That Used to Be Us_ How America Fell Behind in thted and How We Can Come Back - Friedman, Thomas L. & Mandelbaum, Michael [25]
Intelligent regulations and standards, often drawn up in consultation with business, also promote innovation and investment. When the U.S. government sets high energy-efficiency standards for air conditioners, for example, and every American manufacturer has to innovate in order to meet them, those companies can then compete effectively in every other market in the world. By contrast, when we lower our standards, we invite competition from every low-cost manufacturer around the world.
At the same time, regulations and regulatory bodies provide the vital foundation of trust that fosters innovation and risk-taking. The creation of the Securities and Exchange Commission in 1934 increased the importance of the New York Stock Exchange by making it a less risky place. The Federal Deposit Insurance Corporation, created by the Banking Act of 1933, substantially reduced the chance of bank runs, and the stability of the FDIC helped attract capital from around the world. The North American Free Trade Agreement, which went into effect in 1994, created a regulatory framework that has triggered massive cross-border investments and trade between the United States and both Mexico and Canada. America’s patent laws, which protect the intellectual property of innovators, encourage even foreigners to register their patents in America, where they know their ideas will not be stolen—unlike in China. In 2010, more than 500,000 patents were filed with the United States Patent and Trademark Office, thousands of them by non-Americans.
The country’s first Patent Act was signed into law by President George Washington, and over the next two hundred years successive presidents enlarged protections for all kinds of intellectual property—in the form of copyrights, trademarks, and patents. Today, the United States Patent and Trademark Office proudly boasts that over the last two hundred years it has granted patents for “Thomas Edison’s electric lamp, Alexander Graham Bell’s telegraphy, Orville and Wilbur Wright’s flying machine, John Deere’s steel plow, George Washington Carver’s use of legume oils to produce cosmetics and paint, and Edwin Land’s Polaroid camera.” America’s patent process has created a huge bank of scientific and technical knowledge in the form of roughly eight million issued patents and more than two million trademarks since its founding.
One reason America became a nation of starter-uppers is that failure did not carry the permanent stigma that it carried in old Europe. This was a cultural difference, but also one that was enshrined in our formula through steadily evolving regulations that made it possible to get a fresh start.
One of those regulations was the bankruptcy law. Beginning in the nineteenth century, the United States enacted laws to allow companies and individuals to declare bankruptcy and start over relatively easily. The banks could liquidate your assets or force you to reorganize, but then you could try again. Yes, there would be a black mark on your credit record for a few years, but then it would disappear. While no one wants to encourage bankruptcy, there was not a lot of stigma attached to bankruptcy in America—at least compared to Europe, where a single bankruptcy was a mark of Cain that usually meant the end of your business life. American bankruptcy laws emphasized rehabilitating debtors rather than punishing them. Europeans have long marveled at how easy it is for entrepreneurs in Silicon Valley to try something, fail, declare