George McGovern On Why Politicians Who Haven't Built A Business Are Bad At Regulating

from the good-points dept

With the passing of former Senator and Presidential candidate George McGovern this weekend, the Wall Street Journal reran a 1992 column he wrote about how much he learned from trying to start a business after he’d left politics. TheMoneyIllusion has an excerpt as well:

In 1988, I invested most of the earnings from this lecture circuit acquiring the leasehold on Connecticut’s Stratford Inn. Hotels, inns and restaurants have always held a special fascination for me. The Stratford Inn promised the realization of a longtime dream to own a combination hotel, restaurant and public conference facility — complete with an experienced manager and staff.

In retrospect, I wish I had known more about the hazards and difficulties of such a business, especially during a recession of the kind that hit New England just as I was acquiring the inn’s 43-year leasehold. I also wish that during the years I was in public office, I had had this firsthand experience about the difficulties business people face every day. That knowledge would have made me a better U.S. senator and a more understanding presidential contender.

He goes on to talk about how all sorts of crazy regulations, that may have appeared to make sense to the politicians passing them, were actually serving to create a huge headache for businesses — often because whoever is writing the laws has no idea what they’re talking about:

In short, “one-size-fits-all” rules for business ignore the reality of the marketplace. And setting thresholds for regulatory guidelines at artificial levels — e.g., 50 employees or more, $500,000 in sales — takes no account of other realities, such as profit margins, labor intensive vs. capital intensive businesses, and local market economics.

The problem we face as legislators is: Where do we set the bar so that it is not too high to clear? I don’t have the answer. I do know that we need to start raising these questions more often.

When we talk about Washington DC (and other governments) passing regulations that impact how entrepreneurs and innovators build great new companies, this is the kind of thing that we’re worried about. The vast majority of elected officials really have no idea. They pass rules and regulations that sound good and are meant to serve a good purpose, but they rarely take into account the consequences of the regulations they pass or how they’ll impact how companies act. This is not to say that there shouldn’t be regulations, but that regulators need (a) a much better understanding of business and (b) they need to be aware that the impact of regulations can be stifling. I’ve never understood why every piece of legislation that will impact companies doesn’t come with specific metrics to determine if it’s a success and a mandatory review period / sunset provision, in which an independent board is tasked with determining if the law accomplished what it set out to do, and if there were any costly side effects or unintended consequences.

McGovern seemed to discover all that after his political career was over, but with his passing, perhaps we can encourage current politicians to recognize just how big an issue this is today. Especially when we rely on so many new technologies, innovations and services on a daily basis.

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Comments on “George McGovern On Why Politicians Who Haven't Built A Business Are Bad At Regulating”

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Mason Wheeler (profile) says:

One problem with that

The problem with stating that people who haven’t built businesses are bad at regulating them is that it implies that the only people who are good at regulating them–and therefore the only people who should be regulating them–are people who have built them. This, of course, brings with it a very specific perspective and worldview.

“Why yes, Mr. Fox. You seem like an excellent candidate as our new Henhouse Chief of Security.”

Anonymous Coward says:

Re: One problem with that

Or, a PETA Vegan running a meat packing plant.

Based on the context of his comments, it seems more likely Sen. McGovern would have liked to have been between the extremes of pure selfish interest (Mr. Fox) and outright loathing and disdain.

How about encouraging successful small business people to take a turn at legislation and focus on reform and or repeal of laws made in absence of business realities?

Vote the incumbents out of office to encourage them to make frequent trips to the private sector?

nah… that would never work now.
We are so polarized “the system” needs to utterly fail in order to equalize.

BeachBumCowboy (profile) says:


Of course there are no studies done to determine if legislation did what it was supposed to do. Without such studies, legislators can always say, “See we did something.” (Patent Reform Yea!!!) But they don’t ever want their opponents to be able to say, “They acted and their own reports say they made things worse.”

out_of_the_blue says:

Well, that's basically the "I didn't mean me!" shock.

First, I wonder why McGovern bought a biz he didn’t understand; must have been sucked in by the contemporary Tom Peters “love it and the money follows” notion.

