Over-regulation of American companies

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Over-regulation of American companies

We vaguely recall having read an article that said the Hudson River was so clean that one could now eat up to four ounces of fish caught from it, per month, assuming one were over eighteen years of age and not pregnant. This factoid, which may or may not be true, encapsulates for us the conundrum of balancing regulation with necessity. On the one hand, we do not wish to make American corporations non-competitive with their foreign counterparts. On the other hand, we also do not want corporations doing bad things simply because they are “not illegal.”

A recent example of the latter comes from the Salmonella Typhimurium- laden peanut butter scandal of last year. In this case, the company apparently sent a sample of the peanut butter to a lab, as required by law. It came back as contaminated, which should have caused the batch to be destroyed and the source of contamination found and cleaned up.

Instead, the company sent out another few batches, until they finally got a lab result they liked, at which point they released the contaminated peanut butter. It is our understanding that the law had no clear statement that if the first batch came back as contaminated there was no do-over. Nor that the lab report the finding to the FDA.

The problem is that constraining regulations tend to be put into place because companies, acting on the principle that “if it is not illegal, then it must be legal,” have severely abused the public trust. Should all companies be saddled with onerous over-regulation because of the sins of a few?

An easy way to answer this is to get six jars (this gives you the same odds as Russian roulette) of peanut butter, one of which was on the recall list, and make a peanut butter and jelly sandwich using a mixture of all six jars. If you are a diehard opponent of all regulation, you will eat it.

We do not know what needs to be done to make it more profitable for American corporations to be doing their work in America (though lowering of the corporate tax rate to make the climate more hospitable – or even structuring it so that the U.S. became the world’s most favored tax haven – with a requirement that any individual remuneration over forty times the remuneration of the average employee be matched with an equivalent contribution to employee benefits, to discourage corporate executive pay abuse). We do, however, know that the American manager and worker are the best in the world, and that they represent a significant resource that should be better utilized. And that we should be able to order a peanut butter product with some assurance that it won’t kill us.

One suggestion has been that we follow the Chinese model, and give the government the ability to have business offenders put to death: If the CEO of a large corporation were summarily executed it would probably cause others to re-think doing bad, yet not illegal, things. However charming an idea this might be, it fortunately doesn’t fall under the rule of law.

A better idea might be to look at the effectiveness of regulation, rather than its volume, and to work on the development, of effective regulation that is free from politics and special interests, if such is possible,. And that after- the-fact regulation look at what would have been effective in preventing the problem, rather than acting merely as an administrative tax.

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