As ever, it appears that Mr. Ridley and I are thinking along the same lines

Here he is in The Times.

Sound familiar? Every small businessman I talk to these days has a horror story to tell about the delays and costs that have been visited upon him by planners, inspectors, officials and consultees. Using the excuse of “cuts”, the bureaucracy is taking even longer to make decisions than five years ago. In the time it has taken Britain’s Government to decide whether to allow a fifth exploratory shale gas well to be drilled in Lancashire, and from the same standing start, the same investors have drilled 72 producing wells in Argentina. That the country of Watt and Stephenson should look a potential cheap-energy gift horse in the mouth in this way is staggering to this jaded optimist.

A growth-preventing bureaucracy is not the only thing suppressing enterprise in Europe.

Here\’s me in The Register a couple of days back:

In order to get something as simple as a method of getting a cab out to market, you\’ve got to fight through layer upon layer of bureaucracy. Indeed, these companies seem to be having exactly the same fight in every city whose market they attempt to enter.

Your standard issue microeconomist would be able to tell you what is happening too. It\’s generally known as regulatory capture. Sure, we need some regulations to protect consumers: but what tends to happen is that those regulators get captured by the producers being regulated. They are, after all, the people with the most interest, the most money to make or lose, dependent upon what the regulations are. So, at the very least, they pay more attention. As a result, regulation tends to develop into a cosy little cartel of the current suppliers. And the regulations themselves as a way of keeping out those pesky upstarts with their innovative ideas.

We\’ve ended up with a world where if you\’re doing something new then there are few barriers to your being able to do it. But if you\’ve got a better way of doing something old then there\’s quite an array of regulators and regulations sitting there trying to stop you from subverting the established order of things. At which point it doesn\’t surprise me all that much that economic growth is slowing down. For it isn\’t just about new things to do, it\’s also very much about better ways of doing old things.

Yes, agreed, some regulation is indeed necessary to protect people. But we\’ve managed to create so much of it that we\’re in danger of returning to a system remarkably similar to those medieval guilds which Smith so vehemently protested against. It\’s a system where you\’re allowed to do all the creation you like but don\’t you dare try doing any of that destruction: and that rather obviates the point of a lot of innovation.

So I\’m emphasising the incumbent protection aspect of much regulation: Matt is emphasising the bureaucracy itself. But we come up with the same answer: the regulatory state is stifling economic growth through the limits it places upon innovation.

A real world example for you. In part of my planning for this German/Czech extravaganza to produce scandium I looked into the possibility of building our own tungsten processing plant (technical background. The Sc is in the W ore. That W ore needs to be processed to release the Sc, we can then extract it from the standard wastes of the standard W processing plant.). We\’d have needed more capital but it looked eminently possible. Margins were good, kit is available on the market. There are two such factories in Europe already (for boring technical reasons our own plant would be better than slipping our ore through those plants). The place we would have put the plant used to do this very process 20 years ago. All of the inputs are produced onsite (that\’s why the old processing plant was at this chemicals factory). There\’s still trained staff around. All of the ancillary stuff is available (from staff canteen through purification of waste water, fire service, medical centre and even surplus hydrogen to reduce the WO3 produced to W).

Seems perfect. Except it would take 18 months just to prepare the required environmental impact study under European Union rules. This is on the site of an extant chemicals factory, producing sulphuric acid and caustic soda. We\’re not talking about violating God\’s Green Acres here, we\’re talking about sticking a few machines in an empty building on a site that has been pumping out all sorts of gunk for well over a century.

Meantime, in China, I know of three Sc producing factories that have been set up within the last 18 months. From bare ground to producing material.

No, I\’m not arguing that we should have China levels of pollution, of zero control over matters environmental. I am though pointing at the way in which such environmental controls do indeed slow economic growth. In this particular case, exclude its possibility: we\’re simply not going to spend the time or money to do it. The plant won\’t get built, the jobs won\’t materialise and the most likely outcome is that the W production will be done in the US.

Or as I\’ve mentioned before, a by product of our processing the wastes of the W production (which we will take back from the US plant) will be a couple of tonnes a month of iron powder. Value maybe $500 a month. Iron\’s a pretty well known substance, it\’ll just be sent off into the scrap chain but better that it is extracted than we landfill it. To do this I must register that one product, iron, at a bureaucracy in Finland at a cost, if I\’ve got this paperwork right, of €8,000.

OK, a trivial example of REACH stupidities. But the great move in the metals world these days is to have a look at all of the wastes from current processes and see what\’s in there that can be extracted as byproduct. No, really, it is. What is there lying around in the wastes of tantalum processing (rare earths mainly). Or aluminium production (erm, iron, alumina, sand, titanium dioxide, rare earths, gallium, germanium, vanadium and by the time you get to that you\’ve pretty much got the entire periodic table available for extraction, certainly potassium, uranium and thorium). But each and every producer of each and every one of these elements must register them with that bureaucracy in Finland. And for a larger company, costs can be €80,000 a substance, not €8,000.

Way to encourage people to extract marginally viable elements from extant waste guys.

I do not claim this is the only reason why economic growth has been slower in recent decades than in the post war ones. But I do claim that it is one of them. We have a system of bureaucracy which is antipathic to the innovation which is economic growth. Maybe it\’s even right, on environmental grounds, that we do have this system. You can certainly argue that although I would say that there\’s too much of it. But what no one can deny is that there is a cost to all of this and that cost is of fewer jobs and less economic growth than we would have without it, or even with a rational and efficient such system.

As ever in a democracy it is your choice: but do please be aware of the choices that are being made.

14 thoughts on “As ever, it appears that Mr. Ridley and I are thinking along the same lines”

  1. So Much For Subtlety

    This seems as good a moment as any for a Robert Heinlein quote:

    Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.

