How the regulator-activist-legal complex threatens American technological innovation

America continues to lead the world in science and technology, but this is hardly a God-given right. Compared to the U.S., China is already publishing more peer-reviewed papers (though many are of dubious quality) and is rapidly closing the R&D spending gap. We must be vigilant to retain our technological superiority.

But there is evidence that we are seriously losing the plot. Currently, the biggest threats to American innovation come not from China but from within — namely, government regulators joining hands with the notorious activist-legal complex.

Nuclear power and the fish that waited 32 years

Two anecdotes illustrate the danger that we are facing.

First, the Nuclear Regulatory Commission (NRC), which oversees nuclear power, seems to exist not to regulate nuclear power but to eliminate it entirely. Of the roughly 100 gigawatts (GW) of operating nuclear capacity in the U.S., 95 GW came online between 1970 and 1990, a mere 4 GW between 1992 and today.

Why? One reason is the NRC has dragged its feet in approving changes that would allow the construction of more advanced nuclear power plants. Another is that politicians have played political games with waste storage facilities, such as the one constructed at Yucca Mountain but never used. And another is cost, often driven up by unnecessary regulations. These reasons are why it took 43 years to build the Watts Bar 2 nuclear plant, which finally opened in 2016.

In the meantime, China is embarking on the “biggest expansion of nuclear power in human history,” including meltdown-proof Generation IV reactors.

Second, genetically modified organisms (GMOs) possibly have faced more regulatory scrutiny than any product ever invented (save nuclear power). Consider the AquAdvantage salmon, which was created in 1989 when researchers discovered that inserting a growth hormone gene into the genome of the Atlantic salmon allowed it to grow much faster. The idea is that it would be far more sustainable and ecologically friendly to meet consumer demand by growing these fish in aquaculture on land rather than harvesting them from the wild.

Despite passing every conceivable regulatory hurdle, the AquAdvantage salmon only began sales in 2021 — 32 years after they were invented.

Regulators heed the activist-legal complex

Forty-three years to build a nuclear power plant and 32 years for a fish to see a swimming pool. What can possibly explain this excessively long delay? Partly, it’s regulators regulating for the sake of regulation. Regulators wield only hammers, and every product they encounter is perceived as a nail. But there is something far more nefarious at play: the activist-legal complex.

As I wrote previously, the activist-legal complex is “an unholy alliance of activists and trial lawyers who deploy various pseudoscientific tricks to score multibillion-dollar lawsuits.”

Examples are legion: Johnson & Johnson has offered $8.9 billion to settle claims that its baby powder causes cancer. (It doesn’t.) Bayer has paid $10.9 billion to settle claims that the herbicide glyphosate causes cancer. (It doesn’t.) Sanofi will shell out $100 million to settle allegations that Zantac causes cancer. (It probably doesn’t.) The list goes on and on.

Beware, Big Tech

Now, lawyers are coming after Big Tech. Today, the world is seeing an explosion of advances in artificial intelligence (such as generative AI, like ChatGPT) — driven almost exclusively by American innovation. But this is now under threat.

OpenAI, which created ChatGPT, is facing a multitude of lawsuits and investigations. One class-action lawsuit accuses the company of violating privacy laws; several lawsuits by media outlets say the company violated their copyright; and Elon Musk, who co-founded OpenAI, is suing the company because — well, it’s hard to say why. The FTC and SEC are also investigating OpenAI.

Cryptocurrency is facing similar headwinds. The SEC has sued almost every major player in the industry, from Ripple to Coinbase to Binance. The latter laid off two-thirds of its employees after revenues crashed 75%, dealing perhaps a fatal blow to the company’s operations in the U.S.

Regardless of the merit of these cases, one thing is perfectly clear: AI (and maybe crypto) will be the future of just about everything, perhaps ushering in a new era of creativity and prosperity, what some are calling the Fourth Industrial Revolution. Yet, America is at genuine risk of strangling the Golden Goose.

Potential Solutions

The challenges that we are facing are complex and multi-faceted. Hence, no single policy or quick fix can quash the threats posed by the regulator-activist-legal complex. However, a few ideas are worth highlighting.

Set binding timelines for all regulatory approvals and government investigations. There is no good reason for a company’s product to be in regulatory limbo for years, let alone for over three decades. Likewise, agencies such as the FTC and SEC should not be allowed to conduct investigations with no end in sight. Regulatory uncertainty is inherently bad for innovation.

Place caps on “jackpot” class-action lawsuits. Companies, even large ones, do not have an infinite supply of cash. Johnson & Johnson has resorted to using a series of bankruptcies to avoid paying exorbitant punitive damages for a disease its product didn’t cause. If we can’t eliminate these lawsuits, then there should at least be major restrictions on the number of people who can join them and the amount of any monetary compensation.

We need to implement such reforms quickly. Otherwise, Americans should be prepared to cede 21st century innovation to Korea, Japan, China, and Europe.