Who's *REALLY* Minding The Store?!?

John blueoval at SGI.NET
Wed Oct 11 18:26:03 MDT 2000

 From the Offshore and Privacy Club newsletter.

Who Should Regulate Business?

In today's media-manipulated world of images, reputations, and notoriety,
it is often difficult to tell which is worse: Big Business or Big
Government?  Both seem to be involved in more than their fair share of
sordid dealings, unethical practices, and unsavory misadventures.

We are all familiar with the theoretical roles each of these institutions
are meant to play: government is meant to safeguard its citizens' rights
and safety (however they may be defined by the popular sentiments of the
day), while the function of business is to earn a profit for its owner(s).

In practice, we are all too aware that government has grown and spread like
a cancer to assume a self-protective, self-serving agenda of its own.  Big
Government is more of a threat to our personal safety and security than any
other enemy facing individuals today.

But why is Big Business regarded with equal if not greater skepticism than
Big Government?  Is the tarnished reputation of Big Business due solely to
anti-business, socialist-oriented media propaganda, or is there something
more to this issue than meets the eye?  Let's look at the role and function
of business in more detail to see why problems could be occurring:

We know that a business is formed and operated for the purpose of earning a
profit.  A profit is earned by selling goods and services to
customers.  Customers will buy only if they need the goods and services,
and only if they feel the products are fairly priced.  What determines fair
pricing?  Usually it's competition between similar businesses, which
discover by trial and error what prices customers are willing to pay for a
given good or service.

Businesses that can't successfully adapt to the above requirements will die
a quick death, thus making room for those who can.  It's survival of the
fittest, with the marketplace being a cruel and unforgiving natural
environment and the customers' dollars being the energy source to fuel it
all.  In a true free market, there should be very few uncompetitive
businesses and very few unhappy customers.  The bad businesses will go
extinct and unhappy customers will either redirect their dollars to a
satisfactory business or start their own in response to an unfulfilled need.

This hardly describes many marketplaces today.  So what's wrong?

Government regulations and regulatory agencies are ordinarily the biggest
hindrances to a free market.  Every time a government imposes laws and
rules that restrict the freedom of business, it prevents competition in
some small or large way.  This may not necessarily be the intention of the
law or regulation - it may in fact have a rather "noble" purpose of
attempting to make businesses ethical or responsible in some way.  But
businesses are not created to be ethical or responsible - they are intended
only to earn a profit!  (It is customers - not governments - who should
insure that businesses are ethical and responsible by patronizing only
those enterprises that appear to be so.)  This may stick in the throat of
some readers who feel otherwise, but it is a fact that an efficient and
proper business has no other goal than making money for its owners.

Whenever this ultimate, money-making purpose is sidestepped by outside
regulation (however well-meaning), competition is decreased in the
marketplace.  This is ultimately bad for customers, as a true free market
is to their advantage.  But is it bad for businesses too?  Not
necessarily.  In fact, what occurs is that certain businesses are now
favored over others by the laws and regulations.  They are now given a
competitive advantage, not because they are better at serving happy
customers in their target market, but because they better comply with a
arbitrary set of standards than other businesses.

Obviously, if you own a business, you would want regulations that favor
your business and impose restrictions on any competitors. This will
indirectly allow you to fulfill the ultimate goal of your business, which
is making profits, even if the means employed seem less than ideal, insofar
as customers are concerned.  (Isn't it ironic that so many regulations are
created for the sake of "making" businesses ethical?)

Suddenly a different set of skills are needed by your business. Instead of
devoting all your energies to making money by satisfying customers, you are
instead devoting at least some portion of your energies to making money by
influencing regulations and laws.

However, if you want regulations slanted in your favor, you will need some
influence with those who create the regulations: the government.  To have
the necessary influence, you must have significant sums of money to buy
favors either directly or indirectly with those in a position to create
laws.  This means the bigger your business, the better your chances of
influencing legislation that will regulate the marketplace to your
advantage. Your competitors can be squeezed to the sidelines or even
eliminated by the appropriate laws.  "Your" government can be persuaded to
impose price fixes, reserve exclusive markets, and enforce other
uncompetitive practices if it is given enough incentive to do so.

And so now it is obvious why Big Business is usually lumped in the same
sordid trough as Big Government.  Thanks to the rise of a bloated,
regulation-happy, and power-hungry government entity, many businesses find
it more lucrative and efficient to cater to government rather than
customers.  The purpose of business (earning profits from customers) has
been kept intact, but an intermediary (government) has been inserted to the
detriment of the customers.

Unfortunately, the customers haven't figured this out yet.  They are
convinced by the media that business is inherently evil and would run
rampant over them the moment government regulation is halted or
restricted.  Customers do not understand their own power in permitting
businesses to survive or to die.  Monopolies and cartels, for example - the
entities most feared by the public - would not exist were it not for
government regulations enforcing their legitimacy.  Even "cartels by
collusion" not directly endorsed by government would not be able to last
without government rules in some way barring competitors from their target

The best regulator of business is the marketplace itself. Removing the
government from business regulation would make businesses, even the
much-maligned Big Business, respond to their customers as a first priority
once again.  Good companies would be rewarded for their efforts to please
their customers, and bad ones (including bad businesses engaging in fraud
or other practices considered unethical by the public) would soon find
themselves without customers and out of business rather quickly.  They
would also be sued by wronged parties in a court of law.  All of this,
without government intervention!

There is no real need for a seemingly all-powerful intermediary to achieve
satisfactory regulation, as long as customers are willing to keep
themselves informed about their marketplace.  Knowledge is power, after
all.  But what about those customers short on time or expertise in a given
market?  "Keeping informed" could include a payment of fees to watchdog
businesses monitoring a given market on behalf of their own paying
customers.  In a fundamentally sound fashion, the watchdog businesses
themselves would be subject to the same "survival of the fittest" principle
in responding to their customers' needs.

In this scenario, who would "defend" the public from Big Business choosing
to adopt unacceptable practices?  Why, the public themselves, in the form
of lawsuits, protests, or similar tactics. No government required!

Of course, governments don't particularly like this turn of events. After
all, they themselves are force-backed monopolies, and therefore are the
most ardent anti-competition institutions on Earth.  But a free market is
in the public's best interest, even if the public doesn't yet have a clear
grasp of the true benefits. The solution to this perceptual problem, as
always, is more information and clearer thinking, a promise the
Internet-based future brings into sharper focus with each passing day.

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