Wednesday, November 9, 2011

TIME: Putting the Propaganda in Perspective // Don't Blame U.S. Business Regulations for American Job Losses or China Success

This week, TIME Magazine had a surprising chart that I think is worth sharing with Maryland policymakers. Call me old school, but I still subscribe to TIME and read it religiously just to get a sweep of newsworthy tidbits that would otherwise fall outside my natural interest.

The chart below, however, is very much related to things Maryland Juice has been pondering lately. As the Republican case against taxes evaporates, the "problem" of business regulation is increasingly being highlighted by national conservatives, think tanks, and business leaders. TIME's chart below debunks myths that developing economic powers like China, India and Brazil owe their recent successes to a lawless regulatory environment for businesses (note: I added emphasis with red-flags below):

Of course, many business lobbyists are currently arguing that the United States must de-regulate various industries in order to compete with China (or Virginia). The chart above notes that the U.S. is number 4 in the world for business-friendliness. Moreover, many of the aforementioned nations actually have very difficult aspects to their business environments. TIME notes two counter-intuitive examples:
  1. "Despite rapid growth in China, it takes 311 days to build a warehouse there -- twice as long as the rest of the world," and
  2. "Companies spend an average of 2,600 hours a year complying with Brazil's tax code."
The text that accompanies the chart states:
Overregulation has been a persistent economic bogeyman this year.... In mid-October the World Bank released its annual ranking of countries on the basis of ease of doing business; it took into account the number of regulations, tax rates, the time it takes to start a business and other factors. 
Out of 183 countries, the U.S. was deemed the fourth easiest place in the world to do business, unchanged from the year before. What's more, a number of lower-ranked nations--including South Africa, China and Brazil--have had much faster-growing economies than the U.S. in the past five years. Neil Gregory, a deputy director for indicators at the World Bank, says regulations kill some jobs but create others. He says rules that promote small-business lending are essential. The search for the true job killer continues.

This is not to say that complicated business regulations don't impact companies in negative ways -- but how much of the U.S.'s business-friendliness is due to the predictability of the business environment vs. China and India's more chaotic systems? My attorney-friends who work on business cases abroad do not have pleasant things to say about the state of the Chinese and Indian legal systems right now (with respect to business). Indeed, Maryland Juice believes that many business people are incorrectly attributing cause and effect to the fact of regulation, instead of other contributing factors like predictability/unpredictability. There are numerous examples of how this plays out in local government, especially with regard to land use. More on that in the future!

1 comment:

  1. Yeah, we're going to spend some time tonight talking about this on "The Broadside". Here's a basic concept: you can't have an economy that is $14 trillion in size spend 1/7th of its money on dealing with (federal) regulations without it having an impact (which is, incidentally, the entire point of having a regulatory state).

    Woe unto any person SERIOUSLY interested in public policy who denies this. It's fairly straightforward math.