Shackling Business to Create African Peace

Story Stream
recent articles

Do you know whether the tantalum in your iPhone is wicked? Does the tungsten in your TV come from a bad neighborhood? Are you sipping soup from a morally compromised can? Rest assured, Congress has commanded Wal-Mart, Costco, and Target to tell you.

Tucked into one of the many obscure corners of the Dodd-Frank Financial Services Reform Act lurks a provision designed to force manufacturers, as well as certain retailers, to disclose whether their goods contain trace amounts of tin, tantalum, tungsten, or gold originally mined in war torn parts of central African. Failure to comply won't result in legal penalties, yet. But compliance is sure to cost countless companies serious money. And once a vast reporting infrastructure is in place policed by an army of government inspectors that need to be paid, which do you think is more likely to follow - peace or fines?

Apparently pleased with the way it's handling our own economy, Congress wants to try its hand solving intractable problems in the Congo. Hence section 1502 of Dodd-Frank requires public companies making and selling products as varied as medical devices, cell phones, airplane engines, DVDs, laptops, automobiles, tin cans, and machine tools to certify that their products don't contain so-called "conflict minerals."

What does this have to do with making sure we never again experience a cataclysmic real estate meltdown that topples well-connected Wall Street derivatives casinos? You'll have to ask Barney Frank. Apparently reforming his errant creations at Fannie Mae and Freddie Mac, both untouched by his legislation, took a back seat to throwing more sand in the gears of main street commerce.

Embargoing goods from enemy states is not new to foreign policy. Effective or not, one can understand the logic behind banning ExxonMobil from buying crude oil from Iran. But can you imagine the chaos and futility that would ensue from a law demanding that Toys-R-Us certify that not a drop of Iranian oil was used to manufacture any of its plastic toys made in plants scattered around the world?

That's exactly what Congress is trying to do with these minerals.

The model for this breed of tainted goods legislation comes from the United Nations 1998 resolution banning the purchase of "conflict diamonds" from Angola. The goal was to cut off a major source of revenue for the UNITA rebels, a truly unsavory bunch of revolutionaries. Both Bill Clinton and George W. Bush followed with whack-a-mole Executive Orders aimed at blocking the rough diamond trade after it spread from Angola to neighboring Liberia and Sierra Leone. Maybe the restrictions did some good. At least the burden imposed on the wider business community was minimal since the ban only affected a handful of companies that purchase uncut diamonds.

Yet power, once exercised, has a way of metastasizing. It would be one thing to ban American corporations from purchasing "conflict minerals" directly from rebels in central Africa. Perhaps it would do some good, with only a modest burden imposed on a few ore importers. But erecting a vast new regulatory bureaucracy covering thousands of globally sourced products requiring chain-of-custody documentation and auditing from raw materials through retail is insane. How do the costs imposed across our economy ever get weighed against the purported benefits delivered to some far off land? Congress's answer? Who cares, it's someone else's money!

Treating American businesses as if they were cost-free instruments of public policy is central to the economic malaise we are experiencing. Want to give voters a nifty new entitlement without raising taxes? Make employers pay for it. Want vocal Hollywood celebrities to run a fundraiser for you? Saddle up Chamber of Commerce members and take them for a ride, all for a good cause.

Not knowing what crazy rule is going to pop out of Washington next is a direct source of business uncertainty, exacerbating persistent unemployment. Does anyone really believe we can earn our way back to prosperity by forcing employers to add more lawyers, lobbyists, and compliance officers to their payrolls? Do we need to pile on yet another reason to discourage startup companies from going public?

The fact that there was bipartisan support for this insidious economic intrusion, which will require hundreds of pages of SEC regulations just to define, belies Republican claims that they have a clue how to get businesses moving again. Perhaps they were afraid to speak out against this madness knowing that MoveOn.Org would label them racist enablers of rape and mass murder, such being the current state of partisan political discourse.

Painting bright lines around the powers of Congress, keeping politicians from commandeering other people's time, property, and money to fight demons in foreign lands, was one of the key tasks our founders designed the Constitution to perform. The story of how we came to docilely accept Congressional omnipotence without even giving the Constitution a glance is the story of our once great nation's slow demise.

Bill Frezza is a fellow at the Competitive Enterprise Institute, and a Boston-based venture capitalist. You can find all of his columns, TV, and radio interviews here.  If you would like to have his weekly columns delivered to you by e-mail, click here or follow him on Twitter @BillFrezza.

Show commentsHide Comments

Related Articles