Information Technology and U.S. Competitiveness
But stock markets are not the only avenue where government intervention has raised the cost of capital. The other arena companies turn to to raise money is the equity market, or banks.
4. Reducing Banking Regulations. Another way to make U.S. companies more competitive is to reduce or remove onerous banking regulations. The federal government maintains a host of restrictions on American and foreign financial institutions operating in the U.S. These regulations increase the cost of doing business, with the difference passed on to consumers in higher monthly fees and transaction costs. The Glass-Steagall Act of 1933 prevents banks from selling stocks; and the U.S. Bank Holding Company Act of 1956, as amended, prevents banks from selling real estate, insurance policies, and other services (although Congress is considering legislation that would reform these laws).
Removing regulations that separate financial services would allow competition in all of these areas to increase. It also would allow financial institutions to diversify their risks and costs, thus further reducing their chances of loss. Financial institutions would be more competitive, costs would be lower, and the cost of borrowing capital would be reduced. In addition, current ownership restrictions on foreigners limit the number of foreign banks in the U.S. These restrictions should be removed, both to allow more domestic competition and to make more capital available to American businesses.
5. Keeping the Internet Free of Burdensome Regulations.
Finally, the U.S. government has moved quickly to regulate one of America's fastest growing industries, the Internet. Although it is a "global" information network, it is a U.S. invention, and U.S. companies and individuals still provide most of its services and users. In order to maintain this competitive lead, U.S. policymakers should not impair the Internet with onerous regulations. For example, Congress approved the Communications Decency Act of 1996 (CDA) as part of a broad bill to increase competition in the telecommunications industry. The main focus of this legislation was to prevent offensive material from reaching children. Yet the Act stifled the creative and innovative forces that made the Internet grow to where it is today. Fortunately, the Act was struck down by the Supreme Court. However, Democratic lawmakers under the direction of the Clinton Administration, which lobbied bard for its passage, are trying to resurrect the effort to regulate the Internet using similar methods.
Instead of regulating the Internet from Washington, the government should allow the private sector to
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