature of business and you can't expect any different. That is why we have these regulations. 2: Bureaucracy is defined as an "organization of non-elected officials of a government or organization who implement the rules, laws, and functions of their institution." Bureaucracy cannot be removed without losing the teeth of the regulations we have implemented to protect our citizen's health and welfare.
There should definitely be more tax credits for companies that build factories on U.S. soil, open up headquarters, and put people to work. There needs to be some sort of financial carrot for keeping innovation here as opposed to letting centers of excellence go off overseas.
The truth is though, companies are going to set up shop where they can find the talent. I've been hearing a lot about companies setting up simulation centers of excellence and other software-driven or consulting-driven, so-called white collar jobs in far off locale because that's where they can get access to knowledge experts for a reasonable investment. My point is is it's great to discuss the politics around regulation and the tax code, but let's not forget that investment in STEM (both government and private industry) is also an essential ingredient to rebuilding American manufacturing.
Thanks for a thoughtful column, Alex. My one quibble is that I don't think reducing regulations is usually a good idea, although that depends on what they are regulating. Many of them are protecting our health and the health of the environment. I think akwaman gives the rebuttle quite well. Also, the larger a social/economic/political system is, the larger the bureaucracy required to run it, so reducing it is unlikely and perhaps not even a good idea. Meanwhile, I definitely agree that the flood of technology transfers going to China is a big problem, and that the flood of jobs going there is an even bigger one: they've both been a big problem for well over a decade. I think tax incentives would make a lot of sense, as Beth mentions.
Kudos, Alex, for bringing up the P-word, Politics and the R-word, Regulation in the same column. I suspect this thread will be teaming with comments in a short time. If a simple mathematical equation could be applied to calculate the perfect amount of regulation required to balance positive and negative effects on any system, we would be using it. But as with all NP-Hard problems, our system is multidimensional and non-linear. I hope we can agree that regulations that treat our manufacturing system as uni-dimensional and linear are not helpful.
I agree with R&D credits, and keeping technology here, but time and time again we have seen the public damaged by companies that will do anything in the name of profit. Sometimes fines aren't enough because the companies are willing to pay the fines if they still make a good solid profit. There was an earlier article on ethical software practices, and in the same vein there are more amoral people than there are dishonest ones. Companies may be willing to do something that the public finds distasteful, but they are less likely to cross the line and do something that will involve prison or a hefty fine.
As much as companies like to blame their failures on government policy -- and deny that government policy plays any role in their successes -- my experience has been that much of the decline of U.S. manufacturing in the 1970s and 1980s was a result of poor management decisions. Instead of blaming unions, taxes, regulations, or foreign competition, CEOs would do better to look in the mirror.
If bureaucracy and regulations are the problem, then why is there so much manufacturing in China, where there is exponentially more bureaucracy and regulation?
If taxes or unions are the problem, then why is there so much manufacturing in Germany, where taxes and labor costs are higher?
The fact is that many U.S. companies made short-sighted decisions without considering the long term consequences. Often, companies continued to throw money away year after year in misadventures because the responsible decisionmakers couldn't admit their mistakes, and no one was allowed to question them. And executives who drove once-successful companies into the ground were rewarded with golden parachutes, while the communities which had been home to these companies were left with high unemployment and environmental problems, with no future in sight.
Dave is right on target. But let's not forget the sacred cow in the room, and significant root cause for the deterioration of our manufacturing base- corporate law. Companies have a legal obligation to maximize benefit to their shareholders. But shareholder interests are not the same as national interests. Companies are acting rationally with regard to their fiduciary responsibilities to lower costs and maximize profits, and naturally seek the cheapest sources for labor and materials. Don't like this equation?... then change corporate law. For now, regulations are used in the absence of more balanced business drivers to bridge the gap in what companies are measured against and held responsible to.
Where are all the Conservative Republicans ? Isn't the 'correct' answer to eliminate all regulations, eliminate all unions, eliminate all healthcare benefits - except for the wealthy of course - and eliminate the minimum wage ?
