(Steven Cole is President and CEO of the Council of Better Business Bureaus, the umbrella organization for 112 BBBs in the US. Roger Cochetti is a former executive with IBM, COMSAT and VeriSign and has helped organize numerous industry self-regulatory programs in the information technology and Internet industries.)
The discussion leading up to the $789 billion stimulus package was dominated by two themes that might actually miss the larger point. Spending and tax relief alone will not create a sustained recovery and more regulations alone will not protect consumers.
For any economic recovery to outlive the immediate effects of the federal spending or reduced taxation, it must engage individuals and businesses, and small business in particular, in a way that encourages them to risk their time, creativity and capital in the development of new goods and new services. And the individual or the business decision to take a risk of time and/or money to create something new – which lies at the heart of sustainable economic resurgence - is based on many factors, the cost of money and tax rates being only two. Equally important is a business environment free from unreasonable, or overly-burdensome regulation.
President Obama and the Congress must be balanced in their approach, identify the areas most crucial to public protection, tailor regulatory choices to dealing with the problems identified – and do that in a practical way. Further, the President and Congress need to defer to credible self-regulatory approaches where those can do the job as well and with greater flexibility, or at least build into any regulatory solution credible self-regulatory enforcement where that is viable.
But this isn’t all about the government. It is vital that our business colleagues listen carefully to the public dialogue now underway. The pressures for more regulation are not simply about mortgages and credit – or peanuts. They extend to all facets of the economy—product safety, advertising, and almost anything that runs a risk of consumer harm. The pendulum that swung far in favor of deregulation starting with Albert Kahn and Jimmy Carter could now swing to the other extreme.
It is essential for business – worried about a positive environment for investment – not to simply run to the barricades every time a new regulation is proposed. What business must do is get ahead of the curve—prove that private sector solutions are more flexible by identifying areas where the public needs to be protected and where abuses are occurring –and it should do so before it is too late, and it is forced into a defensive, reactive and frankly unsympathetic position. As Seth Godin’s blog reminds us, energy and resources spent on lobbying against regulation and for the status quo does a disservice to business – it might be better spent taking concrete actions that business can actually implement and control.
Business leaders know as well as consumers and politicians where the danger points are. Instead of keeping their fingers crossed that government officials miss their particular industry, they need to step forward and make a difference with believable private sector regulation so that their case to Congress is a thoughtful, reasonable and timely one.