05/14/2010 12:37 pm ET Updated May 25, 2011

The Gulf Spill and Effective Management of Regulation

Now we learn that the U.S. Mineral Mining Service issued permits to drill for oil in the Gulf of Mexico despite warnings from the National Oceanographic and Atmospheric Administration (NOAA) that the drilling would likely harm the Gulf's fragile ecosystem. Of course we can be grateful that Interior Secretary Ken Salazar recently decided to split the Mining Service into two parts- separating staff that regulate safety from those that collect royalties for drilling on federal property. Unfortunately, both divisions will continue to report to the Department of Interior, an agency infamous for selling natural resources to the highest bidder.

This is not a new story. The Obama Administration is discovering failures throughout the world of federal regulation. Federal drinking water programs, air pollution programs, financial regulations, auto safety regulations, and of course, resource extraction regulations are all in various states of disrepair. We saw evidence of this in New York City when EPA was pressured by the Bush White House to give the "all clear" to reoccupy lower Manhattan immediately after 9-11. For too long regulation of business has been painted as illegitimate government intrusion in commerce.

Given the wealth they can deploy, it is not surprising that the business community and its lobbyists have managed to create an image of government regulation as un- American and vaguely socialist in origin. Imagine if we had the same attitude toward traffic lights on a busy intersection. ("Drive baby drive!") I realize that red lights restrict the freedom to drive, but don't we need red lights in order to have green lights? And what about those amber lights? What's that all about?

The problem is that population growth and the emerging global economy have increased the complexity and volume of economic transactions worldwide. This requires more rather than less regulation. However, in order for this regulation to be effective and to truly promote rather than destroy the economic wealth we are seeking to generate, regulation needs to be more sophisticated and better managed. Attacking science and cutting regulatory oversight is the wrong answer to the problem. So too is the symbolic battle between ecologists and industrialists. We need a realistic discussion of the risks we are undertaking to stoke the economic machine, but then a serious, well managed effort to monitor and minimize those risks.

It is clear that the past decade and a half of a weakened Clinton Administration and an anti-regulatory Bush Administration has had a devastating impact on the regulatory capacity of the U.S. federal government. The attack on scientists, analysts and decision makers has been reversed by the Obama administration, but as the Gulf spill clearly demonstrates, the impact of this anti-regulation era will be with us for a long time. The almost cult-like glorification of the free market needs to end. There is no question that the capitalist market provides enormous social good and creates the wealth we all enjoy. But the rule of law is still needed. Free markets can't do everything. We don't want the mafia to run the trucking industry and we don't want gangs to run amok in our neighborhoods. The profit motive can do a lot of good, but without the rule of law, it can also result in great harm. It is an indication of how idiotic this dialogue has gotten that I find it necessary to defend the idea of regulation.

We need rules, but regulation, while necessary, is far from sufficient. We also need organizational capacity and that requires resources. Cut the New York City police force from 40,000 to 30,000 cops and you will see the crime rate spike. Cut regulatory oversight and enforcement and you will see oil rigs and coal mines exploding, resulting in death and destruction. However resources are not enough. The other night I watched LeBron James and his high paid teammates lose to the Celtics. Cleveland had the capacity to win, but they needed leadership and motivation that seemed lacking. Organizations are like sports teams. They can perform listlessly and go through the motions or they can act with energy and enthusiasm.

Over the past quarter century, America's regulatory agencies have been attacked and deconstructed. This began with Reagan's notion that government was the problem and continues despite sporadic efforts to improve and reinvent government performance. At virtually every level of American government the philosophy of "starve the beast" tends to dominate. Most of the public service and mission driven students I have taught since the 1990's have headed toward nonprofits and away from government. Yet the policing function that we need if we are to manage the transactional and technological complexity of the modern economy requires government capacity. Government needs resources to attract talent and brainpower, but then must apply those resources with energy, skill and determination. Organizations are subject to a peculiar kind of gravity. If they are not moving forward with energy and drive they quickly settle into mediocrity, sloppiness and the type of performance we have seen in the incompetent regulation of oil drilling and coal mining. It's time to invest in that capacity or suffer the economic and ecological consequences.