Then companies would have free rein. Or is it free reign ?
Nope, the correct answer is definitely not eliminating regulation. Regulation is necessary because not all people act responsibly and there is no valid reason to allow the worst among us to act in their interest at the expense of others.
We need regulation to control the worst in human nature and help ensure proper processes are used to produce the best results. The problem with regulation is that economics is treated as the only reality when it is merely a figment of the human mind.
Well said, Alex. I think you're right on the money when you say that executives are chomping at the bit to spend more money, but their companies are sitting on piles of cash. It's going to take awhile for some of these companies to learn to trust the economy again.
I do not agree with removing regulations; perhaps sunsetting most regulations, so lawmakers have to revisit the existing regulations on the books, instead of spending their time writing new, sometimes insane regulations (i.e., now floating a bill past congress that would make it illegal for children to work on family farms). If lawmakers had to revisit many of the current insane regulations, they could revise the existing law(s) to better reflect the current economic/environmental situation, or remove the regulation if it is frivolous.
I think it is important to note that much of the "regulations" of industry are self imposed; i.e. ANSI standards. Much of ANSI is "self policing". So if you don't like the ANSI "reg" then don't follow it; of course, you can't mark your product with ANSI, but it is your business choice.
Sometimes regulations come about as the result of trade wars within industries. In the case of the farm bill cited, it is my opinion that there is a war between local, family farms, which, I believe, are more likely to be "Organic" producing farms and "Conventional" Industrial farms. I.e.; if your competition is taking away your profits at the checkout line then beat them at government handout line. One look at all the Monsanto transplants in government agriculture bureaucracy should give a good picture of whose behind pushing out the small farm competition that has been steadily increasing due to the increasing popularity of CSAs and Farmer's Markets.
We need less regulation, not total elimination of regulations. Without regulations, there are all manner of evils that people might do. However, there are somewhere above sixty thousand pages of federal regulations on the books, with more being added daily. That seems a bit much.
Many of the regulations currently on the books have outlived their usefulness. In other cases, regulations from one government agency contradict those from another. Many of the regulations were written for specific businesses, by bureaucrats friendly with a specific company, "protecting the people" by giving that company an advantage over its competitors. Others were written with loopholes so big as to render them ineffective or so ambiguously that their actual intent is a mystery.
We need a thorough, impartial review of existing regulations, eliminating those that have outlived their usefulness, harmonizing those that contradict each other, clarifying ambiguities and culling those that show corporate favoritism. Further, we need a thorough, impartial review of new regulations, before they are placed into effect, to ensure they do not contradict existing regulations, do not show corporate favoritism, are unambiguous and are understandable by persons without a law degree.
Anytime I hear that "reducing regulation" will create jobs or improve the economy I want to cry out "what regulations, when removed, will do that?" It's all vague and general, a mantra to keep more careful thinking at bay. I'm sure there are plenty of conflicting, overlapping, or outdated regulations, and that culling that herd would be helpful in understanding what's required. Of course doing that is the job of government and its bureaucracy, which some want to reduce substantially also. As Pogo said, we have met the enemy and it is us.
I know that as someone with an idea that I'd like to turn into a manufacturing business, I can't afford a cadre of lawyers to study 60,000+ pages of regulations to tell me which ones apply to my business and how to comply. I can't afford the time to study them myself and if I could, there's so much convoluted legalese that I probably wouldn't understand half of them. So my business remains a dream, contributing nothing to the economy.
I agree with most of the comments here and also believe that reducing regulation will have no impact on creating jobs in the U.S. Isn't it obvious when Corporate executives tell us that regulations are strangling them while they sit on piles of cash. Why can't they invest some of that money into educating potential workers in this country as Beth suggested?
I teach at a technical college and I can't tell you how many of my students are going to school full-time, working part-time and trying to support a family as well. We have lost many over the years because they could not cut it financially and/or physically.
