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.
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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.
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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.
