Friday, September 6, 2019

Deregulation to Save Businesses?

No doubt there are regulations that make businesses cringe. Some of the regulations are administrative—like requiring OSHA accident reports and such. Others require some procedural changes—like more auditing or environmental and safety controls (e.g. safety harnesses on construction sites). There is a Office of Management and Budget study that shows generally a $1 in extra cost due to regulations saves the business and/or the community $4-10 in other costs—or benefits— such as medical bills and lost time due to accidents. [The linked report does critically review—pros and cons—the OMB’s and other researchers’ methods.]

And then there’s the report that environmental and safety regulations for the coal mining industry have been ‘relaxed’ in the past two years. Yet, mine closures are accelerating. In 2008, there were over 1400 mines (underground and surface); in 2017 there were less than 700. Demand globally has grown a bit in the past two years but at lower levels than the rate of demand increase in 2000-2010; advanced economies’ (like the US’s) demand has steadily dropped since 2000. Deregulation cannot overcome market forces: coal-fired power generation facilities continue to be retired in lieu of growing use of natural gas and renewable sources.
Source: International Energy Agency
If politicians (and coal bosses) want to blame the industry’s demise on regulations, there isn’t any evidence to support the claim. It’s simple market economics. Just like saying businesses will hire more people—coal miners, for example—if their corporate taxes are reduced. Demand is a bigger influence than regulations or taxes. Without demand, no amount of deregulation or tax reductions can resurrect a dying industry. Imagine trying to renew interest in VCR machines, pay phone (booths), slide rules, etc. through deregulation and tax cuts or other government subsidies. It really can’t be done. We business owners need to stop asking for such government aids to help our non-strategic business models.

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