Another big thing is health insurance. You can squeek by when you are young and healthy (if you're lucky), but once you have a family, you have to have it. As a result, many people are stuck in dead-end jobs just because they have health insurance.
Ask yourself how many potential Wright Brothers or Henry Fords are stuck in a cubicle doing a job they hate because they cannot risk losing health insurance.
How many great ideas for new products or designs are never realized or small businesses never started because of that one ball & chain?
You want to rebuild manufacturing and innovation in the U.S? Provide an AFFORDABLE (or free) government-sponsered health care option for anyone who needs it.
From their arguments they are sitting on that cash so as not to pay taxes on it. If they hold it off-shore they are not taxed. This isn't about improving American society, it's about maximizing their take at the expense of American society as a whole.
The anti-regulation" lament is rarely followed by any examples. The fact is that free market theory has failed absolutely as proven by the existence of financial crises and bubbles as it claims that the freer the market the more accurate the price. The free market has never solved any problems, except rather minor ones with products, without excessive cost.
The problem with this discussion is that it revolves around economic ideology rather than reality. Economics is purported to be a science that explains how we interact with regards to resources, products, and services, when it is generally used as an ideology, such as promoting failed free market theory because we are a society fundamentally Calvinist, which chooses to ignore inconvenient externalities, such as the environmental or health costs simply because most people value money more than the environment or the health and safety of people they don't know.
Does anyone really think that we should eliminate regulation to allow the "market" to decide acceptable consequences? This article should have been written to provide the specifics about which regulations people see as problems rather than what seems an open ended whine.
First R&D tax. Tax is a cover up for the real problem. If CEO don't want R&D, you are not going to change his mind with tax. Even if you force the CEO to do R&D, is going to waste. Look at Kodak with digital camera R&D. They were the first. Apple with millions on R&D before Steve. Steve saw them spend all the money, but nothing to show for. Clinton tried that with hybrid. Millions given to auto companies. Is all gone. We are still 10 years behind the Prius. Bush tried again with fuel cell. Millions again, and now is just another footnote.
I worked as an intern for my dad on wind turbines in the 80's. Looked impressive from the freeway. Closer, you see all these broken turbines sewn all over Altamont pass in CA. Every single one had major flaws. They were used as tax shelter. None of them worked. Had a 400lb motor falling hundred feet down to the ground because of fatigue that was not calculated. Oh yeah, nobody bothered to check the nature of wind and how they have constant slight direction change, and large amplitude change. Just stand on top of a mountain, and you will see that.
Corporations are under high pressure from stock holder to generate profit for next quarter, not next year or 5 years. Oil industry and some others are an exception though. You are fighting against market force. People buy and sell stock within hours. Stocks are dumped if they even think the company is going to increase R&D spending.
Our capital gain tax does not take into account how long the stock is held. Change that, and people will hold on to the stock for longer, then they will demand R&D. Then you get real R&D that will be rushed to market. Get to the root cause, reduce tax for the long term stock holder, or some other means to encourage holding to a stock for long term. Stock holder will be interested in long term viability of the company. CEO will get the message loud and clear, then you have meaningful change from within.
Regulations are necessary. Without them, we have lead paint on cribs, Standard Oil monopolies, used components sold as new, etc., etc. Two things need to be done about regulations: (1) Periodic reviews of regulations by knowledgeable, multidisciplinary panels to weed out regs that are obsolete, conflicting, favor certain businesses over others, or have after-the-fact negative ramifications. (2) Review how these regulations are implemented. I have personal experience with regulations granting extra bidding credit to businesses employing verterans, disabled persons, small businesses, minority businesses, etc. This is okay, but when a small business has to spend a month filling out forms written in legalese in order to bid on an $800 sale, something is radically wrong. I understand that in an uncertain economy people are more likely to cheat, and that protective documentation is needed, but common sense needs to be put in the driver's seat.
