Government Regulation Hurts A Nation's Competitiveness.......

Government regulation has always been a debating point for those of us that want less of it vs. those of us that find wisdom in such ventures. However, its important to consider some other points when looking at the issues.

But why should the average citizen care about this hidden tax? It's born by big businesses, not us. Not so. Small entrepreneurs, the engine of economic growth in America, bear the greatest burden. For small manufacturers, those employing fewer than 100 workers, the cost-per-employee of complying with workplace regulations is 68 percent higher than for large firms. Unnecessary regulatory burdens increase the cost of hiring U.S. workers, reducing American competitiveness, hindering job growth, and sending jobs overseas.

There is something for everyone in any regulatory regime. There is a perceived or real risk or problem that has to be solved. There is a process that decides how to solve it and then there are governmental answers to those problems.

I wrote a paper on airline regulation when I was in school 20 years ago. The Civil Aeronautics Board [CAB] was in charge of both safety and the setting of fares and routes. I was a big proponent of deregulating fares and routes since this is the best way to determine demand for the service, the supply that should be dedicated to a particular route and the price that should be charged.

Of course when preaching about the benefits of deregulation, my friends sometimes completely misconstrued my argument by stating that they didn't think that this was a good idea since safety would suffer. I was not a proponent of deregulating safety measures since airline safety sometimes affects even those people that don't fly.... we don't want planes crashing into neighborhoods killing people, now do we. However, there is also a large incentive in place anyway even without a strict regulatory environment and that is a large and cumbersome court and tort costs associated with airline safety accidents. But I digress.

My point is that not all regulation is good. And when a regulatory environment is imposed it sometimes does not adjust to changing times and can become a burden beyond what is intended. In the case of airlines, management was so used to the setting of fares and routes that they did not understand how to adjust to changes and this caused many problems. Additionally, labor was inculcated into the cost plus type of pricing and labor disputes were common with strict work rules that caused legacy airlines to fold under competitive pressures to new upstarts.

Regulations on the airline industry created an environment of underperformers, higher costs and a troublesome labor environment. China also has boatloads of regulations and rules. The problem associated with Chinese business rules and regulations is that there are so many of them that it is impossible to comply with them all or even know about them all. Secondly, these rules are are not levelly applied to everyone but are typically used by government officials for shakedowns and bribes and not for the safety or welfare of Chinese citizens.

This coupled with a burdensome tax environment, where tax rates are second highest in the world only surpassed by regulation and tax happy France, create an environment that will hinder business at some time in the future. I do not look forward to the day when the Chinese economy starts to slow and these relations and taxes start to take their toll on competitiveness there.