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By J. P. Tangen
For Mining News 

We need a holiday from the Regulatocracy

Federal regulators need to suspend operations until the Great Recession is over and the investor community returns to the table

 

Last updated 6/26/2011 at Noon



Once upon a time, I was actually awarded a degree in political science. Assuming that "science" describes reproducible results, it now appears that "political science" is the quintessential oxymoron. This explains why I know so many things that I just don't understand.

For instance, the Alaska Miners Association has a bunch of committees to monitor developments in everything from getting along with other users of public lands to monitoring developments in industrial minerals. Two of the committees, one dealing with oversight of state legislation and the other dealing with oversight of federal agencies, are especially high profile. The latter area of concentration, especially, dominates a large amount of the association's time.

Most recently, there has been a heightened level of activity on the federal oversight front. Administrative initiatives that affect mining in Alaska and require analysis and comment have been crossing the AMA's desk incessantly since the early 1990s, generally at the rate of about one a week, Now, however, they seem to come over the transom almost once a day.

What is curious about this is that collaterally, it appears that that country is bleeding to death. The Great Recession lingers on. National rates of unemployment hover in the 9 percent range; and those numbers allegedly mask much higher numbers of out-of-work people. Many commentators wish out loud that the private sector would start hiring up again, and express the hope that small businesses will lead the country out of the doldrums.

Somehow the dots cannot be connected by our leaders. Private business, especially small business, requires capital investment. Capital investment requires an expectation of return. The rate of return is balanced against the perceived risk. Risk is calculated by assessing stability. Stability is skewed by, among many other things, regulatory consistency. If the people who make the rules keep changing the rules, there is no predictability. Therefore, prudence dictates that investors wait for another day.

Of course, individual risk assessment is subjective, so the decisions of different investors will vary depending on circumstances; but, where as in the current environment the collective judgment unequivocally is to withhold investment because the regulatory risk is off the charts, it seems fundamental to slow, not increase, the rate of change.

The applicable cliché, ironically inapplicable to mining, is that when one finds oneself in a hole, he should stop digging. Nonetheless, the message to the regulatory agencies should be loud and quite clear: "Knock it off." Let us catch our breath. The current administration must be persuaded to embrace a moratorium on new regulations, including those in the pipeline, for at least two years. Two years of equipoise would allow capitalists to stick their heads out of their shells far enough to prime the economic pump.

Assuming for the sake of conversation that the incumbents do not have a socialistic agenda, it is unequivocally clear that the commitment at high levels in Washington is to exploit bureaucratic discretion well beyond the scope of legislative intent. Legislation implies deliberation and deliberation is excruciatingly slow. Often during the legislative process a pending bill becomes the vehicle for achieving unanticipated objectives. Democracy is a messy process. Administrative initiatives are much more efficient. An agency dumps its plan into the Federal Register, holds the odd public hearing, fends off a few objections, and starts sending out the enforcers.

Although the seeds of our American Regulatocracy were planted a generation ago, they really didn't take root until recently. It used to be that the stern hand of government was merely an obstacle and not a barrier. In recent years, however, government has emerged as a stifling roadblock with palpable consequences. The nexus between regulatory excess and capitalistic reticence may not be well defined in the popular media, but at an intuitive level, it is unmistakable. On the other hand, as I say, I don't pretend to understand everything I know.

 

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