Alright here's an example of problem regulation: In "Guidance for Industry, FDA Reviewers and Compliance on Off-The-Shelf Software Use in Medical Devices" (issued on: September 9, 1999) section 1.1 Introduction and Background states:
"Off-the-shelf (OTS) software is commonly being considered for incorporation into medical devices as the use of general purpose computer hardware becomes more prevalent. The use of OTS software in a medical device allows the manufacturer to concentrate on the application software needed to run device-specific functions. However, OTS software intended for general purpose computing may not be appropriate for a given specific use in a medical device. The medical device manufacturer using OTS software generally gives up software life cycle control, but still bears the responsibility for the continued safe and effective performance of the medical device."
One can see the FDA's concern for patient safety in their contention that the manufacturer using OTS SW has no control over that SW. Fine. But in my direct experience, this does not take into account vendor SW that is merely a process on a user's network as the medical device does NOT incorporate OTS SW but lives in it.
The problem here is that modern enterprise system software, such as middle ware, is not dealt with adequately, thus leading vendors astray as to what the FDA requires as they do not see their medical device (a process) as incorporating any OTS SW while the FDA inspectors generally understand that, but use this as the process (the medical device) requires OTS SW to properly function.
Therefore, the problem with certain regulation may be attributable to people not competent in the art developing the regulation or that the regulation is trapped in a bygone era.
Airlines got deregulated and the prices dropped and the "jet set" disappeared.
Ma Bell got deregulated or de-monopolized and telecom industries grew at a phenomenal rate.
Regulations and regulators have become "police" that are out to punish and fine. Regulators should be allowed to help small business operate within regulation instead of sending them to expensive lawyers. OSHA comes and inspect and fine not to help correct. They are not allowed to advise because it may cause "conflict of interest." Bbureaucracies should help companies comply and maybe they will learn how to write regulations better.
We should ask why Steve Jobs said that the "job are not coming back" and analyze why.
I have done work in China and their bureaucracy was in the importing. The company I was working with was small and looking to expand in to other markets and capabilities. Their infrastructurew as limited but what there were was very efficient. You can get an injection mold made in a much shorter time and at a much lower cost than in the US. This is CAD/CAM territory where the US is supposed to be good.
I expect that a baker starting out will need to fill out an EPA statement for effluents that come out of baking. It makes starting small businesses extremely complicated and difficult, Requiring much up front $ and time that is not spent on product development.
Sysdesign, just to let you know, this posting didn't work. For some reason, the spaces between words are missing. It probably occurred because you didn't write the posting in the posting window. Please repost.
It's a bit more complicated than the entire system is dysfunctional and adversarial. For example, on the adversarial side, I told the Code Enforcement department head that their job is to help develop a better society, through helping property owners maintain their property, and got a blank stare. Owners of a small book store were not allowed to sell certain coffee products because they would have been forced to install a grease trap, which they don't need for making coffe products. Then there's the examples of bureaucracies helping people comply shown in programs like "Hoarders", in which inspectors work with people to make their homes livable again.
Perhaps some of the problem is that so many regulators/inspectors are rewarded like police who are rewarded for tickets rather than the effects of good policing, such as a reduction in accidents or improvement iin public safety.
SMART regulation instead of 'no regulation' seems to be the intelligent theme of these comments. Let me tell you about my $5,000 ditch. I built my own house. Due to a state regulation I had to have this 250 ft ditch dug to drain "all that rain" from my roof, which was 150 ft away, and the ditch is uphill from my house. Also, the soil is sandy which has absorbed all of the runoff for years and years now. The ditch does nothing. The purpose of the ditch was NOT to drain water. The true purpose of the ditch was to enable an inspector to put a checkmark on her clipboard. I was with her when she did that, she went away happy. A happy bureaucrat.
