Friday, November 18, 2016

Seventeen Solutions – use government to spur innovation

his is a continuation of my overview of Ralph Nader's book, The Seventeen Solutions. Click here to get the rest of the series.

9. Use government procurement to spur innovation

We frequently hear the claim (as part of the drumbeat to eliminate regulations) that we need to get government out of the way and business will unleash its creative zeal. Nader says that it isn’t a case of government doing too much, which supposedly has the effect of stifling innovation. It’s the case that government does too little, it doesn’t harness its purchasing power to drive innovation.

In 2010 the gov’t spent $528 billion on goods and services. The goods included office equipment, cars, drugs, foods, energy, electronics, appliances, paper, building materials, and road pavement. Here are ways the gov’t could harness its purchasing power.

Requiring gov’t buildings to be energy efficient would open new markets for alternative energy, speeding development of such sources. Obama has been doing some of this. Alas, in the case of energy, much of the gov’t is beholden to the fossil fuel industry (and after Trump ran on restoring coal, do you see him putting solar panels on the White House?).

Gov’t can instantly create a large market for a product. That improves a supplier’s economy of scale and lowers the risk of investing in new technology. And it can do so before there is much of a consumer demand.

Because the gov’t buys so much of a product, such as computers, it doesn’t have to accept what the suppliers offer. It can demand or encourage suppliers to be more imaginative, more efficient, and more responsible. It can boost the adoption of new products. It can require greater safety, a cleaner environment, and taxpayer savings (and, as Obama has done, demand fair treatment of LGBT workers).

For example, the patents for car air bags were issued in the 1950s and ‘60s. But carmakers were reluctant to put them in cars – until the gov’t specified the cars it purchased must have driver-side air bags, which it did in the late ‘80s.

Why doesn’t the gov’t do more of this? I’ve already mentioned political influences, such as the fossil fuel industry blocking the installation of solar panels on the roof of every gov’t building. Other reasons: Most purchases focus on initial cost, not life-cycle cost. The gov’t also doesn’t pay much attention to energy efficiency, environmental care, and social cost or benefit.

There is also bureaucracy. President Bill Clinton issued an executive order that all paper should use recycled content. But orders are ignored or undermined by inertia and incompetence.

Nader mentioned another type of bungle. The Department of Justice took Microsoft to court for abuses of its operating system monopoly. The outcome was an agreement that had far too many holes for Microsoft to weasel through and an expiration date. The gov’t could have been more effective if it used its purchasing power to demand such things as requiring the operating system be more open to third party vendors, stopping discriminatory pricing, providing support to those third-party vendors, and perhaps auctioning off licenses to some of Microsoft’s intellectual property to provide competition. The gov’t doesn’t need to be a passive consumer.

The gov’t needs to recognize its purchasing power and how it can drive benefits for consumers. Nader proposes purchasing guidelines.
1. Improve government employee health and productivity.
2. Spark innovation and benefit society as a whole.
3. Lessen our energy demands, advance consumer safety, and reduce environmental damage.
4. Reduce long-term economic costs.

Sound procurement policies represent a way for the biggest consumer – We the People – to say to the biggest sellers. Here is what we want to buy. Take it or leave it.

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