Among a number of very fine articles on the way regulation is crippling the American economny, the Schumpeter column's argument that "America is becoming a less attractive place to do business" strikes particularly close to home. Schumpeter elaborates:
The March issue of the Harvard Business Review is devoted to “American competitiveness” (by which it means the country’s ability to improve productivity and living standards). A gaggle of gurus delivers a harsh verdict. Michael Porter and Jan Rivkin of the Harvard Business School (HBS) sum up the mood: “The US government is failing to tackle weaknesses in the business environment that are making the country a less attractive place to invest and [is] nullifying some of America’s most important competitive strengths.” The Review also reports that declinism is prevalent among HBS alumni: in a survey, 71% said that American competitiveness would decline in the coming years.
This struck home because I participated in a similar gaggle of gurus organized by Frank Buckley in which a number of very prominent legal experts discussed the ways the law in their particular field of expertise is throttling the US economy. Frank is collecting the resulting essays into a book entitled The American Illness to be published by Yale University Press. You can preview the table of contents here. You can download preliminary working drafts of some chapters here.
My contribution to the volume is tentatively entitled Corporate Governance and U.S. Capital Market Competitiveness and can be downloaded here. The abstract follows:
During the first half of the last decade, evidence accumulated that the U.S. capital markets were becoming less competitive relative to their major competitors. The evidence reviewed herein confirms that it was not corporate governance as such that was the problem, but rather corporate governance regulation. In particular, attention focused on such issues as the massive growth in corporate and securities litigation risk and the increasing complexity and cost of the U.S. regulatory scheme.
Tentative efforts towards deregulation largely fell by the wayside in the wake of the financial crisis of 2007-2008. Instead, massive new regulations came into being, especially in the Dodd Frank Act. The competitive position of U.S. capital markets, however, continues to decline.
This essay argues that litigation and regulatory reform remain essential if U.S. capital markets are to retain their leadership position. Unfortunately, the article concludes that federal corporate governance regulation follows a ratchet effect, in which the regulatory scheme becomes more complex with each financial crisis. If so, significant reform may be difficult to achieve.
Selected portions of that chapter were also worked into the relevant parts of my book Corporate Governance after the Financial Crisis