What I don't see here is suggestions about HOW to effect smart regulation. Is your local candidate shouting the he will try to reduce paperwork and regulations? Did you vote anyone out of office because they didn't do anything about EPA fines where you work? "They" should do something about these suffocating regulations. Who are "they" and who are we going to vote in or out of office so "they" will start reducing regulations? Until we support candidates who are promising such, we will all have our own $5,000 ditches.
I had a similar episode with regards to a furnace installed by a state licensed pro, but not licensed by my city (the city requires all such pros to pass a city test to do business here), who also did not get a permit, which was required. The code enforcement folks were all concerned about that and it became my problem. Either the guy would get licensed in the city or I would have to get another pro to take out the permit for inspection. The ultimate result was that months after its installation the original guy's mentor took out the permit and the installation passed.
Now here're the problems: 1) I was forced to commit fraud by law, by getting a person other than the one who did the work to pull the permit. (2) The city knew that the person taking out the permit did not do the work and so they inspected knowing that fact. (3) They did nothing to protect me as a consumer and forced me to deal with the problem under threat of fine and punishment for something that the person I contracted with did, or rather did not do. Why not deal with him directly? (4) They failed to ensure the health and safety of my tenants because they refused to inspect the installation until the permit was pulled (what if it was done wrong?).
So, the question must be what the purpose is for permit regulation. It cannot be to ensure the health and safety of people. It cannot be to protect consumers. It cannot be to help ensure that pros are properly qualified. It must have some other purpose. My guess is that it has everything to do with limiting liability exposure and protecting the tax base, and NOTHING else. BTW, Mike Holmes in his TV shows have shown as much. That may be the case with regards to other regulation, such as that for industry.
Most if not all of our problems stem from the undue influence of special interests that have appropriated control of our government for their benefit. The solution is to forever dissociate politicians, in fact all civil servants, from benefitting from all money and compensation that are currently available due to their job
a) publicly fund elections exclusively, (b) make it illegal for politicians and their staff to accept jobs in businesses that they affected (one revolving door), (c) implement term limits, (d) make it illegal for pols, their staff, family, and all civil servants to ever lobby for any compensation (the other revolving door), (e) tax the wealthy enough to control their power, including not taxing work at a higher rate than speculation, (f) make it illegal for politicans, their staff, their family, and all civil servants to use insider information for profit, and (g) Repeal the benefits for elected officials and make them deal with life as we do and end early retirement and double-dipping for all civil servants.
I'm in agreement with Dave Palmer on his point at German manufacturing, in that it's not all about regulation. (OTOH, one would not be incorrect to say that their current industrial status was facilitated by the green field situation they faced in 1945/46.)
I'm also in agreement with TJ about ending the H1-B program, which is a subsidy program for employers at the expense of US engineers.
I came to this thread because the email news letter stated the readers said the solution was to reduce regulation and made it sound like the thread was dominated by the right wing pundits wanting to eliminate regulation and allow the corporate pirates full sway to do their worst to society. However, after reading through the comments, it's apparent to me that what's being said is that we need smart, effective regulation. Regulations and tax law that not only protect the environment and worker safety but encourage (force) corporations to pay back society for the special status awarded them by c orporation law in providing the benefits to society that justified creating the law, namely opportunity and jobs.
Tim, that's what was so gratifying about all the comments I received to my original question on our LinkedIN group. Rather than being politically extremistic on either side, the vast majority of the comments were intelligently thought out and even nuanced. I might be biased, but it verified for me that engineers are smarter than the average bears....
Once again, what government needs to do is to "not get in the way" of development. Government bureaucracies are typicaly collections of those who are not able to perform well enough in the business world or in industry, and so they get into government, where mostly they just need to show up, and not to think. At least that is the way it looks in this city, and from the comments it is probably similar elsewhere. The best that that part of government does is provide guidlines that can be helpful, but more typically the bureaucrats do not think, or consider a particular situation, they only recite a script, which may or not apply, as the other postings point out. THAT is the part of government that we need to remove, or at least bypass, so that actual business can thrive.
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