This week’s “Daily Journal” guest columnist is Haley Wynn, Research Intern for the John Locke Foundation.
Legislators take pride in drawing business to North Carolina through the use of economic incentives. Gov. Mike Easley proudly displays press releases, detailing the grants accepted by businesses for the opening of new offices and factories, along with the number of new jobs “created,” on his official Web site. The economic incentive methodology is certainly questionable, as has been discussed in previous Daily Journals. But at least state policymakers are concerned about the economic well-being of North Carolina. Aren’t they?
For all the glorification of attracting new business to the state, production in North Carolina continues to be tainted by overly strict inspection rules that may actually chase business away. Under current regulations, businesses must obtain a seal of approval—literally—for every piece of industrial equipment used in the business. This requirement applies to all electrical equipment used to produce a product, from printing presses to popcorn machines. Obtaining this approval is extremely inconvenient. For example, Underwriters Laboratories, a leading equipment tester, requests a lengthy description of each machine inspected. The following is an excerpt:
List all components and materials used in the product – including manufacturers’ names, catalog, numbers, sizes, ratings, etc. – and whether they are Listed or Recognized by UL. Include the generic name, manufacturer and type designation on any polymeric material (for example, a thermoplastic material) and explain how it’s used in the product.
One of the beautiful things about a market economy is that the factory owner in Detroit does not need to know that the dopple-dinger valve in his grinding machine came from a plastic manufacturer in Korea. To him, all that matters is that his grinding machine serves its purpose. Unfortunately, if he moves his factory to North Carolina, he is not only required to know where his dopple-dinger valve came from, but to report on its origin and the origin of every other part in his grinding machine.
I should point out that I am not criticizing the third-party equipment inspection companies. They are making a profit by performing a service in compliance with the law. It is the inspections policy that needs changing.
Now, on to the second part of the inspections requirement: the State Building Code gives undue authority to city- and county-appointed building inspectors, who may, without advance warning, halt the use of a machine that doesn’t meet standards. Needless to say, this rule gives business owners further disincentives to operate in North Carolina, when they could just as well do business in a state without the constant threat of an equipment inspector impeding business.
To illustrate just how harmful this power is, think of Jack Entrepreneur opening his own breakfast buffet, Carolina FlapJacks. His toaster, griddle, coffee maker, dishwasher, and refrigerator must all be approved by an independent testing lab. Jack has many other things to do, and, in the bustle of starting a business, forgets to have his griddle tested. On opening day, a city building inspector comes to check for the proper stickers on the restaurant’s equipment. He spots the griddle with no seal of approval and orders Jack to stop making flapjacks until he can obtain outside approval. Not only must Jack now turn away hungry customers, but he must also suspend operation for days, maybe months, to come. Jack considers moving his new business to Texas and changing its name.
This example, while humorous, is not all that far-fetched. Allen Gant Jr., who owns his own textile company, was caught with unsealed machines in Glen Raven and was forced to put his business on hold for two months while an electrical engineer dissembled and reassembled his machines with parts replacements. Two months of lost business is a significant cost to bear for not having your own equipment marked with someone else’s stamp of approval.
Thankfully, state legislators are beginning to recognize the negative economic impact of the all-inclusive inspections rule. In March, Sens. Dan Clodfelter and David Hoyle introduced a bill to remove the equipment inspection requirement from the State Building Code. The Senate approved the bill and sent it to the House. Passage of this bill would represent a victory for business owners. It would allow them to focus more of their resources on true needs, instead of being forced to squander them on a frivolous state requirement. Several other bills of the same nature have been introduced, only to be dropped shortly thereafter.
North Carolinians should be free to make their own business decisions. The current inspections requirement forces business owners to bear gratuitous costs. It encourages existing North Carolina producers to leave the state and discourages out-of-state producers from coming in. If the goal is to foster economic prosperity, let’s be consistent about it.