    This is known as “bad luck.”

    (With thanks to Instapundit)

    People simply assume technological progress. I don’t see why. We don’t know what causes these advances in society and unfortunately the dominant intellectual paradigm in recent times has been Marxism which assumes they are like a force of nature. Unstoppable.

    As can be seen by Europe, they are by no means unstoppable. They are, in fact, by and large the work of northern Europeans.

    This is why the loss of Mitt Romney and the EU are both so bad. The EU is putting Southern European values in charge of Northern European economies. One of the great benefits of Europe was disunion so that even the French and Italians could see what the British and Germans were doing. They could even copy it. But if the French and Italians are running Germany, expect to see southern dysfunction trump northern innovation.

  2. So Much For Subtlety

    Incidentally Freeman Dyson has an excellent discussion of what he calls the Costs of Saying No somewhere. Probably in Disturbing the Universe.

  3. I have two hats in this ring. On the one hand I’ve been in several meetings of small business people where the subject has been ‘red tape’ preventing small businesses to operate even, let alone grow and move forward…..The point you are making, and a serious concern.
    On the other hand I have been in many meetings with residents or councillors, where the subject has been big building developments (mostly wind follies) being forced onto an area against local opposition by central government…..This is the other side of the same coin. On the one hand we want less regulation for our businesses and occupations, on the other hand we want more protection against greedy and thoughtless development from other business interests.

  4. fenbeagle

    They are not really two sides of the same coin.

    Big business wants regulation to stop competition from little business, knowing that the cost of employing red tape navigators is much less on a payroll of 5,000 people than on one of 15.

    Government wants a private sector it can invite around for a cosy chat, not a million individual voices.

    After that cosy chat, it bulldozers through the developments that it has been persuaded are essential.

    Hence we all lose out except big business.

  5. > As ever in a democracy it is your choice
    Not that we are ever offered the choice of sacking the civil “servants”, mind you.

  6. On the one hand we want less regulation for our businesses and occupations, on the other hand we want more protection against greedy and thoughtless development from other business interests.

    Wind follies would not exist without government subsidising them.

  7. Every small businessman I talk to these days has a horror story to tell about the delays and costs that have been visited upon him by planners, inspectors, officials and consultees. Using the excuse of “cuts”, the bureaucracy is taking even longer to make decisions than five years ago.

    This sounds like Russia, the excuse of “cuts” excepted.

  8. I’ve been involved with a fair few pre-start-ups over the last year or two. Every one was scuppered by regulations and red tape – most by regulations not even aimed at them – apart from the one based on exploiting a loophole, which has done rather well. The one business plan I’ve seen where regulation was not an overwhelming burden was a micro-brewery – you can be as cynical as you like as to whether that’s a coincidence.

    I also have a fair idea about a couple of start-ups in building services and light manufacturing respectively which are pure cash businesses with no official existence whatsoever – they seem to be doing pretty nicely.

  9. Yet the OECD’s Regulation Index, which takes into account 1) state control of business enterprises, 2) legal and administrative barriers to entrepreneurship, and 3) barriers to international trade and investment, finds that the UK is one of the least restricted of its member countries, second only to the US in its lack of business regulation.

  10. Pingback: Bureaucracy and suspicion of science « Homepaddock

  11. Tim,

    I am not a big fan of Ridley’s – he’s very good at popularising science, but not so good at chairing banks. That is not intended to be in any way sarcastic, merely a true and fair statement of the historical record. For all we know Johnny Ball might have done a better job, if only because his maths.

    Your business seems a very specialised one, but even so it seems surprising that the bureaucracy should take so long. However, having worked in (aarrghh!) 22 different businesses, under business owners of widely varying degrees of both competence, diligence and, indeed, mere sanity, you have to wonder whether some of the ‘small business owners’ Ridley is talking to are using bureaucracy as an excuse not to go out and just work harder. All business involves an element of risk, otherwise it’s not business, a fact that many small business owners seem to find very hard to accept. Nobody starts a legitimate business in this country with a gun at theor head, and it baffles me why people should seem to feel they should be congratulated for doing so when they either want more money than thye could earn in salaried employment or indeed are so sociopathic that they just can’t actually work with other people.

    The history of British bureaucracy is a very reactive one – bureaucracy tends to be created when somebodym and not infrequently it’s bene business owners, have behaved in a thoroughly wackadoo manner which suggests the urgent donning of the white jacket with very long arms.

  12. Tim,

    I am not a big fan of Ridley’s – he’s very good at popularising science, but not so good at chairing banks. That is not intended to be in any way sarcastic, merely a true and fair statement of the historical record. For all we know Johnny Ball might have done a better job. We’d certainly have had confidence in his maths.

    Your business seems a very specialised one, but even so it seems surprising that the bureaucracy should take so long. However, having worked in (aarrghh!) 22 different businesses, under business owners of widely varying degrees of competence, diligence and, indeed, mere sanity, you have to wonder whether some of the ‘small business owners’ Ridley is talking to are using bureaucracy as an excuse not to go out and just work harder. All business involves an element of risk, otherwise it’s not business, a fact that many small business owners seem to find very hard to accept. Nobody starts a legitimate business in this country with a gun at their head, and it baffles me why people should seem to feel they should be congratulated for doing so when they either want more money than they could earn in salaried employment or indeed are so sociopathic that they just can’t actually work with other people.

    The history of British bureaucracy is a very reactive one – bureaucracy tends to be created when somebody, and not infrequently it’s been business owners, have behaved in a thoroughly wackadoo manner which demands the urgent removal from mothballs of the white jacket with very long arms.

    All the best for 2013, by the way, I hope it’s prosperous for you.

    Best,

    Martin

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