Anyway, troubles with excessive regulation are easily avoided by a steeply progressive yet CLEAR and simple income and inheritance taxes. No one gets rich except by skimming from the labor of many people, and therefore high incomes are simply re-distribution schemes that profit a few. You can say this person or that deserves more for brains and so on, but still requires a complex SOCIAL SYSTEM to make it real. Therefore my income tax plan is simple: first ten million dollars is entirely untaxed, but it’s 100% rate above that. My plan doesn’t “penalize success”, merely limits possible rewards to a level far beyond subsistence. Now, the other important point is that no one is “entitled” to be born rich and live always off the efforts of others, so inheritance taxes on money can be set essentially the same: one could inherit comfort, not a thousand times of excess. — And note that applies to money, not property. Money is a social product, and essentially a claim on the labor of others, and how can anyone possibly inherit that? The current system is simply reverting to feudalism: a few are born rich into unearned luxury, the majority poor and doomed to labor. Let’s make it all more fair, that’s the purpose of civilization. And by the way, the current prosperity began when The Rich were pulled down in The Enlightenment, and luck of birth no longer gave some an automatic claim upon the lives and labor of The Poor.

I think McGovern would approve of my general plan.

Anonymous Coward says:

Re: Well, that's basically the "I didn't mean me!" shock.

first: no one cares about your crazy tax policies.

second: under that system, no taxes would be paid. 0 revenue. There is no incentive to work once you can earn more than $10,000,000. You also don’t solve any issues; what do you do when you would make $10,000,001? You pay your husband, daughter, cousin. You keep it in the family in some way, or send it somewhere else, or you go work in a country without some nutjob’s tax policy.

I’m glad to know you stopped paying attention to U.S. history right around when your highschool teacher got to 1900 or so, but really, either you are mentally defunct, trolling, or What Is Wrong With America Today.

Yakko Warner (profile) says:

It's really a more widespread problem

The number of TechDirt posts we’ve seen about new tech legislation that reveals very little understanding about how tech works (e.g., SOPA/PIPA) shows that this is more widespread across industries.

It makes sense, though. How can you expect someone to effectively regulate an industry (business, tech, energy, farming, you name it) if they don’t have any experience in that industry?

Ideally, they should rely on industry experts for advice. That does have its own issues (politicians listening to the “experts” that pay the most, or have their own interests/agenda at heart; not necessarily those with the most sound advice).

Suzanne Lainson (profile) says:

Re: It's really a more widespread problem

Ideally, they should rely on industry experts for advice.

This is already how most regulations are written. And that’s why we have lots of bad regulations. Look at housing codes, for example. It’s a good way to keep innovative homebuilders from competing with established homebuilders. A lot of innovative energy solutions have been hampered by housing codes that don’t recognize unconventional construction.

out_of_the_blue says:

Politicians only care about power. I'm for producing goods.

“I’ve never understood why every piece of legislation that will impact companies doesn’t come with specific metrics to determine if it’s a success and a mandatory review period / sunset provision, in which an independent board is tasked with determining if the law accomplished what it set out to do, and if there were any costly side effects or unintended consequences.”

Really, Mike: you confess to abject ignorance and argue for endless arguing through bureaucracies about what to argue about. YOU really are “What Is Wrong With America Today”, unable to grasp the least ordinary things because you’ve never known want or hunger, never HAD TO work at a dull low-pay job without a future, never raised your own food, and all the simple things that are actually better than this high-tech gee-whizzery; in short, you’ve known only the good side of life and never even seen the ugly reality. — You were born into the ruling class, and haven’t yet achieved understanding! That’s because you haven’t been FORCED to.

I’m unduly aiming some invective at Mike after AC sniping, but it’s just a common flaw here that you “libertarians” in fact support plutocracy, not freedom. You don’t even know the difference, are just eager to lick boots and long for unearned riches like winning the lottery so you too can lord it over the poor. — That’s not civilization: we humans try to build, not rule.

Look, I can’t in a single post explain everything to cowards who have only ad hom and don’t wish to learn, but in short, I’m for Productivity and Labor over Moneyed Interests, and especially want to get rid of the Born Rich; it’s easy to do and has been done before, is necessary because they always try to take over everything.

