June 20, 2005

June 20, 2005 | Commentary on

The Risk of a "Risk-Free" Life

"We cannot guarantee a risk-free life."

Reasonable words, and good ones to hear from a world leader in an era when many expect government to protect us from all harm.

But it isn't President Bush who's noting that government can't do everything. It's British Prime Minister Tony Blair, who laid out his new philosophy in a May 26 speech at University College in London.

He called for a "sensible debate about risk in public policymaking." Otherwise, he said, the British will continue down the road toward an over-regulated life, and the result will be "a plethora of rules, guidelines, responses to 'scandals' of one nature or another that ends up having utterly perverse consequences."

We in the United States are well aware of the dangers of being over-regulated. Businesses labor under unnecessary federal regulations, and litigious attorneys compel them to slap silly warnings on virtually every product.

Consider the iron that warns, "Never iron clothes on the body." The blow dryer that cautions, "Do not use while sleeping." The food products that suggest you "unwrap before eating."

This attempt to avoid all risk explains why it's almost impossible to get a hot cup of coffee these days, although every cup of tepid coffee will warn you "this beverage is extremely hot." And it explains a lot of unnecessary laws and regulations, including Sarbanes-Oxley.

Slapped together in the wake of the Enron implosion, Sarbanes-Oxley was supposed to protect American investors. Instead, it will end up costing them billions.

For example, the average company has paid $4.36 million to comply with the new accounting standards, far more than the $3.14 million they'd expected to pay, according to a survey from the group Financial Executives International. And the bill will only get bigger.

An e-mail security company estimates businesses will shell out more than $4 billion to archive e-mail (as required under Sarbanes-Oxley) in 2009, up from $465 million now. These costs will be passed on to shareholders and customers, so we'll all pay for the "protection" the new law is supposed to provide.

And as Blair noted in his speech, "There is a delicious irony in this [that] illustrates the unintended consequences of regulation. Sarbanes-Oxley has provided a bonanza for accountants and auditors, the very professions thought to be at fault in the original scandals."

To make sure Britain doesn't eventually pass its own Sarbanes-Oxley, Blair lays out some simple guidelines. "Instead of the 'something must be done' cry that goes up every time there is a problem or a 'scandal,'" he says, "we will reflect first and regulate only after reflection."

Even more critically, Blair says he wants to start to roll back the regulatory state, especially in the European Union. Britain is about to assume the rotating presidency of the EU, so Blair will be in a position to act. He says he'll work to make sure cost assessments are finished before any new regulations are put into place, and that he'll speak with business leaders before changing any regulations.

"We also need a far more rational, balanced and intelligent debate as to how 'risk' is debated. Not every 'scandal' requires a regulatory response," he says, sensibly. Unfortunately, that approach hasn't yet reached across the pond.

Back on Labor Day 2003, President George W. Bush announced, "We have a responsibility that when somebody hurts, government has got to move." But it's constant, knee-jerk movement that leads to over-regulation and the government's over-involvement in our lives -- even though, as Blair puts it, "government cannot eliminate all risk."

Hopefully, the prime minister has started a debate that will resonate not only in his country, but in the United States as well. We already have plenty of rules. We need more common sense.

Ed Feulner is president of the Heritage Foundation.

About the Author

Edwin J. Feulner, Ph.D. Founder, Chairman of the Asian Studies Center, and Chung Ju-yung Fellow
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