No More Regulation Roulette

Sunday, May 25, 2008

There is a pervasive belief peddled in the halls of Annapolis and on Capitol Hill that regulation is inherently bad for business. In Maryland, we heard it from the previous administration during clashes with state lawmakers. And we've seen it at the federal level for seven years.

But recent regulatory breakdowns at the state and national levels, and even globally, have shown that effective regulation and a positive business climate are not mutually exclusive. Inadequate regulation is not only dangerous for consumers but also detrimental to the health of entire industries and our economy as a whole.

Take some recent events at our nation's airports. After years of regulatory negligence, revelations about potentially unsafe planes led to increased scrutiny of Southwest, United, American and Delta airlines, causing flight cancellations and delays nationwide. The chaos that ensued was a public relations nightmare for an already struggling industry. Certainly the years of nonexistent regulation that led to the mess did not improve the climate for the airlines.

Last year's uproar over unsafe toys from China showed us how poor regulation elsewhere affects us at home. Because of China's regulatory failures, parents have to fret over whether toys will harm their children. Meanwhile, U.S. businesses that sought to cut costs by outsourcing production learned the painful lesson that cheaper does not always equal better.

To bring it closer to home, at Maryland's Department of Labor, Licensing and Regulation, the former administration implemented its "pro-business" policies by gutting the unit that enforces wage and hour and other labor laws. Enforcement nearly ceased -- leaving workers unprotected by laws intended to ensure their health, safety and well-being. It also hurt our law-abiding businesses -- the ones we should protect the business climate for -- because they faced a competitive disadvantage when other employers cheated.

To offer one more example, the impractical, inappropriate and sometimes even fraudulent lending practices that proliferated during the housing boom caused a foreclosure crisis that has shaken our economy to its core. We've learned the hard way that abandoning common-sense oversight puts people in harm's way and industries at risk.

Effective regulation is critical to building a sound business climate -- a fact illustrated during the recent session of the General Assembly. In response to foreclosures in Maryland, Gov. Martin O'Malley called lenders, brokers, real estate agents, housing counselors, consumer advocates and government officials to the table last year to find consensus on aggressive yet necessary reforms for the mortgage industry. The resulting legislative package received overwhelming bipartisan support.

We've seen the consequences of allowing industry to operate like the Wild West. O'Malley recognizes that it is possible, and imperative, to adopt policies that are both pro-consumer and pro-business.

We do no favors to the business community, or to our broader community, by neglecting our responsibility to protect workers, consumers and law-abiding businesses.

-- Tom Perez


The writer is Maryland's secretary of labor, licensing and regulation.

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