I’m for people getting rich through producing and trading values with others rather than various financial trickery to skim off labor, but not for anyone getting too rich because it splits society into idle parasites and forced laborers. If humans can’t learn from the last two centuries, when so many have so much leisure yet waste it, then humanity is doomed.

Anonymous Coward says:

Re: Politicians only care about power. I'm for producing goods.

If “humans” try to build and not rule, you’re conveniently redefining humanity to exclude every dictator in history. You also seem to have managed to ignore every petty tyrant who managed to find a police uniform or bureaucracy to exert power over others.

I won’t go into the flaws with quite literally every other thing you said, but the moment you decide to redefine “human” in order to make some made up point, you need to stop, walk away, and think about what that says about you as a person.

CR Jackson says:

Re: Politicians only care about power. I'm for producing goods.

The situation described here, and in Mike’s commentary, little existed until some 30 years ago. Legislative bodies had a corrective mechanism for such law-making flaws that mostly worked. Of course, then, another type of psychology primarily held legisative office, one whose approaches were akin to governing, rather than electioneering.
That mechanism was variously named, but was the “off-season” governing-body public hearing which reviewed conditions in society sectors, including the impact of legislation of any age. It produced timely critiques, thoughtfully written publicly available reports, and approaches for remedies (including specified no action).
In the current grasping for power, not only have rules changed which governed such efforts, but so did the culture in which they were embedded. As a consequence, over time all learned that the only environment for analytic approaches is the regualtory body, which led to increasingly intentional diffuse power grants to such bodies, opaque “public commentary” and increasingly un-democratic results.
Most critiques of the current system originate from observation of its results on society or its constitutient elements. However, short of unlikely revolutionary change, postive alteration of this system will come only after its failures, structural and otherwiee, are well understood publicly, and a democratic enterprise reapirs them…that is, those who want change take the time and effort to become involved in driving it. The nature of our science and its impact on our citizenry demands some such; otherwise, our safety and security itself will demand further erosion of our remaining democratic bulwarks.

Anonymous Coward says:

“I’ve never understood why every piece of legislation that will impact companies doesn’t come with specific metrics to determine if it’s a success and a mandatory review period / sunset provision, in which an independent board is tasked with determining if the law accomplished what it set out to do, and if there were any costly side effects or unintended consequences.”
Because there’s always politicians that use the metrics “did this cost my rich backers anything overall or did it bring them money” . In those cases said politicians will try to get themselves on any panel judging the law and make decisions friendly to their political contributors. It’s why the house committee on science is full of religious fundamentalists that oppose and hate science.

Anonymous Coward says:

Re: i believe it

like all of these “best professors” like the big brains at Harvard business school who lost multi-millions / billions of dollard in the financial crisis, they did not see it coming. they are supposed to be your best and brightest..

Industry experts will do anything to protect their industry in its current form.

yes, it happens that way, if the industry changes they are not longer ‘expert’, therefore to remain experts in that industry it stays within the expertise of those who run it.

what do you expect, industries to be run by people who are not expert ?? or that people who start new industries are not allowed to become expert in that industry.. or if you are in an industry and become expert in it, you have to give up your job to someone who does not know what they are doing ???

Suzanne Lainson (profile) says:

Businesses that don't police themselves

Yes, regulations can get out of hand. But often we end up with regulations because the unregulated industries push the boundaries until someone gets hurt.

U.S. Concern Over Compounders Predates Meningitis Outbreak – “But the memo is emblematic of the industry?s frequent and often successful attempts to fend off regulators at a time when concerns are growing about the quality of compounded drugs and the uncertain provenance of their ingredients, some of which originate in China and flow through various repackagers and middlemen with little scrutiny, according to interviews with health experts and government records.”


Re: Businesses that don't police themselves

This reminds me of a story I recently saw on another site. It was about food inspections. It turns out that most of those are a sham and that “oppressive regulation” in food processing clearly is neither of those things.

