Editor's Page
Regulation and innovation John Hanley is chairman and president of Monsanto. Last month he addressed a group of Houston businessmen. Here are excerpts from what he had to say. Our nation's most serious shortage today involves not energy or raw materials or jobs, but innovation. So, it should concern every citizen when something happens that affects the innovation rate. The federal government—as ubiquitous as gravity—cannot help but affect innovation for better or worse at every turn. Sensitive to this fact, the Carter Administration has initiated a Cabinet-level review of how federal policies affect innovation. Also, a subcommittee of the Senate Commerce, Science & Transportation Committee has begun exploring the connections among U.S. trade deficits, federal policies, and industrial innovation. Federal tax policies figure heavily in our country's output of innovation because they shape the overall investment climate. The U.S. ranks far below other industrialized countries on percentage of national output reinvested in productive capacity. It's no coincidence that we also tax capital gains and stock dividends more harshly than most industrialized nations. Federal antitrust laws create still another worry for innovators. Their new technology may be too successful and precipitate lawsuits. But when it comes to frustrating would-be innovators, nothing beats the federal regulatory process. For starters, there is the staggering drain on financial resources. Economist Murray Weidenbaum, director of Washington University's Center for the Study of American Business, calculates that regulatory compliance will cost business almost $100 billion in 1979 alone. Regulation injects new uncertainties into the already risky business of innovation. Will regulatory approvals take so long that millions in sales will be lost—as well as the competitive lead? Will the approval process cost so much that a useful innovation meant to serve a small market can never be profitable? Will the fruits of innovation be lost entirely because of a needless product ban based on flimsy evidence? These are not hypothetical situations. They can be demonstrated all too readily. I am not calling for the elimination of regulation. I am not disagreeing with the underlying social goals of protecting the consumer, the worker, and the environment. But good sense must define a point of balance. We cannot go on ignoring the impact that government regulation is having on U.S. innovation. As Treasury Secretary Michael Blumenthal has said, "Our technological supremacy is not mandated by heaven." What can we do, then, to safeguard our technological pre-eminence before it is too late? I would encourage every U.S. business leader to consider seriously these three points for immediate action. Point one: We must support the Carter Administration's effort to learn how federal policies help or hinder industrial innovation, and to identify positive steps toward encouraging innovation. Point two: We must voice our concern about the innovation lag on Capitol Hill. [Monsanto has] suggested some specific legislative actions. One is an investment tax credit for industrial research and development expenditures. R&D is an investment in a productive future. Our tax laws should encourage large and small corporations to devote more resources to innovation. [My company has] also suggested that Congress establish a formal system of reviewing all regulatory agencies every three years. Point three: We must take this issue to the people, because low public awareness decreases the likelihood of positive action in Washington. Our nation is well-versed in the politics of energy, economy, environment, worker and consumer safety. Now we must give as much attention to the politics of innovation, because this will determine our ability to achieve all the other national goals. •
C&EN editorials represent only the views of the author and aim at initiating intelligent discussion
Oct. 16, 1978C&EN
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