The part that really caught my attention was how retailer A differed from retailer B. When it came to food testing, one tolerated Salmonela contamination to the level allowed by law. The other tolerated no Salmonela contamination.

Regulation is always the result of some nonsense usually involving people being maimed or killed.

Suzanne Lainson (profile) says:

Re: Re: Businesses that don't police themselves

It would be great if no regulations are necessary, but sometimes it is worth the cost to pay for someone to be monitoring products to protect public safety. Sure, we can adopt a buyer beware attitude and in many cases it works, but when consumers have no way of knowing what is safe or isn’t, then having agencies (whether public or private) to help them verify safety is valuable.

And when regulations work well, that reduces consumer decision-making because, in theory at least, all products on the market are safe.

Asbestos is another product that probably wasn’t going to disappear until government regulations intervened. Asbestos was being put in a wide range of products and consumers had no idea when they were being exposed to it.

Another situation that probably requires some government oversight is pest control across national borders. Without some monitoring, we’d probably have far more invasive species coming in attached to international transportation and trade and wiping out native and commercial ecosystems. It’s not the sort of situation where any one particular industry would likely monitor itself. It’s kind of like fossil fuels these days. The companies that make money aren’t paying for the negatives that their activities create across society.

Suzanne Lainson (profile) says:

Where does something like this fall?

The lab that produced the drugs causing meningitis was not only not really regulated, it was also operating unsafely. Legally where does this fall? If there are no regulations, did this company do anything wrong? (Of course I definitely think they did something wrong.) Are the company owners guilty of manslaughter? Or is there some other legal recourse against them?

We have drunk driving laws and reckless driving laws. If you break those, you face legal consequences. Should there be laws? Should anyone be held accountable for anyone else’s death if they didn’t actually murder them?

Should business have to be accountable to anyone? What is the nature of product liability if a company produces an unsafe product and people directly die as a result?

I’m curious how those of you who don’t approve of regulations would deal with something like this.

Sterility Found Lacking at Drug Site in Meningitis Outbreak – “The compounding pharmacy blamed for a deadly national meningitis outbreak repeatedly failed to follow standard procedures to keep its facility clean and its products sterile, Massachusetts officials said Tuesday, painting a harrowing picture of a company that flouted crucial rules as it hurried to ship drugs around the country.”

Suzanne Lainson (profile) says:

I'll add this to the mix

Travis Shrugged: The creepy, dangerous ideology behind Silicon Valley?s Cult of Disruption | PandoDaily: “Given their Randian origins, we kid ourselves if we think most Disruptive businesses are fighting government bureaucracy to bring us a better deal. A Disruptive company might very well succeed in exposing government crooks lining their pockets exploiting outdated laws, but that?s only so the Disruptor can line his own pockets through the absence of those same laws.”

Suzanne Lainson (profile) says:

This is a very relevant piece

This points out what many of us know. Government regulations are often drafted by those the regulations are meant to regulate, so the intended goal is not accomplished.

Simon Johnson: The Dark Side of Bipartisanship – “… of the task force?s 14 members, an overwhelming majority are very close to the industry?s way of thinking.”

Susan Lindsey (profile) says:

Let's call the Marketplace Fairness Act the "Grinch that Stole Christmas"

Seem like “fairness” as echoed across the county advocates of the Marketplace Fairness Act sounded right to the Senate that passed the act May 6, 2013 as the vote followed the $50 million lobby funds. And now it seems to be getting much mileage in the House because it “sounds” right, maybe like a universal truth padded by yet another $50 million.

Perhaps the Congressmen will get the small business’ point if we rename it the “Grinch that Stole Christmas Act!”

Jim Whitehead (profile) says:

Arrogant Politicians know better, don't they?

"… why every piece of legislation that will impact companies doesn’t come with specific metrics to determine if it’s a success and a mandatory review period / sunset provision, in which an independent board is tasked with determining if the law accomplished what it set out to do, and if there were any costly side effects or unintended consequences. "

Gee, that would require humility and the ability to admit they were wrong. Right now, the Congress can’t admit they were chasing a phony Russian collusion witch hunt. You expect these same people to grow a pair and admit they are fools?

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